    -------------------------Indexing Terms-------------------------
    REPORTNUM:   RCED-90-13

    TITLE:     FARMPROGRAMS Conservation Reserve Program Could Be Less Costly and More Effective

    DATE:   11/15/1989

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    RCED-90-13

    United States General Accounting Office , Report to the Chairman, Committee
    on * Agriculture, Nutrition, and Forestry, U. S. Senate

    November 1989 FARMPROGRAMS Conservation Reserve Program Could Be Less Costly
    and More Effective

    Resources, Community, and Economic Development Division

    B- 231285 November 15. 1989 The Honorable Patrick J. Leahy Chairman,
    Committee on Agriculture,

    Nutrition, and Forestry IJnited States Senate

    Dear Mr. Chairman: In response to your request and subsequent discussions
    with your office, this report discusses the Department of Agriculture's
    administration of the Conservation Reserve Program, including, among other
    things, its benefits and costs.

    We are sending copies of this report to the appropriate House and Senate
    Committees; interested Members of Congress; the Director, Office of
    Management and Budget; and other interested parties.

    This report was prepared under the direction of John W. Harman, Director,
    Food and Agriculture Issues, who may be reached on (202) 275- 5138, if you
    or your staff have any questions. Other ma. jor contributors to the report
    are listed in appendix III.

    V J. Dexter Peach Assistant Comptroller General

    - - Exrcutivr Summary

    Principal Findings CRP Benefits Of the 28 million acres enrolled in the CRP
    through December 1988,

    about 1.7 million acres were planted with trees. While not meeting the 12.5
    percent goal for tree planting, the CRP is still one of the largest fed-
    erally sponsored tree planting programs. The 28 million acres already in the
    (‘ HI' will reduce soil erosion by 574 million tons a year, decrease
    sedi- mentation of reservoirs and streams, protect recreational resources,
    and help preserve the land's long- term productivity. The amount of damag-
    ing chemicals washed into streams and lakes will decrease and fish and
    wildlife habitat will br improved due to increased planting of trees and
    grasses and the reduced use of chemicals. The production of surplus
    commodities receiving federal price and income support payments will be
    reduccld, and additional income support will be provided to farmers.

    While CM' benefits are substantial, the overall impact and effectiveness of'
    the program could have been enhanced if IWA had managed the pro- gram to
    address the full range of CRY objectives instead of focusing on the need to
    enroll prescribed acreage amounts. For example, to increase the number of
    trees planted, I'SIIA relaxed the soil erosion eligibility cri- trria for
    enrolling land. LVhik~ I'SIIA'S decision 1.0 seek more tree acreage has
    merit in terms of the program's tree planting goal, the overall cffec-
    tivcness of the program sufftlrrd because the relaxed criteria allowed more
    acreage that was not highly erodible into thp CRT'. As a result, the soil
    savings on tree ac'rcs decreased and other benefits, like reduced sed-
    imentation and improved water quality, were not attained.

    I WA could have improvc) d the effectiveness of the program by targeting
    cropland eroding at the highest rates. Although IWA officials have st, ated
    that reducing soil erosion was the primary objective of the CKP, program
    managers chosr, not to focus on the land experiencing the worst. soil
    losses. As a result. only about, 30 percent of the most highly erodiblc land
    is now enrolled in tht> (‘ I< I'. IISIN could also have improved the
    effec- tivcness of cw by targeting c, ropland that contributed most to
    surface water and groundwattlr contamination. While IISIM has taken some
    steps to address these problems, more could have been done. For the most
    part, I- SLL~ accepted improved water quality as a residual benefit of get-
    ting acreage enrolled in 1 he (XI'. Another aspect of the program that may
    restrict IMI~ Z'S ability 1.0 achiclvr program benefit. s is a legislative
    provi- sion restricting the amount of land that can bc mrollcd in the
    (‘ RI' to 25 prrccmt 01‘ all cropland in il county.

    Page 3 GAO/ R(: ED- 90.13 (: onservation Reserve Program

    Executive Summary Matters for Congressional Consideration

    This report presents options that the Congress could use to increase the
    effectiveness and sharpen the focus of the CRP. Among them are options to
    (1) require LEDA to implement a competitive bid system including fac- t, ors
    such as the land's contribution to reducing soil erosion and meeting other
    program objectives, (2) allow flexible annual and overall acreage goals that
    would better enable USDA to focus on the full range of program objectives
    rather than primarily on meeting the acreage goals, and (3) modify the 25
    percent limit on acreage that can be enrolled in a county to allow LEDA more
    flexibility to target the most highly erodible acres or those that
    contribute to water quality problems. (See ch. 4.)

    Recommendations . ..~_______

    GAO makes several recommendations to the Secretary of Agriculture to improve
    the effectiveness of the CRP by better targeting the CRP, improv- ing the
    administration of the bidding process, and improving the effec- tiveness of
    IJSDA'S tree planting initiative. (See ch. 4.)

    Agency Comments I- SDA commented that the program was cost- effective and
    provided detailed comments by ASCS and its Economic Research Service (ERS).

    While ASCS disagreed with GAO's conclusions and recommendations on the
    bidding process, F: KS agreed with GAO. ASCS also disagreed with GAO'S
    position on the tree planting initiative. GAO continues to believe its posi-
    tions have merit. IBM'S comments and GAO'S evaluation are discussed in the
    appropriate chapters of this report and included in appendix III.

    Page 5 GAO/ RCED- 90- 13 Conservation Reserve Program

    Contmts Appendix 111: Comments From the U. S. Department of

    Agricukure 71 Appendix IV: Major Contributors to This Report 79

    - Tables Table 2.1: Extent to Rhic~ h Program Design Favors Wind-

    Over Water- Caused Erosion Table 3.1: Relationship of Maximum Acceptable
    Rental

    Rate as a Percent of Cash Rent to the Percent of Available hcrcs Enrolled
    Table 3.2: Percentage of' I3ids and Total Acres Bid Within

    $5 of the Maximum Rctntal Rate Through the Fifth Sign- Up Table 3.3: CRP
    Acws Contracted During the First Sign- IJp

    as a Percent of Eligibk Acres Table 3.4: ISDA Guidanw Inflated Bid Levels
    and Rental

    Rates: Two Examplw Table I. 1: Rejected Hid- Responses by Category Table
    1.2: Confidence Int wvals for Estimates of Rejected

    Bids That Excwtlt~ cJ I'wvailing Local Rental Rates Table 1.3: Reasons for
    Sot Planting Trees Table 1.4: Incentivrs to I'lant Trees Table II. 1: Direct
    Cost of a 40- Million- Acre CRP, Crop

    Years 1986- 99 25

    34 35

    38 46 65

    66 68 68 69

    Figure Figure 3.1: CRP Corn ,4cres as a Percentage of All CRP Acres, Sign-
    ITps 1- Y 41

    Abbreviations ASCS (‘ RI' EKS GAO I.(‘( ' OIG 1 ‘SDA

    Agricultural Stabilization and Conservation Service Conservation Rcscrve
    Program Economic Research Service I:. S. General Accounting Office land
    capability class Office of Inspwtor General U. S. Departmctnt of Agriculture

    Page 7 GAO/ R(: ED- 90- 13 Chservation Reserve Program

    Chapter 1 introduction

    While federal outlays are high, the government receives some direct off-
    setting dollar benefits from the CRP. When producers enroll land in the CRP
    that qualifies for payments under USDA'S annual price and income support
    programs, payments for crops normally grown on this land are not made. As of
    December 1988, about 64 percent (18 million) of the 28 million enrolled
    acres qualified for annual payments.

    The CHI' also produces societal benefits through the reduction of wind and
    water erosion on cropland. USDA estimated that the 28 million acres enrolled
    through 1988 save about ,574 million tons of soil annually, resulting in the
    long- term preservation of cropland; reduced sedimenta- tion; a reduction in
    the amount of fertilizers, herbicides, and other agri- cultural chemicals
    washed into surface waters or leached into groundwaters; and improved
    wildlife habitat. The extent and value of these benefits, which depend on
    many variables, are discussed in chap- ter 2.

    Why Soil Erosion Is a Soil erosion is a natural process that occurs when
    wind and water move Concern topsoil, nutrients, and organic ingredients.
    Either the wind picks up and

    carries away loose particles of soil, or rainwater running over exposed soil
    washes some of it away. Wind erosion is generally considered an on- site
    problem that, if left unchecked, can reduce the productivity of the land.
    Water erosion is both an on- site problem that affects productivity and an
    off- site problem that contributes to sedimentation and pollution of streams
    and other water bodies. Western states, particularly the Southern Plains and
    Moumain States, are primarily subject to wind ero- sion The East, Southcast,
    and portions of the Midwest, particularly in the Corn Belt, suffer mostly
    from water erosion,

    Whether caused by wind or water, soil erosion that exceeds the rate at which
    new topsoil is formed can reduce product, ivity. Such productivity losses
    generally occur over many years and may go virtually unnoticed where the
    topsoil is very deep or where the loss of soil only slightly exceeds the
    creation of new topsoil. Over hundreds or thousands of years, however, even
    the best and deepest topsoils can erode to the point where they become
    tmproductive.

    Page 9 GAO/ RCED- 90- 13 Conservation Reserve Program

    that are not highly erodible lands but that pose an off- farm environmen-
    tal threat or, if permitted to remain in production, pose a threat of con-
    tinued degradation of productivit, y due to soil salinity.”
    Accordingly, the C'RI' was envisioned as atahkving multiple objccti\, es,
    including

    . reducing soil erosion, . protecting long- t, erm agricultural
    productivity. . reducing sedimentation in streams and along roads, .
    improving water quality, . improving fish and wildlife habitat, . curbing
    production of surplus commodities, and . providing some ncedvd income
    support for farmers.

    Thus, the CKP places t~ nvironmental goals alongside traditional farm po-
    icy goals of supporting income and reducing surplus commodity produc. 1 ion.

    The legislation also mandat, es that highly erodible land be enrolled in the
    program at, a rate of not less than 5 million acres in 1986, not less than
    10 million acres in each of the years 1987 through 1989, and not less than 5
    million acres in 1990. up to the maximum of 45 million acres. Further, the
    law set a goal of having, t, o the extent, practicable, not less than one-
    eighth ( 12.5 pr\ rccnt,) of the tot, al arrcs planted in trees.

    How the CRP Works Within IXA, the Agriculture Stabilization and Conservation
    Service (ASCS) adminiskrs t, hc, (‘ RI', with assistance from the Soil
    Conservation

    Service and t. he Forest Service. ASCS established and implements enroll-
    ment procedures and d& ermines eligibility in conjunction with the Soil
    Consrrvat, ion Servic~ c~. The Soil Conservation Service, in addition to
    assisting with cligibilit \ dct erminations, provides kchnical assistance to
    producers in selectirlg and establishing grass conservation cover. The
    Forest Service provides technical assistance to producers in selecting and
    establishing t. r'cLc* t~ onscrvation cover.

    Enrollment Procedures The (‘ RI' is a voluntary program. IISLM holds
    periodic sign- ups during which producers can bid the number of highly
    erodible acres they wish

    to enroll in the (XI' and their desired annual rental rate. Nine sign- ups
    had been held t. hrough :Iugust 1989. After each sign- up, lmA compares t hc
    bids it received to t he maximum acceptable rental rate it established for
    each of 139 geographic. arcas throughout t. ht, country. Bids less than or
    ~~ qual to the maslnr~ lm acccptablc renlal rate are accepted provided

    Chapter1 Introduction

    . in LCC II- V and with actual erosion equal to or greater than 2T and seri-
    ous gully problems, OI . with potential erosion equal to or greater than 8T
    and actual erosion

    greater than 1T (potential erosion is the amount of erosion that would occur
    if the land werr bare).

    I WA estimates that about IO 1.5 million acres of cropland meet the above
    criteria and that these acres account for over 63 percent of all cropland
    erosion.

    Beginning with the sixt. h sign- up, LJSDA expanded its eligibility criteria
    to make land that was not highly erodible eligible for the CRP. Effective
    with the sixth sign- up, filter strips consisting of land 66 to 99 feet wide
    bordering waterways could be enrolled without regard to LCC or actual and
    potential erosion. In addition, if the producers enrolling land agreed to
    plant trees, their land could be enrolled if one- third of their fields had
    an actual erosion rate of 2T. In the eighth sign- up, MDA allowed produc-
    ers to enroll wetlands previously converted to agriculture production and
    land subject to erosion from periodic flooding of nearby streams if the
    producers agreed to plant trees or, when approved by IJSDA, grasses. About
    220,000 acres were enrolled during the eighth sign- up as a result of this
    change.

    Program Funding The Food Security Act did not establish any funding levels
    for the CKP. Kather, funding is authorized as part of USDA'S annual
    appropriation.

    Since no limit was placed on either annual or total program costs, the only
    constraint on the c, ost of the CIZP is the Congress' willingness to
    appropriate funds annually.

    To a large extent, however, the level of funding has been predetermined by
    the number of acres enrolled by USDA and the per acre payment rate. While
    all CRI' contracts contain a clause that allows LJSDA to effectively cancel
    the contract if funds are not available to pay the annual rental, it is
    unlikely that this would occur because of the implied commitment of the
    federal government to the contract. As a result, the Congress' pre- rogative
    to decide whether to fund the program on an annual basis has largely been
    relegated to approving funds to pay for commitments that I'SW has already
    made.

    During fiscal years 1986 and 1987, the program did not require that annual
    appropriations bc made directly by the Congress. Instead the

    Page13 GAO/ RCEDBOlB Conservation Reserve Program

    Chapter 1 Introduction

    Costs of the CRP To determine the costs of the CKP, we reviewed major
    studies that have been done on the CRI', including those by IJSDA and the
    American Farm-

    land Trust, a private group interested in agricultural issues. After
    reviewing these studies to gain a thorough understanding of their
    assumptions and methodologies, we developed our own estimates by changing
    the assumptions to reflect more current information on acres enrolled in the
    CKP, enrollment costs, and other related factors. We then analyzed those
    assumptions and data to estimate the annual and total program costs.

    Relationship Between CR Rental Payments and Current Land Values and Rental
    Rates

    .P The objective of this portion of our analysis was to determine whether
    CRP rental rates were higher or lower than prevailing land values and

    rental rates for land not enrolled in the CKP. To determine the relation-
    ship between CIII' rent al rates paid to producers and current land values
    and rental rates, we compared the average CRP rental rate and the maxi- mum
    acceptable rental rate by county, with local IlSDA officials' esti- mates of
    the average dry land value and rental rate. We used both the average CKP
    rental rates and the established maximum acceptable rental rate because the
    latter formed a bid cap on the rates that were accepted by I'SDA. As such,
    many of the bids collapsed around the maximum accept. able rental
    ratt‘. In this portion of the analysis, we used data from 1985, 1986,
    and 1987 since t, hose were the latest available at the time we did our
    detailed fieldwork.

    Because the maximuni ac, ceptable rental rates reflect CRP rental rates and
    cash rental rates reflect local land values, we attempted to demon- strate
    the effect of any variations between these rates by analyzing CRP enrollment
    patterns. Specifically, we determined the extent to which CRP enrollment
    increased as maximum rental rates increased relative to local rental rates.
    The local rental rate data we used were provided by USDA. We do not know the
    extent to which t, hese currently prevailing rates are representative of
    rates on 1 O- year leases, as opposed to shorter term leases.

    Additionally, we assessed the process used by IJSDA to ensure that CRP
    rental rates were not cxc, essive compared to prevailing local rental rates
    for comparable land. This limitation on CRP rental rates was placed on the
    program as part of I XM'S fiscal year 1988 appropriation act. To determine
    the basis for setting the rates, we obtained information from local IJSM
    officials on the procedures used to set the rates for a random sample of 800
    bids.

    Page 15 GAO/ RCED- 90- 13 Conservation Reserve Progmn

    Chapter 2 Program Benefits Are Significant, but More Could Have Been Done

    The CRP enrolled 28 million acres during the first 3 program years- a rate
    of enrollment slightly ahead of the mandated 25 million acres to be enrolled
    through 1988. In addition, 1.7 million acres or 6 percent of the 28 million
    acres will bc planted to trees- a rate of enrollment that is about one- half
    of thcl program's tree plant, ing goal. Judged solely on the basis of
    meeting the mandated annual acreage requirements, the CRP appears to be
    highly successful. While the program has been less suc- cessful in meeting
    the tree planting goal, the tree acreage enrolled to date is still an
    impressive total that makes the (or one of the largest publicly sponsored
    treat planting programs ever.

    IIowever, the C'KP is a multiple ob. jective program that is intended to
    address a variety of‘ problems in American agriculture and the
    environ- ment. These ob. jectivrs go beyond the specific acreage requirement
    and tree planting goal to address soil erosion, sc, dimentation, production
    of surplus commodit. ics. long- term agricultural productivity, adverse
    envi- ronmental taffects 1'ron1 agricllltural chemicals, wildlife habitat,
    and farm income support

    An evaluation of the (‘~ 1' against these ot, ht> r, more qualitative
    objectives shows that IXIN has not bcrn as successful in achieving the full
    range of program objectives. liatht, r, INA concentrated on meeting mandated
    acreage enrollment rrquirements and the tree planting goal. However, because
    IISD. A treated t hesc other objectives as secondary, t, he CRP'S potential
    impact has been diminished. While these objectives were achieved to a ccrt
    ain txt. tlnt by the fact that 28 million acres were taken out of
    production, T SIN could have, done more to address the program's full range
    of objrctivc> q. SpcLcifically. IXI)~ A did not, (1) target the most highly
    erodible acrcag: 1~ for cnrollmcnt, (2) target acreage that caused the most
    ellvironnlc, nt~ Il damage, and (3) limit the amount of non- eroding land
    that entered (hi program as part of the tree planting initiative. While not
    pursuing ~hc> st possibilities enabled I WA to meet its mandated acreage
    rcquiromr, nt s. th( b Department's choic. es reduced the program's potent,
    ial to rcduccx soil erosion and sedimc, ntation and control on- site and
    off- site cnvil. onmr, nt; tl damage.

    Program Results Are Results of the first sc> ven (‘ RI' sign- ups
    through 1988 show that there Significant have been accomplishments in
    meeting program ob, jectives. Over 28 mil-

    lion acres were enroll4 in the (‘ RI' through the first seven sign-
    ups- slightly ahead of 1 h( x ‘5 million acres mandated at that point
    in the pro- gram. About 1.7 million xr(\ s (6 percent) are planted in trees.
    While less

    Paye 17 GAOjR(: ED- 90- 13 Conservation Reserve Program

    Chapter 2 Program Benefits Are Significant, but More (: m~ hi Have Been Done

    income support programs. As a result, the program has reduced the pro-
    duction of crops that are in surplus. Almost 47 percent of the enrolled
    acres that qualified for payments were wheat acres and 17 percent were corn
    acres. Sorghum and barley acre reductions were about 12 percent each. Some
    of the remaining 10 million acres were also used to raise these crops but,
    for one reason or another, did not qualify for program benefits. Reduced
    crop production as a result of CRP, particularly for crops that are in over-
    supply, like corn, tends to increase market prices for these crops and, in
    turn, helps stabilize farm income. This condition allows for lower
    government price and income support payments.

    Another objective of the program- to provide income support to farm- ers- is
    being met through the CRP rental payments. Currently, IJSDA is making $1.4
    billion in annual rental payments to participants.

    These results are substantial, but they were achieved with a manage- ment
    approach that emphasized meeting the mandated acreage require- ment and the
    tree planting at the expense of other program ob, jectives. Thus, the CRP'S
    full pot, cntial was not achicvtbd.

    Greater Soil Erosion Benefits Could Have Been Achieved If USDA Had Targeted
    the Highest Eroding Land

    The Most Highly Erodible Land Was Not Targeted

    Although L'SDA officials have stated that reducing soil erosion was the
    primary objective of the CRP, ITSDA chose not to target cropland eroding at
    the highest rates. In addition, ~JSDA relaxed the implementing regula- tions
    for the conservation compliance provisions of the Food Security Act of 1985
    that were designed, in part, to encourage enrollment of the most highly
    erodible cropland in the CRP. As a result, 70 percent of the most highly
    erodible land eligible for the program, as measured by actual erosion, had
    not, been enrolled through 1988. To some degree, however, USDA'S ability to
    target and enroll the most, highly erodible land is limited by the provision
    of the act that restricts enrollment to 25 per- cent, of cropland in any one
    county. Even so, targeting its efforts toward enrolling the most highly
    erodible land would have allowed IISDA to fur- ther enhance the objective of
    reducing soil erosion.

    Through the first five sign- ups, any land that met minimum erosion eli-
    gibility criteria could be enrolled if a producer's bid amount was at or
    below the maximum bid level established by TWA. The same procedures were
    followed in the sixth and sevent, h sign- ups, except that the mini- mum
    erosion criteria were relaxed if producers agreed to plant trees and
    eliminated entirely i 1' the cmrolled acres served as a filter strip.

    Page 19 GAO/ RCED- 90- 13 Conservation Rwxve Program

    Chapter 2 Program Benefits Are Significant, but More (: ould Have Been Done

    anyone out of farming. However, IJSDA'S decision to relax the conserva- tion
    compliance rules removed the only existing nonmonetary incentive to
    encourage and target enrollment of the most highly erodible acres in the
    CRP.

    County Limit Restricts The Food Security Act of 1986 limits the amount of
    land enrolled in the Enrollment of Some Highly (XI' to 25 percent of the
    cropland in a county. IJSDA estimates that 31 Erodible Land percent of the
    10 1.6 million acres of highly erodible land that would

    otherwise be eligible for the CRP is not available because of this limit. As
    a result, many producers in counties with eligible land in excess of the
    limit will not be able to enroll highly eroding land in the CRP.

    The Congress imposed this limitation to avoid problems experienced with
    earlier conservation programs in which, without a limit, producers enrolled
    the majority of cropland in many counties with adverse effects on the
    agriculture- dependent economies of those counties. The act allows the
    Secretary to waive this limit if a determination is made that the waiver
    will not adversely affect the economy of the county for which the waiver is
    granted. In using this authority, the Secretary, with three exceptions, has
    granted waivers only to complete the enrollment of acres offered during the
    sign- up period in which the limit was reached. He then closc~ i enrollment
    in subsequent sign- up periods.

    The exceptions were made for three counties in the Southeast because 1lSllA
    wanted to encourage tree planting in these counties. Two of these counties
    are allowed t, o enroll up to 40 percent of their cropland and the third
    county up to 50 percent. No exceptions have been made for pro- ducers to
    continue enrolling the most highly erodible acres. So far, enrollment has
    been closed in 55 of the 2,326 count,& enrolling land in the CRI' because of
    th( b 25 percent limit.

    As a result of this limit, some producers in counties with highly erodible
    land in excess of the limit will not be able to enroll their land, even
    though in some instanc, es their land is eroding severely and should be
    taken out of production. For example, Yoakum County, Texas, has 294,000
    acres of eligible land, but only 74,500 acres were available for enrollment
    because of the 25 percent limit. With a waiver, local TJSDA officials
    enrolled 76.000 acres but are no longer accepting offers to enroll acres.
    These officials estimate that about one- half of the remain- ing 218,000
    eligible :I( PS is eroding in excess of IOT and should be taken out of
    production.

    Page 21 GAO/ RCED- SO- 13 Conservation Rrservr Program

    Chapter 2 Program Benefits Are Significant. but More Could Have Bern Done

    productivity losses from soil salinity. However, USDA did not specifically
    address this problem. Affected areas were eligible for enrollment only if
    they met the basic (XI eligibility criteria for soil erosion.

    Currently, there is no comprehensive national data base that contains all of
    the information IN).& would need to fully identify areas where there are
    surface water and/ or groundwater problems or specific cropland that
    contributes to these problems. However, much of the needed infor- mation is
    available from the Environmental Protection Agency and state and local
    organizations. To get. this needed data and to help the CRP bet- ter achieve
    its water quality objectives. lEDA will have to better coordi- nate with
    these other organizations.

    USDA Has Not Fully Utilized the CRP's Potential to Address Surface Water
    Quality Problems

    -~~ ~~~ ___ The Food Security Act givt> s the Secretary authority to include
    lands in t, he CRI' that are not highly erodible but that pose an
    “off- farm environ- mental threat .” TIw implementing
    regulations specifically identify water quality improvcmcnt, as a program
    objective. However, USDA con- siders water quality improvement as a
    secondary benefit that may result from reducing soil erosion. Thus, through
    the fifth sign- up, ~JSDA based WP eligibility strictly on soil erodibility,
    whether caused by wind or water, and did not at, tempt to target land that
    might improve water quality. As a result, minimal surface water quality
    improvement can be att, ributed to the (XI'.

    The Conservation Foundation- a nonprofit organization dedicated to the
    conservation of AnIcrica's natural resources- estimates that cropland
    erosion's direct and indirect damages to surface water quality may be $3.1
    billion annually and could easily exceed the on- site produc- tivity impacts
    of erosion. In January and February 1988, Resources for the Future (a
    constarvat. ion research organization) and the Environmen- tal Protection
    Agency released draft reports concluding that, as of the fourth sign- up,
    thr WI' had had minimal impact, on water quality. During this time and
    through 1 ht fifth sign- up, any positive impacts of CRP on water quality
    resulted solrly from the existence of the program, that is, simply taking
    highly credible land out of production. It was not until the sixth sign- up,
    after 22 million acres had been enrolled, that USDA took specific action to
    addrclss surface water quality issues. At that time, I'sDA expanded the (XI'
    eligibility criteria to include filter strips for cropland that poses
    “ii substantial threat to the degradation of water quality .”
    Filter strips are 66- to 99- foot wide strips of grass, shrubs, or trees
    planted on cropland along streams and waterbodies to reduce the amount of
    sedimc, ltt and chemicals entering surface water resources,

    Page 23 GAO/ RCED- 90- 13 Conservation Reserve Program

    other parts of the country with acreage suffering from the relatively more
    damaging water- caused erosion had less incentive to enter the program.

    Over (IO percent of the (‘ RI' acres and soil savings are in the
    mountain and plains states that suffer predominately from wind erosion, as
    shown in table 2.1, while less than 30 percent of the acres and soil savings
    are in the remainder of tht, country that suffers predominantly from water
    erosion.

    Table 2.1: Extent to Which Program Design Favors Wind- Over Water- Caused
    Percentof soil loss on Percent of soil Erosion eligible acres from Percent
    of saved on

    Region Wind Water Total enrolled acres enrolled acres Mountaln states 13 3
    16 20 19 N Plains states 5 7 12 25 20 s Plams states 22 3 25 16 56

    Subtotala 40 13 53 61 66 Northeast states Lake states Corn belt states
    Appalachian states Southeast states Delta states Paclflc state

    h 3 3 1 3- 4

    1 8 7 1- 23 24- 14 13

    - 7 -7- 3 4 #I 2 2-- -5 4 II 2 2 3 3 1 2 3 5 3 4 43 47 39 34 Total
    ‘May not add due to rounding ' Less than 0 5 percent

    44 56 100 100 100 Sett, ing higher rent, al rates in areas suffering
    primarily from wind- caused erosion has vtlry little, if any, adverse impact
    on the program objectives to reduce soil erosion, preserve the land's
    productivity, reduce production of surplus commodities, and provide income
    to farm- ers, as these objectives c- an be met through the enrollment of
    land with either wind- or water- caused erosion. However, IISDA'S approach
    has had an impact on the program's ability to meet the objectives of
    improved water quality, reduced sedimentation, and improved fish habitats,
    because these objcctix, es are met primarily through the enrollment of land
    with water- caused erosion. Given the Secretary's discretionary authority to
    permit acreage to enter the program that was not highly

    Page 2.5 GAO/ RCED- 90- 13 Conservation Reserve Program

    (: haptrr 2 Program Benefits Are Siylificant, bul Mow Could Have Hcrn Donr

    ~-__ Existing sources of information that LTDA could use to identify and
    tar- get cropland contributing to water quality problems include reports
    required under the Clean Water Act of 1977 (P. L. 95- 217) and the Wat, er
    Control Act of 1987 (P. L. 100- 4) and the Association of State and Inter-
    state Water Control Administrators' 1985 report entitled America's Clean
    Water. These reports describe the location, nature, and extent of water
    quality problems identified to date and could serve to target spc- cific
    geographic art'as for enrollment in the CRP.

    Effective use of these and other sources would require increased coordi-
    nation between INIA and other governmental and private agencies, because no
    one agency may have all the information needed or can pro- vide the
    comprehensive effort needed to address wat, er quality prob- lems.
    Consequently. IC- XIA program managers would need to establish close working
    relationships with the Environmental Protection Agency, state and local
    water quality agencies, and private conservation groups to avail themselves
    of the data and resources t, hat already exist. l7sing these data, program
    managers could better achieve the CIIP'S water qual- ity ob. jrctivcs.

    Tree Planting ___~

    As part. of the CKP, I. sr) i\ was given a legislative goal of having 12.5
    per- Initiative Increased cent of all CRP acres planted with trees as the
    conservation cover. In an

    effort to meet this goal. (NM relaxed the CNI' eligibility criteria for par-
    Enrollment of Acres ticipants willing to plant trees. Prior to this change
    in eligibility criteria, That Were Not Highly which occurred during the
    sixth sign- up, IJSDA was not attaining the tree Erodible planting goal.
    While I MN'S decision to seek more tree acreage has merit,

    we do not belicvc it was the best decision given the full range of CRP
    objectives- particularly those relating to reduced soil erosion and
    sedimentation.

    llnder ITSDA'S changed eligibility criteria, a field to be planted to trees
    would be eligible if om- third of the field was eroding at twice its soil-
    loss tolerance level (21'). Prior to the sixth sign- up, at least two-
    thirds of the field had to be eroding at three times its tolerance level
    (3T) to be eligible. ' In other words. to bring about the increase in the
    percentage of acres planted to trees. -\ s(‘ s was willing to
    sacrifice soil erosion savings.

    For example, I'SDA enrolled more tree acres eroding at less than 3T in the
    sixth and seventh sign- lips than it did in the previous five sign- ups, and
    the number of these u(* r(‘ s c\ roding at less than 2T was twice the
    number

    Page 27 GAO/ RCED- 90- 13 (: onsrrvation Reserve Program

    Chapter2 Program Brnefits Are Significant, but More Ckmld IIave Been Done

    We are not faulting ASCS for its administration of the 25 percent county
    limit, but we do suggest in chapter 4 that the Congress may wish to con-
    sider relaxing the limit in some situations to achieve other objectives-
    such as enrolling the most highly erodible land.

    .& XS stated that GAO did not sufficiently recognize the water quality
    efforts that were made in the sixth sign- up. Specifically, ASCS cited the
    inclusion of filter strips and 2T land with gully erosion, as well as bid
    pool increases of $5 to $25 for about 600 counties after the sixth sign- up.

    Although we discussed the introduction of filter strips in the sixth sign-
    up, we did not discuss land eroding at 2T with gullies- except to note that,
    it is eligible- because our review of a sample of CRP contracts dis- closed
    that the number of these acres enrolled was insignificant (at the .Ol level
    of significance 1. We discussed the $5 to $25 per acre increases in the
    maximum acctaptable rental rates in chapter 3 because it seemed more
    appropriate to that discussion. However, as noted in that discus- sion,
    these increases have not been effective in increasing enrollment.

    EIZS commented that it was difficult, if not impossible, to simultaneously
    maximize multiple objectives and stated that the Congress could have
    provided additional guidance by ranking the objectives or providing a
    mechanism to judge trade- offs. I: KS also stated that our recommendation to
    allow flexible anmlal and overall acreage goals is a positive step to
    emphasize that acrrlagc targets are not the CRP'S most important objective.

    ERS also stated that we did not address how much greater water quality
    benefits could have been or the additional costs of achieving those bene-
    fits. ERS stated that water quality benefits of $1.9 billion to $5.6 billion
    over the life of the program are not minimal. Further, EKS stated that the
    greatest water quality benefits come from retiring land in high- cost areas
    such as the Corn Mt and would therefore cost more. Finally, ERS stated that
    there is no adequate or defensible mechanism for identifying particular
    fields to I arget for water quality.

    We criticized IwA for taking no specific act, ion to address water quality
    issues until after it had enrolled 22 million acres in the CRP, but we rec-
    ognized the water quality benefits provided by those acres. ERS' esti- mates
    of $1.9 billion to $5.6 billion in water quality benefits appear significant
    until compared to its estimates of $50 billion to $180 billion in wat, er
    quality damagtls from soil erosion during the same period. We

    Page 29 GAO/ RCED- 90- 13 Conservation Reserve Program

    Chapter 3 Program Costs Were Higher Than Necessary

    Budget outlays for a 40- million- acre CRP could total over $22 billion. In
    reviewing the management of the CRP, we found several areas in which program
    costs could have been reduced with minimal adverse impact on benefits
    achieved. We could not determine precisely how much costs could have been
    reduced. However, we estimate that USDA may be incur- ring as much as $296
    million annually in additional costs because of the noncompetitive bid
    acceptance process it uses and as much as $3 million annually because it did
    not target its CRP tree planting initiatives.

    In general, the decisions faced by program managers involve trade- offs
    between measures that are most likely to achieve program objectives and
    those that are more cost effective. For the CRP, USDA'S choices were between
    measures most likely to permit the Department to meet the mandated acreage
    enrollment requirements and the tree planting goal and measures that cont,
    rolled costs. Many of these decisions were diffi- cult when I- SDA was faced
    with choices that could have emphasized cost control at the expense of
    program enrollment or could have emphasized enrollment at higher costs.
    IIowever, some decisions did not necessarily involve difficult trade- offs
    and, in our opinion, unnecessarily increased the cost of the program. These
    decisions included (1) using a noncompet- itive bid acceptanctl system, (2)
    giving bonuses to producers to encourage tree planting even though trees
    were not planted, and (3) inadequately implementing the limit on CRP rental
    rates by providing lit- tle guidance. review. or supervision. In each of
    these areas, IJSDA pro- gram managers could have better controlled the costs
    of the program with minimal, if any, impact on the benefits achieved.

    Beyond program management decisions made by USDA, another aspect of the
    program- the legislative restrictions on the amount of cropland enrolled in
    each county-- also may increase program costs. While this is an important
    featurtl of' the program that limits the adverse impact of the C'KP on local
    economies. it also limits the number of eligible acres available for
    enrollmc~ nt in the (‘ RI' and, as a result, could increase pro- gram
    costs if I! SDA must raise rental rates to attract a greater proportion of
    the remaining eligibk acres.

    CRP Outlays Will Total About $22 Billion

    Budget outlays for a 40. million- acre CRP could total over $22 billion by
    the time the last contract expires in 1999. Most of the cost is for annual
    rental payments to producers, but about $2 billion is for the govern- ment's
    share of planting cover crops, the corn bonus, and administrative expenses.
    Annual rental costs, which are currently about $1.4 billion for the 28
    million acres cnrolkd to date, will peak at about $2.1 billion in

    Page 31 GAO/ RCED- 9013 Conservation Reserve Program

    USDA Frequently Paid Inflated Rental Rates

    I TSIM reviewed a number of options before selecting a bid system. I~ SDA'S
    Economic Research Service> developed models that allowed IJSDA pro- gram
    managt'rs to assthss thta impact of various types of bid systems. Among
    other things, these models included means for determining bid pool size,
    eligibility criteria, and bid selection criteria. ERS' model for assessing
    various bid selection criteria allowed IJSDA to choose between seltlction
    criteria that ac, cqXed all bids below a specified maximum rental rate- t he
    opt ion ultimately selected- or to choose criteria that would s& act thr
    most (, ost- cffcctive bids in t, erms of reduced erosion or reduced
    production cut' s~ u+ plus commodities.

    llsr). A ofl'icials i. old us t h; tt they chose the bid selection that
    accepted all bids below a spe'c'ificd maximllm because this opt, ion was
    easier to administer than thrb c~ tlrc~ options. HIS' model also indicated
    that, for the same cost. mortl WIIY WOIM be enrolled under this option than
    under t, hts othc‘ r options.

    As part of the bid s\ st (TL I SI )A chose to establish at least one and
    some- times more than OIW bid pool (i. e., area of competition) in each
    state rat her than ;I national hid pool, although ERS' analysis showed that
    a national bid pool was t ht> most cost- effective means to reduce soil ero-
    sion. This dttcision I\ as made to ensure that producers had the opportu-
    nity to enroll their hlgtlly c\ rodiblc land wherever it was located. In a
    national pool, produ,, ckrs t'rom areas with high land values compete
    dircsct ly with protluc t'r\ from ar(\ as with low land values.

    To implcmcnt, its brtl 5) Elton, I'SDA cst, ablishod maximum acceptable rt~
    l al rates for each 1~ 1 pool. I lsrM officials responsible for setting
    these r; rtos relicts on the% Illtignront as to what rental rate to use for
    each bid pool. These ,judgmc, nt s M'C'W driven by I‘ SIIA'S concern
    about getting the dcGrc, tl lcvcl of part 1(~ 11at ion and the desire to bt
    reasonable in view of t I It' Stlcrc‘ t; rry of Agric, l I It I
    111” s decision that once established, maximum rc> ntal rates wor~ ld
    tnot II
    *** End of document. ***