Livestock Grazing: Federal Expenditures and Receipts Vary,	 
Depending on the Agency and the Purpose of the Fee Charged	 
(30-SEP-05, GAO-05-869).					 
                                                                 
Ranchers pay a fee to graze their livestock on federal land.	 
Grazing occurs primarily on federal land located in the western  
states managed by 10 federal agencies. Generally, the fee is	 
based on animal unit months (AUM)--the amount of forage that a	 
cow and her calf can eat in 1 month. For most federal land, the  
fee per AUM is established by a formula. Advocates argue that	 
grazing uses federal land productively and that the grazing fee  
is fair. Opponents argue that grazing damages public resources	 
and that grazing fees are too low. GAO was asked to determine the
(1) extent of, and purposes for, grazing in fiscal year 2004 on  
lands 10 federal agencies manage; (2) amount federal agencies	 
spent in fiscal year 2004 to manage grazing; (3) total grazing	 
receipts the 10 agencies collected in fiscal year 2004 and	 
amounts disbursed; and (4) fees charged in 2004 by the 10	 
agencies, western states, and ranchers, and reasons for any	 
differences. In commenting on a draft of this report, the	 
Department of the Interior and the Forest Service neither agreed 
nor disagreed with the findings. The Forest Service stated that  
the report accurately described the purpose of the grazing fee.  
The Army and Air Force and the Department of Energy provided	 
technical comments, which we incorporated as appropriate. The	 
departments of Commerce and of Justice responded that they did	 
not have comments.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-869 					        
    ACCNO:   A38957						        
  TITLE:     Livestock Grazing: Federal Expenditures and Receipts     
Vary, Depending on the Agency and the Purpose of the Fee Charged 
     DATE:   09/30/2005 
  SUBJECT:   Cost analysis					 
	     Federal property management			 
	     Financial analysis 				 
	     Grazing rights					 
	     Land management					 
	     Land use law					 
	     Public lands					 
	     User fees						 

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GAO-05-869

                 United States Government Accountability Office

                     GAO Report to Congressional Requesters

September 2005

LIVESTOCK GRAZING

Federal Expenditures and Receipts Vary, Depending on the Agency and the Purpose
                               of the Fee Charged

                                       a

GAO-05-869

[IMG]

September 2005

LIVESTOCK GRAZING

Federal Expenditures and Receipts Vary, Depending on the Agency and the Purpose
of the Fee Charged

  What GAO Found

The 10 federal agencies managed more than 22.6 million AUMs on about 235
million acres of federal lands for grazing and land management in fiscal
year 2004. Of this total, the Department of the Interior's Bureau of Land
Management (BLM) and the U.S. Department of Agriculture's Forest Service
managed more than 98 percent of the lands used for grazing. The agencies
manage their grazing programs under different authorities and for
different purposes. For BLM lands and western Forest Service lands,
grazing is a major program; the eight other agencies generally use grazing
as a tool to achieve their primary land management goals.

In fiscal year 2004, federal agencies spent a total of at least $144
million. The 10 federal agencies spent at least $135.9 million, with the
Forest Service and BLM accounting for the majority. Other federal agencies
have grazingrelated activities, such as pest control, and spent at least
$8.4 million in fiscal year 2004.

The 10 federal agencies' grazing fees generated about $21 million in
fiscal year 2004-less than one-sixth of the expenditures to manage
grazing. Of that amount, the agencies distributed about $5.7 million to
states and counties in which grazing occurred, returned about $3.8 million
to the Treasury, and deposited at least $11.7 million in separate Treasury
accounts to help pay for agency programs, among other things. The amounts
each agency distributed varied, depending on the agencies' differing
authorities.

Fees charged in 2004 by the 10 federal agencies, as well as state land
agencies and private ranchers, vary widely. The grazing fee BLM and the
Forest Service charge, which was $1.43 per AUM in 2004, is established by
formula and is generally much lower than the fees charged by the other
federal agencies, states, and private ranchers. The other agencies,
states, and ranchers generally established fees to obtain the market value
of the forage. The formula used to calculate the BLM and Forest Service
grazing fee incorporates ranchers' ability to pay; therefore the current
purpose of the fee is not primarily to recover the agencies' expenditures
or to capture the fair market value of forage. As a result, BLM's and the
Forest Service's grazing receipts fell short of their expenditures on
grazing in fiscal year 2004 by almost $115 million. The BLM and Forest
Service fee also decreased by 40 percent from 1980 to 2004, while grazing
fees charged by private ranchers increased by 78 percent for the same
period. If the purpose of the fee were to recover expenditures, BLM and
the Forest Service would have had to charge $7.64 and $12.26 per AUM,
respectively; alternately, if the purpose were to gain a fair market
value, the agencies' fees would vary depending on the market. Differences
in resources and legal requirements can cause fees to vary; however, the
approaches used by other agencies could close the gap in expenditures and
receipts or more closely align BLM and Forest Service fees with market
prices. The purpose of the grazing fee is, ultimately, for the Congress to
determine.

                 United States Government Accountability Office

Contents

  Letter

Results in Brief
Background
Grazing Occurs on About 235 Million Acres of Federal Lands for a

Variety of Purposes

Federal Agencies Spent at Least $144 Million on Grazing Activities,
Although Some Agencies Do Not Track Expenditures for Grazing on Federal
Lands

Federal Agencies Collected About $21 Million in Grazing Receipts in Fiscal
Year 2004-Less Than One-Sixth of the Expenditures Needed to Manage Grazing

Grazing Fees Charged by Federal Agencies, Western States, and Private
Ranchers Varied Widely, Depending on the Purpose of the Fee and the
Approach Taken to Set It

Concluding Observations Agency Comments

1 5 8

14

20

30

37 50 51

Appendixes

Appendix I:

Appendix II:

Appendix III:

Appendix IV:

                                       Appendix V: Appendix VI: Appendix VII:

Objectives, Scope, and Methodology

Additional Factors in Evaluating Federal Grazing Expenditures and Revenues

Implications of Grazing for Local Economic Development Implications of
Grazing on Quality of Rural Communities and Rancher's Life Implications of
Grazing for Rangeland Ecosystems and Management

Detailed Grazing Data for Bureau of Land Management and the Forest Service

Acres and AUMs of Grazing Permits and Leases by Size

Grazing Fee for Lands Managed by BLM and the Forest Service

Current Fee for BLM's and the Forest Service's Western States History of
Western Grazing Fees

Examples of Other Federal Agency Grazing Fees Western State Grazing Fees
and Formulas Comment from Department of the Interior

GAO Comments

                                       55

                                     61 61

62

64

67 67 75

79 79 84

88

93

102 104

                                    Contents

Appendix VIII: Comments from the Forest Service 105 Appendix IX: GAO
Contact and Staff Acknowledgments 106

Related Products 107

Grazing Reports 107 User Fee Reports 109

Tables	Table 1: Table 2: Table 3:

Table 4:

Table 5: Table 6: Table 7:

Table 8: Table 9:

Extent of Grazing in Fiscal Year 2004 on BLM and Forest
Service Lands, Acres and AUMs
Extent of Grazing in Fiscal Year 2004 on Other Agencies'
Lands, Acres and AUMs
Expenditures by BLM and the Forest Service for Direct,
Indirect, and Range Improvement Grazing Activities,
Fiscal Year 2004
Estimated Expenditures by the National Park Service, U.S.
Fish and Wildlife Service, Reclamation, DOE, and DOD on
Grazing Activities, Fiscal Year 2004
Expenditures for Grazing-Related Activities by Other
Agencies on Federal Lands, Fiscal Year 2004
BLM and Forest Service Grazing Receipts, Fiscal Year
2004
National Park Service, U.S. Fish and Wildlife Service,
Reclamation, DOE, and DOD Services Grazing Receipts,
Fiscal Year 2004
Fees Charged by Federal Agencies, State Land Agencies,
and Private Ranchers, 2004
Fees Charged by Private Ranchers and State Land
Agencies in 2004

                                     15 17

21

25 27 31

34

39

45

68

72 76

77

77

78

78

Table 10: BLM Data on Acres and AUMs, by Field Office for Fiscal Year 2004

Table 11: Forest Service Data on Acres and AUMs, by Forest and Grassland,
Grazing Year 2004

Table 12: Number of BLM Permits by Size, Fiscal Year 2004

Table 13: Number of Forest Service Cattle Permits by Size, Grazing Year
2004

Table 14: Number of Forest Service Sheep Permits by Size, Grazing Year
2004

Table 15: Number of Cattle and Calf Operations and Percent of Inventory,
United States, 2004

Table 16: Number of Beef Cow Operations and Percent of Inventory, United
States, 2004

Contents

Table 17: PRIA Formula Data for 1979 through 2004 and Fee Results

for 1980 through 2005 83 Table 18: Information on State Lands Used for
Grazing, Revenues,

and Fee-Setting Approach in 17 Western States, Fiscal Year

2004 94

                                  Location of Federal Lands, by Agency        
Figures Figure 1: Figure 2:   Grazing Fee BLM and the Forest Service     9
                                            Charged, 1980 to               
                                                  2005                     48 
                     Figure 3:   Unconstrained Formula Results and PRIA    
                                               Grazing Fee                 
                               Compared with Fees Charged on Private Lands 81 
                     Figure 4:  Value of PRIA Grazing Formula Components,  
                                                  1979                     
                                              through 2004                 82 

Abbreviations

AUM Animal unit month
BCPI Beef Cattle Price Index
BLM Bureau of Land Management
DOD Department of Defense
DOE Department of Energy
FLPMA Federal Land Policy and Management Act
FVI Forage Value Index
GAO Government Accountability Office
IOAA Independent Offices Appropriation Act
NMFS National Marine Fisheries Service
OMB Office of Management and Budget
PPI Prices Paid Index
PRIA Public Rangelands Improvement Act
USDA Department of Agriculture
USGS U.S. Geological Survey

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A

United States Government Accountability Office Washington, D.C. 20548

September 30, 2005

Congressional Requesters:

Since the early 1900s, the federal government has required ranchers to pay
a fee for grazing their livestock on millions of acres of federal land
located primarily in western states. On many federal lands, if these
ranchers comply with permit or lease conditions, they may be able to renew
their permits or leases indefinitely, effectively adding forage, and hence
value, to their operations.1 Over the years, this arrangement has spurred
controversy across a range of issues. Advocates of grazing on federal
lands contend that grazing is a productive use of these lands and supports
local economic development. Advocates also believe that the fee charged is
fair, allows ranchers to stay in business, and provides stability to small
rural communities. Opponents argue that grazing damages public resources,
such as wildlife habitat, threatened and endangered species, and water
quality. Opponents also argue that federal expenditures for grazing are
too high and that fees charged for grazing are far too low, thereby
contributing to increased grazing and deterioration of range conditions.

Ten federal agencies have programs to allow private ranchers to graze
livestock on portions of the lands they manage: the Department of the
Interior's (Interior) Bureau of Land Management (BLM), National Park
Service, U.S. Fish and Wildlife Service, and Bureau of Reclamation
(Reclamation); the U.S. Department of Agriculture's (USDA) Forest Service;
the Department of Energy (DOE); and the Department of Defense's

1Agencies use different arrangements to allow grazing on their lands. The
Bureau of Land Management (BLM) both permits and leases land for grazing,
depending on the legal designation of the land being grazed. Similarly,
the Bureau of Reclamation also issues permits and leases for grazing on
project lands. The Forest Service, National Park Service, and Fish and
Wildlife Service permit grazing on their lands. The Department of Defense
services lease their lands for grazing. BLM manages grazing permits on
lands withdrawn from the public domain for use by the Department of
Energy.

(DOD) Army, Army Corps of Engineers (Corps), Air Force, and Navy.2 In
general, agencies manage their grazing programs by establishing permit or
lease conditions, monitoring livestock numbers and resource conditions,
planning and overseeing projects to improve rangeland, and working with
ranchers and local communities. While federal lands in the eastern states
are also used for grazing, grazing occurs primarily on the agencies' lands
located in 17 western states.3 Other federal agencies, such as USDA's
Wildlife Services and the Department of Justice (Justice), do not have
grazing programs but do conduct activities that support these programs.
For example, Justice provides legal services to federal agencies,
including litigation of federal grazing lawsuits.

Grazing fees are set in several ways. The fee charged for grazing on BLM
and Forest Service lands is set using a formula first called for under the
Public Rangelands Improvement Act (PRIA) of 1978. The formula, which
expired in 1985 but was continued in 1986 by Executive Order 12548,4
results in a price per animal unit month (AUM)-that is, the amount of
forage (vegetation such as grass and shrubs) that a cow and her calf eat
in a month (or one bull, one steer, one horse, or five sheep).5 Fees can
be specifically set by legislation, or agencies are authorized, under
certain circumstances, to charge user fees under the Independent Offices
Appropriation Act (IOAA). Office of Management and Budget (OMB)

2While the Army Corps of Engineers is an agency within the Army, we
consider it as a separate agency for the purposes of this report. The
Bureau of Indian Affairs helps Native Americans to manage grazing on
tribal lands. While private ranchers can lease these lands for grazing at
a fee, the lands are tribal lands and therefore are not included in this
discussion of grazing on federal lands.

3Generally, there are 17 states, including the Great Plains states,
considered to be western: Arizona, California, Colorado, Idaho, Kansas,
Montana, Nebraska, New Mexico, Nevada, North Dakota, Oklahoma, Oregon,
South Dakota, Texas, Utah, Washington, and Wyoming. However, depending on
the situation, western states can be grouped and counted differently. BLM
primarily manages grazing in 11 western states, including Arizona,
California, Colorado, Idaho, Montana, New Mexico, Nevada, Oregon, Utah,
Washington, and Wyoming. The Forest Service manages grazing for its
forests in 16 western states, excluding Texas, under the range management
subchapter of the Federal Lands Policy and Management Act of 1976 and the
Public Rangelands Improvement Act of 1978, and grazing on national
grasslands.

4Exec. Order No. 12548 (Feb. 14, 1986).

5While BLM uses the term AUM as a unit for purposes of charging fees, the
Forest Service uses the term head month. The two units are calculated the
same way. We will use the term AUM in this report to refer to both AUM and
head month. Of the other agencies, some charge by AUM while others charge
a flat fee or by acre.

Circular A-25, which further interprets IOAA, states that user fees can be
established to recover the full cost of managing a program or to seek a
fair market value-that is, the price set through competitive bids or
market prices. When fees are set through competitive bidding, they achieve
a fair market value-that is, the price that a willing and knowledgeable
buyer pays and a willing and knowledgeable seller accepts. Competitive
bidding usually includes the use of either sealed bids or public auction,
advertising the permit or lease, and awarding it to the highest bidder. In
lieu of competition, fees can be set to achieve market value based on an
estimate or appraisal of comparable properties.

Changes in the livestock industry, as well as continued disagreement
between advocates and opponents of grazing have, over the last 2 decades,
resulted in several efforts to reform federal grazing fees for BLM and
Forest Service lands. In 1986 and 1992, the two agencies studied
alternative approaches to value grazing on federal rangelands and the fee
charged. In 1994, the Administration considered administrative changes to
the fee and range management regulations. In the late 1990s, the Senate
passed legislation to reform the fee to reflect beef production from
federal lands, but Congress ultimately did not enact this legislation. In
2003, attention turned to buyouts of federal grazing permits and leases in
addition to grazing fees. Because of changes in the livestock
industry-increasing conflict with other users of federal land, fluctuating
prices of beef, and difficulty finding new owners for ranches-some
ranchers have expressed support for the idea of a buyout. Others remain
opposed.

In this context, you asked us to determine for 2004 the (1) extent of
grazing on, and program purposes for, lands managed by the 10 federal
agencies in the fiscal year; (2) amount spent in the fiscal year by these
agencies, and other federal agencies that have grazing-related activities,
to manage livestock grazing on public lands; (3) total receipts collected
during the fiscal year for grazing privileges by the 10 federal agencies
with grazing programs, and the amounts disbursed to counties, states, or
the federal government; and (4) fees charged by the 10 federal agencies,
western states, and private ranchers, and the reasons for any differences
among the

fees.6 In considering agencies' expenditures and receipts, it is important
to note that we conducted a budgetary evaluation; that is, we examined the
effects of grazing programs on the U.S. Treasury and the federal budget
and did not analyze economic costs and benefits, which would involve a
broad set of trade-offs-some of which cannot be quantified-made by
individuals, the public, and the federal government. (See app. II for a
discussion of such factors.)

To respond to these questions, we obtained agencies' data on acres and
AUMs for their grazing programs,7 as well as expenditures, receipts,
disbursements, and fees.8 If an agency had a central data information
system, we obtained the data from this system and determined, through
interviews, system tests, and file reviews, as appropriate, the
reliability of the data and whether the agencies have sufficient internal
controls over the fund information in the systems. If an agency did not
centrally track the needed data, we developed a data collection instrument
for the agency's field unit managers to complete. We relied on data
reported by the agencies. To assess whether the various types of data were
sufficiently reliable for use in this report, as well as to check key
internal controls over grazing receipts, we visited several agencies'
field offices to review their grazing programs, data systems, and a
selection of grazing files to verify the billing information; and we
interviewed officials about key steps in the processes for issuing grazing
permits and leases and billing for and collecting fees. We reviewed all
the files at agencies with smaller grazing programs (those with up to 25
permits or leases at an office) and selected 10 percent of files at the
two agencies that had large grazing programs (250

6Data on acres and AUMs are provided for fiscal years, except for the
Forest Service, which reported these data by grazing year. The grazing
year extends from March through February. Data on expenditures and
receipts are reported by fiscal year, while fee data are reported
differently depending on the agency. Specifically, BLM and Forest Service
fees are reported by grazing year, the other federal agencies' fees are
reported by fiscal year, state fees are reported primarily by fiscal year,
and private fees and some state fees are reported by calendar year.

7While the majority of grazing is described according to AUMs and many
agencies can calculate the amount of AUMs in their permits and leases,
some of the agencies' field offices do not use AUMs as a convention to
measure grazing. These offices use other measures to determine the amount
of grazing that is occurring, for example, the amount of forage that
remains. About five national parks, one Air Force base, and two Corps
districts did not provide information on AUMs.

8The discussion does not include Alaska, which is treated differently in
grazing law. See 43 U.S.C. S: 316.

and 500 allotment files per office). While we gathered and reviewed
expenditure data from the agencies, we did not validate the data or the
accounting systems that produced them. To understand the differences among
fees and approaches to setting fees, we interviewed a range of experts
from Colorado State University, New Mexico State University, Oregon State
University, and the University of Montana, as well as the Society for
Range Management. See appendix I for a detailed discussion of our
methodology. We conducted our review between August 2004 and July 2005 in
accordance with generally accepted government auditing standards.

Results in Brief	The 10 federal agencies managed more than 22.6 million
AUMs on about 235 million acres of federal lands for private grazing and
land management in fiscal year 2004. Of this total, BLM and the Forest
Service managed almost 21.9 million AUMs on almost 231 million acres, or
more than 98 percent of the federal lands used for grazing. The remaining
8 agencies managed almost 794,000 AUMs on more than 4 million acres. While
the agencies' grazing programs are similar in that they offer private
ranchers access to federal lands and forage for their livestock, the
agencies manage their grazing programs under different authorities and for
different purposes. For BLM lands and western Forest Service lands,
grazing is considered a principal or major program, while other agencies
generally use grazing as a management tool to achieve their land
management goals. For example, the U.S. Fish and Wildlife Service uses
grazing to reduce some grasses and thereby allow other grasses to flourish
that are favorable to particular types of birds. Similarly, some of the
DOD services use livestock to "cut" their grass.

In fiscal year 2004, federal agencies, both those that have grazing
programs and those that have activities to support grazing, spent a total
of at least $144.3 million. The 10 federal agencies with grazing programs
spent at least $135.9 million, of which BLM and the Forest Service spent
the majority- about $132.5 million. The 8 remaining agencies spent at
least $3.4 million, but not all of them could estimate their expenditures
because they do not conduct grazing as a major activity and therefore do
not track expenditures specifically for grazing. The 10 agencies spent
funds on activities that directly supported grazing, such as managing
permits and leases, managing grazing allotments, assessing the resource
conditions of these allotments, and implementing projects to improve the
allotments, such as building fences and developing water projects. They
also spent funds on activities that indirectly supported grazing, such as
management, budget, personnel,

and other activities. In addition to these 10 agencies' expenditures,
other federal agencies that do not have grazing programs spent at least
$8.4 million to support grazing on public lands; some do not know the
amount they spent because they do not distinguish between work done on
public and private lands. For example, USDA's Wildlife Services removes
predatory or nuisance wildlife that threaten livestock on both public and
private lands; the agency estimated that it spent more than $5 million in
fiscal year 2004 on its activities on public lands. In the same year,
Justice, which provides legal services to federal agencies including
services for litigation related to grazing on public land, estimated that
it spent about $159,000 on grazing lawsuits. Other agencies, such as the
Environmental Protection Agency and USDA's Natural Resources Conservation
Service, conduct water quality projects and range improvement work that
are related to grazing, but the agencies cannot separate expenditures for
public lands from those on private lands.

The grazing permits and leases the 10 federal agencies manage generated a
total of about $21 million from fees charged in fiscal year 2004-or less
than one-sixth of the expenditures to manage grazing. From that amount,
the agencies distributed almost $5.7 million to states and counties in
which grazing occurred, deposited almost $3.8 million in the Treasury as
miscellaneous receipts, and deposited at least $11.7 million in separate
Treasury accounts for the agencies' use. The amounts distributed by each
agency vary, depending on the agencies' differing authorities. For
example, of the $11.7 million deposited in the separate Treasury accounts,
BLM and the Forest Service deposited $8.8 million into their range
improvement funds. The majority of grazing receipts-more than $17.5
million-came from BLM and Forest Service permits and leases, while more
than $3.7 million was generated from the remaining agencies. In addition
to cash receipts, the DOD services also received almost $1.4 million in
services, such as maintaining fences, that offset grazing fees charged to
their lessees.

Fees charged in 2004 by the 10 federal agencies, as well as state land
agencies and private ranchers, vary widely, depending on the purpose for
which the fees were established and the approach used to set the fees. The
fee BLM and the Forest Service charge for grazing-which was $2.36 per AUM
for BLM and $2.41 per AUM for the Forest Service in 1980, when the fee
based on the formula enacted by PRIA was first charged, and $1.43 per AUM
in 2004-is established by formula to account for livestock industry prices
and to support ranchers and the western livestock industry. It is
therefore generally lower than the fees charged by the other federal
agencies, states, and private ranchers. The other agencies generally

establish their fees based on the market value of the forage, and as a
result charged fees ranging from $0.29 to more than $112 per AUM in fiscal
year 2004, depending on the location, range condition, and accompanying
in-kind services. The state land agencies in 17 western states charged
fees that ranged from $1.35 to $80 per AUM in fiscal year 2004, while the
average fee private ranchers charged ranged from $8 per AUM in Arizona and
Oklahoma to $23 per AUM in Nebraska. The complex formula used to calculate
the BLM and Forest Service fee for grazing on their lands incorporates
factors that consider ranchers' ability to pay; the purpose of the fee is
therefore not primarily to recover the agencies' expenditures or to
capture the fair market value of forage. These factors that adjust the fee
resulted in a difference of almost $115 million between grazing receipts
and agencies' expenditures on grazing activities in fiscal year 2004. BLM
and the Forest Service would have had to charge $7.64 per AUM and $12.26
per AUM, respectively, to recover these expenditures in 2004. These
adjustment factors also resulted in the fee decreasing by 40 percent from
1980 to 2004 for grazing on BLM and Forest Service lands, while fees
charged by private ranchers increased 78 percent over the same period.
Although differences in the quality of resources, the level of services
provided, and legal requirements complicate the comparison of private and
federal lands, and competitive methods may be administratively expensive,
the approaches other federal agencies, states, and private ranchers use
could provide alternative approaches for setting fees. These approaches
could close the gap in expenditures and receipts or more closely align BLM
and Forest Service fees with market prices; however, the purpose of the
grazing fee and any policy trade-offs are, ultimately, for the Congress to
determine.

In responding to a draft of this report, Interior and the Forest Service
provided written comments. The agencies neither agreed nor disagreed with
the findings. Interior stated that the report recognized that differences
in resource conditions and legal requirements can cause grazing fees to
vary. The Forest Service stated that the report accurately described the
purpose of the grazing fee charged by BLM and the Forest Service. DOD and
DOE provided technical comments, which we incorporated as appropriate. The
departments of Commerce and of Justice responded that they did not have
comments. Interior's and the Forest Service's comments are included in
appendixes VII and VIII, respectively.

Background	The federal government manages more than 680 million acres of
land in the United States, including lands in national forests,
grasslands, parks, refuges, reservoirs, and military bases and
installations. Of the total federal lands, BLM and the Forest Service
manage almost 450 million acres for multiple uses, including timber
harvest, recreation, grazing, minerals, water supply and quality, and
wildlife habitat. BLM's 12 state offices manage more than 260 million
acres in 12 western states, including 82 million acres in Alaska, while
the Forest Service's 123 administrative offices manage more than 190
million acres across the nation.9 As shown in figure 1, the majority of
federal lands are located in the western half of the country.

9While the Forest Service has 155 proclaimed national forests and 20
grasslands, it has combined them into 123 administrative offices for
management purposes.

o 	DOE manages almost 2.4 million acres of land making it the fourth
largest federal land owner after Interior, USDA, and DOD. It operates 30
major facilities on land holdings in 34 states. The buffer zones
surrounding many of these facilities consist of forests and rangelands.

o 	DOD has numerous Army, Air Force, and Navy installations on 29 million
acres of land in many states, while the Corps, like Reclamation, manages
12.7 million acres of land associated with water projects in many states.

Livestock Grazing in the United States

Most rangelands-primarily grasslands and shrublands-used to raise
livestock in the United States are privately owned, and as a result, only
a portion of livestock is raised on federal land.10 In 2004, the livestock
industry had almost 95 million cattle and 989,460 cattle and calf
operations, which include cattle raised for beef as well as milk.11
Regionally, the eastern states had almost 590,000 cattle and calf
operations, of which almost 440,500 were beef cow operations; the states
in the Great Plains (Nebraska, Kansas, Oklahoma, North and South Dakota,
and Texas) had 292,300 cattle and calf operations with 253,000 beef cow
operations; and the 11 western states had more than 106,000 cattle and
calf operations with about 80,400 beef cow operations. In contrast, the
number of livestock operations with BLM and Forest Service grazing permits
and leases for cattle, sheep, and other livestock totaled more than
23,000. Livestock operations in the West differ from those in the eastern
United States. In the West, livestock operations involve larger areas of
land, and ranchers depend on a mix of private and federal lands to graze
cattle seasonally-in the summer and fall they use federal lands to graze
their livestock while they grow hay crops for the winter on their private
lands. In some parts of the West, primarily the Southwest, grazing occurs
year-round on federal lands. In the East, sufficient rain allows grazing
to occur on smaller pastures, in some places, year-round.

10Rangelands are lands on which the indigenous vegetation is predominantly
grasses, grass-like plants, forbs (herbs), or shrubs and is managed as a
natural ecosystem. Rangelands include natural grasslands, savannas, many
deserts, tundras, alpine communities, marshes, and meadows. They differ
from pastureland in that they are not periodically planted or treated
through tilling, fertilization, mowing, weed control, or irrigation. Not
all rangelands are used for grazing purposes.

11In the same year, the industry had about 6 million sheep and 67,160
sheep operations, which raise sheep for both meat and wool.

Grazing on Federal Lands	The country's rangelands have been used to graze
domestic livestock since the United States was settled, and the federal
government has managed grazing on federal lands for more than 100 years.
During western expansion, settlement typically occurred along streams and
rivers, where the soil is richer, vegetation denser, and water more
available. Lands that remained for the federal government to manage after
western expansion were lands that settlers did not want or could not
easily settle; the lands are often drier, less productive, and located at
higher elevations or farther from water. As the West was settled
throughout the late 1800s, conflict among different users of the
rangelands increased, as did degradation of these lands. As a result, in
1897, the federal government began managing livestock grazing in the
nation's forest reserves; in 1906, the Forest Service started charging a
fee for grazing on these reserves.

The Forest Service managed grazing under its general authorities until
1950, when Congress enacted the Granger-Thye Act, authorizing the
Secretary of Agriculture to issue grazing permits on national forest lands
and other lands under the department's administration. In addition to
national forest lands on which grazing is allowed in the 16 western
states, the Forest Service manages national grasslands in the western
states and forest lands in the eastern states for grazing. The federal
government started purchasing privately owned land in 1911 as necessary
for regulating the flow of navigable streams, creating national forests in
the East. The national grasslands, which are primarily located in
Colorado, Kansas, New Mexico, and North and South Dakota, were purchased
by the federal government under a land utilization program started in the
1930s. Originally, the program purchased submarginal lands to provide
emergency relief to farmers whose lands were failing. It evolved into a
program designed to transfer land to its most suitable use, culminating in
the Bankhead-Jones Farm Tenant Act of 1937. In 1954, the Secretary of
Agriculture transferred the responsibility for program administration to
the Forest Service and in 1960 designated almost 3.8 million acres of
lands in the program as national grasslands.

To stop continued degradation caused by overgrazing of the remaining
public lands, among other purposes, the Congress passed the Taylor Grazing
Act in 1934. Under the act, the predecessor to BLM-the Grazing Service-was
created, and control over grazing on public lands was established. The
Taylor Grazing Act authorized the establishment of grazing districts from
public lands that were considered to be chiefly valuable for grazing and
raising forage crops and the leasing of other public lands that were
located outside grazing districts. The act also provided for

the issuance of permits and leases for these lands and set forth
requirements for the distribution of funds received from grazing.
Additional laws affecting grazing on both BLM and western Forest Service
lands were enacted in the 1970s. The Federal Land Policy and Management
Act of 1976 (FLPMA) limited the length of permits and leases to 10 years
and allowed shorter terms, authorized terms and conditions to be placed on
a permit or lease, and allowed seasonal limits on grazing. In 1978, PRIA
required BLM and the Forest Service to inventory and manage their lands in
western states.

To provide access to grazing, both BLM and the Forest Service divide their
rangelands into allotments, which can vary in size from a few acres to
hundreds of thousands of acres of land. Because of the land ownership
patterns that occurred when the lands were settled, the allotments can be
adjacent to private lands, or they can be intermingled with private lands.
Under its authorities, BLM permits grazing in allotments within its
grazing districts and leases lands outside grazing districts. The Forest
Service, which does not have grazing districts, uses permits to authorize
grazing in its allotments. To be eligible for a permit or lease on one of
BLM's allotments, ranchers, among other things, are required to own or
control land or water, called a base property.12 Under Forest Service
guidance, permits are issued to purchasers of permitted livestock or base
property.

The other federal agencies that manage grazing do not have the same
grazing authorities, processes, or fees as BLM and the Forest Service.
Each agency manages its grazing for different purposes and under different
authorities. For example, the U.S. Fish and Wildlife Service permits
grazing on a year-to-year basis, depending on a refuge's land management
goals, while the National Park Service permits grazing for a longer period
but can choose to not renew a permit if certain conditions change,
including damage to park resources, limitations to interpretive
experiences, or impairment of park facilities.

12A base property is property that is capable of serving as a base of
operation for livestock use of public lands within a grazing district or
contiguous land, or, when no applicant owns or controls contiguous land,
noncontiguous land that is capable of being used in conjunction with a
livestock operation that would use public lands outside a grazing
district. A water base is water that is suitable for consumption by
livestock and is available and accessible to the authorized livestock when
the public lands are used for livestock grazing.

User Fees for Grazing on Federal Lands

Federal grazing fees are considered as user fees. Without statutory
authority to charge a fee and retain the proceeds, a federal agency may
not charge a fee to defray the cost of services or resources it provides.
Congress has provided some agencies with specific authority to charge a
user fee and retain and use the proceeds. If an agency does not have
specific authority, the IOAA provides general authority for an agency to
impose a fee if certain conditions are met. However, even if the user fee
applies, an agency may not retain the proceeds from a user fee without
specific authority to that effect, but must credit the collections to the
general fund of the Treasury as miscellaneous receipts. OMB Circular A-25
provides guidance to agencies regarding their imposition of user fees
under the IOAA and other statutes. Under the circular, federal agencies
that do not have specific authority to impose a fee are to charge user
fees pursuant to the IOAA when an individual or a group receives
benefits-such as those that provide business stability or respond to an
individual or a group's request-that are greater than those that the
general public enjoys. Increasingly since the 1980s, to relieve pressure
on taxpayers for increasing general appropriations for the federal
government, user fees have been levied to help pay for federal services
and resources that benefit specific groups of users. User fees differ from
broad-based taxes in that they attempt to recover some amount of the
government expenditures made for a specific program. For example, Congress
enacted laws to increase the use of recreation fees for access to federal
parks, forests, and BLM lands in the 1990s.

While agencies are generally to deposit funds they receive in the general
fund of the Treasury under the Miscellaneous Receipts Act, some federal
agencies have specific legislative authority to distribute funds to states
and counties or to deposit funds into special accounts in the Treasury for
the agency's or program's use. Generally, funds that are deposited into
the Treasury as miscellaneous receipts are deposited in the general fund
where they are then available to be appropriated as Congress may see fit.
Funds that are deposited into special accounts in the Treasury are
dedicated for specific purposes. The special accounts may be permanently
appropriated or further congressional action may be needed to make the
funds available. Some agencies are also authorized to retain funds for
credit to their appropriations.

Grazing Occurs on About 235 Million Acres of Federal Lands for a Variety
of Purposes

In fiscal year 2004, BLM, the Forest Service, the National Park Service,
U.S. Fish and Wildlife Service, Reclamation, DOE, the Army, the Corps, Air
Force, and Navy allowed more than 22.6 million AUMs of grazing on about
235 million acres of the lands they manage.13 BLM and the Forest Service
managed most of this grazing activity, allowing almost 21.9 million AUMs
on almost 231 million acres, or more than 98 percent of the grazed lands.
The remaining eight agencies allowed almost 794,000 AUMs of grazing on
more than 4 million acres. While the agencies' grazing programs are
similar in that they offer private ranchers access to federal lands and
vegetation for their livestock, agencies manage their grazing programs
under different authorities and for different purposes.

BLM and the Forest Service Managed About 230.6 Million Acres for About
21.9 Million AUMs of Private Livestock Grazing in Fiscal Year 2004 to
Foster Economic Development

As table 1 shows, in fiscal year 2004, BLM and the Forest Service approved
a total of almost 21.9 million AUMs for grazing on more than 230.6 million
acres-BLM approved almost 12.7 million AUMs on more than 137.7 million
acres, and the Forest Service approved almost 9.2 million AUMs on more
than 92.9 million acres. Ranchers were billed for and used fewer AUMs-a
total of almost 13.7 million AUMs-primarily because of the continuing
drought in the western and southwestern states, according to agency
officials. While BLM maintains a list of historical AUMs-or grazing
privileges that have been reduced from historical amounts and are not
available to be used-these numbers do not affect the totals.

13The Forest Service data on the extent of grazing is for the grazing year
March 2004 to February 2005; the remaining agencies provided grazing data
for fiscal year 2004.

Table 1: Extent of Grazing in Fiscal Year 2004 on BLM and Forest Service
Lands, Acres and AUMs

                     Agency Acres AUMs approved AUMs billed

BLM state officesa

           Arizona             7,955,000          660,000             354,000 
         California            5,672,000          421,000             196,000 
          Colorado             6,593,000          655,000             311,000 
            Idaho              10,756,000        1,352,000            899,000 
           Montana             7,839,000         1,366,000          1,178,000 
         New Mexico            11,533,000        1,869,000          1,134,000 
           Nevada              39,331,000        2,129,000          1,075,000 
      Oregon/Washington        12,786,000        1,058,000            740,000 
            Utah               19,321,000        1,229,000            553,000 
           Wyoming             15,917,000        1,951,000          1,193,000 
          Subtotal            137,702,000c       12,691,000         7,634,000 

                                Forest Serviceb

           Eastern               75,000           35,000               34,000 
        Intermountain          24,107,000        2,979,000          2,164,000 
           Northern             8,268,000        1,095,000            539,000 
      Pacific Northwest        11,408,000         550,000             398,000 

      Pacific Southwest       12,353,000         486,000              374,000 
       Rocky Mountain         17,129,000        1,927,000           1,564,000 
          Southern              675,000           40,000               19,000 
        Southwestern          18,908,000        2,052,000             959,000 
          Subtotal            92,924,000        9,165,000           6,051,000 
            Total             230,626,000       21,856,000         13,685,000 

Source: BLM and Forest Service (data); GAO (analysis).

Note: Numbers may not total due to rounding.

aBLM has 12 state offices, 2 of which-the Eastern Office and the Alaska
Office-are not included here. BLM manages grazing under PRIA in the 11
states listed, which are managed by the 10 state offices.

bThe Forest Service is organized by regions, not states.

cBLM authorizes grazing on approximately 160 million acres of land, but
all the land may not be used for grazing in any given year. The number in
the table represents BLM's best estimate of the lands on which grazing was
billed.

As table 1 shows, BLM's and the Forest Service's responsibilities for
managing grazing varied considerably by state office or Forest Service
region. The BLM Nevada state office had the most grazing in fiscal year
2004, in terms of both acres and approved AUMs, while Montana had the

most grazing in terms of billed AUMs; the California state office had the
least grazing, in terms of both acres and approved AUMs. For the Forest
Service, the Intermountain Region, which includes Utah, Nevada, and
portions of Idaho and Wyoming, had the most grazing, while the Eastern and
Southern regions had the smallest amounts of grazing. Appendix III
contains the detailed extent of grazing for each BLM field office within
each state office and Forest Service administrative office.

Grazing is allowed on BLM and Forest Service lands for the purpose of
fostering economic development for private ranchers and ranching
communities by providing ranchers access to additional forage.
Particularly in the western states, where the agencies manage anywhere
from 30 to almost 85 percent of the land, access to federal forage
increases the total forage available to ranchers, enabling them to
increase the number of livestock they can support and sell. Under FLPMA,
the Taylor Grazing Act, and the Granger-Thye Act, BLM's and the Forest
Service's permits and leases are set for not more than 10 years and can be
renewed without competition at the end of that period, which gives the
permittee or lessee a priority position against others for receiving a
permit or lease-a position called "preference." While ranchers have
preference, they do not obtain title to federal lands through their
grazing permits and leases, nor do they have exclusive access to the
federal lands, which are managed for multiple purposes or uses.

The Remaining Eight Federal Agencies Managed About 794,000 AUMs of Grazing
on More Than 4 Million Acres in Fiscal Year 2004 to Help Them Achieve Land
Management Objectives

In fiscal year 2004, the National Park Service, Reclamation, U.S. Fish and
Wildlife Service, DOE, and DOD services managed about 794,000 AUMs of
grazing on more than 4 million acres of land. Table 2 shows the extent of
grazing.

Table 2: Extent of Grazing in Fiscal Year 2004 on Other Agencies' Lands,
Acres and AUMs

Number of parks, refuges, Agency projects, and installations Acresa AUMs
approved AUMs billed Interior DOD

        National Park Service          31 parks 1,580,000b   71,000    63,000 
             Reclamation            36 projects  737,000c    91,000    77,000 
U.S. Fish and Wildlife Service    94 refuges  740,000b   199,000   199,000 
              Subtotal                      161  3,054,000  361,000   339,000 
                 DOE                     1 site   291,000    13,000     6,000 

     Air Force         12 installations    277,000      102,000        89,000 
        Army           20 installations    201,000      126,000       122,000 
       Corps                64 projects    169,000      162,000       161,000 
        Navy            8 installations    16,000       30,000         28,000 
      Subtotal                      104    663,000      420,000       399,000 
       Total                        266   4,008,000     794,000       744,000 

Source: Agencies (data); GAO (analysis).

Note: Numbers may not total due to rounding.

aThe rate of AUMs per acre can vary, depending on the productivity of the
land and does not necessarily show overuse or underuse of land.

bThis total does not include about 2.7 million acres of National Park
Service land in Alaska that has about 17,000 AUMs approved for grazing or
almost 795,000 acres of U.S. Fish and Wildlife Service land in Alaska that
has about 12,000 AUMs approved for grazing. These lands are approved for
grazing of reindeer, and no fees are charged.

cThis total includes almost 499,000 acres of Reclamation land with about
47,000 AUMs approved and 41,000 billed AUMs that are managed by other
agencies. Of the 499,000 acres, BLM managed almost 172,000 acres and the
U.S. Fish and Wildlife Service managed almost 66,000 acres.

As table 2 shows, the extent of grazing on the eight agencies' lands
varied considerably in fiscal year 2004, with the National Park Service
managing grazing on about 1,580,000 acres, while the Navy managed almost
16,000 acres. In terms of approved AUMs, the U.S. Fish and Wildlife
Service managed the most-more than 199,000 AUMs-while DOE allowed about
13,000 AUMs.

The eight agencies presented in table 2 manage or allow grazing for
different purposes, as the following discussion details:

National Park Service. The agency is authorized to allow grazing within
any national park, monument, or reservation as long as such use is not
detrimental to the primary purpose for creating the park, monument, or

reservation. Agency regulations prohibit grazing except as (1)
specifically authorized by statute, (2) required under a reservation of
use rights arising from the acquisition of a tract of land, (3) required
in order to maintain a historic scene, or (4) conducted as an integral
part of a recreational activity. For example, in Virginia and North
Carolina, the agency allows grazing at Blue Ridge National Parkway-about
5,000 AUMs of cattle on more than 2,000 acres-to maintain a historic
scene. In contrast, at the Appomattox Court House National Historical
Park, the agency allowed grazing on almost 200 acres to maintain a
desirable grass level. Grazing is managed as a special park use, requiring
a permit, lease, concession, contract, or commercial use authorization.
Each park superintendent approves or disapproves requests for special park
uses, such as grazing, and can impose conditions to protect park resources
and values and visitors and the visitors' experience. In fiscal year 2004,
the National Park Service reported that grazing was permitted to occur at
31 of its parks, with Glen Canyon National Recreation Area, in Utah and
Arizona, accounting for the most acres-almost 666,000-and Point Reyes
National Seashore, in California, accounting for the most AUMs-about
18,500 AUMs on about 24,000 acres.

U.S. Fish and Wildlife Service. The National Wildlife Refuge System
Administration Act of 1966 authorizes various uses of U.S. Fish and
Wildlife Service lands, including grazing, as long as the agency
determines that such use is compatible with the major purposes for which
the refuge was established. The agency uses grazing as a tool to manage
habitat. For example, in the Anahuac, McFaddin, and Texas Point National
Wildlife Refuges, along the Texas Gulf Coast, the agency allowed livestock
grazing from October to April, the cool season of the year, to encourage
different types of marsh grasses, generate annuals, and increase
vegetative diversity, thereby opening up additional habitat for foraging
waterfowl. In fiscal year 2004, the U.S. Fish and Wildlife Service
reported that livestock grazing occurred on 94 of its refuges and wetland
management districts, ranging from 25 AUMs on 60 acres at Detroit Lakes
Wetland Management District in Minnesota to about 21,500 AUMs on 450,000
acres at the Charles M. Russell National Wildlife Refuge in Montana.

Reclamation. Reclamation allows its lands to be used for incidental
purposes, such as recreation and grazing, as long as such uses do not
interfere with the operation of the dams or irrigation works associated
with these projects. In general, Reclamation allows grazing on its project
lands when asked to do so by users, such as ranchers who have had
historical access to the lands or wildlife managers wanting to improve
habitat. For

example, the Albuquerque Area Office allows grazing on more than 19,000
acres in the Brantley and Avalon Reservoirs project area, thereby allowing
ranchers access to lands that they historically grazed. In fiscal year
2004, Reclamation reported that it permitted and leased lands for grazing
at 36 of its facilities in 16 area offices, with the agency managing some
of the permits and leases and other agencies, such as BLM, the U.S. Fish
and Wildlife Service, or local and state agencies managing additional
permits and leases under joint management agreements. For example, in
central Washington state, BLM manages grazing on more than 8,000 acres of
Reclamation land that is adjacent to BLM land in the Columbia Basin
Project. In the same area, the Washington Department of Fish and Wildlife
manages grazing on almost 18,000 acres of Reclamation land to improve
vegetation and thereby enhance bird habitat. In total, in fiscal year
2004, Reclamation issued permits and leases for about 91,000 AUMs of
grazing on almost 737,000 acres-almost 44,000 AUMs and about 238,000 acres
under Reclamation's management and about 47,000 AUMs and about 499,000
acres managed by agreement with other agencies.

DOE. The department allows grazing on only one site, the Idaho National
Laboratory. Under the Taylor Grazing Act, the Secretary of the Interior is
authorized, by order and with the approval of the relevant department, to
establish grazing districts of certain public domain lands that are not in
national forests, parks, or monuments. In Idaho, Interior, with the
agreement of DOE, issued such an order, and livestock grazing continues on
approximately 50 percent of the Idaho National Laboratory site. BLM
manages the land as part of its grazing program but is to follow the
security and land access requirements set by DOE.

DOD. Under 10 U.S.C. S: 2667, the Secretaries of the Army, Air Force, and
Navy are authorized to lease property under their control that is not
excess property, if it will promote national defense or be in the public
interest. The military services use this authority to lease rangelands on
military installations and bases for grazing, among other uses. For
example, the Air Force leases to nearby ranchers land that forms a buffer
around the Melrose Air Force Range at Cannon Air Force Base in New Mexico.
The buffer consists of rangelands surrounding target areas used in
training exercises and protects more developed areas from stray (unarmed)
bombs. According to Air Force staff, leasing the land to ranchers does not
hinder training exercises, but it does provide access to grazing for
neighboring landowners and to maintain rangeland, by keeping grass low, to
control fire. Similarly, Fort Hood in Texas allows grazing on lands used
for armored vehicle training maneuvers. The Army determined that grazing
cattle could

be compatible with training exercises, although uncertainty remains about
the intensity of grazing that can be allowed, given the need to let
vegetation recover from training exercises, and hence, reduce soil erosion
into nearby streams and reservoirs. Like the Army, Air Force, and Navy,
the Corps manages grazing on its lands under 10 U.S.C. S: 2667. In fiscal
year 2004, the DOD military services leased about 494,000 acres for
grazing, and the Corps leased about 169,000 acres.

Federal Agencies Spent at Least $144 Millionon Grazing Activities,
Although Some Agencies Do Not Track Expenditures for Grazing on Federal
Lands

Federal agencies spent at least $144.3 million in direct and indirect
expenditures to support grazing activities on federal lands in fiscal year
2004. The 10 federal agencies spent at least $135.9 million, of which the
Forest Service and BLM spent the majority of funds, about $132.5 million.
The 8 remaining agencies spent at least $3.4 million on their grazing
programs, but not all of the agencies could estimate their expenditures
because they do not conduct grazing as a major activity and therefore do
not specifically track grazing expenditures. The 10 agencies spent funds
on activities that directly supported grazing, such as managing permits
and leases, monitoring resource conditions on grazing allotments, assuring
permit and lease compliance, and implementing range improvements such as
developing water sources and constructing fences. The agencies also spent
funds on activities that indirectly supported grazing, such as management,
budget, and personnel. In addition to these 10 agencies' expenditures,
other federal agencies that do not have grazing programs spent at least
$8.4 million to support grazing on public lands. While some of these
agencies could identify their expenditures related to grazing on public
lands, not all agencies could do so because they do not distinguish
between work done on public and private lands. These agencies spent funds
on activities related to grazing, such as grazing litigation, threatened
and endangered species consultations for grazing plans, and the removal of
predatory or nuisance wildlife from grazing lands. Because some agencies
do not track their grazing expenditures on public lands specifically, the
expenditures presented are a conservative estimate of federal grazing
expenditures; expenditures would most likely be higher if these agencies
could provide estimates.

BLM and the Forest Service Spent About $132.5 Million on Direct, Indirect,
and Range Improvement Activities for Grazing Programs in Fiscal Year 2004

BLM and the Forest Service spent about $132.5 million to manage their
grazing programs in fiscal year 2004-BLM spent more than $58.3 million,
and the Forest Service spent almost $74.2 million. As shown in table 3,
the agencies spent these funds on both direct, indirect, and range
improvement activities. BLM has implemented a cost-management system that
identifies direct and indirect expenditures and used it to identify its
direct and indirect expenditures in fiscal year 2004. Unlike BLM, the
Forest Service does not have a cost-management system, but rather reports
expenditures for items in its budget, called budget line items.14 The
agency uses its Foundation Financial Information System to centrally track
and formally report expenditures. For fiscal year 2004, the Forest Service
used expenditure reports for grazing and related line items, in addition
to its WorkPlan system that shows its intended work plans for the fiscal
year, to identify the amount of expenditures.15

Table 3: Expenditures by BLM and the Forest Service for Direct, Indirect,
and Range Improvement Grazing Activities, Fiscal Year 2004

                              Dollars in millions

Number of BLM field offices and Forest Service administrative Agency
offices allowing grazing Expenditures

                                      BLM

                                  Direct $27.9

Indirect

Range improvement funds (both direct and indirect)

                       Subtotal 107 $58.3 Forest Servicea

14According to a Forest Service financial management official, the agency
has not implemented a cost-accounting system because it has been focused
on improving the agency's financial statements, which we previously
identified as having material control weaknesses.

15The Forest Service implemented a new work planning system, called
WorkPlan, in fiscal year 2004. The system allows forests and districts to
develop detailed plans, including personnel resources, vehicles, and other
resources, needed for conducting work on individual projects. The plans
are used to allocate budgets and are to be updated during the year to keep
the plans current.

(Continued From Previous Page)

Dollars in millions Range improvement funds (both direct and indirect)

                         Number of BLM field offices and    
                              Forest Service administrative 
                Agency             offices allowing grazing      Expenditures 
                Direct                                                   58.0 
              Indirect                                                   13.3 

                               Subtotal 99 $74.2

                                Total 206 $132.5

Source: BLM and Forest Service (data); GAO (analysis).

aThe Forest Service estimated direct expenditures from the Forest Service
grazing line item, its watershed and vegetation line item, and its General
Management and other cost pools. Because the watershed and vegetation line
item can be spent for other programs in addition to the grazing program,
the Forest Service allocated a portion (11 percent) of these expenditures
using WorkPlan, a tool used to estimate and plan fiscal year workloads by
program. To estimate the expenditures from its General Management and
other cost pools, the agency attributed a portion of the grazing line item
equal to the amount of funds allocated to the pools and attributed a share
of the watershed and vegetation line item equal to the allocated portion
(11 percent) of funds in the pools.

In fiscal year 2004, the agencies generally included the same activities
in reporting their expenditures. Both BLM and the Forest Service included
managing grazing permits and leases, monitoring resource conditions on
grazing allotments, conducting environmental assessments for allotments,
and managing grazing fees as direct expenditures. Both agencies included
expenditures that specifically related to grazing management, rather than
broader range management expenditures, because grazing activities are
distinct from more general rangeland management activities. According to
agency officials, many range management activities need to be conducted
whether or not grazing occurs. For example, monitoring rangeland
conditions through vegetation surveys supports work that the agencies
conduct to manage noxious weeds. While some noxious weeds may occur on
federal lands as a result of livestock grazing, some can be transported by
other means. Although both agencies spent funds on land management
planning to support their specific grazing plans and activities, neither
agency included land management planning expenditures. According to BLM
and Forest Service officials, land management planning and environmental
impact statements are important enough to be a separate direct expenditure
from grazing and would continue to occur if the agencies no longer
permitted or leased grazing activities on their lands. Furthermore,
according to agency officials, land management planning encompasses all
activities-including livestock grazing-conducted by BLM, at the field
office level on public lands, or by the Forest Service, at the national
forest level for all national forest system lands. Even if grazing

activities were not conducted, other range management activities, such as
oil and gas leasing and off-road vehicle use, would still need to be
planned and studied.

For indirect grazing activities in fiscal year 2004, BLM spent almost
$18.7 million, and the Forest Service spent an estimated $13.3 million.
Indirect activities are those that cannot be specifically attributed to
grazing because they also benefit other resource programs. These include
activities such as administrative activities, infrastructure, or technical
support.16 One method of allocating indirect expenditures is to pool the
activities and allocate the related expenditures across all the programs
that use the activities. BLM allocated its indirect expenditures using its
cost-management system. The system allocated expenditures for such
activities as management, state office expenditures, and BLM office
expenditures in fiscal year 2004. Because the Forest Service does not have
a cost-accounting system, it allocates its budget according to potential
indirect expenditures. The Forest Service has six cost pools, into which
it allocates a percent of each of its budget line items for the fiscal
year to be used to cover indirect expenditures during the year.17

BLM and the Forest Service also spent $14.6 million on range improvement
activities in fiscal year 2004. These funds are revenues from grazing fees
charged in 2003 and deposited as receipts in the agencies' range
improvement accounts. The agencies use the funds to pay for direct and
indirect activities related to range improvement projects that include
constructing fences, developing water sources such as tanks or
impoundments, and seeding to improve vegetation and forage amounts. The
expenditure of funds on these assets represents an investment in

16OMB defines those costs that can be considered indirect. We applied
these definitions to the expenditures supplied by the agencies. OMB,
Managerial Cost Accounting Concepts and Standards for the Federal
Government: Statement of Federal Financial Accounting Standards Number 4
(Washington, D.C.: July 31, 1995).

17The six cost pools are General Management, Public Communications,
Ongoing Business Services, Common Services, Office of Worker's
Compensation, and Unemployment Compensation Insurance. The General
Management pool and some of the activities in the Common Services pool are
considered direct or support rather than indirect costs. These are
included in the estimate of direct expenditures.

infrastructure assets that are the property of the United States.18 Under
federal financial management standards, both BLM and the Forest Service
are working to identify the value of these assets, which is currently
unknown.

The Remaining Eight Federal Agencies Spent at Least $3.4 Million on
Grazing Programs in Fiscal Year 2004, but They Do Not Track All
Expenditures

In fiscal year 2004, the National Park Service, U.S. Fish and Wildlife
Service, Reclamation, DOE, and the DOD services spent at least $3.4
million on their grazing programs, as shown in table 4. Because it
arranges with BLM to manage its grazing program, DOE incurs only
incidental expenditures related to grazing. Because the agencies use
grazing as a tool to support other management goals, they do not
specifically track grazing, and hence do not track direct or indirect
grazing expenditures. For this reason, the expenditures are the best
estimates of individuals who manage the grazing programs.

18In proposed regulations, BLM would allow cooperators (ranchers and
others), subject to valid existing rights, to share title with the United
States to permanent structural range improvements, such as fences, wells,
and pipelines, where authorization is granted after February 6, 2004, in
proportion to their contributions to the development and construction
costs.

Table 4: Estimated Expenditures by the National Park Service, U.S. Fish
and Wildlife Service, Reclamation, DOE, and DOD on Grazing Activities,
Fiscal Year 2004

Agency

             Number of parks, refuges, projects, and installations

Estimated expendituresa Interior DOD

                       National Park Service         31 parks        $410,000 
                                 Reclamation   36 projects             91,000 
              U.S. Fish and Wildlife Service    94 refuges         1,099,000b 
                                    Subtotal              161      $1,600,000 
                                         DOE           1 site           1,500 

                   Air Force            12 installations              377,000 
                        Army            20 installations              717,000 
                       Corps                 64 projects              672,000 
                        Navy             8 installations               39,000 
                    Subtotal                         104           $1,805,000 
                       Total                         266           $3,406,000 

Source: Agencies (data); GAO (analysis).

Note: Numbers may not total due to rounding.

aNot all offices provided an estimate.

bThis total does not include $9,000 of expenses at Yukon Delta National
Wildlife Refuge in Alaska for operations approved for nonfederal use for
grazing of reindeer; no fees are charged.

The field managers for these eight agencies identified the following
activities associated with grazing on federal lands: fence installation
and repair, cattle troughs, cattle guard installation, fertilizer,
personnel, security, monitoring and inspections, control of invasive
species and noxious weeds, and managing grazing leases. Generally, the
estimates are low because they do not include all expenditures-including
indirect expenditures-and several offices did not provide estimates.

Other Agencies Have Grazing-Related Activities and Expenditures of at
Least $8.4 Million, but Some Do Not Know Their Expenditures for Grazing on
Federal Lands

In addition to the 10 federal agencies' expenditures, other federal
agencies estimated that they spent $8.4 million on activities that are
related to grazing on federal lands. Agencies that have grazing-related
activities include the following:

o 	several USDA agencies that provide research, insurance, resource
management, and other agricultural services to farmers and ranchers on
both federal and private lands;

o 	Justice, the Interior's Office of the Solicitor, and USDA's Office of
General Counsel, which perform legal services for BLM and the Forest
Service;

o 	the National Oceanic and Atmospheric Administration's National Marine
Fisheries Service (NMFS) and the U.S. Fish and Wildlife Service, which
consult with agencies on threatened and endangered species;

o 	the U.S. Geological Survey (USGS), which provides research on resource
conditions on rangelands; and

o 	the Environmental Protection Agency, which provides grants to improve
watersheds that may include areas with resources degraded by grazing.

The agencies estimated, when possible, the share of their fiscal year 2004
expenditures for grazing-related activities on federal lands, as shown in
table 5.

Table 5: Expenditures for Grazing-Related Activities by Other Agencies on
Federal Lands, Fiscal Year 2004

                          Agency Activity Expenditures

Agricultural services USDA

Animal and Plant Health   Wildlife Services conducts control    $5,183,000 
                               projects (hunting and trapping)     
     Inspection Service      for nuisance species and predators.   
                                    Plant Protection and           
                            Quarantine conducts insect control on  
                                 western lands in particular       
                                and has a Mormon cricket and       
                              grasshopper program that targets     
                           treatments in infested areas to prevent 
                                         outbreaks.                

       Cooperative State     Conducts education and extension  Not availablea 
           Research,         services to help public agencies  
Education, and Extension   like BLM and the Forest Service  
                               and private landowners manage   
            Service               their range resources.       
                              Provides operating, ownership,   Not availablea 
      Farm Service Agency     and emergency loans to farmers   
                                and ranchers. Also provides    
                             disaster assistance to livestock  
                                 producers through various     
                                         programs.             

National Agricultural Statistics Conducts surveys of different farm
sectors, prices, and products, $105,500 b Service including ranching,
livestock, and cattle. Conducts specific surveys

to produce data needed to calculate federal grazing fee.

     Natural Resources      Works with private landowners to   Not availablea 
                           conserve soil, water, vegetation,   
    Conservation Service      and other resources. Manages     
                             programs to conserve wetlands,    
                              land (easements), and water.     
                          Provides insurance products that may Not availablea 
Risk Management Agency      apply to federal lands and      
                          tools for making resource decisions. 
                                Developing a Web tool to       
                               assist mangers in applying      
                            prescribed burns to rangelands.    

Subtotal agricultural services $5,183,000 b Legal services Subtotal legal
                        services $846,000 Consultations

    USDA Office of General   Provides legal advice and support for   $194,000 
                                     the Forest Service in          
           Counsel          managing its grazing lands and permits. 
Interior's Office of the  Provides legal advice and support for  $493,000d 
          Solicitorc                 agencies that manage           
                                       grazing programs.            
           Justice              Provides legal services such as               
                               litigating grazing-related cases.     $159,000

U.S. Fish and Wildlife   Conducts consultations to determine if   $549,000 
          Serviced                     grazing programs              
                             jeopardize terrestrial or freshwater    
                                  threatened and endangered          
                           species, or adversely modify or destroy   
                                      critical habitat.              
           NMFSd            Conducts consultations to determine if            
                                       grazing programs              $132,000
                           jeopardize ocean-dwelling and anadromous  
                                        threatened and               
                          endangered species, or adversely modify or 
                                  destroy critical habitat.          
Subtotal consultations                                            $681,000 

(Continued From Previous Page)

                          Agency Activity Expenditures

Research Other

            USGSe            Conducts research on the effects      $1,350,000 
                             of grazing on plant communities,  
                            including invasive species; runoff 
                              and erosion; select species or   
                              species groups; and ecosystem    
                            health, including riparian areas.  
    Agricultural Research       Conducts research on plant     Not availablea 
           Service          resources, forage, livestock, and  
                              grazing management, as well as   
                              natural resource problems such   
                                   as invasive species.        
Forest Service Research    Conducts integrated studies of                  
                              grazing on public lands, which         $368,000
                              involves effects of livestock    
                                  grazing on resources.        
      Subtotal research                                            $1,718,000 

Environmental Protection   Provides grant money to states   Not availablea 
                              under section 319 of the Clean   
            Agency          Water Act to improve watersheds by 
                                 reducing nonpoint source      
                              pollution, including increased   
                              runoff and sedimentation from    
                                    livestock grazing.         
     Total all activities                                         $8,428,000b 

Source: Agencies (data); GAO (analysis).

Note: Numbers may not total due to rounding.

aThese agencies could not distinguish their expenditures on private and
public lands.

bThe National Agricultural Statistics Service estimated its expenditures
to be $105,500, the full amount of which was reimbursed by BLM and the
Forest Service because the data produced are used to set grazing fees.
Therefore, these expenditures are not included in the total.

cThe Solicitor's expenditures include funds reimbursed by BLM for legal
services provided to the agency. According to BLM staff, because the
attorney provides services to BLM in general, the appropriate share of
expenditures that should be applied to grazing is difficult to estimate.
As a result, some of the Solicitor's funds may also be counted under BLM's
expenditures.

dThe U.S. Fish and Wildlife Service noted that fiscal year 2004 was the
first year that it implemented its cost-accounting system to capture these
costs, and it has not yet determined the level of accuracy that the system
will provide for distinguishing expenditures for various activities. While
NMFS did not use a cost-accounting system to determine its expenditures,
it estimated its expenditures using time estimates for specific employees
that worked on grazing consultations in 2004. NMFS reported these data for
the calendar year, not the fiscal year.

eUSGS estimated its fiscal year 2004 expenditures based on its 2005 budget
figures; according to an official, funding has been stable.

Agricultural services. As the table shows, in fiscal year 2004, the
largest amount of identified expenditures for grazing-related activities
went to agricultural services provided by USDA. The Animal and Plant
Health Inspection Service spent most of these funds to control nuisance
species and insects, such as Mormon crickets and grasshoppers, that affect
forage on federal lands. Not all the agencies identified as having
programs that might be used by ranchers with federal permits and leases
could separate out the funds they spent on public lands. For example, the
Natural Resources Conservation Service helps ranchers manage their soil,
water, and vegetation to prevent the resources from becoming degraded;
however,

because the agency focuses on ranchers, it cannot distinguish the work
that it performs on private land from work on federal lands.

Legal services. Justice attorneys represent the United States in cases
that go to court or settlement, while Interior's Office of the Solicitor
and USDA's Office of General Counsel provide legal advice to the agencies.
In addition to these expenditures, BLM and Forest Service staff provide
support work for litigation in the form of copying and preparing
administrative files and documents, but these expenditures are not tracked
separately from the agencies' other work. Legal services would include any
payment of attorney fees; however, none were paid in fiscal year 2004.
Attorney fees are usually paid by agencies, but in some cases would be
paid from the Department of Treasury's Judgment Fund.

Consultations. The federal agencies with grazing programs must consult, in
some cases, with the U.S. Fish and Wildlife Service and NMFS to determine
if their grazing programs pose any problem for threatened and endangered
species. The U.S. Fish and Wildlife Service consults with the agencies on
the potential effects to terrestrial animals and freshwater species, while
NMFS consults with the agencies on the potential effects to anadromous
fish-that is, fish that live in both fresh and saltwater.

Research. USGS has four centers that conduct research on the effects of
grazing on plant communities, including invasive plants; runoff and
erosion, and other hydrologic and soil conditions; select species or
species groups, including sage grouse, amphibians, grassland birds, and
bats; and ecosystem health, including riparian areas. The agency works
with federal land management agencies on these and related issues to
inform management actions and plans and to design and implement rangeland
monitoring and inventories. The Forest Service's Rocky Mountain and
Pacific Northwest research stations conduct integrated studies of the
effects of livestock grazing on lands and resources and assist national
forests and grasslands by providing them this information. Finally, USDA's
Agricultural Research Service has more than 100 laboratories in almost
every state. The agency conducts research on ecosystems and sustainable
management, plant resources, forage management, livestock management, and
management of pests and weeds. Because the agency's work benefits both the
livestock industry and public lands, the Agricultural Research Service
cannot estimate its expenditures related to grazing on federally managed
lands.

Environmental Protection Agency. The agency provides grants to states to
improve watersheds and water quality that has been impaired by nonpoint
sources of pollution, such as agricultural runoff. States use the funds to
develop projects to remove or decrease sources of pollution. For example,
New Mexico received funds to improve the Chama River and its tributaries,
and the Santa Fe National Forest participated by conducting different
vegetation and livestock management activities, such as fencing riparian
areas, developing alternative water sources in areas away from the river,
and ensuring the rotation of livestock into different pastures away from
the river. However, because many grazing areas include both federal and
nonfederal lands and because states are not required to track what type of
land is involved in a project, Environmental Protection Agency officials
stated that they cannot identify the funds that are spent on federal lands
that have been grazed.

Federal Agencies Collected About $21 Million in Grazing Receipts in Fiscal
Year 2004-Less Than One-Sixth of the Expenditures Needed to Manage Grazing

The 10 federal agencies collected a total of about $21 million from fees
charged for their grazing permits and leases in fiscal year 2004-less than
one-sixth of the expenditures needed to manage grazing; the largest amount
of funds, $17.5 million, was collected by BLM and the Forest Service. From
the total amount, the agencies distributed almost $5.7 million to states
and counties, deposited almost $3.8 million in the Treasury as
miscellaneous receipts, and deposited at least $11.7 million to separate
Treasury accounts to be further appropriated or used by the agencies for
their various programs. In addition, the DOD services received payment
in-kind valued at almost $1.4 million to offset grazing fees, and
Reclamation and the U.S. Fish and Wildlife Service also received in-kind
services. Reclamation received services valued at about $1,100, and the
U.S. Fish and Wildlife Service received services of unknown value. The
distribution of funds depends on the agencies' different authorities.

BLM and the Forest Service Collected About $17.5 Million in Grazing
Receipts in Fiscal Year 2004, Distributed About $4.8 Million to States and
Counties, and Deposited About $3.7 Million to the General Fund of the
Treasury and Almost $8.8 Million to Range Improvement Funds

BLM and the Forest Service collected about $17.5 million, or 83 percent,
of all grazing receipts federal agencies collected in fiscal year 2004. As
shown in table 6, depending on the authorities under which the receipts
were raised, the funds were distributed to the states, deposited into the
general fund of the Treasury, and deposited into special accounts in the
Treasury for further appropriation and agency use, including use for range
improvement.

       Table 6: BLM and Forest Service Grazing Receipts, Fiscal Year 2004

                              Dollars in millions

                            Disposition of receipts

Receipts deposited

Receipts deposited in Treasury range

Receipts distributed to states and counties

        in the general fund, Agency Receipts Treasury improvement funds

                           BLM $11.8 $2.2 $3.7 $5.9a

Forest Service 5.7 2.6 Unknown

                           Total $17.5 $4.8 $3.7 $8.8

Source: Agencies (data); GAO (analysis).

aIn fiscal year 2004, BLM also deposited $1.2 million in certain mineral
receipts as funds for range improvements. The total funds deposited were
therefore $7.1 million.

Under FLPMA, 50 percent or $10 million, whichever is greater, of fees
collected in a year for grazing on BLM lands managed under the Taylor
Grazing Act and the Act of August 28, 1937, and on Forest Service land in
the 16 western states, are to be credited to a special fund receipt
account in the Treasury for range rehabilitation, protection, and
improvements, called the range improvement fund. Half of this account is
authorized to be appropriated for use in the district, region, or national
forest from which it was generated, and the remaining half is to be used
for range rehabilitation, protection, and improvement as the Secretary
directs. According to agency officials, the agencies distribute 50 percent
of the actual grazing receipts from their individual grazing accounts to
their respective range

improvement funds. As table 6 shows, in fiscal year 2004, BLM distributed
about $5.9 million to its range improvement fund, and the Forest Service
distributed about $2.9 million to its range improvement fund, for a total
of about $8.8 million. BLM distributes grazing fees from four accounts,
according to where the funds were collected-within or outside a grazing
district or from grasslands. It also deposits certain mineral receipts
into its range improvement fund; in fiscal year 2004, it deposited $1.2
million in mineral receipts. The Forest Service deposits receipts and
distributes funds from its National Forest Fund that also contains
receipts for other activities on forest lands such as timber harvest.

In addition to the receipts distributed to range improvement-under the
Taylor Grazing Act, the Act of August 28, 1937, and the Bankhead-Jones
Farm Tenant Act-BLM also distributes receipts from the four accounts to
states and the Treasury, according to whether the fees were collected
within or outside a grazing district or from grasslands.19 For lands
within grazing districts-those lands on which grazing is permitted-BLM
distributes 12.5 percent of receipts to the states in which the grazing
districts are situated and deposits the remaining receipts in the Treasury
as miscellaneous receipts. For lands outside of grazing districts-those
lands that are leased-BLM distributes 50 percent of the receipts to the
states and does not return any funds to the Treasury as miscellaneous
receipts. For grasslands, BLM distributes 50 percent of receipts to the
range improvement fund, 25 percent to states, and 25 percent to the
Treasury as miscellaneous receipts. The states are to distribute the funds
to the counties in which the lands are permitted or leased for school or
road purposes. In 2004, the agency distributed more than $2.2 million to
the states and counties and deposited more than $3.7 million in the
Treasury.

Under the Act of May 23, 1983, the Forest Service distributes 25 percent
of all of its receipts-timber, recreation, grazing, and others-to states
for schools and roads. Alternatively, the states can receive funds under
the Secure Rural Schools and Community Self-Determination Act of 2000.
This act sought to stabilize payments to states in which shared revenues
from the federal lands, such as from timber, were dwindling. The act
allows some counties and states to choose a payment equal to the average
of the three highest payments for Forest Service receipts during a
particular eligibility period. As a result, the Forest Service makes a mix
of payments,

19BLM also distributes funds from certain lands in Oregon and California
under the Act of August 28, 1937, 50 Stat. 875.

depending on what each county has chosen. In 2004, the Forest Service
estimated that it distributed more than $2.6 million in grazing receipts
to the states and counties; because the Forest Service deposits many types
of receipts into the Treasury, it was unable to estimate the amount of
grazing funds deposited in the Treasury as miscellaneous receipts.

National Park Service, U.S. Fish and Wildlife Service, Reclamation, DOE,
and DOD Services Collected More Than $3.7 Million in Grazing Receipts in
Fiscal Year 2004 and Distributed About $855,000 to States and Counties,
Deposited About $65,000 in the General Fund of the Treasury, and Deposited
at Least $2.9 Million in Separate Treasury Accounts

Grazing receipts collected by the National Park Service, U.S. Fish and
Wildlife Service, Reclamation, and the DOD services totaled more than $3.7
million in fiscal year 2004, with the U.S. Fish and Wildlife Service
generating the largest amount, more than $1.0 million. In addition, the
agency received services in-kind of an unknown value. Under the
interagency agreement between DOE and BLM, BLM retains grazing fees
collected at DOE's Idaho National Laboratory. The DOD services-which
combined received a total of more than $2.0 million from fees-also
received almost $1.4 million in payments in-kind that offset grazing fees.
The agencies have different authorities for distributing the receipts
collected from use of their lands. Table 7 shows the results of the
distribution in fiscal year 2004. Of the $3.7 million in total receipts,
more than $855,000 was distributed-by three of the eight agencies-to the
states or counties in which the receipts were collected in fiscal year
2004. Two agencies deposited about $65,200 in the general fund of the
Treasury as miscellaneous receipts, and each of the agencies deposited
varying portions of the receipts for their programs.20

20The amounts distributed and deposited are greater than the amounts
collected because the DOD military services have reimbursable programs in
which they can collect and keep funds and use them to reimburse or fund
their grazing and agricultural programs. The amounts spent do not have to
equal the amount collected in any given year.

Table 7: National Park Service, U.S. Fish and Wildlife Service,
Reclamation, DOE, and DOD Services Grazing Receipts, Fiscal Year 2004

                            Disposition of receipts

Receipts deposited in special Treasury

                                Agency Receipts

                                  Receipts distributed to states and counties

                             Receipts deposited in

the general fund, Treasury

accounts for agency programs Interior DODe Total without offsets
$3,708,000 $855,000 $65,200 $2,952,000

        National Park Service        $196,000     $800    $2,500     $192,000 
             Reclamation             478,000a       0        0       478,000b 
    U.S. Fish and Wildlife Service   1,029,000  541,000c     0       488,000c 
               Subtotal             $1,702,000  $542,000  $2,500   $1,158,000 
                 DOE                          d                   

            Air Force             $663,000        0         0        $773,000 
    Payment in-kind (offsets)    (300,000)                        
              Army                706,000         0         0         941,000 
    Payment in-kind (offsets)    (211,000)                        
              Corps               487,000      313,000    62,700       42,000 
    Payment in-kind (offsets)    (301,000)                        
              Navy                150,000         0         0          39,000 
    Payment in-kind (offsets)    (562,000)                        
            Subtotal             $2,006,000    $313,000  $62,700   $1,794,000 
        Subtotal offsets        ($1,375,000)                      

Total offsets ($1,375,000)

Total with offsets $5,083,000 $855,000 $65,200 $2,952,000

Source: Agencies (data); GAO (analysis).

Note: Numbers may not total due to rounding.

aOf the total, about $476,600 was collected as cash receipts, and about
$1,100 was provided as services in-kind to offset fees. Of the $476,600,
Reclamation collected more than $303,300, and the agencies that manage
grazing permits and leases on Reclamation lands collected and distributed
almost $173,300 to Reclamation. In addition to the $173,300 that they
distributed to Reclamation, the agencies that manage grazing permits and
leases for Reclamation collected and retained almost $108,500, for a total
of almost $282,000.

bOf the $476,600 collected by Reclamation in cash receipts, about $188,000
was deposited into the Reclamation Fund, and about $279,200 was retained
by Reclamation to repay projects; agency officials could not explain where
about $9,400 was credited.

cThe U.S. Fish and Wildlife Service disburses all receipts for activities
such as grazing, forest products, oil and gas, sand and gravel, and others
from its National Wildlife Refuge Fund. Because the agency cannot separate
out the disbursed funds by type, such as grazing, we used the percent that
grazing funds made up of total funds to show the distribution. Grazing
funds were 16 percent of the total funds.

dDOE has an agreement with BLM to manage its grazing and therefore the
grazing receipts gathered are included in BLM's totals.

eThe military services' programs are reimbursable in that the services
collect funds and then use those funds to reimburse or pay for program
expenditures.

National Park Service. The National Park Service has the authority to
recover its costs of providing services associated with its special-use
expenditures. These reimbursements are to be credited to the current
appropriation. Under National Park Service guidance, each national park
retains funds to reimburse its expenditures for managing grazing and is
responsible for calculating the amount of funding that it can recover.21
In fiscal year 2004, the parks retained about 98 percent of their grazing
receipts and distributed about 1 percent to the Treasury. Two parks-Blue
Ridge National Parkway and Point Reyes National Seashore-gathered 75
percent, or about $146,000, of the total receipts. In addition to the
amounts retained by the parks, the City of Rocks National Reserve in Idaho
distributed about $800 to the state in fiscal year 2004 under a
cost-sharing arrangement.

U.S. Fish and Wildlife Service. Under the Refuge Revenue Sharing Act of
1935, as amended, the U.S. Fish and Wildlife Service deposits grazing
receipts-as well as receipts it gathers for other uses of its lands-into a
separate Treasury account called the National Wildlife Refuge Fund. The
funds deposited remain available until expended, without further
appropriation, and the Secretary may pay necessary expenditures incurred
by the U.S. Fish and Wildlife Service from the account. The act also
requires the agency to make payments to counties to offset tax losses for
the purchase of fee title lands,22 based on a formula contained in the law
that entitles counties to the greater of three amounts: (1) $0.75
multiplied by the total acres of fee title land in the county; (2)
three-quarters of 1 percent of the fair market value of the fee title land
in that county; or (3) 25 percent of the net receipts collected by the
agency at that unit. The Secretary is also required to pay 25 percent of
the net receipts collected on lands reserved from the public domain. In
practice, the agency retains a portion of all receipts from its lands to
pay for various administrative and

21In a recent GAO report, we found inconsistencies in the cost recovery
methods used by parks for some of their special use permits, the same type
of permit used for grazing activities. GAO, National Park Service:
Revenues Could Increase by Charging Allowed Fees for Some Special Use
Permits, GAO-05-410 (Washington, D.C.: May 6, 2005).

22We use fee title land to refer to land that was acquired by the United
States and is managed by the U.S. Fish and Wildlife Service.

refuge expenditures and provides the remainder to the counties. In fiscal
year 2004, the agency collected more than $6 million in receipts for all
permitted uses on its lands; and about 16 percent of the receipts were
grazing receipts. After the agency retained $3.1 million for its use, it
had about $3.5 million to pay to the counties. Because grazing receipts
collected in fiscal year 2004 represented about 16 percent of total
receipts, we estimate that the U.S. Fish and Wildlife Service retained
about $488,000 for its refuge system administration and distributed about
$541,000 to counties.

Reclamation. Reclamation credits revenues generated from grazing leases in
a number of different ways. For example, under specific project
authorizations, Reclamation retains receipts to repay projects or deposits
funds to be appropriated for future projects. Under Reclamation's
agreements with the agencies that manage leases on its land, grazing fees
will be deposited into a Treasury account. When authorized by Reclamation,
the fees may remain with the managing agency to serve as reimbursement. In
fiscal year 2004, of the total amount collected for grazing on Reclamation
land, about $303,300 came from grazing leases that Reclamation manages and
about $173,300 came from leases managed by other agencies; the agency also
received about $1,100 in services in-kind to offset fees. Reclamation
deposited about $188,000 in the Reclamation Fund in the Treasury and
retained about $279,200 to repay projects (agency officials could not
explain into which of these accounts the remaining $9,400 was deposited).
The other agencies that manage grazing leases on Reclamation land kept
about $108,500 in grazing receipts.

DOD. The Army, Air Force, and Navy do not return grazing receipts to the
states or the Treasury, while the Corps is required to deposit all of its
receipts-for recreation, grazing, or other leases of lands surrounding its
water projects-in the Treasury; the Secretary of the Treasury is then
required to return 75 percent of these receipts to the states in which the
lands are located. The Army, Corps, Air Force, and Navy are authorized to
retain and spend funds to cover the administrative expenses of their
grazing programs and to cover the financing of multiple land use

management programs at any of their installations.23 The Corps district
offices began retaining and managing 10 percent of their receipts for
administrative expenses in fiscal year 2004; agencywide, these receipts
totaled almost $42,000. Under their leasing authorities, the Army, Corps,
Air Force, and Navy collected more than $3.7 million in receipts and
received payments in-kind valued at about $1.4 million to offset fees. The
DOD services offset fees by allowing the lessees to work on the grazing
lands to pay for a portion or all of the lease. For example, some of the
grazing programs at DOD installations, projects, and bases allow the
lessees to maintain fences or mow the lands, in addition to grazing, to
reduce vegetation. The value of such services-and therefore the offset
value-is either estimated by the staff in charge of grazing programs based
on prior expenditures, prices from the Natural Resources Conservation
Service, or bids submitted by the ranchers.

Grazing Fees Charged by Federal Agencies, Western States, and Private
Ranchers Varied Widely, Depending on the Purpose of the Fee and the
Approach Taken to Set It

Fees charged in 2004 by the 10 federal agencies, as well as state land
agencies and private ranchers, varied widely, depending on the purpose for
which the fees were established and the approach to setting the fee.24 On
BLM and Forest Service lands in the 11 western states, the grazing fee was
$1.43 per AUM, while the fees on other federal lands varied from $0.29 to
over $112 per AUM. In part, the BLM and Forest Service fee, which was
initially set by legislation and was extended by executive order, enables
ranchers to stay in production by keeping fees low to account for
conditions in the livestock market. Most other federal agencies generally
charge a fee based on competitive methods or set to obtain a market price
for the forage on their lands, and some of them also seek to recover
expenditures for their grazing programs. Similarly, state land offices in
the 17 western states and private ranchers seek market value for grazing
on their lands; the state agencies charged from $1.35 to $80 per AUM,
while

23The agencies hold the funds in their suspense accounts until the funds
can be either credited or obligated to the services' respective grazing
programs. A recent GAO report discussed accounting weaknesses related to
the accounts. GAO, DOD Problem Disbursements: Long-standing Accounting
Weaknesses Result in Inaccurate Records and Substantial Write-offs,
GAO-05-521 (Washington, D.C.: June 2, 2005). To improve accountability, in
July 2005, the DOD Deputy Chief Financial Officer directed that specific
suspense subaccounts be used to capture receipts from grazing leases.

24Grazing fees for BLM and the Forest Service are for the grazing year
(March to February). All other federal agencies reported fees for the
fiscal year. States predominantly reported fees for the fiscal year,
although some reported fees for the calendar year. Private ranchers' fees
are reported for the calendar year.

the average price private ranchers charged ranged from $8 per AUM in
Arizona and Oklahoma to $23 per AUM in Nebraska. If the BLM and the Forest
Service were to charge a fee for the purpose of recovering their
expenditures, they could have charged up to $7.64 per AUM and $12.26 per
AUM, respectively, in 2004. If they were to charge a market-based fee, the
fee could vary but would likely not equal private or state fees. The
prices charged by other federal agencies, states, and private ranchers may
vary because of factors, such as range productivity, services provided by
the landowner, and access to land.

BLM and Forest Service Grazing Fee in Western States Is Lower Than Fees
Charged by Other Agencies, States, and Ranchers Because It Was Established
to Support the Western Livestock Industry

The grazing fee BLM and the Forest Service charge in western states is
based on a formula that was originally established by PRIA to, among other
things, prevent economic disruption and harm to the western livestock
industry; the formula expired after 7 years but was extended indefinitely
by Executive Order 12548.25 Federal grazing fees are set using a formula
to achieve multiple conflicting objectives, including achieving fair
market value; recovering federal expenditures for the program; and
treating different parties such as ranchers, the public, and other users
of public lands equitably. As a result, the fee produced by the formula is
generally lower than the fees charged by the other agencies, states, and
private ranchers. Table 8 shows the fees charged by each agency, state,
and private ranchers, as well as the approach to setting the fee-either a
formula or a market-based approach. None of the federal or state agencies
use an approach that strictly recovers their agencies' administrative or
management expenditures.

25The Taylor Grazing Act directs the Secretaries of Agriculture and the
Interior to charge "reasonable fees." 43 U.S.C. S: 315(b). A federal
district court has determined that FLPMA did not alter this objective. See
Natural Resources Defense Council v. Hodel, No. S-86-0548, slip op. at 3-4
(E.D. Cal. Oct. 13, 1987). The preamble to FLPMA states that it is the
policy of the United States to receive fair market value for the use of
public lands. However, FLPMA specially instructs the Secretaries of
Agriculture and the Interior to determine a fee that is "equitable to the
United States and to the holders of grazing permits and leases," which
takes into consideration the costs of production along with other factors
that may relate to the reasonableness of the fee. 43 U.S.C. S: 1751(a).
The IOAA similarly provides that fairness, public policy interests, and
other interests and relevant factors are to be considered in establishing
a fee.

Table 8: Fees Charged by Federal Agencies, State Land Agencies, and
Private Ranchers, 2004

Average fee charged Range of fees charged per AUM (or Agency per AUM (or
equivalent)a equivalent)a Approach to setting fee

                            Interior USDA DOD States

            BLM                         b $1.43    Executive order-formula    
National Park Service  $1.35 to $7.00   4.30 Fixed prices and market value 
                           1.50 to 25.00        
                             per acre           
        Reclamation        1.27 to 56.46  10.93 Market value and fixed prices 
U.S. Fish and Wildlife  0.29 to 34.44  11.24   Market value and negotiated 
          Service                                                      prices 

Forest Service-16 western states            b 1.43 Executive order-formula 
Forest Service-grasslands                   b 1.52 Formula                 
Forest Service-eastern states    2.47 to 5.04    b      Formula and market 
                                                                        value 
DOE                                         b 1.43 BLM fee-formula         

Air Force                  1.35 to 26.67c        15.49        Market value 
Army                      0.99 to 66.09 c        19.10        Market value 
Corps                     0.82 to 112.50c         6.22        Market value 
Navy                      10.42 to 97.49c        32.60        Market value 

     Arizona                    b         2.23  Market-based appraisal with   
                                                           annual             
                                                         adjustment           
    California      1.35 to 12.50            b Market based on average rates  
     Colorado        6.65 to 8.91            b      Market-based formula      
      Idaho                     b         5.15 Formula similar to federal fee 
      Kansas                    d            d               d                
     Montana        5.48 to 80.00            b    Market with minimum bid     
     Nebraska      16.00 to 28.00            b    Market with minimum bid     
    New Mexico  0.71 to 10.15 per            b    Market with minimum bid     
                             acre              
      Nevada                    d            d               d                
North Dakota 1.73 to 19.69 per            b    Market with minimum bid     
                             acre              
     Oklahoma       7.00 to 16.00            b    Market with minimum bid     
      Oregon                    b         4.32  Formula based on production   
                                                          factors             
South Dakota 3.00 to 56.00 per            b    Market with minimum bid     
                             acre              
      Texas         4.16 to 12.50            b     Market-based appraisal     
       Utah                     b 1.43 or 2.35 Formula similar to federal fee 
                                b 5.41 or 7.76        Market-based formula or 
    Washington                                                  formula based 
                                                   on production factors      

(Continued From Previous Page)

                                         Average fee        
                                         charged            
                           Range of fees        per AUM (or 
                                 charged                    
Agency                    per AUM (or       equivalent)a       Approach to 
                            equivalent)a                          setting fee 
Wyoming                             b               4.13 Market-based      
                                                            formula           
Private                                                                    
ranchers-17                                              
statese                 8.00 to 23.00              13.40 Market value

Sources: GAO's analysis of data provided by 10 federal agencies, 17 state
agencies, and USDA's National Agricultural Statistics Service.

Note: The 11 western states used to calculate the BLM and Forest Service
fee are Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico,
Oregon, Utah, Washington, and Wyoming. The 9 western and Great Plains
states used to calculate the Forest Service grassland fee are Colorado,
Kansas, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas,
and Wyoming.

aFor permits and leases that are competitively bid, a total amount is
often bid. In such cases, we divided that total by the amount of AUMs in
the permit or lease to determine an equivalent fee per AUM.

bData are not applicable or available.

cThe ranges reported for the Army, Corps, Air Force, and Navy have been
converted by dividing the total receipts plus offsets by the number of
AUMs reported. The ranges are based on average lease prices for the
installations, bases, and projects.

dKansas and Nevada do not manage grazing on state trust lands and
therefore did not provide fee information.

eThe private rancher fees in the 17 states are calculated using AUM and
per head data, adjusted. The formula is (AUM + per head)/2.

As shown in table 8, the fee BLM and the Forest Service charged for the
western states in 2004 was $1.43 per AUM. The fee, which is set for each
upcoming grazing year (March to February), is produced by a formula that
consists of a $1.23 base value, multiplied by the sum of three indexes
that are calculated each year by USDA's National Agricultural Statistics
Service.26 These indexes are based on data collected in the agency's
livestock, prices, and cattle surveys. In effect, the fee is adjusted to
reflect ranchers' ability to pay. The $1.23 base value represents the
difference between the costs of conducting ranching business on private
and public lands,27 as computed in a 1966 study of 10,000 ranching
individuals in the western states. The three indexes are the following:

26The exact formula is: Fee = $1.23 x (FVI +BCPI - PPI)/100. The data used
to calculate the fee are from the year prior to the year when the fee is
charged. For example, the 2004 fee is based on data from 2003.

27The base was calculated with the premise that the cost of conducting
livestock grazing on private and public lands should be equal. Under this
premise, the $1.23 base was calculated by totaling the costs of conducting
livestock grazing on private lands, including grazing fees, and
subtracting the total cost of conducting business on public lands,
excluding grazing fees.

o 	Forage Value Index (FVI). This index is based on the weighted average
estimate of the annual rental charge for cattle on private rangelands in
11 western states.

o 	Beef Cattle Price Index (BCPI). This index is based on the weighted
average selling price for beef cattle in the 11 western states.

o 	Prices Paid Index (PPI). This index includes select adjusted components
from USDA's Index of Prices Paid by Farmers for Goods and Services. The
components include items such as fuel, tractors and machinery, interest,
and farm wage rates.

Under both PRIA and the executive order, increases and decreases in the
fee are limited to 25 percent per year, and under the executive order, the
fee cannot drop below $1.35 per AUM.

The Forest Service's fees for grazing on national grasslands and eastern
forests differ from the fee charged in its forests in the 16 western
states. The fee charged for grasslands uses a formula similar to the
western grazing fee, but with a different base value that recognizes the
different costs for managing national forests versus national grasslands.
The fee charged for grazing in the eastern forests is based on a formula
with a noncompetitively established base value adjusted by the current
period's hay price index, less the value of any range improvements
required by the agency. The 2004 fee for grasslands was $1.52 per AUM, and
the fee for eastern forests ranged from $2.47 per AUM in Florida to $5.04
per AUM in the northeastern states for noncompetitive permits. In
addition, the Forest Service puts some permits up for competitive bidding
in the eastern states.

Appendix IV discusses the BLM and Forest Service fee and formula first
established under PRIA in more detail, the history of the federal grazing
fee, and the results of studies conducted over the years to recommend
alternative approaches to charging fees.

U.S. Fish and Wildlife In contrast to the fee charged by BLM and the
Forest Service for grazing on Service, Reclamation, and western lands, the
National Park Service, U.S. Fish and Wildlife Service, DOD Services
Generally Set Reclamation, and DOD services are required or directed to
set fees that

reflect, or come close to, market value. The agencies do not have oneFees
at, or Close to, Market uniform approach to setting a grazing fee: some of
the agencies, such as the Value Air Force and National Park Service,
charge per acre; and others, such as

the Corps, receive a total bid price for a pasture. To achieve a fair
market

value, in some instances, the agencies use a competitive bidding process
that involves notifying the public of the opportunity to permit or lease a
grazing pasture, the acceptance of sealed bids, and the selection of the
highest bid. In other instances, the agencies conduct a market appraisal
of a grazing property, or use an average prevailing rate for the local
area, and set a fee based on those values. Consequently, as the following
discussion shows, the prices that the agencies charge vary widely, from as
low as $0.29 per AUM to more than $112.50 per AUM.28

National Park Service. The fees charged for grazing in fiscal year 2004
ranged from $1.35 to $7 per AUM and $1.50 to $25 per acre. National Park
Service guidance directs parks to charge fair market value for special
uses such as grazing, unless otherwise directed by law. The fees charged
in fiscal year 2004, which were set by individual parks or park units,
included some fees set at market prices and others that were negotiated or
fixed. The lowest fee per AUM, $1.35, was charged by several parks,
including Black Canyon of the Gunnison National Park in Colorado and
Capitol Reef National Park in Utah. The highest fee per AUM, $7, was
charged by Point Reyes National Seashore, in northern California. That
park used an independent appraisal of its lands to establish the grazing
fees. The lowest per acre fee in fiscal year 2004, $1.50 per acre, was
negotiated at the Buffalo National River in Arkansas. The highest per acre
fee, $25, was charged at several parks, including Minuteman Missile
National Historic Site in South Dakota, which set its fee based on average
local rates, and Eisenhower National Historic Site and Gettysburg National
Military Park in Pennsylvania, which fixed their grazing fees, also based
on average local rates. Similarly, Blue Ridge National Parkway, in
Virginia and North Carolina, which accounted for just over 50 percent of
total Park Service livestock grazing permits in fiscal year 2004, charged
a rate of $10 per acre for each of its 212 permits. The fee was
established using values in a 2002 survey that the park's staff conducted
of other National Park Service field offices that administer agricultural
programs, as well as market-rate information for grazing in the vicinity
of the parkway that the park staff gathered from county extension and
other agricultural offices.

U.S. Fish and Wildlife Service. The grazing fees charged in fiscal year
2004 were, for the most part, established using market-value prices,
including prices set by USDA's National Agricultural Statistics Service.
Prices ranged

28For fees that are competitive, a total amount is bid. In such cases, we
divided that total by the amount of AUMs in the permit or lease to
determine an equivalent fee per AUM.

from $0.29 per AUM to $34.44 per AUM; both fees were based on competitive
bids for grazing permits at the Sand Lake Wetland Management District in
South Dakota, where access to small sites and forage conditions can vary
greatly. Under U.S. Fish and Wildlife Service regulations, refuges are to
charge a fee for the grant of privileges or products taken from refuges
that is commensurate with fees charged for similar privately granted
privileges or products, or with local market prices. To establish the fees
charged in fiscal year 2004, most refuges-particularly those in western
states-issued permits at the market rate, including the USDA rate. For
example, the fee charged at the refuge with the largest amount of grazing,
the Charles M. Russell National Wildlife Refuge in Montana, averaged
$14.76 per AUM. A few refuges did not use a market value fee but instead
negotiated the grazing fee with the permittee. For example, managers at
the Hutton Lake National Wildlife Refuge in Wyoming negotiated a fee of
$8.80 per AUM, based on the USDA rate, less services for fencing and
irrigation.

Reclamation. In fiscal year 2004, the fees charged ranged from $1.27 per
AUM to $56.46 per AUM. Reclamation guidance directs the agency to enter
into permits and leases using competitive means when there is likely to be
demand from more than one party, but permits and leases may be negotiated
when it is in the best interest of the United States or if no competition
is present. In fiscal year 2004, while the majority of Reclamation's area
offices set grazing fees using competitive approaches, or other approaches
that establish a market price, some of the offices used fixed fees or
negotiated with local ranchers to agree on a fee. For example, the Wyoming
Area Office, which manages several projects in and around the state of
Wyoming, used competitive bidding that opened with a minimum bid. The area
office staff set the minimum bid using the average private lease rates in
the state, as provided by USDA. One area office also used a discounted
lease method, in which the office used an average private lease rate for
the area and discounted it for factors such as multiple uses of the
lands.29 When area offices charged fixed fees, they generally set

29Reclamation area offices used different market-based approaches to set
fees, including appraisals, a competitive method with a minimum bid, a
limited method, and a discounted method. To establish market prices in
instances in which competition is limited to ranchers that have access to
the parcels involved, Reclamation area offices use a "limited" market
approach to set fees, in which a permit or lease is competitively bid
among the limited number of ranchers who have direct access to the grazing
allotment. In those cases in which only one rancher has access to
Reclamation land, the area offices may offer the permit or lease to the
rancher at the minimum fee.

them at historic levels. For example, the Lahontan Basin Area Office,
which manages Reclamation activities in the Lahontan Basin Area in
northern Nevada and eastern California, manages 56 grazing permits and
leases that were inherited from local irrigation districts and charged the
same fee in fiscal year 2004 as the irrigation offices charged in the
past.

DOE. In its agreement with DOE to manage on Idaho National Laboratory
land, BLM charges its current fee for grazing on DOE lands.

DOD. In fiscal year 2004, the Army, Corps, Air Force, and Navy, offered
the majority of their leases as competitive bids. The bids ranged from an
average of $0.82 to $112.50 per AUM. Under the laws and regulations for
grazing on lands managed by the services, their lands may be leased for up
to 5 years and payment for a lease is generally to be fair market value,
although the payment can be made through services in-kind. The DOD
services may accept less than fair market value under certain
circumstances when it is determined that a public interest will be served.
For example, Army officials recently negotiated a new 5-year lease for
grazing at Fort Hood (in Texas) with a group of cattlemen that included
some previous landowners. The Army determined that, although it had no
legal obligation to continue leasing only to this group, its relationship
with the neighboring ranchers helped to sustain its mission, meet its
environmental stewardship responsibilities, and maintain its good
relations with the community. In April 2005, the Army negotiated a grazing
price that was 40 percent lower than the appraised value, pending a new
appraisal that explicitly considered the unique military circumstances of
grazing on the installation. The new appraisal, completed in August 2005,
valued the lease at a price per animal unit that is 30 percent less than
the fair market value assessed for other, similar grazing parcels to
account for such unique military circumstances.

See appendix V for details of federal grazing fees charged by these
agencies.

Private Ranchers and State Fees charged by private ranchers and state land
agencies are higher than Land Agencies Generally Set the BLM and Forest
Service fees because, generally, ranchers and state Fees at Market Values
to agencies seek to generate grazing revenues by charging a price that

represents market value for that land and/or the services provided.
TheGenerate Revenues average fee private ranchers charged in 2004 in the
11 western states was

$13.30 per AUM and $13.80 per head of livestock,30 which represents market
value, or the price that ranchers are willing to pay and receive for
privately owned grazing lands in western states. This fee is determined
annually through USDA surveys of private ranchers in 17 western states and
is the average price ranchers (producers) reported as being paid in their
area for privately owned nonirrigated grazing land. The National
Agricultural Statistics Service calculates the average for each state, as
well as for the 9 Great Plains states and different combinations of
western states-11 western states, 16 western states, and 17 western
states.31 As shown in table 9, the average private grazing fee for the
states ranged from $8.00 per AUM in Arizona and Oklahoma to $23.00 per AUM
in Nebraska.

Table 9: Fees Charged by Private Ranchers and State Land Agencies in 2004

                    State land agency Average private fee Average private fee 
      State           (per AUM unless          (per AUM)a         (per head)a 
                               noted)                     
     Arizona                    $2.23               $8.00               $9.00 
    California          1.35 to 12.50               14.50               15.50 
     Colorado            6.65 to 8.91               13.50               14.00 
      Idaho                      5.15               12.20               12.60 
      Kansas                        b               13.00               13.50 
     Montana            5.48 to 80.00               15.90               16.20 
     Nebraska          16.00 to 28.00               23.00               25.20 
      Nevada                        b               10.60               12.00 
    New Mexico      0.71 to 10.15 per                9.70               11.00 
                                 acre                     
North Dakota     1.73 to 19.69 per               13.00               13.50 
                                 acre                     
     Oklahoma           7.00 to 16.00                8.00 
      Oregon                     4.32               13.00               12.50 
South Dakota     3.00 to 56.00 per               17.60               19.20 
                                 acre                     
      Texas             4.16 to 12.50               10.00 

30The National Agricultural Statistics Service gathers data and calculates
fees per AUM and head. The price per head is used in the calculation of
the federal grazing fee and is equivalent to the AUMs used by BLM and the
head months used by the Forest Service. The 2004 data was used to set fees
for 2005. Fees charged in 2003 were $12.80 per AUM and $13.40 per head.

31Generally, there are 17 states considered to be western. BLM primarily
manages grazing in 11 western states, and the Forest Service manages
grazing for its forests in 16 western states, excluding Texas.

(Continued From Previous Page)

                    State land agency Average private fee Average private fee 
      State    (per AUM unless noted)          (per AUM)a         (per head)a 
      Utah               1.43 or 2.35               11.80               13.10 
Washington            5.41 or 7.76               10.80               10.80 
     Wyoming                     4.13               13.90               14.30 

Source: State agencies and National Agricultural Statistics Service
(data); GAO (analysis).

Note: The 11 western states used to calculate the BLM and Forest Service
fee are Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico,
Oregon, Utah, Washington, and Wyoming. The 9 Great Plains states used to
calculate the Forest Service grassland fee are Colorado, Kansas, Nebraska,
New Mexico, North Dakota, Oklahoma, South Dakota, Texas, and Wyoming.

aThe National Agricultural Statistics Service gathers data on fees per AUM
and per head. The per head fee is used in the PRIA fee and, because of the
way that BLM and the Forest Service measure AUMs for billing purposes,
corresponds to the fee per AUM charged by BLM and the Forest Service.

bKansas and Nevada do not have grazing on state trust lands and therefore
did not provide fee information.

In fiscal year 2004, state land agencies in 15 western states charged
grazing fees that ranged from $1.35 per AUM in California to $80 per AUM
in Montana and $0.71 per acre in New Mexico to $56 per acre in South
Dakota; 2 states did not charge fees because they do not have grazing on
state trust lands. As table 9 shows, most states charged more than one
fee: while 4 states charged a single fee for all of their state lands, 2
states charged two fees and 9 states charged a range of fees, depending on
market rates or based on counties or areas with variable vegetation. The
agencies manage state trust lands to help pay for schools; the lands were
set aside for this purpose when each state was created. Like the federal
government, the western state agencies lease their lands for grazing,
among other uses. According to Interior officials, unlike the federal
government, the western state agencies have a fiduciary responsibility to
obtain revenues from grazing fees on state trust lands to support schools
and education systems.

Of the 15 state agencies charging fees, 6 agencies used competitive
methods to determine the fair market value of their lands in fiscal year
2004; 6 used appraised prices or formulas to estimate the fair market
value of their lands; and 3 used only formulas that do not start with a
market price. Generally, the formulas adjusted the value of private
grazing lands for different factors, such as the lack of fencing or water
on state lands, or the price of beef. For example, Wyoming based its
grazing fee on the average of private lease rates, as estimated by the
Wyoming Agricultural Statistics Service, for the previous 5 years. The
rate was then adjusted to account for changing resource conditions, market
demand, and industry viability, and reduced by 20 percent to reflect
contributions made by the lessee. (See app. VI for a discussion of the
state fees.)

The Purpose of the BLM and the Forest Service Fee in Western States Is Not
to Recover Expenditures or to Charge Market Value; Different Purposes
Would Result in Different Fees

As we noted in our 1991 report on the BLM and Forest Service grazing fee,
fees can vary depending on the purposes for which they are charged.32 The
BLM and Forest Service fee is set in accordance with the policy of
preventing economic disruption and harm to the western livestock industry.
The primary purpose of the BLM and Forest Service fee is not to recover
the agencies' administrative expenses. Consequently, in fiscal year 2004,
the agencies spent $132.5 million to manage their grazing programs and
collected $17.5 million in receipts, leaving a gap of about $115 million.
If the purpose of the fee were to recover expenditures and if each agency
were to charge a fee that recovered its expenditures, BLM would have had
to charge up to $7.64 per AUM, and the Forest Service would have had to
charge up to $12.26 per AUM in 2004, according to our analysis of the
agencies' estimated expenditures and the number of AUMs billed (7.6
million AUMs for BLM and 6.1 million AUMs for the Forest Service). While
many argue that fees for grazing on federal lands should recover the
agencies' expenditures, some grazing advocates argue that agencies'
expenses are high and reflect inefficiencies and that the fee should not
encourage the agencies' inefficient practices.

The primary purpose of the BLM and Forest Service fee formula is also not
to achieve fair market value prices. Instead, the fee was designed to
reflect fees charged by private ranchers by including the forage value
index, while also adjusting the value to reflect the net costs of
conducting ranching business. It reflects net costs by including the beef
cattle price and producer prices indexes (a measure of the change in
income and production expenses). While initially, the base price used in
the formula represented what Congress and economists considered fair
market value, the adjustments included in the formula have resulted in a
fee that has not tracked private fees.33 Consequently, while the fee
charged by BLM and the Forest Service fluctuated up and down, it decreased
overall by about 40 percent from $2.36 per AUM in 1980 for BLM and $2.41
per AUM for Forest Service to $1.43 per AUM for both agencies in 2004.
Private ranching fees

32GAO, Rangeland Management: Current Formula Keeps Grazing Fees Low,
GAO/RCED-91-185BR (Washington, D.C.: June 11, 1991).

33The definition of fair market value in relation to the fee is the $1.23
base value established in the 1966 Western Livestock Survey "added to the
nonfee cost of operating on public grazing land so that the total cost of
grazing on public land equals the total cost (nonfee plus private lease
rate) of operating on comparable privately leased grazing land."
Departments of the Interior and Agriculture, Study of Fees for Grazing
Livestock on Federal Lands (Washington, D.C.: October 21, 1977), 4-3.

increased by 78 percent over the same period, from $7.53 per AUM to $13.40
per AUM.34 The federal fee increased to $1.79 per AUM in 2005. (See fig.
2.)

Figure 2: Grazing Fee BLM and the Forest Service Charged, 1980 to 2005

Dollars 198019811982

198319841985198619871988198919901991199219931994199519961997199819992000200120022003
                                      2005

                                      2004

Year

    Source: National Agricultural Statistics Service (data); GAO (analysis).

Notes: The fee formula is Fee = $1.23 x (FVI + BCPI - PPI)/100.

In 1980, BLM and the Forest Service charged $2.36 per AUM and $2.41 per
AUM, respectively, or on average, $2.38 per AUM. Prior to 1981, the
agencies charged different fees for grazing-in 1979, they charged $1.89
per AUM and $1.93 per AUM, respectively. In 1980, the agencies used the
PRIA formula to calculate their fees, but the formula produced a fee of
$2.77, and PRIA limited the annual increase in the fee to 25 percent. The
different fees charged in 1980 were a result of the agencies applying the
25 percent increase to their 1979 fees.

If the primary purpose of the formula were to produce a fee equal to
market value, the fee would likely not be the same as that charged on
private or state lands for two key reasons. First, because BLM and Forest
Service permits and leases are not bid competitively, the fees associated
with those permits and leases are not set in the market. In lieu of a
market for BLM

34The fee figures are presented in nominal dollars.

and Forest Service grazing, the agencies could estimate the value of their
lands based on comparable properties. However, it is generally recognized
that private lands, which are leased at market prices, are not often
comparable to public lands because the private lands have better forage
and sources of water. The quality of forage and availability of water on
state lands are considered more comparable to that on federal lands
because the federal government granted some of its lands to various states
when they entered the Union.35 In addition to differences in the quality
of soil, forage, and water resources, private grazing fees differ from
fees for public lands because private landowners often provide services
that are not provided on BLM and Forest Service lands. For example,
private landowners may provide daily livestock care-watering, fencing,
feeding, and veterinary care-as well as maintaining fences, corrals, and
water tanks. In addition, lessees of private land can themselves lease the
land to other users, such as hunters, and generate revenue. Moreover,
public access to private lands is limited, whereas access to federal land
is generally not limited. State agencies also limit access to their lands,
a factor that makes their lands less comparable to BLM and Forest Service
lands for purposes of setting fees.

Second, market values are difficult to use for BLM and Forest Service
permits and leases because the prices ranchers have paid for their private
ranches often include the capitalized value of any associated federal
grazing permits and leases-called "permit value"-and advocates state that
ranchers have paid full market value for the grazing permits and leases,
albeit not in the form of a payment to the government.36 Although Interior
and USDA do not recognize grazing permits and leases issued by BLM and the
Forest Service as a legal property right, the real estate market realizes
the value of holding these permits and leases. As a result, it is
generally recognized that while the federal government does not receive a

35Originally, with the Land Ordinance, the number 16 lot of every township
was reserved for that township. In 1848, the act establishing Oregon gave
states in the Northwest territory sections 16 and 36 in each township. In
1894, Utah, followed in 1910 by Arizona and New Mexico, entered the nation
with two additional sections reserved in each township, sections 2 and 32.

36Some believe that the existence of permit value indicates that the fee
does not capture the full value of federal forage. However, recent
research has shown that the value of permits may be capturing other values
than the income earning potential of land. That is, despite the fact that
ranchers assert that they are paying equal or higher total grazing costs
on public versus private lands, they have been willing to pay an
additional premium to buy permits to graze on public lands, indicating
nonprofit motives such as quality of life, as reasons for ranch ownership.

market price for its permits and leases, ranchers have paid a market price
for their federal permits or leases-by paying (1) grazing fees; (2) nonfee
grazing costs, including the costs of operating on federal lands, such as
protecting threatened and endangered species (i.e., limiting grazing area
or time); and (3) the capitalized permit value. Should the BLM and Forest
Service charge a grazing fee that reflects market values, the ranchers'
investments could be reduced accordingly, which complicates the use of the
market value of the permits and leases.

Because of these difficulties in estimating and using market value, some
grazing experts have suggested establishing a competitive bidding process
for federal permits and leases, as has been done for the McGregor Range,
an Air Force bombing range. BLM manages grazing on this range using
competitive bidding to set prices. In 2004, BLM received fees ranging from
$5.00 to $14.50 per AUM for several leases that it offered at auction.
(See app. V for more details.) Experts acknowledge, however, that
significant changes to the current grazing system would be needed to allow
competition, with uncertain results. In particular, range experts and
agency officials point out a potential increase in administrative
activities and expenditures for items such as changing operators, start-up
time, and law enforcement that could occur with greater BLM and Forest
Service involvement in competitive bidding. In addition, some change in
the preference system on BLM and Forest Service lands might need to occur
to allow competitive bidding. However, some states have implemented a form
of competitive bidding while retaining preference. For example, New Mexico
allows ranchers with preference to meet the best offer that results from
competing the lease. Finally, range experts and agency officials point out
that the effect of competitive bidding on grazing receipts collected
could, in fact, reduce receipts because some allotments could be less
competitive than others, given their location and quality of resources.
Others stated that increased competition could reduce the economic
opportunities for some smaller permittees and lessees.

Concluding	It is difficult to identify the full cost of grazing on federal
lands. Many federal agencies have their own grazing programs, but other
agencies

Observations	support grazing in carrying out their responsibilities.
Nevertheless, an analysis of federal expenditures and receipts provided by
the agencies demonstrates that BLM and the Forest Service are spending
much more on grazing than they are generating in receipts. Moreover, the
existence of permit value indicates that while ranchers may have paid full
value for grazing privileges, the agencies have not captured these
payments in their

grazing fee. These shortfalls reflect legislative and executive branch
policies to support local economies and ranching communities by keeping
grazing fees low. BLM and the Forest Service are charging a fee that
supports this purpose.

The current fee for livestock grazing has not been changed significantly
since it was first established a quarter century ago, largely because of
controversy over the purpose of the fee and the role of grazing in
contributing to ranching economies and communities and in degrading
rangeland ecosystems. Although a budgetary analysis such as the one we
conducted does not consider economic, environmental, or societal costs and
benefits, it does demonstrate the need to periodically reexamine programs
to assess their relevance and relative priority for a changing society,
including how much of the program's financing should be paid for by those
who benefit most directly. Taking a hard look at existing programs and
carefully considering their goals and their financing is a challenging
task. However, faced with a growing and unsustainable fiscal imbalance,
the government cannot accept all of its existing programs, policies, and
activities as "givens." Now, as in the 1990s, tightened federal budgets
and a persistent federal deficit create the need to examine federal
programs that spend more funds than they generate in receipts and to
determine whether the purposes of these programs warrant increasing user
fees.

Although other federal agencies' grazing programs are much smaller than
BLM's and the Forest Service's, they demonstrate the application of
competitive and market-based approaches to charging user fees for grazing
programs and recovering some program expenditures. Depending on the
approach taken to set and implement a grazing fee for lands managed by BLM
and the Forest Service, the federal government could close the gap that
exists between those programs' grazing expenditures and receipts. But any
change in the current fee may necessitate that Congress reconsider the
purpose of the fee and policy trade-offs of different fees. In addition,
an evaluation of the difficulties of implementing the chosen fee would
need to be conducted in order to understand the consequences for the
agencies' programs and expenditures and to deal fairly with such issues as
preference and permit value.

Agency Comments	We provided USDA, Commerce, DOD, DOE, Interior, and
Justice with a draft of this report for review and comment. Interior and
the Forest Service provided written comments (see apps. VII and VIII). DOD
did not provide official written comments, but the Air Force and Army
provided technical

comments, which we incorporated as appropriate. DOE also did not provide
official written comments but provided technical comments, which we
incorporated as appropriate. Commerce and Justice did not have comments on
the draft report.

In its comments, Interior did not agree nor disagree with the findings in
the report. In general, the department stated that the report accurately
recognizes that differences in resource conditions and legal requirements
can cause variations in livestock grazing fees and pointed out the
difficulty in capturing the costs of grazing programs. However, Interior
stated that the report did not sufficiently discuss significant indirect
benefits from grazing to other BLM programs that are difficult to
quantify. We do not agree with this point. We believe that the report
presents the facts about BLM's grazing program as described in many
different documents BLM provided to us and as discussed in multiple
meetings. Interior also provided several specific comments clarifying the
text of the report. These comments and our response can be found in
appendix VII. In addition to its comments on BLM's grazing program, the
department enclosed technical comments on the U.S. Fish and Wildlife
Service and Reclamation programs, which we incorporated as appropriate.

The Forest Service provided coordinated comments for USDA. The Forest
Service neither agreed nor disagreed with the findings in the report. The
agency stated that the report accurately recognizes that the Forest
Service fee is set in accordance with an executive order that maintains
the fee formula established in FLPMA, as amended by PRIA. Further, it
stated that the report accurately recognizes that the fee is not related
to the cost of Forest Service administration of the grazing program. In
addition to these comments, the Farm Services Agency and the National
Agricultural Statistics Service within USDA provided technical comments,
which we included as appropriate.

As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution of this report until
30 days from the date of this letter. At that time, we will send copies of
this report to interested congressional committees; the Secretaries of
Agriculture, Commerce, Defense, Energy, and the Interior; the Attorney
General of the United States; the Administrator of the Environmental
Protection Agency; the Director of the Office of Management and Budget;

the directors of the 17 state land agencies; and other interested parties.
We will also make copies available to others upon request. In addition,
the report will be available at no charge on the GAO Web site at
http://www.gao.gov.

If you or your staff have any questions, please contact me at (202)
512-3841 or [email protected]. Contact points for our Offices of Public
Affairs and Congressional Relations may be found on the last page of this
report. GAO staff who made major contributions to this report are listed
in appendix IX.

Robin M. Nazzaro Director, Natural Resources and Environment

List of Requesters

The Honorable Nick Rahall Ranking Minority Member Committee on Resources
House of Representatives

The Honorable Earl Blumenauer House of Representatives

The Honorable Raul Grijalva House of Representatives

The Honorable Rush Holt House of Representatives

The Honorable Jim McDermott House of Representatives

The Honorable Christopher Shays House of Representatives

Appendix I

                       Objectives, Scope, and Methodology

We provided information on the (1) extent of livestock grazing on, and
program purposes for, land managed by 10 federal agencies; (2) amount
spent in fiscal year 2004 by these agencies and other federal agencies
that have grazing-related activities, to manage livestock grazing on
public lands; (3) total receipts collected for grazing privileges by the
10 federal agencies with grazing programs and the amounts disbursed to
counties, states, or the federal government; and (4) grazing fees charged
by the 10 federal agencies, western states, and private ranchers, and the
reasons for any differences among the fees.

We performed the majority of our work at the 10 federal agencies that have
programs to allow private ranchers to graze livestock on portions of the
land they manage. These agencies were the Department of the Interior's
(Interior) Bureau of Land Management (BLM), National Park Service, U.S.
Fish and Wildlife Service, and Bureau of Reclamation (Reclamation); the
U.S. Department of Agriculture's (USDA) Forest Service; the Department of
Defense's (DOD) Army, Army Corps of Engineers (Corps), Air Force and Navy;
and the Department of Energy (DOE). We also performed work at other
federal agencies that have grazing-related activities. These agencies are
Interior's U.S. Geological Survey (USGS) and Solicitor's Office; USDA's
Agricultural Research Service; Animal and Plant Health Inspection Service,
Cooperative State Research, Education and Extension Service, Farm Service
Agency, National Agricultural Statistics Service, Risk Management Agency,
Natural Resources Conservation Service, and Office of General Counsel; the
Environmental Protection Agency; the Department of Commerce's National
Marine Fisheries Service; and the Department of Justice.

To determine the purposes of livestock grazing programs managed by the 10
federal agencies, we reviewed authorizing legislation and agency policies
and regulations, and we interviewed agency headquarters and field office
officials. Through our review of legislation, policies, and regulations,
we determined that we would not include Alaska in our analysis because it
is treated differently under grazing law. We identified field offices to
visit with the goal of visiting as many agencies as possible in an
efficient manner. We visited at least one field office for every agency
except for the Corps, Navy, and DOE. We visited BLM field offices in
Medford, Oregon, and Las Cruces, New Mexico; a Forest Service office in
Santa Fe, New Mexico; the National Park Service's Dinosaur National
Monument in Colorado and Utah; U.S. Fish and Wildlife Service's Klamath
Basin Wildlife Refuge Complex in northern California and southern Oregon;
Reclamation's Albuquerque Area Office in New Mexico; Cannon Air Force

Appendix I
Objectives, Scope, and Methodology

Base in Clovis, New Mexico; and Fort Hood Army Installation in Killeen,
Texas.

To determine the extent of grazing on land managed by the agencies, we
obtained agency data for 2004 on acres and animal unit months (AUM). BLM
maintains a centralized Rangeland Administration System that formally
tracks and reports acres and AUMs on its lands as well as on other
agencies' lands (e.g., DOE's Idaho National Laboratory and various
Reclamation locations) where it manages grazing activity on behalf of
these agencies. The Forest Service uses an information system, called
INFRA, to centrally track and formally report acres, head months, and
AUMs. To determine if the AUM and acreage data produced by BLM's Rangeland
Administration System and Forest Service's INFRA system were sufficiently
reliable for use in this report, we interviewed system managers about the
processes used to manage the data in the systems and conducted a
"walk-through" of the system with these managers. In addition, we tested
the completeness and accuracy of a selection of AUM and acreage data using
fiscal year 2004 system reports at the BLM field and Forest Service
offices. We asked field office officials to provide us their 2004 report
that specifically showed, by permit or lease, the number of AUMs
authorized and billed and the fee charged. We reviewed all the files at
agencies with smaller grazing programs-those with up to 25 permits or
leases at an office-and selected 10 percent of files at the two agencies
that had large grazing programs-250 and 500 allotment files per office. We
then verified that the data in the systems were the same as data in the
files by tracing the data through actual permit and lease documents,
bills, and receipts showing that payment had been submitted. We
determined-based on these reviews and, if necessary, follow-up interviews
with local managers- that the data reported were reliable for purposes of
this report.

Unlike BLM and the Forest Service, the National Park Service, U.S. Fish
and Wildlife Service, Reclamation, and DOD do not have similar management
information systems that formally track and centrally report acres and AUM
data on specific livestock grazing activities. For these agencies, we
collaborated with agency headquarters and field office officials to design
and test a data collection instrument tailored for each agency, which we
sent to field offices. To design and test the data collection instruments,
we visited several agencies' field offices and followed the same process
we used at BLM and the Forest Service to sample files, review relevant
documents, track AUM data, and interview local officials to verify the
completeness and accuracy of data that they could submit to us. We
performed this work at the Dinosaur National Monument, Klamath

Appendix I
Objectives, Scope, and Methodology

Basin Wildlife Refuge Complex, Reclamation's Albuquerque Area Office,
Cannon Air Force Base, and Fort Hood Army Installation. To help ensure the
reliability of the data we received from the agencies, we reviewed the
data to determine whether they were complete and accurate. When we found
data that were missing or appeared to be inaccurate, we called appropriate
agency officials to discuss, and if necessary, correct the data. Based on
these reviews and appropriate follow-up interviews, we determined that the
data reported were sufficiently reliable for purposes of this report.

To determine the expenditures the 10 federal agencies incurred in fiscal
year 2004 to manage specific livestock grazing on federal lands they
manage, total receipts collected for grazing privileges by these agencies,
and the amounts disbursed to counties, states, or the federal government,
we obtained agency expenditure, receipt, and disbursement data for fiscal
year 2004. BLM maintains an Activity Based Costing System that centrally
tracks and formally reports expenditures on livestock grazing activities,
the receipts that grazing generates, and amounts disbursed. BLM officials
used this system to identify the amount of direct and indirect
expenditures the agency incurred for livestock grazing activities. The
Forest Service does not have a cost-accounting system, but rather reports
expenditures for items in its budget, called budget line items. The agency
used expenditure reports for these line items, in addition to its WorkPlan
system (which shows the forests' intended work plans at the beginning of a
fiscal year) to estimate the amount of expenditures on grazing activities
in fiscal year 2004. The Forest Service direct expenditures include
expenditures from the Forest Service grazing line item, expenditures from
its watershed and vegetation line item, and estimated expenditures from
its General Management and other cost pools. Because the watershed and
vegetation line item can be spent for all programs and not just the
grazing program, the Forest Service allocated a portion of these
expenditures-11 percent- using WorkPlan, which is a tool for planning and
budgeting program work at the forest level. The Forest Service uses six
cost pools to allocate indirect activities and expenditures: General
Management, Public Communications, Ongoing Business Services, Common
Services, Office of Worker's Compensation, and Unemployment Compensation
Insurance. The General Management pool and some of the activities in the
Common Services pool are considered direct or support costs, rather than
indirect costs. These are included as direct expenditures. To estimate
expenditures from its General Management and other cost pools, the agency
attributed a share of the expenditures related to the amount of grazing
and related watershed and vegetation funds that were put into the fund for
the fiscal

Appendix I
Objectives, Scope, and Methodology

year. We did not validate the data provided by the agencies' or test their
financial management and accounting systems. We did contact USDA's and
Interior's Office of Inspector General and representatives of KPMG, a
private contractor that annually audits the agencies' financial
statements, to determine if there was any reason we could not use
expenditure data in this report. There were none. In addition, we reviewed
the agencies' internal controls over grazing receipts through our testing
of the agencies' grazing files and AUM data.

Unlike BLM and the Forest Service, the National Park Service, U.S. Fish
and Wildlife Service, Reclamation, and DOD services do not all formally
track and centrally report specific livestock grazing expenditures,
receipts, and disbursements. Using the same data collection instrument
described above to obtain acres and AUM data from these agencies' field
units, we also requested their estimates of expenditures and receipts. In
addition, we asked headquarters officials to query their financial
management and accounting systems in an effort to extract specific receipt
and disbursement data related to livestock grazing activities. When
necessary, we conducted follow-up interviews with agency headquarters and
field office officials to ensure that the data were reliable enough for
use in this report. We did not validate these financial management and
accounting systems.

To identify livestock grazing expenditures that other federal agencies may
incur to support livestock grazing, we first developed a list of agencies
and activities that are conducted that are related to grazing on public
lands. To develop this list, we reviewed reports about livestock grazing
on public lands, interviewed BLM and Forest Service officials, and
interviewed experts at the Society for Range Management,1 as well as the
author of a recent study on the costs of the federal grazing program.2 We
then contacted the agencies to confirm that the activities they conduct
are related to grazing and are conducted on public lands; if the agencies
conducted activities that support grazing on public lands, we then
requested estimated expenditures for fiscal year 2004. To that end, we

1The Society for Range Management is an association of range management
specialists that represents nearly 4,000 members. Its mission is to
promote and enhance the stewardship of rangeland ecosystems and renewable
range resources, with an aim to meet human needs through scientific
research and policy.

2Karyn Moskowitz and Chuck Romaniello, Assessing the Full Cost of the
Federal Grazing Program (Tucson, Arizona: October 2002).

Appendix I
Objectives, Scope, and Methodology

contacted officials at USGS; USDA's Agricultural Research Service, Animal
and Plant Health Inspection Service, Cooperative State Research,
Education, and Extension Service, Farm Service Agency, National
Agricultural Statistics Service, Natural Resources Conservation Service,
and Risk Management Agency; and the Environmental Protection Agency. We
asked these officials to estimate, if possible, the expenditures they
incur in support of livestock grazing activities. To determine agency
expenditures on consultations for threatened and endangered species, we
requested the data from the two agencies involved, the U.S. Fish and
Wildlife Service and the National Marine Fisheries Service. To determine
agency expenditures for litigation related to livestock grazing we
contacted the Department of Justice, Interior's Office of the Solicitor,
and USDA's Office of General Counsel. Their representatives estimated the
cost of their time devoted to livestock grazing cases in fiscal year 2004
and identified that no payments were made for attorney fees in the same
period. The National Park Service, U.S. Fish and Wildlife Service,
Reclamation, and DOD services reported that they were not involved in any
litigation related to livestock grazing in fiscal year 2004.

To determine the fees charged in 2004 by the 10 federal agencies, western
states, and private ranchers and the reasons for any differences among the
fees, we relied on several different sources. For the fees charged by BLM
and the Forest Service, we contacted BLM and Forest Service officials, who
provided us with 2004 fee and an explanation of the formula used to
calculate the fee. We also discussed the formula and its components with
the staff of the National Agricultural Statistics Service. We also
reviewed historical studies of the formula and fees resulting from the
formula. We gathered National Park Service, U.S. Fish and Wildlife
Service, Reclamation, and DOD service fees using the data collection
instrument described above and also gathered information on the methods
used to establish the fees. For agencies that provided fee data as a
per-acre price, we converted the fees to a per-AUM price by totaling the
receipts and any offsets to receipts and dividing the total by the number
of AUMs approved for use on that land. We reviewed agencies' discussion of
their user fees in their Chief Financial Officers' Annual Reports, but we
did not review the agencies' compliance with the Independent Offices
Appropriation Act or OMB Circular A-25, which lay out conditions under
which user fees can be charged.

To determine the fees that the 17 western states charged ranchers in 2004
to graze on their state lands, and the basis for their fees, we conducted
telephone interviews of program officials in the 17 states using a

Appendix I
Objectives, Scope, and Methodology

semistructured interview format. To determine the fees private ranchers
charged in 2004 to graze on their private lands, we used the results
reported by USDA's National Agricultural Statistics Service, which
conducts a survey of, among other things, fees charged by private ranchers
for livestock grazing on their private lands in the 17 western states. The
agency's staff calculates average fees for each state and the average fees
charged in different groups of Great Plains and western states: 9 Great
Plains states, 11 western states, 16 western states, and 17 western
states. We also interviewed the National Agricultural Statistics Service
officials about the agency's survey methodology for gathering data on
private grazing leases and the calculation of the BLM and Forest Service
fee components.

To identify additional factors that should be considered in evaluating
federal grazing expenditures and fees, we conducted an extensive search of
studies that go beyond a limited federal budgetary analysis of livestock
grazing activities and attempted to identify social, environmental, and
other economic costs and benefits that both advocates and opponents of
grazing use to make their respective arguments. We also interviewed
experts at New Mexico State University, Oregon State University, Colorado
State University, and University of Montana who have conducted relevant
research to obtain their views of these various livestock grazing issues,
as well as issues related to fees.

We conducted our work between August 2004 and July 2005 in accordance with
generally accepted government auditing standards.

Appendix II

Additional Factors in Evaluating Federal Grazing Expenditures and Revenues

To place the budgetary evaluation presented in this report in a larger
context, this appendix briefly discusses conflicting views on key effects
of federal lands grazing: local economic development, rural community and
quality of life values, and rangeland ecosystems and management. The
purpose of the appendix is to present the conflicting views on
grazingrelated issues and as such we did not verify the accuracy of the
positions and statements presented by advocates and opponents of grazing.
A comprehensive analysis of the effects should quantify and capture not
only the budgetary expenditures and receipts discussed in this report but
also the impact on regional and local economic development and the
economic costs and benefits-which are often unquantified-to society.
However, a comprehensive evaluation is not yet possible because, despite
years of extensive research and evaluation, the exact nature of many of
these effects is still unknown, unresolved, or unquantifiable. For
example, opponents of grazing believe that grazing diminishes ecosystem
values by reducing biodiversity and disrupting wildlife habitats, the lost
value of which is borne by the nation and future generations and which the
federal budget and agencies' budgets cannot entirely capture.1 On the
other hand, advocates of grazing believe that the government and the
public benefit from livestock grazing because it reduces the federal
government's cost for land management and contributes to preserving open
space, both values that the federal budget does not capture.

Implications of Grazing for Local Economic Development

According to grazing advocates, ranching on federal land is critical to
local economies, particularly in the western states, and many small towns
across the West that depend on local ranchers' business would not survive
without federal grazing. In these localities, many ranchers who rely on
public lands could be driven out of ranching because, without access to
public lands, their ranches would not be economically viable. In addition,
studies have shown that grazing is beneficial to rural economies because
it provides them with a more diverse economic base in conjunction with
other compatible land uses, such as recreational activities.2 Advocates
also note

1To the extent that an agency's budget allocates funds for monitoring,
planning, and protecting the resources, these costs are reflected in their
budgets. However, when the level of funds and activities are not
sufficient to restore the resources, the damages remain a cost to the
society.

2David T. Taylor, James G. Thompson, and Tim Darden, "Rural Communities
and the Changing Rangeland Users," in Current Issues in Rangeland
Resources Economics (Salt Lake City, Utah: Utah Agricultural Experiment
Station and Utah State University, 2004).

                                  Appendix II
                    Additional Factors in Evaluating Federal
                       Grazing Expenditures and Revenues

that while some economic studies indicate that grazing on federal land is
of minimal economic importance, these studies only consider grazing's
dependence on public forage on an average annual basis and not on a
seasonal basis. They point out that ranchers rely on forage from federal
lands during certain parts of the year, particularly during the summer and
fall grazing season, and that ranchers' dependence on federal lands
becomes quite important when only the grazing season is taken into
account.

In contrast, opponents point to studies showing that, for many of the
western states, federal lands provide only a small percentage of the total
forage needed to support ranchers' herds and do not contribute
significantly to local economic production and income. For example, one
study that examined the reliance of ranchers on federal land in 11 western
states showed that only $1 of every $2,500 of income (0.04 percent) earned
in those states is directly associated with grazing on federal lands.3
This minimal contribution also holds steady in more grazing-dependent
counties, according to this study. Out of 102 such counties analyzed, only
11 were found to have more than 1 percent of total income associated with
grazing on public lands.

Implications of Grazing on Quality of Rural Communities and Rancher's Life

The budgetary evaluation of grazing on public lands does not reflect the
contribution of grazing to the quality of life in rural communities as
well as the contribution to individual ranchers' quality of life.
Advocates point to the value of preserving the tradition and culture of
rural ranching communities as an important contribution of grazing. These
advocates believe that because federal land grazing at current rates
provides the support ranchers need to stay in business, grazing prevents a
growing trend toward urbanization and sprawl in rural areas. The
development of ranch lands reduces the availability of open space for
scenic pleasure and recreational opportunities, reduces wildlife habitat,
and increases the infrastructure and tax burden on nearby communities.
Further, federal managers point out that their support of ranchers and
rural communities maintains a buffer around federal lands-for example,
military lands- preventing development along these boundaries.

3Thomas M. Power, "Taking Stock of Public Lands Grazing: An Economic
Analysis," in Welfare Ranching: The Subsidized Destruction of the American
West (Washington, D.C.: Island Press, 2002).

Appendix II
Additional Factors in Evaluating Federal
Grazing Expenditures and Revenues

Similarly, grazing advocates point out the importance of grazing to the
quality of life for individual ranchers, which is another factor not
captured by a budgetary analysis. Studies have documented the importance
of quality of life (consumptive value) in ranchers' decisions to purchase
or remain in business despite economic pressures. These studies have
compared the future earning potential of the land from ranching with the
market values for ranches in many rural communities and found that
ranchers have been willing to accept rates of return on their investment
that are below market value, which indicates that the desire to own a
ranch is not motivated entirely by profit, but also by the less tangible
benefit on the quality of life that the rural lifestyle offers.4

While the contribution of ranching to the quality of life and well being
of a segment of society is widely recognized, grazing opponents question
the role of the government in protecting ranchers' social or economic way
of life at a cost to all taxpayers. In the opponents' view, preserving the
heritage of "western cowboys" by allowing them the use of public lands is
a subsidy to the livestock industry. The opponents question the use of
continuing subsidies, rather than a functioning free market, and question
the choice of subsidizing one lifestyle or chosen profession over another-
for example, teachers.

Opponents also disagree with the argument that grazing subsidies are
essential to preserving open spaces and stopping development. They point
out that many factors, such as an individual rancher's wealth and
commitment to ranching as a way of life, will ultimately influence the
decision to continue ranching. Population growth and demand for housing
will widen the disparity in land values between grazing and development
and put some ranchers-especially those facing financial pressures-in a
position to sell. However, opponents note that the replacement of cows
with condominiums is not a foregone result of changes in grazing policy.
Subdividing and developing ranch land is primarily driven by market
conditions-demand-for the land, and market conditions for subdividing the
ranch lands is far from uniform across the West. For example, it would not
be economically feasible to develop lands in some remote areas of the
West. However, acknowledging the reality of development of the ranch

4Studies have also shown that despite equal or higher total grazing costs
on public versus private lands ranchers have been willing to pay an
additional premium to buy permits to graze on public lands that supports
the quality of life and nonprofit motives for ranch ownership.

                                  Appendix II
                    Additional Factors in Evaluating Federal
                       Grazing Expenditures and Revenues

lands in some geographic areas, opponents believe that subsidized grazing
on public lands is neither an efficient nor an effective means of
preserving open spaces. They recommend other tools, such as zoning
regulations or land purchases through conservation trusts, to more
effectively protect the land from urban sprawl and development.

Implications of Grazing for Rangeland Ecosystems and Management

According to grazing advocates, ranchers are the principal managers of
federal land, and if they cease operation, federal agencies would have to
pay others to manage these lands, thereby raising budgetary costs to the
government. By grazing the land, ranchers help to maintain rangeland
ecosystems-particularly those east of the Rocky Mountains-that developed
historically and naturally with herbivory by wild animals such as buffalo,
antelope, deer, and elk. According to advocates, grazing also helps to
manage weeds, including invasive plant species, and control fires by
preventing excessive biomass buildup or by reducing the intensity of fires
that do start-expenses that would otherwise shift to federal agencies. For
example, advocates maintain that sheep grazing reduces the need to use
herbicides on the range because the sheep eat noxious plants that other
animals avoid.5 Advocates also contend that ranchers provide a valuable
service to federal agencies by reporting problems on public lands, such as
fires and illegal activities, and assisting in search-and-rescue
operations.

Furthermore, grazing advocates assert that modern rangeland management
facilitates the maintenance and health of the land because ranchers
understand the science behind ranching and make decisions that preserve
and improve the health of the rangeland, including wildlife habitat.6 In
general, they point to the increased number of wildlife and game animals
in recent years on the lands with ranch and water developments. For
example, one study has shown that biodiversity for vegetation and animals
is higher on rangelands managed for grazing than on small ranches.7 They

5See for example "Sheep and the Environment: The Facts on Sheep Ecology,"
prepared by American Sheep Industry Association, 2005.

6See for example, "Cattle and Beef Handbook: Environment," National
Cattlemen's Beef Association; www.beef.org/ncbenviroment.aspx.

7The study is based on a random survey of land outside urban areas and
represents the rural land-use gradient, including preserves, ranches, and
low-density development. Jeremy D. Maestas, Richard L. Knight, and Wendell
C. Gilgert, "Biodiversity Across a Rural Land-Use Gradient," Conservation
Biology, Vol. 17, No. 5 (October 2003).

Appendix II
Additional Factors in Evaluating Federal
Grazing Expenditures and Revenues

say that water improvements made by ranchers are the reason behind
enhanced wildlife habitat and numbers and contribute to lower maintenance
costs by the agencies.8

To the contrary, grazing opponents argue that grazing has contributed to,
and increased the amount of, the federal government's land management
costs. For example, they note, by eliminating grass and low-lying
vegetation in ponderosa pine forests, grazing has contributed to increased
density of conifer trees and shrubs and made these forests more prone to
large, intense fires that are costly to fight. Grazing opponents also note
that grazing contributes to the spread of invasive species, thereby
increasing agencies' costs for managing their rangelands. For example,
opponents state that livestock transport seeds; weaken and remove native
plants, such as grasses; disturb the soil; and help invasive species to
take hold and grow.

Grazing opponents also note that grazing in general and overgrazing in
particular, have harmed plants and wildlife on federal lands by exposing
soils to erosion, disrupting normal wildlife behavior, and reducing
biodiversity. For example, an environmental group states that grazing has
contributed to the listing of 22 percent of federal threatened and
endangered species.9 Furthermore, livestock can be detrimental to native
wildlife because they can transmit diseases, compete for food, disrupt
normal behavior patterns, or damage habitat.10 For example, because some
invasive plants can better tolerate intensive grazing than most native
plants, they can prosper and drive out other native plants. The U.S. Fish
and Wildlife Service has argued that grazing can cause habitat degradation
and disrupt normal behavior patterns of wildlife such as breeding,
feeding,

8Interview with Sam Albrecht, Executive Vice President, Society for Range
Management, et al., Lakewood, Colorado, September 2004.

9See for example www.sierraclub.org/grazing, based on the work by D.S.
Wilcove, D. Rothstein, J. Dubow, A. Phillips, E. Losos, "Quantifying
Threats to Imperiled Species in the United States," BioScience, Vol. 48,
No. 8 (August 1998).

10In general, an economically efficient mix of uses requires adjusting the
size and mixture of livestock and wildlife relative to the values these
different animals provide. In one article comparing value of forage on
public lands for wildlife and livestock uses, the authors concluded that
the marginal value of forage for deer and elk is competitive with the
forage value for cattle ranching in Challis, Idaho area. John Loomis,
Dennis Donnelly, and Cindy Sorg-Swanson, "Comparing the Economic Value of
Forage on Public Lands for Wildlife and Livestock," Journal of Range
Management, Vol. 42, No. 2 (March 1989).

Appendix II
Additional Factors in Evaluating Federal
Grazing Expenditures and Revenues

or sheltering.11 For example, livestock management practices, such as
fencing rangelands, can create obstacles for many native wildlife species,
limiting their movement in search of food and shelter. Similarly,
livestock protection has played a large role in eliminating native
predators, which are often killed by private ranchers or federal agencies
to protect the livestock. Finally, the opponents note that livestock
grazing is also a threat to water quality when, for example, the livestock
trample stream banks, causing them to erode and increase sedimentation or
spread infectious water-borne diseases to water supplies.12

11See, e.g., Arizona Cattle Growers Assn. v. Fish and Wildlife Service,
273 F. 3d 1229 (2001) (The court found that the record did not support the
FWS claims in this particular case.) But see, e.g., Palila v. Hawaii Dept
of Land and Natural Resources, 852 F.2d 1106, (9th. Cir. 1988) (sheep
grazing constituted a "taking" of palila birds under the Endangered
Species Act, since although sheep do not destroy full-grown mamane trees,
they do destroy mamane seedlings, which will grow to full-grown trees, on
which the palila feeds and nests).

12Lynn Jacobs, Waste of the West: Public Lands Ranching (Tucson, Arizona:
1991).

Appendix III

Detailed Grazing Data for Bureau of Land Management and the Forest Service

This appendix provides detailed information on grazing permits and leases
on lands managed by BLM and the Forest Service. The first section of this
appendix provides information on acres available for grazing on lands the
agencies manage, the AUMs approved for grazing, and the AUMs billed in
fiscal year 2004 for BLM and grazing year 2004 for the Forest Service. The
second section categorizes BLM and Forest Service permits and leases by
size.

Acres and AUMs of Grazing

This section provides a snapshot of the grazing that occurred on BLM and
Forest Service lands in 2004. The acres of BLM and Forest Service land
available for grazing each year can change, depending on the results of
environmental assessments conducted on grazing allotments; and the amount
of grazing that is allowed each year can change, depending on annual
assessments of forage and range conditions. Both agencies measure the
number of acres of their lands available for grazing by allotment each
year, but the two agencies use different terms to measure the amount of
grazing. BLM calls this amount "active" or "authorized," and the Forest
Service calls this amount "permitted." Similarly, BLM refers to the amount
of grazing that it bills for annually-which can vary from the amount it
authorizes because of range or climate conditions-as "billed," and the
Forest Service refers to this amount of grazing as "authorized." We use
the term "AUMs Approved" to refer to the amounts of grazing authorized by
BLM and permitted by the Forest Service and "AUMs Billed" to refer to the
amount of grazing for which BLM billed ranchers and the amount of grazing
authorized each year on Forest Service lands. Table 10 shows the acres,
AUMs approved, and AUMs grazed for BLM's field offices in fiscal year
2004.

Appendix III Detailed Grazing Data for Bureau of Land Management and the Forest
                                    Service

Table 10: BLM Data on Acres and AUMs, by Field Office for Fiscal Year 2004 State
                        Acres AUMs approved AUMs billed

Arizona California

       Arizona Strip               2,250,219     179,463               76,785 
          Kingman                  1,959,713     141,983               78,091 
       Phoenix North               1,958,357     117,487               73,945 
          Safford                  1,114,283     133,786               86,636 
           Tucson                    481,936      57,272               35,754 
            Yuma                     190,348      29,924                2,751 
          Subtotal                 7,954,856     659,915              353,962 

                  Alturas                      361,107   52,517        26,943 
                  Arcata                        27,904    3,389         2,137 
                Bakersfield                    243,757   95,407        23,981 
                  Barstow                      612,013    9,154         5,873 
                  Bishop                       307,036   36,466         9,416 
                Eagle Lake                     971,096   51,937        28,968 
                 El Centro                      30,949    2,047         1,033 
                  Folsom                        36,073    5,184         3,995 
                 Hollister                     108,893   27,958        12,410 
                  Needles                      631,222   18,451         3,695 
        Palm Springs - South Coast              74,887    3,790         1,652 
                  Redding                       27,716    5,902         5,811 
                Ridgecrest                     829,818   15,680        12,682 
                 Surprise                    1,399,562   92,335        56,975 
                   Ukiah                        10,290     788     
                 Subtotal                    5,672,323   421,005      196,221 
                 Colorado                                          
     Canyon Ancients National Monument         139,120    9,241         2,963 
                 Columbine                      23,559    2,598         1,956 
                  Dolores                      335,872   23,052         9,832 
             Glenwood Springs                  446,724   45,806        27,933 
              Grand Junction                   982,731   112,829       28,564 
                 Gunnison                      349,141   36,262        14,198 
                 Kremmling                     276,603   35,317        24,762 
                  La Jara                      139,890   13,386         2,836 
               Little Snake                  1,231,411   144,685       70,339 

Appendix III Detailed Grazing Data for Bureau of Land Management and the
Forest Service

                         (Continued From Previous Page)

          State                   Acres    AUMs approved          AUMs billed 
      Pagosa Springs              2,841                 457               276 
       Royal Gorge              392,456              33,674            15,547 
         Saguache               174,665              17,149             6,266 
       Uncompahgre              668,685              52,349            19,049 
       White River            1,428,982             128,145            86,548 
         Subtotal             6,592,680             654,950           311,069 

Idaho

           Bruneau                  1,392,635     128,355              94,329 
            Burley                    826,791     140,823              88,984 
           Challis                    660,597     52,357               28,568 
          Cottonwood                   88,852      6,210                5,237 
         Four Rivers                1,063,834     144,925              95,414 
          Jarbridge                 1,480,906     190,256             140,764 
            Owyhee                  1,197,199     123,071              95,608 
          Pocatello                   532,269     85,774               66,790 
            Salmon                    427,273     65,605               44,035 
           Shoshone                 1,491,667     208,121             108,784 
      Upper Snake River             1,593,666     206,686             130,030 
           Subtotal                10,755,689    1,352,183            898,543 
           Montana                                            
           Billings                   312,738     55,044               45,023 
            Butte                     228,267     23,809               17,313 
            Dillon                    793,268     109,913              63,888 
           Glasgow                    990,870     144,782             135,472 
            Havre                     564,309     90,819               69,894 
          Lewistown                   791,289     125,777             119,232 
            Malta                   1,040,872     176,069             155,459 
          Miles City                2,712,286     550,211             490,444 
           Missoula                    80,703      5,273                5,190 
         North Dakota                  51,537      9,216                9,610 
         South Dakota                 272,392     75,154               66,658 
           Subtotal                 7,838,531    1,366,067          1,178,183 
          New Mexico                                          
           Carlsbad                 1,891,062     380,988             229,359 
          Farmington                1,171,014     121,231              75,075 
          Las Cruces                4,299,298     632,369             355,623 
          Rio Puerco                  864,392     132,469              76,336 

Appendix III Detailed Grazing Data for Bureau of Land Management and the
Forest Service

                         (Continued From Previous Page)

        State                   Acres    AUMs approved            AUMs billed 
       Roswell              1,487,960              328,005            204,781 
       Socorro              1,476,144              229,544            172,444 
         Taos                 343,225               44,776             20,760 
       Subtotal            11,533,095      1,869,382                1,134,378 

Nevada Oregon

      Battle Mountain             6,174,963     260,745               168,679 
        Carson City               3,340,103     171,291                69,430 
            Elko                  6,751,609     708,016               383,798 
            Ely                  10,412,518     523,504               177,090 
         Las Vegas                  166,391               0a            2,311 
          Tonopah                 4,621,982     130,435                57,207 
         Winnemucca               7,863,246     335,494               216,972 
          Subtotal               39,330,812    2,129,485            1,075,487 

                     Andrews                     1,635,153   96,337    71,972 
                     Ashland                        115,388   9,002     7,233 
                      Baker                         372,139  50,117    40,137 
                      Border                         88,125  12,161     9,906 
                   Butte Falls                       76,186   5,100     2,547 
                  Central Oregon                    425,877  64,348    20,793 
                     Coos Bay                           541    49          14 
                    Deschutes                       543,228  56,417    26,630 
                      Jordan                     2,507,713   186,221  154,751 
                  Klamath Falls                     172,184  13,401    10,252 
                     Lakeview                    2,865,315   164,536  111,535 
                     Malheur                     2,070,694   226,719  158,352 
                     Roseburg                        11,879    743          0 
                   Three Rivers                  1,743,822   153,086  105,797 
                    Wenatchee                       158,093  19,810    20,211 
                     Subtotal                   12,786,337  1,058,047 740,130 
                       Utah                                           
                    Cedar City                   1,853,636   148,428   66,747 
                     Fillmore                    4,160,071   262,063  138,351 
Grand Staircase-Escalante National Monument   1,301,225   75,544    17,009 
                      Kanab                         234,400  18,416     5,946 
                       Moab                      1,559,695   89,426    28,837 
                    Monticello                   1,991,216   78,649    35,707 

Appendix III Detailed Grazing Data for Bureau of Land Management and the Forest
                                    Service

                         (Continued From Previous Page)

         State                   Acres    AUMs approved           AUMs billed 
         Price               1,921,523              100,267            35,568 
       Richfield             2,126,747              103,553            45,484 
       Salt Lake             2,215,951              175,066           116,318 
      St. George               470,103               28,428            10,853 
        Vernal               1,486,240              149,493            52,602 
       Subtotal             19,320,807      1,229,333                 553,422 

Wyoming

          Buffalo                   734,825     104,536                99,081 
          Casper                  1,268,671     183,046               163,232 
           Cody                     653,735      78,981                30,229 
         Kemmerer                 1,449,185     152,469               111,661 
          Lander                  2,243,482     275,961               162,731 
         Newcastle                  284,741      48,854                47,733 
         Pinedale                   934,802     106,574                63,265 
          Rawlins                 3,044,835     457,546               267,651 
       Rock Springs               3,553,435     306,755               137,876 

Worland 1,748,793 236,064 109,591

Subtotal 15,916,504 1,950,786 1,193,050

Total 137,701,634 12,691,153 7,634,445

Source: BLM (data); GAO (analysis).

aPermits can be issued for ephemeral rangeland, which refers to areas of
the Hot Desert region that do not consistently produce enough forage to
sustain a livestock operation, but from time to time, produce sufficient
forage to accommodate livestock grazing. Such permits do not have AUMs
designated, but grazing is approved and billed.

Table 11 shows the acres of grazing available, approved AUMs, and billed
AUMs in grazing year 2004 for Forest Service administrative offices and
grasslands.1 The data on acres include acres in active and vacant
allotments but not allotments that have been closed that are not available
for grazing. The data on AUMs include data that the Forest Service calls
"head months." Unlike BLM, the Forest Service uses two methods to tally
the amount of grazing that occurs-AUMs and head months. The agency uses
the term AUM to refer to the amount of forage grazed by livestock, while
it uses the term head months to refer to the number of livestock (head)
that are grazed and that are subject to billing. We used the Forest
Service head month data

1The Forest Service has 123 administrative offices, which manage 155
proclaimed national forests and 20 national grasslands. National
grasslands are listed under the administrative units with which they are
associated.

Appendix III Detailed Grazing Data for Bureau of Land Management and the Forest
                                    Service

because they are equivalent to the BLM's data on AUMs, but we used the
term AUM to simplify the comparison with BLM and other agencies' grazing
data.

Table 11: Forest Service Data on Acres and AUMs, by Forest and Grassland,
Grazing Year 2004

      Regions Acresa AUMs approvedb AUMs billedb Region 1, Northern Region

        Beaverhead-Deerlodge National Forest      2,446,004  200,149  169,055 
             Bitterroot National Forest            227,390    4,546     3,017 
          Idaho Panhandle National Forest          78,453     5,208     5,208 
             Clearwater National Forest            179,257    9,339     6,167 
               Custer National Forest              687,942   164,343  150,927 
    Dakota Prairie National Grasslands (includes                      
                 Cedar River, Grand                                   
River, Little Missouri, and Sheyenne National  1,250,080  517,929   56,927 
                    Grasslands)                                       
              Flathead National Forest             126,006    2,145     1,872 
              Gallatin National Forest             598,711   30,646    23,434 
               Helena National Forest              505,681   38,228    29,199 
              Kootenai National Forest             362,669    5,946     5,490 
          Lewis and Clark National Forest          844,064   75,990    56,502 
                Lolo National Forest               296,898    5,251     3,266 
             Nez Perce National Forest             665,191   35,753    27,845 
                      Subtotal                    8,268,346 1,095,473 538,909 
          Region 2, Rocky Mountain Region                             
              Bighorn National Forest              963,772   123,734   94,722 
            Black Hills National Forest           1,211,319  87,449    85,925 
      Grand Mesa Uncompaghre Gunnison National    2,780,322  276,365  224,602 
                       Forest                                         
         Medicine Bow-Routt National Forest       1,797,144  298,774  263,066 
          Thunder Basin National Grassland         722,494   138,360  136,250 
Nebraska National Forest (includes Fort Pierre                     
                      National                                        
                     Grassland)                    200,793   68,759    65,646 
     Oglala and Buffalo Gap National Grasslands    829,380   230,051  184,625 
             Rio Grande National Forest           1,560,430  86,516    69,530 
         Arapaho-Roosevelt National Forest         514,286   11,555     7,713 
             Pawnee National Grassland             198,041   82,445    28,025 
          Pike-San Isabel National Forest         1,125,780  27,148    15,740 
     Cimarron and Comanche National Grasslands     528,096   116,758   92,781 
              San Juan National Forest            2,012,944  141,230   97,290 

Appendix III Detailed Grazing Data for Bureau of Land Management and the
Forest Service

                         (Continued From Previous Page)

              Regions                  Acresa  AUMs approvedb    AUMs billedb 
     Shoshone National Forest       1,227,788           51,836         35,691 
    White River National Forest     1,456,895          186,136        162,582 
             Subtotal              17,129,484        1,927,116      1,564,188 

                         Region 3, Southwestern Region

        Apache-Sitgreaves National Forest      1,877,307   209,723     95,165 
             Carson National Forest            1,657,436   113,326     80,901 
Cibola National Forest (includes McClellan                       
                 Creek National                                     
                   Grassland)                  1,500,254   111,514     70,445 
      Black Kettle, Kiowa, and Rita Blanca        256,297  215,376     84,573 
               National Grasslands                                  
            Coconino National Forest           1,707,982   168,932    115,549 
            Coronado National Forest           1,334,461   286,472    145,191 
              Gila National Forest             2,966,004   269,696    146,634 
             Kaibab National Forest            1,440,927   89,886      47,632 
             Lincoln National Forest              917,050  103,918     49,622 
            Prescott National Forest           1,215,178   128,531     26,219 
            Santa Fe National Forest           1,405,045   74,958      56,322 
              Tonto National Forest            2,629,757   279,697     40,804 
                    Subtotal                   18,907,698 2,052,029   959,057 
         Region 4, Intermountain Region                             
             Ashley National Forest            1,055,123   104,884     61,174 
              Boise National Forest            1,449,325   92,149      97,243 
          Bridger-Teton National Forest        2,254,437   372,658    191,925 
              Dixie National Forest            1,732,152   119,042     91,217 
            Fishlake National Forest           1,421,228   125,088    102,126 
           Manti-LaSal National Forest         1,311,426   252,396    190,391 
             Payette National Forest           1,009,796   167,577     97,117 
         Salmon-Challis National Forest        2,488,187   134,697     96,116 
            Sawtooth National Forest           1,710,407   294,025    198,056 
         Caribou-Targhee National Forest       2,329,740   481,826    423,713 
            Curlew National Grassland              47,790  21,501      20,153 
        Humboldt-Toiyabe National Forest       5,775,113   460,301    297,485 
              Uinta National Forest               648,861  202,044    167,569 
          Wasatch-Cache National Forest           873,177  150,696    129,417 
                    Subtotal                   24,106,762 2,978,884 2,163,702 
       Region 5, Pacific Southwest Region                           
             Angeles National Forest               30,250  14,917           0 
            Cleveland National Forest             113,775   4,606       2,135 

Appendix III Detailed Grazing Data for Bureau of Land Management and the
Forest Service

                         (Continued From Previous Page)

                 Regions                   Acresa AUMs approvedb AUMs billedb 
        Eldorado National Forest          407,562          7,403        7,403 
          Inyo National Forest            866,587         63,711       51,611 
    Klamath National Forest (includes     708,640         19,372       17,521 
    Butte Valley National Grassland)                             
         Lassen National Forest           902,983         31,781       19,423 
       Los Padres National Forest       1,065,067         47,315       32,335 
        Mendocino National Forest         640,417          5,989        3,821 
          Modoc National Forest         3,832,197        126,206       97,737 
       Six Rivers National Forest         255,445          5,916        4,417 
         Plumas National Forest           645,888         27,883       19,774 
     San Bernardino National Forest       171,996          3,419        1,300 
         Sequoia National Forest          889,519         58,584       45,504 
     Shasta Trinity National Forest       130,059          9,659        2,637 
         Sierra National Forest           532,571            N/A          N/A 
       Stanislaus National Forest         633,764         26,703       42,969 
          Tahoe National Forest           495,063         32,617       25,344 
    Lake Tahoe Basin Management Unit       31,550            303 
                Subtotal               12,353,333        486,384      374,089 
Region 6, Pacific Northwest Region                            
        Deschutes National Forest         602,687          9,507        4,772 
         Fremont National Forest        1,407,837         49,484       43,348 
     Gifford Pinchot National Forest      177,297            N/A          N/A 
         Malheur National Forest        1,627,719        118,539       92,810 
         Mt Hood National Forest          284,884          1,818        3,527 
         Ochoco National Forest           787,644         44,856       37,861 
    Crooked River National Grassland      112,357         16,930            7 
        Olympic National Forestc                0              0            0 
       Rogue River National Forest        554,485         11,249        7,655 
        Siskiyou National Forest          157,422            462          379 
        Siuslaw National Forestc                0              0            0 
        Umatilla National Forest          967,985         56,854       39,170 
         Umpqua National Forest           121,147            N/A          N/A 
     Wallowa Whitman National Forest    1,645,814        135,598      105,774 
Okanogan-Wenatchee National Forests  1,675,338         87,957       51,473 
       Willamette National Forest              45            N/A          N/A 
         Winema National Forest           466,026         17,173       10,804 
        Colville National Forest          819,646            N/A          N/A 
                Subtotal               11,408,333        550,427      397,580 

Appendix III Detailed Grazing Data for Bureau of Land Management and the Forest
                                    Service

                         (Continued From Previous Page)

 Regions Acresa AUMs approvedb AUMs billedb Region 8, Southern Region Region 9,
                                 Eastern Region

              NFS in Alabama National Forest             1,763   452   
           Chattahoochee-Oconee National Forest          1,507  3,690  
               National Forests in Florida              44,866   600   
                Kisatchie National Forest               73,238  6,238  
             National Forests in Mississippi             2,724   577   
     George Washington and Jefferson National Forests    8,400  9,579   7,405 
                 Ouachita National Forest               453,195 7,326   4,225 
             Ozark-St Francis National Forest           49,732  7,092   3,192 
            National Forests in North Carolina            291    N/A      N/A 
National Forests in Texas (includes Caddo/Lyndon B.                 
                         Johnson                                       
                   National Grasslands)                 39,342  4,404   3,449 
                         Subtotal                       675,058 39,958 19,275 

                      Chippewa National Forest 125 N/A N/A

                  Huron Manistee National Forest 1,584 N/A N/A

                Mark Twain National Forest 42,777 15,341 13,630

              Wayne National Forest                   148    606    
       Midewin National Tallgrass Prairie          19,165   4,910       7,658 
    Green Mountain and Finger Lakes National        5,438   8,942       7,042 
                     Forests                                        
           Monogahela National Forest               6,203   4,917       5,267 
                    Subtotal                       75,440  34,716      33,811 
                      Total                    92,924,454 9,164,987 6,050,611 

Source: Forest Service (data); GAO (analysis).

Notes: The Forest Service has no Region 7.

N/A = Not available.

aAcres values include vacant and active acres for the Forest Service.

bAlthough we use the term AUMs to simplify the comparison with BLM data,
we used the Forest Service's head month data for this table because they
are equivalent to BLM's AUM data.

cAccording to agency officials, the Forest Service permitted grazing in
Olympic and Siuslaw National Forests in the past, but grazing is no longer
permitted in these forests.

Permits and Leases by 	Because the number of AUMs per permit or lease can
vary greatly, the number of AUMs controlled by permittees or lessees also
varies greatly.

Size	Tables 12 through 16 show the number of BLM and Forest Service
permits and leases, and AUMs, by permit size. When considering the data,
it must be noted that multiple permits or leases may be contained on a
single allotment, just as one permit or lease may span multiple
allotments. It must

Appendix III Detailed Grazing Data for Bureau of Land Management and the
Forest Service

also be noted that several operators may share one permit or lease, just
as one operator may possess multiple permits or leases; therefore, the
number of permits and leases does not necessarily correlate to the total
number of operators. Table 12 shows the size of BLM permits and leases,
using approved AUMs in fiscal year 2004. The data do not include permits
and leases with less than 2 AUMs.2

Table 12: Number of BLM Permits by Size, Fiscal Year 2004

         Size of permit or lease, Number of permits and  
                            AUMsa                 leases  Total approved AUMs 
                          2 to 10                  1,266                8,613 
                        11 to 100                  6,073              267,368 
                       101 to 500                  5,551            1,367,336 
                     501 to 1,000                  1,910            1,354,380 
                   1,001 to 5,000                  2,556            5,374,337 
                  5,001 to 10,000                    285            1,929,577 
                      Over 10,000                    143            2,364,322 
                            Total                 17,784           12,665,933 

Source: BLM.

aWe start with 2 AUMs because we recreated a table from a previous GAO
report. In that report, officials were concerned about the accuracy of
data for permits with 2 AUMs or less and considered all permits and leases
with more than 2 AUMs.

The Forest Service provided data on permit size for cattle and sheep in
regions 1 through 6, those regions with lands in western states. Table 13
shows the data for cattle, which do not include horses or other livestock
and do not include permits with fewer than 2 AUMs of grazing for cattle.

2The agencies recreated tables that we produced in two previous GAO
reports: GAO, Rangeland Management: Profile of the Bureau of Land
Management's Grazing Allotments and Permits, GAO/RCED-92-213FS
(Washington, D.C.: June 10, 1992) and GAO, Rangeland Management: Profile
of the Forest Service's Grazing Allotments and Permittees,

GAO/RCED-93-141FS (Washington, D.C.: Apr. 28, 1993).

Appendix III Detailed Grazing Data for Bureau of Land Management and the
Forest Service

Table 13: Number of Forest Service Cattle Permits by Size, Grazing Year
2004

           Size of permits, AUMsa    Number of permits    Total approved AUMs 
                          2 to 10                   26                    170 
                        11 to 100                  757                 43,071 
                       101 to 500                2,199                592,251 
                     501 to 1,000                1,090                773,293 
                   1,001 to 5,000                1,170              2,337,730 
                  5,001 to 10,000                   89                604,806 
                      Over 10,000                   34              1,049,515 
                            Total                5,365              5,400,836 

Source: Forest Service.

aThe permit size groups start with 2 AUMs because we recreated a table
from a previous GAO report, and, in the past, officials were concerned
about the accuracy of data for permits with 2 AUMs or less.

Forest Service sheep permits are shown in table 14. For the purposes of
conversion, five sheep equal 1 AUM. In addition to the sheep, an
insignificant number of horses are included in the data because, in some
cases, permittees may keep a horse for herding the sheep.

Table 14: Number of Forest Service Sheep Permits by Size, Grazing Year
2004

           Size of permits, AUMsa    Number of Permits    Total approved AUMs 
                       50 to 500b                   17                  4,680 
                     501 to 1,500                   46                 46,876 
                   1,501 to 5,000                  125                406,865 
                  5,001 to 15,000                  109                969,131 
                 15,001 to 25,000                   25                471,869 

over 25,000 13 461,751

Total 335 2,361,172

Source: Forest Service.

aThe permit size groups start with 2 AUMs because we recreated a table
from a previous GAO report. In that report, officials were concerned about
the accuracy of data for permits with 2 AUMs or less.

bThis does not include permits with less than 50 AUMs.

For comparison purposes, the size of cattle and calf operations in the
United States is shown in table 15.

Appendix III Detailed Grazing Data for Bureau of Land Management and the
Forest Service

Table 15: Number of Cattle and Calf Operations and Percent of Inventory,
United States, 2004

         Number of head of cattle                       
                       and calves Number of operations   Percent of inventory 
                          1 to 49               618,750                  11.3 
                         50 to 99               163,750                  11.6 
                       100 to 499               178,530                  35.4 
                       500 to 999                18,445                  12.7 
                   1,000 to 1,999                 6,300 
                   2,000 to 4,999                 2,700 
                   5,000 to 9,999                   580 
                 10,000 to 19,999                   225 
                      20,000 plus                   180 
                            Total               989,460                 100.0 

Source: National Agricultural Statistics Service (data); GAO (analysis).

The size of beef cow operations is shown in table 16.

Table 16: Number of Beef Cow Operations and Percent of Inventory, United
States, 2004

          Number of head of beef                        
                            cows  Number of operations   Percent of inventory 
                         1 to 49                601,650                  28.1 
                        50 to 99                 95,650                  19.1 
                      100 to 499                 72,020                  38.3 

              500 to 999                  4,030                        7.8 
            1,000 to 1,999                 950                         3.4 
            2,000 to 4,999                 280                         2.1 
              5,000 plus                             50                1.2 
                Total                    774,630                     100.0 

Source: National Agricultural Statistics Service (data); GAO (analysis).

Appendix IV

Grazing Fee for Lands Managed by BLM and the Forest Service

Rangelands in the United States have been used for livestock grazing since
the expansion and settlement of the western frontier. Ranchers have grazed
livestock on lands managed by the Forest Service and its predecessor since
the late 1890s and on lands managed by BLM and its predecessor since 1934.
Historically, BLM and Forest Service fees were established to achieve
different objectives-either to recover administrative expenses or to
reflect livestock prices, respectively-but the agencies began using the
same approach to setting fees in 1969. Over the years, the agencies, as
well as outside entities, have conducted numerous studies attempting to
establish a grazing fee that meets the objectives of multiple parties. The
current fee for BLM and the Forest Service's 16 western states is based on
a formula that estimates ranchers' ability to pay, and was established in
1978 based on studies conducted in the 1960s and 1970s.1 This appendix
discusses the current fee, historical fees, and key grazing studies and
their findings.

Current Fee for BLM's and the Forest Service's Western States

In 2004, the grazing fee for lands managed by BLM and the Forest Service's
16 western states was $1.43 per AUM-or the amount of forage needed to
sustain a cow and her calf for 30 days.2 This fee is set annually
according to a formula established in the Public Rangelands Improvement
Act of 1978 (PRIA) and extended indefinitely by Executive Order 12548. The
formula is:

Fee = $1.23 x (FVI +BCPI - PPI)/100

where $1.23 = the base value, or the difference between the costs of
conducting ranching business on private lands, including any grazing fees
charged, and public lands, not including grazing fees. The costs were
computed in a 1966 study that included 10,000 ranching businesses in the
western states.

FVI = Forage Value Index, or the weighted average estimate of the annual
rental charge per head per month for pasturing cattle on private
rangelands in 11 western states (Arizona, California, Colorado, Idaho,
Montana, New

1The 16 western states include Arizona, California, Colorado, Idaho,
Kansas, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma,
Oregon, South Dakota, Utah, Washington, and Wyoming.

2While BLM uses the term AUM as a unit for purposes of charging fees, the
Forest Service uses the term head month. The two units are calculated the
same way. We use the term AUM in this report to refer to both AUM and head
month.

Appendix IV
Grazing Fee for Lands Managed by BLM and
the Forest Service

Mexico, Nevada, Oregon, Utah, Washington, and Wyoming) divided by $3.65
per head month (the private grazing land lease rate for the base period of
1964-68) and multiplied by 100.

BCPI = Beef Cattle Price Index, or the weighted average annual selling
price for beef cattle (excluding calves) in the 11 western states divided
by $22.04 per hundredweight (the beef cattle price per hundred pounds for
the base period of 1964-68) and multiplied by 100.

PPI = Prices Paid Index, for selected components from USDA's National
Agricultural Statistics Service's Index of Prices Paid by Farmers for
Goods and Services, adjusted by different weights (in parentheses) to
reflect livestock production costs in the western states [fuels and energy
(14.5), farm and motor supplies (12.0), autos and trucks (4.5), tractors
and selfpropelled machinery (4.5), other machinery (12.0), building and
fencing materials (14.5), interest (6.0), farm wage rates (14.0), and farm
services (cash rent) (18.0)].

PRIA limited the annual increase or decrease in the resulting fee to 25
percent. It also established the fee formula for a 7-year trial period and
required that the effects of the fee be evaluated at the end of that
period. Although the fee formula under PRIA expired in 1986, the use of
the fee formula was extended indefinitely by Executive Order 12548. The
executive order requires the Secretaries of the Interior and Agriculture
to establish fees according to the PRIA formula, including the 25 percent
limit on increases or decreases in the fee. In addition, the order
established that the fee should not be lower than $1.35 per AUM.

As shown in figure 3, the formula results have been limited by the PRIA
and executive order constraints, but neither the formula results nor the
PRIA fee has mirrored fees charged for grazing on private lands.

Appendix IV
Grazing Fee for Lands Managed by BLM and
the Forest Service

Figure 3: Unconstrained Formula Results and PRIA Grazing Fee Compared with
Fees Charged on Private Lands

Dollars 15

12

9

6

3

0

Year

Private fees

Formula results

PRIA fee Source: National Agricultural Statistics Service (data); GAO
(analysis).

Note: In 1980, BLM and the Forest Service charged $2.36 per AUM and $2.41
per AUM, respectively, or on average, $2.38 per AUM. Prior to 1981, the
agencies charged different fees for grazing-in 1979, they charged $1.89
per AUM and $1.93 per AUM, respectively. In 1980, the agencies used the
PRIA formula to calculate their fees, but the formula produced a fee of
$2.77, and PRIA limited the annual increase in the fee to 25 percent. The
different fees charged in 1980 were a result of the agencies applying the
25 percent increase to their 1979 fees.

According to different economic studies and our evaluation of the PRIA fee
structure in 1991, the fee is kept low by including the BCPI and PPI,
which are factors that take into account ranchers' "ability to pay."3
Figure 4 shows the value of each PRIA component from 1979 through 2004.

3GAO, Rangeland Management: Current Formula Keeps Grazing Fees Low,
GAO/RCED91-185BR (Washington, D.C.: June 11, 1991).

1979198019811982

198319841985198619871988198919901991199219931994199519961997199819992000200120022003
                                      2005

                                      2004

Appendix IV
Grazing Fee for Lands Managed by BLM and
the Forest Service

Figure 4: Value of PRIA Grazing Formula Components, 1979 through 2004
Index value 800

600

400

200

0

Year

FVI

PPI

BCPI Source: National Agricultural Statistics Service (data); GAO
(analysis).

Table 17 shows the data used in the previous two figures for easier
reading of the numbers.

1979198019811982

1983198419851986198719881989199019911992199319941995199619971998199920002001200220032004

Appendix IV
Grazing Fee for Lands Managed by BLM and
the Forest Service

Table 17: PRIA Formula Data for 1979 through 2004 and Fee Results for 1980
through 2005

          Data  Private lands                            Fee Formula PRIA fee 
          year     grazing fee  FVI   BCPI    PPI  year results (constrained) 
          1979            7.53  206   294     275                  a1980 2.77 
          1980            7.88  216   291     319              1981 2.31 2.31 
          1981            8.83  242   268     359              1982 1.89 1.86 
          1982            8.36  229   262     378              1983 1.39 1.39 
          1983            8.85  242   256     387              1984 1.37 1.37 
          1984            8.86  243   262     395              1985 1.35 1.35 
          1985            9.17  251   243     397              1986 0.93 1.35 
          1986             8.5  233   235     388              1987 0.98 1.35 
          1987            8.54  234   272     381              1988 1.54 1.54 
          1988            8.75  240   297     386              1989 1.86 1.86 
          1989            8.87  243   306     402              1990 1.81 1.81 
          1990            9.22  253   326     419              1991 1.97 1.97 
          1991            9.66  265   327     436              1992 1.92 1.92 
          1992           10.03  275   316     440              1993 1.86 1.86 
          1993            10.2  279   333     451              1994 1.98 1.98 
          1994            10.3  282   304     455              1995 1.61 1.61 

1995 11 301 277 473 1996 1.29 1.35 1996 10.7 293 252 499 1997 0.57 1.35
1997 11.3 310 281 512 1998 0.97 1.35 1998 11.8 323 272 514 1999 1 1.35
1999 11.9 326 281 516 2000 1.12 1.35 2000 12 329 313 554 2001 1.08 1.35
2001 12.6 345 330 559 2002 1.43 1.43 2002 13 356 303 559 2003 1.23 1.35
2003 13.4 367 342 593 2004 1.43 1.43 2004 13.8 378 402 618 2005 1.99 1.79

Source: National Agricultural Statistics Service.

aIn 1980, BLM and the Forest Service charged $2.36 per AUM and $2.41 per
AUM, respectively, or on average, $2.38 per AUM. Prior to 1981, the
agencies charged different fees for grazing-in 1979, they charged $1.89
per AUM and $1.93 per AUM, respectively. In 1980, the PRIA formula
produced a fee of $2.77, but PRIA limited the annual increase in the fee
to 25 percent. The different fees charged in 1980 were a result of the
agencies applying the 25 percent increase to their 1979 fees.

                                  Appendix IV
                    Grazing Fee for Lands Managed by BLM and
                               the Forest Service

History of Western Grazing Fees

Grazing fees have been charged for lands managed by the Forest Service
since 1906-9 years after grazing was authorized on forest reserves-and for
lands now managed by BLM since 1936, 2 years after the enactment of the
Taylor Grazing Act. Before 1906, livestock could graze on federally
managed lands for free, and livestock operators objected to being charged.
Originally, the fee charged by the Forest Service and BLM was $0.05 per
AUM for cattle, but the fee increased by 1968 to $0.56 per AUM for Forest
Service permits and $0.33 per AUM for BLM leases and permits.

Until 1969, the approach used by the Forest Service and BLM for
establishing grazing fees differed. The original Forest Service fee was
based on the rental value of local, private grazing tracts, while the
original BLM fee was based on the agency's administrative expenses.
Beginning in the 1920s and continuing through 1968, the Forest Service
based its fee on beef and lamb prices, as determined through studies it
conducted. BLM (and its predecessor) also conducted studies of its fee
approach. In 1946, the year that BLM was created, one of these studies
supported the use of administrative expenses as a basis for the fee.
However, in 1951, BLM began increasing its fees, and in 1958, it shifted
its approach to one that was similar to the Forest Service approach-that
is, based on livestock prices. Throughout the 1960s, BLM charged fees that
factored in livestock prices. For example, the 1958 fee increased from
$0.19 per AUM to $0.22 per AUM in 1959 and 1960, and it decreased to $0.19
per AUM in 1961 and 1962, reflecting decreasing livestock prices.

Since 1969, the Forest Service and BLM have used a uniform approach to
establish a grazing fee. After a 1960 study conducted for the Bureau of
the Budget-the predecessor of the OMB-by an interdepartmental grazing
committee, the Bureau set a new fee schedule for the agencies to achieve
fair market value for federal grazing permits and leases. An extensive
survey in 1966 of the western livestock industry, called the Western
Livestock Grazing Survey and Analysis, and a 1968 review of that survey
data determined that a fair market value for federal grazing permits and
leases would be $1.23 per AUM. The $1.23 per AUM value equalizes the costs
of conducting business between private ranch lands and federal lands. It
is based on the premise that the costs of conducting grazing activities on
federal lands should be competitive and comparable to the costs on private
land. Because the new fee, if imposed all at once, would have increased
Forest Service fees by $0.72 per AUM and BLM fees by $0.90 per AUM, a
10-year phase period was scheduled.

Appendix IV
Grazing Fee for Lands Managed by BLM and
the Forest Service

Before the new fee could be implemented, drought and continued debate
caused several delays in the phase-in schedule, and in 1976, the Congress
passed the Federal Land Policy and Management Act (FLPMA), which required
the Secretaries of Agriculture and of the Interior to conduct a study to
establish a fee that was equitable both to the United States and to
holders of grazing permits and leases. The 1977 study, Study of Fees for
Grazing Livestock on Federal Lands, written by a task force of Forest
Service and BLM officials,4 evaluated several different formulas for
setting a grazing fee. The goal was to establish a fee that achieved
multiple objectives, including getting fair market value for the forage
while also reflecting the value of grazing to the rancher. The fee was
also to contain regular adjustments to account for changes in fair market
value over time.

On the basis of the 1977 study, Congress enacted PRIA with the task
force's recommended formula for a 7 year trial basis. The agencies studied
the effectiveness of the formula after 7 years, as required in PRIA, and
academic economists sought to establish better ways to set a fee, but the
use of the formula was extended indefinitely by executive order and has
remain unchanged. Two studies by the agencies, one in 1986 and its update
in 1992, evaluated the components of the PRIA formula and its results.5
The reports identified technical issues with the formula, including the
fact that the BCPI does not include prices for calves-which are produced
on western lands-and does include fat cattle (cattle fattened on grain for
slaughter), which are not produced on western lands. The reports also
noted that the PPI does not include a cost of living component; components
of farm origin (feed, feeder livestock, seed, and fertilizer); or taxes;
all of which increases the weight of factors that are affected by
inflation, such as fuel costs. Finally, the reports identified the need to
update the base value ($1.23 per AUM) to reflect current market values
rather than 1960s data.

Critics of the reports stated that the agencies did not evaluate the
effectiveness of the PRIA formula; disagreed with the agencies' appraisal
of private lands and fees; and identified incorrect statistical indexing,
such as

4Departments of the Interior and Agriculture, Study of Fees for Grazing
Livestock on Federal Lands (Washington, D.C.: October 21, 1977).

5Departments of the Interior and Agriculture, Grazing Fee Review and
Evaluation (Washington, D.C.: February, 1986) and Departments of the
Interior and Agriculture, Grazing Fee Review and Evaluation Update of the
1986 Final Report (Washington, D.C.: April 30, 1992).

Appendix IV
Grazing Fee for Lands Managed by BLM and
the Forest Service

using inflation factors instead of a livestock-relevant factor. They also
stated that the agencies failed to recognize the different costs of
operating on federal and private land. According to the critics, one of
these costs is the value of permits and leases, which is included in the
value of privately owned ranches. The livestock industry believes that
this value should be included in the calculation of the $1.23 base value
(subtracted out as a cost of doing business).

In 1993, in response to a perceived need to increase fees to capture the
economic value of forage, another Forest Service and BLM study examined
the potential for an incentive-based grazing fee. The report identified
the "grazing fee dilemma" as one in which the federal government is not
receiving full market value for its forage, but as one in which ranchers
are paying full market value by paying (1) the fee; (2) nonfee grazing
costs (including costs for operating on federal lands, i.e., complying
with federal requirements like those for endangered species habitat); and
(3) investments in grazing permits and leases.6 According to this study,
the only way to determine the fair market value of federal grazing permits
and leases was through competitive bidding, which would have its own set
of administrative expenses. In lieu of competitive bidding, according to
this study, all methods of estimating fair market value resulted in fees
somewhere between $3 and $5, and the base value of the formula should be
negotiated at some price in that range. The report also stated that
including BCPI and PPI in the grazing formula did not improve the ability
of the PRIA formula to track market prices, as anticipated in 1977, and
that FVI would adequately update the grazing fee. This study and report
were used to inform efforts to reform grazing regulations in 1994.

In the late 1980s, agricultural economists examined livestock prices and
ranch revenue-the gross income from ranching-to assess the rate of return
on investments in cattle and sheep ranches. The economists found that
rates of return are relatively low compared with other investments, but
that land value has increased and kept ranchers financially solvent.
Furthermore, the net return in the ranching industry-the value of
production minus costs-is often negative. This information was used to
support federal legislation to change grazing fees in 1997. The
legislation proposed to change the fee to equal the 12-year average of the
total gross

6Department of Agricultural Economics and Agricultural Business, The Value
of Public Land Forage and the Implications for Grazing Fee Policy,
Bulletin 767 (Las Cruces, New Mexico: New Mexico State University, 1992).

Appendix IV
Grazing Fee for Lands Managed by BLM and
the Forest Service

value of production for beef, multiplied by the 12-year average of the
Treasury 6-month bill "new issue" rate, divided by 12.7 The proposal was
not enacted.

7H.R. 2493, Forage Improvement Act of 1997 (introduced Sept. 18, 1997).

Appendix V

Examples of Other Federal Agency Grazing Fees

This appendix illustrates the different grazing fees used by federal
agencies other than BLM and the Forest Service. It describes the specific
fees charged at two Air Force bases-one managed by the Air Force and the
other managed by BLM-an Army base, a national monument, a national refuge,
and a Reclamation project.

Melrose Air Force Range, Cannon Air Force Base, New Mexico

Melrose Air Force Range, located in eastern New Mexico, is a more than
66,000 acre site used by the Air Force to train pilots. It consists of an
8,800 acre target area and 57,000 acres of land surrounding the target
area that acts as a buffer. The land is divided into 13 grazing areas,
each of which has fencing and a water supply provided by a system of
pipelines and water tanks. The target area lands were acquired from local
ranchers in the 1950s, and the remaining area was acquired in the 1980s.
Because the lands were acquired from local ranchers, the Air Force granted
a special waiver in March 2002 to allow noncompetitive leasing to the
former owners. Air Force policy allows waivers of competition under
certain conditions, including offers of first lease of land to former
owners.

In fiscal year 2002, when many of the range's leases were renewed, the fee
charged for grazing was $1.60 per acre of land (about $5.30 per AUM). The
waiver of competition contained a condition that the lease fee was to be
based on a market rate determined by real property specialists. To
establish a market-based grazing fee, the Air Force real estate staff
developed comparable lease information for other grazing land in the
vicinity and set an equivalent price. One source used for pricing
information was a local agricultural land appraiser and the other was a
Web site identified by the local BLM office that contained lease rates for
the state. The prices remain the same for the 5-year term of the lease,
when they will be reestablished. In mid-2003 and all of 2004, Cannon Air
Force Base halted grazing on Melrose Range because of drought conditions
that affected much of New Mexico and the southwestern United States. The
ranchers received credits for the months that their cattle did not graze.

McGregor Range, New McGregor Range in southern Otero County, New Mexico,
is a 694,981 acre

Mexico	area that contains a bombing range used by the Air Force to train
pilots, who practice bombing targets within the range. The land within
McGregor Range has mixed ownership and management, including 608,385 acres
(87 percent) of public land managed by BLM but withdrawn from public use,
71,083 acres (about 10 percent) owned in fee title by the Army, and 17,864
acres (3 percent) managed by the Forest Service.

            Appendix V Examples of Other Federal Agency Grazing Fees

In 1999, the Congress enacted the Military Lands Withdrawal Act, renewing
the withdrawal of public lands comprising the McGregor Range for military
use but requiring BLM to plan and manage use of the lands in accordance
with the principles of multiple use and sustained yield required by FLPMA.
While accommodating the military's continued use of the range, BLM manages
other activities on the range, including livestock grazing, habitat
management, fire prevention and control, and recreation, such as hunting.
BLM's Las Cruces Field Office in New Mexico administers livestock grazing
on 271,000 acres of land. The area is divided into 14 grazing units
available for grazing contract, primarily for cattle.

In contrast to the fee charged on other BLM and Forest Service lands, BLM
manages livestock grazing permits on McGregor Range using competitive
bidding to establish its grazing fee. BLM sets a minimum bid and then
holds an annual public auction, where all bidders meet and openly submit
their offers. As a result, in September 2004, BLM received winning bids
ranging from $5.00 to $14.50 per AUM to graze cattle on designated grazing
units for the 9-month grazing season ending in June 2005. BLM expects the
McGregor Range grazing program to be self-sustaining through competitive
bidding for grazing units. BLM staff for McGregor Range consist of one
rangeland management specialist, one range technician, and one maintenance
worker. Revenues from the grazing leases allow BLM employees to monitor
the number of cattle on the range and manage roads, fences, corrals, and
water pipelines. The livestock owners manage and provide care for the
cattle, including salt, minerals, and veterinary services. According to
BLM officials, additional services provided on the range by BLM result in
a higher minimum bid, and BLM is able to attract higher bids compared to
other livestock grazing areas.

Fort Hood Army Installation, Texas

Fort Hood, located in central Texas, is a 217,000-acre Army installation,
the majority of which is used for military training activities, including
tank and other armored vehicle training exercises. The Army allows a
certain level of grazing on about 197,000 acres of the installation,
having determined that grazing would not interfere with the installation's
primary training mission. The majority of the installation's lands were
acquired from private landowners. Some of the original landowners formed a
group, called the Central Texas Cattlemen's Association, which has
continued leasing the land since 1954. In 2005, upon lease renewal, the
Assistant Secretary of the Army (Installations and Environment) determined
to offer the group a noncompetitive lease, provided that the installation
obtain a fair market value for the lease. The Corps-the Army's leasing
agent-had

            Appendix V Examples of Other Federal Agency Grazing Fees

recommended that the lease be competitively bid, but it also acknowledged
that a transition to competitive leasing may be needed. The Army
determined that while it had no legal obligation to continue leasing to
the group, the relationship with the neighboring ranchers contributed to
the Army's ability to sustain its mission, discharge its environmental
stewardship responsibilities, and maintain its standing in the community.

In 2005, the Army renegotiated a lease with the Central Texas Cattlemen's
Association, charging a price of $4.67 per AUM ($56 per animal unit, per
year), plus the installation's administrative and management expenses. The
Army agreed to adjust the number of animal units based on a new forage
assessment and an evaluation of training intensity and the consequent
effects on forage. The Army also agreed to conduct a new appraisal that
considers factors that are unique to managing grazing on a military
installation, such as lack of fencing, presence of endangered species, and
restricted access to the installation. Although a land appraisal was
conducted in 2004 and determined the price of the new lease to be $7.83
per AUM, Army officials agreed with the Association to discount this value
by 40 percent for April 1, 2005, through August 31, 2005, because the
appraisal did not explicitly consider the military unique circumstances
that, according to Army officials, lead to higher grazing costs on Army
lands. The 40-percent figure was based on a figure used in a 1996
appraisal, although the U.S. Army Audit Agency questioned the adjustment
in a 2001 audit report.1 The Army received a new appraisal on August 12,
2005, that has a price of $5.66 per AUM ($68 per animal unit, per year)
when adjusted for military unique circumstances. It will use this new
amount as the basis of the fee for the remainder of the 5-year lease
period. In addition to these agreements, the Cattlemen's Association
agreed to pay $102,000 for estimated administrative expenditures owed in
the new lease and agreed to reimburse actual expenditures when the Army
presents evidence of actual expenditures at the end of the lease year.
Army staff estimated their 2005 expenditures to be $285,000.

Dinosaur National Dinosaur National Monument, located in northwestern
Colorado and Monument, Colorado and northeastern Utah, was created to
protect a large deposit of dinosaur Utah fossils and later expanded to
protect the river corridors of the Green and

Yampa rivers. The monument, which occupies 210,000 acres of desert

1U.S. Army Audit Agency, The Army Installation Conservation
Program-Outleasing: III Corps and Fort Hood, Fort Hood, Texas, AA 02-099
(Alexandria, Virginia: Dec. 19, 2001).

            Appendix V Examples of Other Federal Agency Grazing Fees

habitat, permits grazing on monument lands to ranchers that have
historically held grazing rights. Several ranchers with grazing rights own
land within the boundaries of the monument, called inholdings, while
several other ranchers with grazing rights own land adjacent to the
monument. In fiscal year 2004, monument staff authorized 1,794 AUMs on
67,120 acres using seven special use permits.

In 2004, the monument charged $1.43 per AUM-the price for grazing on BLM
lands. National Park Service regulations specific to the monument direct
that the grazing fees at the monument shall be the same as those approved
for the BLM.2 The National Park Service is statutorily authorized to
recover the costs of administering special use permits; however, a
monument official said that they have never charged such a fee because of
the more specific regulations that determine the monument's fee.

Klamath Basin National Wildlife Refuge Complex, California and Oregon

The U.S. Fish and Wildlife Service's Klamath Basin National Wildlife
Refuge Complex is part of the wetland and lake system of the Klamath Basin
of northern California and southern Oregon and provides habitat for
numerous birds along the Pacific flyway during spring and fall migrations.
In 1905, Reclamation began to convert wetlands in the basin into
agricultural lands. The refuge complex is comprised of six refuges that
were established between 1908 and 1978 to conserve wetlands as a preserve
and breeding ground for birds and animals. The refuge is also managed to
allow appropriate agricultural uses of land. Klamath Basin refuge managers
authorize grazing on 17,046 acres of the basin to allow adjacent ranchers
access to forage on refuge lands and to reduce certain grasses, thereby
improving the habitat of the birds that use the refuges.

In fiscal year 2004, the refuge charged different fixed amounts ranging
from $5.00 to $6.55 per AUM for grazing on three federal refuges in the
Klamath Basin complex-Clear Lake, Lower Klamath, and Upper Klamath. U.S.
Fish and Wildlife Service regulations require that fees charged for the
grant of privileges and for the sale of all products taken from refuge
areas, including forage, be equivalent to the fees charged by private
owners in the vicinity of the refuge. Refuge officials said that the fees
were negotiated in the 1980s and have remained unchanged. However, they
stated that the fees are appropriate because the refuges receive benefits
from grazing for wildlife

2See 36 C.F.R. 7.63(b)(5).

            Appendix V Examples of Other Federal Agency Grazing Fees

habitat and forage and permittees must meet specific limitations on their
use of refuge lands. For example, in one case involving the Clear Lake
National Wildlife Refuge, when water levels decrease significantly and
expose Native American archaeological sites, one rancher incurs
significant expenditures (e.g., temporary fencing, temporary water
sources, and a herder) to keep cattle away.

Fresno Reservoir and Reclamation's Milk River Project, Montana

Fresno Reservoir, located in north-central Montana, is part of
Reclamation's Milk River Project, which provides irrigation water to about
121,000 acres of land. Reclamation acquired excess land surrounding Fresno
Reservoir when it built the Fresno Dam; the reservoir was originally
planned to be higher and would have flooded more land. As a result,
Reclamation allows grazing on the strip of land surrounding the reservoir.
The area office conducts grazing on over 24,000 acres of land near Fresno
Reservoir, and allows grazing on over 27,000 acres of land managed by two
irrigation districts on Reclamation land within the greater Milk River
Project. Revenue from the grazing receipts goes into either the
Reclamation Fund or is credited to divisions within the Milk River
Project.

In fiscal year 2004, the Montana Area Office charged between $8.25 and
$25.10 per AUM for numerous grazing permits and leases within the Milk
River Project. To establish these fees, the area office used three types
of market-based methods, including competitive, limited competitive, and
negotiated. For all permits and leases, the area office set a minimum bid
based on the market value for permits and leases in the area, and then
discounted the rate for factors such as lack of fencing on Reclamation
lands. The area office then offered the majority of project permits and
leases for competitive bid using a sealed bid process. For parcels with
limited access, the area office limited competition to the adjacent
landowners, giving them equal opportunity to bid on the permits and
leases. Much of the land within the Milk River Project is surrounded by
private land, and therefore the Reclamation land has limited public
access. For a few permits and leases, the area office used what it called
a negotiated method to establish the grazing fee. In these cases, in which
only one rancher has access to a site, the area office offered each permit
or lease to the rancher at the minimum bid, allowing the rancher to accept
or reject the bid.

Appendix VI

                    Western State Grazing Fees and Formulas

As this appendix discusses, the 17 western states vary considerably in the
fees charged for state lands and the methods used to set those fees. These
states' land offices manage more than 46 million acres of trust lands, of
which more than 37 million acres were grazed in fiscal year 2004,1
bringing in grazing revenues of more than $40.7 million.

Upon statehood, most western states, as well as several other states
throughout the nation, received lands from the federal government to be
held in trust to generate revenue for public education. The Land Ordinance
of 1785 initiated a program to reserve certain lands within each western
township to support public schools in that township. In 1848, the federal
government doubled the lands granted to western states, and it did so
again by 1910, with the accession of Utah, Arizona, and New Mexico to
statehood.2

According to many state officials that we interviewed, many state trust
lands are comparable in range condition, productivity, and land value to
federal lands. For example, in some states, such as Wyoming and Oklahoma,
state lands are intermingled with or adjacent to federal lands; thus the
native characteristics of the lands are similar. In some cases, however,
federal and state lands are not comparable. For example, in Oregon much of
the federal land is forested, while much of the state land is rangeland.

Generally, the states charge a fee per AUM. In fiscal year 2004, the
western states charged grazing fees ranging from a low of $1.35 per AUM
for some lands in California to $80 per AUM in parts of Montana. As shown
in table 18, the majority of the western states use a market or
market-based approach to set grazing fees. Specifically, six states
(Montana, Nebraska, New Mexico, North Dakota, Oklahoma, and South Dakota)
offer their leases to the highest bidder through a competitive process,
and six states

1The western states predominantly maintain grazing data by fiscal year.
However, several states (Colorado, Idaho, North Dakota, Oklahoma, Oregon,
South Dakota, and Washington) maintain some grazing data by fiscal year
and some by calendar year.

2Originally, with the Land Ordinance, the number 16 lots of every township
were reserved for that township. In 1848, the act establishing Oregon gave
states in the Northwest territory sections 16 and 36 in each township. In
1894, Utah, followed in 1910 by Arizona and New Mexico, entered the nation
with two additional sections reserved in each township, sections 2 and 32.
In addition to lands granted for schools, states could set aside
additional trust lands to generate revenue for broader purposes, such as
supporting universities, hospitals, and other public buildings.

              Appendix VI Western State Grazing Fees and Formulas

(Arizona, California, Colorado, Texas, Washington, and Wyoming) use
market-based approaches that rely on regional market rates, land
appraisals, or formulas that adjust the market price for grazing by
factors that account for differences between state and private lands and
livestock market conditions. Three states (Idaho, Oregon, and Utah) use
formulas that do not start with a market price for private lands, but
instead use either a base fee, adjusted for livestock market and other
factors, or a fixed percentage of livestock production value. Two states,
Nevada and Kansas, allow some grazing on lands managed by other state
agencies, but they do not allow grazing on state trust lands and are
therefore not included in this appendix.

Table 18: Information on State Lands Used for Grazing, Revenues, and
Fee-Setting Approach in 17 Western States, Fiscal Year 2004a

                                                                  Grazing fee
                               State lands State lands Total revenue (per AUM
                   managed allocated for Total revenue from related to unless

State (acres) grazing (acres) state lands grazing noted) Approach to
setting fee

     Arizona    9,300,000 8,300,000 $145,600,000 $2,200,000 $2.23             
                                                 Market-based appraisal with  
                                                            annual adjustment 
    California                                     8,000 1.35 to 12.50 Market 
                 470,000   13,000      6,200,000      based on average rates; 
                                                         fee varies by county 
     Colorado                                    4,730,000 6.65 to 8.91       
                3,000,000 2,400,000   36,450,000 Market-based formula; fee    
                                                       varies by region       
      Idaho     2,400,000 1,900,000   65,560,000 1,630,000 5.15 Formula       
                                                 similar to federal fee       
     Kansasb            b         b            b b b No grazing on state land 
                                                                       office 
                                                            lands             
                                                      5,500,000 5.48 to 80.00 
     Montana                                          Market with minimum bid 
                5,100,000 4,250,000   75,700,000                       ($5.48 
                                                           per AUM)           
     Nebraska                                     10,000,000 16.00 to 28.00   
                1,450,000 1,200,000   20,000,000   Market with minimum bid    
                                                       (minimum fee varies by 
                                                                      region) 
     Nevadac                      0            c c c No grazing on state land 
                    3,000                                              office 
                                                            lands             
                                                      7,630,000 0.71 to 10.15 
    New Mexico                                        Market with minimum bid 
                9,000,000 8,700,000  278,700,000                       ($4.22 
                                                     (per acre) per AUM)      
North Dakota                                  Unknownd 1.73 to 19.69       
                 710,000   690,000     4,600,000 Market with minimum bid      
                                                      (per acre) (minimum fee 
                                                             varies by tract) 
     Oklahoma                                    Unknownd 7.00 to 16.00       
                 745,000   500,000     9,800,000 Market with minimum bid      
                                                       (minimum fee varies by 
                                                                      region) 
                                                   300,000 4.32 Formula based 
      Oregon    1,570,000  640,000       620,000                on production 
                                                           factors            

              Appendix VI Western State Grazing Fees and Formulas

                         (Continued From Previous Page)

                                                                  Grazing fee
                               State lands State lands Total revenue (per AUM
                   managed allocated for Total revenue from related to unless

State (acres) grazing (acres) state lands grazing noted) Approach to
setting fee

                                                      2,250,000 3.00 to 56.00 
South Dakota    770,000    750,000      3,000,000  Market with minimum bid 
                                                                       ($9.00 
                                                       (per acre) per AUM)    
      Texas        750,000    550,000    365,000,000 1,200,000 4.16 to 12.50  
                                                     Market-based appraisals  
                                                         440,000 1.43 or 2.35 
       Utah                                           Formula that is similar 
                3,500,000  3,000,000      52,500,000               to federal 
                                                           fee formula        
                                                         650,000 5.41 or 7.76 
                                                     Market-based formula for 
    Washington  3,000,000     850,000    210,000,000                   leases 
                                                       or based on production 
                                                                      factors 
                                                           for permits        
     Wyoming    3,600,000  3,500,000      92,900,000      4,180,000 4.13      
                                                       Market-based formula   
      Total                                            $40,700,000 $1.35 to   
                45,400,000 37,200,000 $1,366,600,000          80.00           

Source: State agencies (data); GAO (analysis).

Note: Numbers may not total due to rounding.

aThe western states predominantly maintain grazing data by fiscal year.
However, several states (Colorado, Idaho, North Dakota, Oklahoma, Oregon,
South Dakota, and Washington) maintain some grazing data by fiscal year
and some by calendar year.

bKansas does not manage any grazing on state trust lands.

cThe Nevada Division of State Lands within the Nevada Department of
Conservation and Natural Resources does not manage any grazing on its
lands. While other state offices in Nevada do manage grazing on state
lands, we did not collect these data.

dNorth Dakota and Oklahoma do not know total grazing revenue because they
do not separate grazing revenue from crop revenue.

The states provided details about their approaches to setting grazing
fees, as well as information on their lands and revenues collected.

Arizona: In Arizona, the annual rental rate for grazing land is required
to be the true value rental rate determined by the Arizona State Land
Commissioner based on the recommendations of the grazing land valuation
commission. In fiscal year 2004, the Arizona State Land Department charged
$2.23 per AUM for grazing on lands that it manages. In 1996 the department
appraised the true value of forage on trust land using the market and
income approaches. According to Arizona officials, yearly adjustment to
the appraised value is made based upon a factor that is the ratio between
the 5 year new and old average prices of beef, as compiled by USDA's
National Agricultural Statistics Service. Upon renewal, if multiple
applications are filed for a lease, the current lessee can match competing
bids. The department manages more than 9.3 million acres of land, of which
more than 8.3 million acres were allocated for grazing in fiscal year
2004. Total grazing receipts in fiscal year 2004 were about $2.2 million.

Appendix VI Western State Grazing Fees and Formulas

California: Upon receiving an application to lease lands, the California
State Lands Commission is to appraise the lands and fix the annual rent;
the total amount of the rental should not be in excess of the fair market
value of the lands. In fiscal year 2004, the commission charged a range of
fees, from $1.35 to $12.50 per AUM, for grazing on the lands that it
manages. The commission establishes the grazing fees by calculating an
average rate based on the rates charged by county agriculture
commissioners or assessors and agricultural extension offices. If the
total grazing fee for a lease is less than $500, as is often the case, a
minimum rental fee of $500 per year is applied. The commission manages
about 470,000 acres of surface land, of which almost 13,000 acres were
allocated for grazing in fiscal year 2004. Total grazing receipts in
fiscal year 2004 were about $8,000.

Colorado: The Colorado State Board of Land Commissioners is to include
lease rates that will promote sound stewardship and land management
practices, long-term agricultural productivity, and community stability.
In 2004, the state board charged between $6.65 and $8.91 per AUM for
grazing on lands that it manages, depending on the region. The state board
sets grazing fees on the basis of a 2004 statewide survey of private lease
rates. The grazing fee is calculated for each region based on the average
rate identified by the survey, then reduced by 35 percent to account for
differences, such as fencing or water, between private and state lands.
Each year since 2001, the state board has determined whether the fee
should be adjusted up or down by 3 percent, depending on the Beef Price
Index. The state board manages about 3 million acres of state land, of
which about 2.4 million acres were allocated for grazing in 2004. Total
grazing receipts in fiscal year 2004 were about $4.7 million.

Idaho: The Idaho State Board of Land Commissioners may lease any portion
of the state land at a rental amount fixed and determined by the board. In
2004, the Idaho Department of Lands charged $5.15 per AUM for grazing on
the lands that it manages. The board sets the grazing fee using a formula
based on livestock market factors. The formula establishes the forage
value for a given year based on four factors: the (1) forage value index
for 11 western states; (2) beef cattle price index for 11 western states;
(3) prices paid index for 11 western states; and (4) Idaho forage value
index. The formula is then applied to a base value of $1.70, which was
established in 1993 by the board. If the department receives more than one
application for a lease, then it auctions the lease. The department
manages about 2.4 million acres of land, of which about 1.9 million were
allocated

Appendix VI Western State Grazing Fees and Formulas

for grazing in fiscal year 2004. Total grazing receipts in fiscal year
2004 were about $1.6 million.

Montana: The Trust Land Management Division of the Montana Department of
Natural Resources and Conservation must lease tracts to the highest bidder
unless the Board of Land Commissioners determines that the bid is not in
the state's best interest, and the board may not accept a bid that is
below full market value. The division used competitive bidding to collect
between $5.48 and $80.00 per AUM for grazing on the lands that it manages
in fiscal year 2004. If no bids are received, then the division issues the
lease or permit at the minimum rate, which was $5.48 per AUM in fiscal
year 2004, set by a fee formula. The formula establishes the minimum fee
by multiplying the average price per pound for beef cattle in Montana by a
multiplier of 7.54. The division manages about 5.1 million acres of land,
of which more than 4.2 million acres were allocated for grazing in fiscal
year 2004. Total grazing receipts in fiscal year 2004 were about $5.5
million.

Nebraska: In Nebraska, all school land is subject to lease at fair market
rental as determined by the Board of Educational Lands and Funds. In
fiscal year 2004, the board used competitive bidding to collect between
$16 and $28 per AUM for grazing on the lands that it manages. The board
sets minimum grazing fees by geographic area. It uses a formula that
multiplies the available AUMs by private sector rates, and then adjusts
the resulting per-acre rents downward to reflect fence and water
improvements, which the lessees must provide. The board uses three data
sources to determine private sector rates: (1) verified private sector
rental contracts collected by its employees, (2) a questionnaire that the
board sends to professional farm and ranch managers who have mandatory
fiduciary responsibility to the landowners they represent, and (3) an
annual study conducted by the University of Nebraska. The board gives the
private contracts the most weight when determining the grazing fee. If
more than one qualified bidder is interested in the lease, it is sold to
the party bidding the highest cash bonus at auction. The board manages
more than 1.4 million acres, of which about 1.2 million acres were
allocated for grazing in fiscal year 2004. Total grazing receipts in
fiscal year 2004 were about $10 million.

New Mexico: In New Mexico, the Commissioner of Public Lands is to make
rules and regulations for the control, management, disposition, lease, and
sale of state lands. In fiscal year 2004, the New Mexico State Land Office
charged a minimum of $4.22 per AUM for grazing on lands that it manages,
and collected between $0.71 and $10.15 per acre, based on competitive
bidding. Absent a competitive bid, the state land office sets an annual

Appendix VI Western State Grazing Fees and Formulas

grazing fee using a formula that multiplies a base value of $0.0474 by the
carrying capacity of the land, the acreage, and the Economic Variable
Index. This index is the ratio of the value of a state land office
adjustment factor for that year to the value of that same adjustment
factor calculated for the base year, 1987. The state land office manages
about 9 million acres, of which about 8.7 million acres were allocated for
grazing in fiscal year 2004. Total grazing receipts in fiscal year 2004
were about $7.6 million.

North Dakota: In North Dakota, the Board of University and School Lands is
required to set the minimum rental for uncultivated and cultivated lands,
which it sets for the purpose of public auction using a procedure called
"the fair market value method," which it promulgated in 1989. In fiscal
year 2004, the North Dakota State Land Department collected between $1.73
and $19.69 per acre, based on competitive bidding at public auction, on
grazing lands that it manages. The department accepts bids over a minimum
fee that is set for each tract based on a county-by-county survey
completed annually by USDA's National Agricultural Statistics Service. The
department manages about 710,000 acres, of which about 690,000 acres were
allocated for grazing in fiscal year 2004. The department does not know
the total revenue related to grazing collected in fiscal year 2004 because
they do not separate grazing and cropland revenues.

Oklahoma: In Oklahoma, rentals are required to be determined by public
auction. In 2004, the Oklahoma Commissioners of the Land Office used
competitive bidding to collect between $7 and $16 per AUM for grazing on
lands that it manages. The land office sets a minimum grazing fee based on
appraisals, and the grazing leases are then auctioned and awarded to the
highest bidder. The land office manages about 745,000 acres, of which
about 500,000 were allocated for grazing in 2004. The land office does not
know the total revenue related to grazing collected in fiscal year 2004
because it does not separate grazing and cropland revenues.

Oregon: The Oregon Department of State Lands may lease common school
grazing lands subject to terms and conditions it sets or are otherwise
legislated. In 2004, the department charged $4.32 per AUM for grazing on
lands that it manages, using a formula that considers livestock production
factors. The formula multiplies the (1) animal gain per month, fixed at 30
pounds; (2) marketable calf crop, fixed at 80 percent; (3) the state share
of the calf crop, fixed at 20 percent; and (4) average statewide calf
sales price for the preceding year, from USDA's Oregon agricultural price
data. This annual rental is determined by multiplying the AUM rental rate
by the average annual base rate forage capacity in AUMs of each leasehold
and

Appendix VI Western State Grazing Fees and Formulas

should be at least $100. The department is currently reconsidering
Oregon's grazing fee formula and is comparing the formula with the grazing
fee formulas in surrounding states. The department manages almost 1.6
million acres, of which about 640,000 acres were allocated for grazing in
2004. Total grazing receipts in fiscal year 2004 were about $300,000.

South Dakota: In South Dakota, the Commissioner of School and Public Lands
is to establish the minimum annual rental rate per acre, which is the rate
at which bidding starts. In 2004, the South Dakota Office of School and
Public Lands used competitive bidding to collect between $3 and $56 per
acre on lands that it manages. The commissioner of the office sets a
minimum grazing fee, $9 per AUM in 2004, using a formula that multiplies
the nonweighted 5-year average price per pound of all calves sold in South
Dakota by 425 pounds, the average calf weight. The number is then divided
by 12 months and multiplied by a percentage set by the commissioner, 25
percent in 2004. Once the minimum fee per AUM is established, the office
divides the fee by the land's annual carrying capacity in order to
establish a minimum per acre opening bid. The office manages about 770,000
acres, of which about 750,000 acres were allocated for grazing in 2004.
Total grazing receipts in fiscal year 2004 were about $2.25 million.

Texas: The Texas General Land Office is to award leases to the highest
responsible bidder. In fiscal year 2004, the land office charged between
$4.16 and $12.50 per AUM for grazing on lands that it manages. For the
most part, grazing fees are based on fair market value within the region.
Staff members within the land office conduct on-site evaluations of state
lands to assess the value of the lands and forage as a basis for the
grazing fee, taking into consideration productivity, range condition,
improvements, and location, among other factors. For those state lands
without public access, the grazing fees may be negotiated based on the
appraised rate with the adjacent landowner. The land office manages almost
750,000 acres, of which almost 550,000 acres were allocated for grazing in
fiscal year 2004. Total grazing receipts in fiscal year 2004 were about
$1.2 million.

Utah: The Director of the Utah School and Institutional Trust Lands
Administration is required to base the grazing fee on the fair market
value of the permit. In fiscal year 2004, the Utah School and
Institutional Trust Lands Board of Trustees used a formula to charge $1.43
or $2.35 per AUM for grazing on lands that it manages. The board initially
used the federal fee as the base rate for the state fee, but it now
establishes the state fee by adjusting the previous year's fee up or down,
based on the 7-year trend of local prices for cattle, sheep, wool, and
hay. The fees on state trust lands

Appendix VI Western State Grazing Fees and Formulas

are typically about 60 to 90 cents more than the federal grazing fee:
$2.25 in fiscal year 2004 plus a fee of 10 cents for weed and insect
control. When a permit is up for renewal, ranchers or other interested
parties, in addition to the current lessee, can submit bonus bids on the
permit, but the current lessee has the right to match the bonus bid. On
lands gained through land exchanges with the federal government, the
federal grazing fee applies: $1.43 per AUM in fiscal year 2004. The Utah
School and Institutional Trust Lands Administration is proposing that the
Utah fees be increased over the next 3 to 5 years using a two-fee
structure that will increase the fee to $3.80 per AUM on trust lands that
are intermingled with BLM lands and to $7 per AUM on other trust lands.
The board manages about 3.5 million acres of land, of which about 3
million acres were allocated for grazing in fiscal year 2004. Total
grazing receipts in fiscal year 2004 were about $440,000.

Washington: The Washington State Department of Natural Resources has
responsibility for issuing rules for the grazing of livestock and is to
charge such fees as it deems adequate and advisable. In 2004, the
Washington State Department of Natural Resources charged $5.41 per AUM3
for range permits and $7.76 per AUM for grazing leases on lands that it
manages. Range permits provide only the right to forage over a large area
of land for a limited period of time each year, whereas grazing leases
provide full leasehold rights, including control of the land. The fee for
the range permits is set by a formula that considers several factors,
including average livestock weight gain and livestock prices. The fee for
the grazing leases is based on a 5-year rolling average of private fees,
adjusted downward to account for higher operating costs on state lands,
since the state provides no fences or other on-site services. The
department manages about 3 million acres of trust lands, of which almost
850,000 acres were allocated for grazing in 2004. Total grazing receipts
from range permits and grazing leases in fiscal year 2004 were almost
$650,000.

Wyoming: In Wyoming, the rental of any lease awarded is to be based on an
economic analysis and must reflect at least the fair market value for the
same or similar use of the land based upon a formula adopted by the Board
of Land Commissioners. In fiscal year 2004, the Wyoming Office of State
Lands and Investments charged $4.13 per AUM for grazing on lands that it
manages. The grazing fee is established by a formula that multiplies the
average private land lease rate per AUM for the 5 years preceding the

3This was the fee per AUM for cattle; for sheep, the grazing fee for range
permits was $1.27 per AUM in 2004.

Appendix VI Western State Grazing Fees and Formulas

current year, as estimated by the Wyoming Agricultural Statistics Service,
by the 5-year weighted average parity ratio for beef cattle, as
established by the National Agricultural Statistics Service, to adjust for
changing resource conditions, market demand, and industry viability. The
rate is then discounted by 20 percent to reflect lessee contributions. If
the office receives an application for a lease at a higher amount, then
the present lessee has the right to match the bid. The office manages
about 3.6 million acres, of which about 3.5 million acres are used for
grazing, including hay land. Total grazing receipts in fiscal year 2004
were almost $4.2 million.

                                  Appendix VII

                    Comment from Department of the Interior

Note: GAO comments supplementing those in the report text appear at the
end of this appendix. (Page references in the letter may differ.)

See comment 1.

See comment 2.

Appendix VII
Comment from Department of the Interior

                                 See comment 3.

                                 See comment 4.

                                 See comment 5.

                                  Appendix VII
                    Comment from Department of the Interior

The following are GAO's comments on the Department of the Interior's
letter dated September 6, 2005.

GAO Comments 1.

2.

3.

4.

5.

We disagree. The information in the report accurately and sufficiently
reflects the information provided by BLM in many different documents and
during multiple meetings with rangeland management officials regarding the
benefits from the grazing program to local economies and ranchers.
However, the information provided by BLM in these many meetings and
documents did not refer to any indirect benefits that accrue to other BLM
programs from the grazing program. While Interior's letter states that
such significant indirect benefits exist, it does not provide any detail
on the nature of these benefits; and therefore, we have not made any
modifications to the report.

We changed the text to add the definition of a water base.

We met with attorneys and staff from BLM and Interior's Office of the
Solicitor on August 4, 2005, and have removed the footnote to which
Interior refers in its comments.

In this section, we are not discussing the purpose of the fee and the
grazing fee formula. Rather, we are observing that the fee formula
includes factors that incorporate ranchers' ability to pay (BCPI and PPI).
We agree that other factors, such as access to public lands, enable
ranchers to stay in production and therefore clarified the language,
accordingly.

We disagree that a comparison of alternative fee structures is useless. It
is useful to explicitly and periodically examine the implications of
different policy choices as they relate to grazing fees and to consider
alternative fee options. Our discussion of the McGregor Range is in the
context of a broader discussion of competitive bidding and fees on BLM and
Forest Service lands. That discussion clearly and carefully recognizes the
impediments to establishing such a system. In particular, we recognize
that such a system would only be established if the purpose of the program
and fee were different from those which currently exist. BLM provided text
to clarify the mixed ownership of McGregor Range, which we included in
appendix V.

                                 Appendix VIII

                        Comments from the Forest Service

Appendix IX

                     GAO Contact and Staff Acknowledgments

Key Contact Robin Nazzaro, (202) 512-3841

Staff 	In addition to the contact named above, Andrea Brown, Susan Iott,
Mehrzad Nadji, Tony Padilla, Lesley Rinner, Carol Herrnstadt Shulman,

Acknowledgments	Pam Tumler, and Amy Webbink made significant contributions
to this report. In addition, Denise Fantone, Barry Hill, Miguel Lujan,
Anne Rhodes-Kline, and Jack Warner made important contributions to the
methodologies used in this report.

Related Products

Grazing Reports	Large Grazing Permits. GAO/RCED-93-190R (Suppl.).
Washington, D.C.: July 16, 1993.

Large Grazing Permits. GAO/RCED-93-190R. Washington, D.C.: June 25, 1993.

Rangeland Management: Profile of the Forest Service's Grazing Allotments
and Permittees. GAO/RCED-93-141FS. Washington, D.C.: April 28, 1993.

Rangeland Management: BLM's Range Improvement Project Data Base Is
Incomplete and Inaccurate. GAO/RCED-93-92. Washington, D.C.: April 5,
1993.

Rangeland Management: Profile of the Bureau of Land Management's Grazing
Allotments and Permits. GAO/RCED-92-213FS. Washington, D.C.: June 10,
1992.

Rangeland Management: Results of Recent Work Addressing the Performance of
Land Management Agencies. GAO/T-RCED-92-60. Washington, D.C.: May 12,
1992.

Rangeland Management: Assessment of Nevada Consulting Firm's Critique of
Three GAO Reports. GAO/RCED-92-178R. Washington, D.C.: May 4, 1992.

Grazing Fees: BLM's Allocation of Revenues to Montana Appears Accurate.
GAO/RCED-92-95. Washington, D.C.: March 11, 1992.

Rangeland Management: Interior's Monitoring Has Fallen Short of Agency
Requirements. GAO/RCED-92-51. Washington, D.C.: February 24, 1992.

Rangeland Management: BLM's Hot Desert Grazing Program Merits
Reconsideration. GAO/RCED-92-12. Washington, D.C.: November 26, 1991.

Rangeland Management: Comparison of Rangeland Condition Reports.
GAO/RCED-91-191. Washington, D.C.: July 18, 1991.

Rangeland Management: Current Formula Keeps Grazing Fees Low.
GAO/RCED-91-185BR. Washington, D.C.: June 11, 1991.

Related Products

Rangeland Management: Forest Service Not Performing Needed Monitoring of
Grazing Allotments. GAO/RCED-91-148. Washington, D.C.: May 16, 1991.

Rangeland Management: BLM Efforts to Prevent Unauthorized Livestock
Grazing Need Strengthening. GAO/RCED-91-17. Washington, D.C.: December 7,
1990.

Rangeland Management: Improvements Needed in Federal Wild Horse Program.
GAO/RCED-90-110. Washington, D.C.: August 20, 1990.

Management of the Public Lands by the Bureau of Land Management and the
U.S. Forest Service. GAO/T-RCED-90-24. Washington, D.C.: February 6, 1990.

Change in Approach Needed to Improve the Bureau of Land Management's
Oversight of Public Lands. GAO/T-RCED-89-23. Washington, D.C.: April 11,
1989.

Management of Public Rangelands by the Bureau of Land Management.
GAO/T-RCED-88-58. Washington, D.C.: August 2, 1988.

Public Rangelands: Some Riparian Areas Restored but Widespread Improvement
Will Be Slow. GAO/RCED-88-105. Washington, D.C.: June 30, 1988.

Rangeland Management: More Emphasis Needed on Declining and Overstocked
Grazing Allotments. GAO/RCED-88-80. Washington, D.C.: June 10, 1988.

Rangeland Management: Profiles of Federal Grazing Program Permittees.
GAO/RCED-86-203FS. Washington, D.C.: August 12, 1986.

Rangeland Management: Grazing Lease Arrangements of Bureau of Land
Management Permittees. GAO/RCED-86-168BR. Washington, D.C.: May 30, 1986.

Public Rangeland Improvement-A Slow, Costly Process in Need of Alternate
Funding. GAO/RCED-83-23. Washington, D.C.: October 14, 1982.

                                Related Products

User Fee Reports	User Fees: DOD Fees for Providing Information Not Current
and Consistent. GAO-02-34. Washington, D.C.: October 12, 2001.

Federal User Fees: Some Agencies Do Not Comply with Review Requirements.
GAO/GGD-98-161. Washington, D.C.: June 30, 1998.

Federal User Fees: Budgetary Treatment, Status, and Emerging Management
Issues. GAO/AIMD-98-11. Washington, D.C.: December 19, 1997.

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D.C. 20548

To order by Phone:	Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud, Contact:
Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: [email protected] Programs Automated answering system: (800)
424-5454 or (202) 512-7470

Congressional	Gloria Jarmon, Managing Director, [email protected] (202)
512-4400 U.S. Government Accountability Office, 441 G Street NW, Room 7125

Relations Washington, D.C. 20548

Public Affairs	Paul Anderson, Managing Director, [email protected] (202)
512-4800 U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
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