7. What Is The Nature Of Resource Policy In The U.S. Today?

1
7. What Is The Nature Of Resource Policy In
The U.S. Today?

• Larry D. Sanders
• Fall 2005

Dept. of Ag Economics Oklahoma State
University
2
Introduction

• Purpose
• to understand resource policy issues options
• Learning Objectives
• 1. Become aware of the origin, types values of
  resource policy issues.
• 2. Understand major resource issues, options
  who pays.
• 3. Understand farmland retention preservation
  issues.
• 4. Understand resource provisions in farm bill
  other key legislation (this lesson and NRCS
  presentation on class website).

3
Sources Of Resource Policy Issues

• SCARCITY
• If not reflected in price, use will go up
• Technology Price dependent
• VALUE QUESTIONS
• Availability, Access, Alternate Uses, Political
  Will
• PROPERTY RIGHTS
• Socially Determined, Legally Supported, Not
  Absolute, Externalities Matter

4
Sources Of Resource Policy Issues (continued)

• PUBLIC GOODS
• Free Riders Nondivisibility prevent
  privatization
• FREE MARKET-POPULIST MOVEMENT
• Shifting Political Support to Privatize Localize

5
Resource Types

• NONRENEWABLE
• Stock resource for relevant time frame
• Use leads to depletion
• RENEWABLE
• Flow resource can be replenished within
  relevant time frame
• Use does not lead to depletion
• Sustainability may be an issue
  (rate of usage may matter)
• Quality must be maintained

6
Value Questions

• Private vs. Social values
• Current vs. Future generations
• Market value vs. NONMARKET value
• (Use option existence)
• Property value
• Travel cost
• Contingent values--ownership an issue
• Willingness to pay
• Willingness to sell

7
Key Question Who Pays?

• Free market
• Government subsidies
• Incentives to alter behavior (WTS)
• Taxes
• Internalize cost of externalities (WTP)
• Regulations
• May mandate or prohibit actions
• Current vs. Future generations

8
Issues Options Soil Conservation

• Free Market--Soil Erosion Up, Water Quality Down,
  Productivity Down, Externalities Up
• Federal legislation
• Ag Conservation Payments (ACP)--1930s
• Technical Assistance--1935
• Soil Bank--1950s
• Conservation Compliance Sodbuster1985
• Conservation Reserve Program--1985
• Easements--1990
• Regulation--Takings Issue--1990s
• 1996 FAIR Act (CRP EQIP CFO)
• FSRIA 2002 (expands existing programs adds CSP,
  GRP)
• Green Payments--2007?

9
Issues OptionsWater Use

• SUPPLY
• Development (Dams, Diversions, etc.)
• increased availability ag production lower
  food prices
• reduced endangered species scenic areas
• Pricing or Sale of Rights--typically a
  state/local issue
• increased water costs conservation
• may reduce ag production
• water is more likely available
• Management--typically a state issue
• increased water conservation reduced scarcity
• use more consistent with need
• reduced freedom value of water rights

10
Issues OptionsWater Use

• SURFACE WATER RIGHTS
• Riparian (owner of land)
• Prior Appropriation
• GROUNDWATER RIGHTS
• Absolute ownership
• Reasonable use
• Restatement rule
• Correlative rights

11
Issues OptionsWater Quality

• Free Market--Point Nonpoint
• Pollution
• Input taxes--Internalize costs
• Subsidies
• --Incentives (WQIP CRP EQIP CFO
  WRP Cost-sharing Green payments IPM)
• Point source regulations/fines
• Water quality, production costs, food prices up
• Soil erosion, farmer freedom down

12
Issues OptionsWater Quality (continued)

• REGULATION
• Key regulations
• Clean Water Act (CWA)-1977
• Coastal Zone Management Act (CZMA)-1972
• Safe Drinking Water Act (SDWA)-1974
• Federal Insecticide Fungicide Rodenticide Act
  (FIFRA)-47 Federal Environmental Pesticide
  Control Act (FEPCA)-72 88 96
• Endangered Species Act (ESA)-1973
• Food Quality Protection Act (FQPA)-1996
• Performance Standards (flexibility)
• Prescribing/Proscribing Practices
• Court casesOK-AR example

13
Issues OptionsWetlands

• Definitional issue
• Free market
• Reduced wetlands, water quality, wildlife,
  habitat
• More land for ag, residential commercial use
• Regulation
• Swampbuster
• No net loss
• BMPs
• Subsidies
• WRP--1990
• Compensation
• Hurricane Katrina brings renewed attention to
  value of coastal wetlands as barriers to natural
  disasters

14
Issues OptionsEndangered Species

• Free market
• Increased threat to more species
• Reduced biodiversity
• Low production costs food prices
• Regulation
• Taking prohibited (ESA--1973)
• Cost/benefit analysis
• Sep 05House passed Threatened and Endangered
  Species Recovery Act (TESRA) of 2005
• Calls for compensation rule
• Subsidies
• Compensation

15
Issues OptionsFarmland Protection

• Every single minute of every day, America loses
  two acres of farmland. We lost farm and ranch
  land 51 percent faster in the 90s than in the
  80s. We're losing our best land-most fertile and
  productive-the fastest. Our food is increasingly
  in the path of development. Wasteful land use is
  the problem, not growth itself. Every state is
  losing some of its best farmland. OK losing
  12,660 ac/yr
• --American Farmland Trust, October 2002.
• 
  

16
Issues OptionsFarmland Protection

• Retention--continues active use
• Preservation--prevents nonagricultural use
• Goals--typically state/local issue
• Maintain food/fiber productive capacity
• Maintain healthy local agricultural community
• Maintain open space amenities
• Maintain efficient development policy
  (rural-urban interface?)

17
Issues OptionsFarmland Protection

• Free market vs. Regulation
• Zoning laws
• Development rights market
• Right-to-farm laws
• Preferential assessment
• Ag districts
• Subsidies
• 1996 FAIR act (17.2 mil. for easements in 1998)
  
• FSRIA continues
• State initiatives (OK Land Trust)

18
Issues OptionsGlobal Climate Change

• Key issues
• Time perspective?
• Sources?
• Geography (trans-national?)
• Irreversibility?
• Science?
• Free market
• Research extension
• Regulationvery little domestic rules
• Global
• 1997 Kyoto accords
• 1999 Bonn conference
• US support unlikely soon
• 2002 Earth SummitAfrica
• Subsidies

19
Issues OptionsBiotechnology

• Precision or Prescription Agriculture
• the Great Green Hope or Frankenfoods?
• Robotics, GPS, Microsensors, By-plant
  Prescription Production
• May minimize environmental concerns
• Who can afford it?
• Transportation issues
• Reduced production flexibility/property rights
• Great hope for reducing world hunger

20
Issues OptionsBiotechnology

• Bio-engineered Seed/GMOs/GEOs
• genetically altered attributes (Bt crops
  bacillus thuringiensis)
• Concerns
• unintended direct ecosystem impacts
• unintended mutation impacts
• unintended human impacts when eaten
• labeling to give consumer choice
• Microsofting of agricultural input marketing

21
Property Rights Part of Public Policy Debate

• Institutional Factors
• Property (assumes rights to possession
  use of economic objects w/govt. rules
  for ownership, transfer, use, etc.)
• Private vs. Common Property
• Limited rights (land, water, minerals, air space,
  time share, etc.)

22
Additional Policy Notes (cont.)

• Institutional Factors (cont.)
• Development (zoning, building, flood control,
  homestead, permit markets, taxes, court
  injunctions, eminent domain, etc.)
• Property rights for Land--Fee Simple Ownership
• Rights of Owner to Possess/use, Sell, Devise
  (pass to heirs), Lease, Mortgage, Subdivide,
  Grant Easements
• Rights of Govt. to Tax, Take for public use
  (eminent domain), Control use of (police power),
  Escheat (reversion to state at death)
• June 05 US Supreme Court Kelo Case
• Re-affirmed eminent domain to cover takings for
  community economic development

23
Additional Policy Notes (cont.)

• Institutional Factors (cont.)
• Rights are exclusive, not absolute
• Rights evolve in court cases law
• Rights carry legal ethical responsibilities

24
Cross-cutting Concepts for Environmental Policy

• 1. Control of commercial agriculture in US
• 2. Impact on risk risk management
• 3. Production alternatives
• 4. Political economic trade-offs
• Treating problems or symptoms
• War on Terrorism War on Iraq will complicate
  options.
• Common ground for environmentalists and ag
  producers/landowners (sustainability)
• Food security/safety
• Energy needs versus Environmental protection

25
Summary

• Natural resource policy continues to evolve,
  with recent backlash of individual vs.
  society
• Current policy issues focus on
• Wars on terrorism Iraq
• deficit reduction
• guarding property rights keeping producer costs
  down to maintain competitiveness
• questioning environmental protection

26
Summary (continued)

• Environmental battles likely to return to
  local level, with reduction in overall
  environmental quality increased confusion over
  rules
• More focus on agriculture for energy,
  environmental amenity use, and working farmlands

27
CRPActive Contracts, Aug 2005, US OK
Annual Rental Payments
Type Contracts Farms Acres mil /acre
General 407,642 267,762 32,408,029 1,417 43.74
continuous
--non CREP 250,233 155,356 2,371,742 211 88.93
--CREP 42,990 28,648 681,336 82 120.30
--subtotal 293,223 179,769 3,053,078 293 95.93
Farmable Wetland 8,481 6,859 130,875 16 118.71
TOTAL 709,346 410,867 35,591,982 1,726 48.49
OK Total 9,137 6,240 1, 052,162 34,188 32.49
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CRP 1986-2000

• CRP Rental Rates ranged from 37-43/ac. for OK
  during 1986-1995
• CRP Rental Rates ranged from 28-34/ac for Ok
  during 1996-2000
• OK (OSU-NRCS) 1995 study suggests CRP more
  profitable than returning to production for CRP
  land terminating existing contracts
• Participate in new CRP 25 net income
• Return to wheat/sorghum (16)-(32) net loss
• Keep in grass for grazing 17-24 net income

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Location of CRP Enrollment, October 2000
30
(No Transcript)
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Oklahoma CRP Update, Apr 02 (Prepared by R.
Wanger, OK FSA)
Cimarron 158,615.6
Texas 218,206.4
Beaver 134,586.3
Woods 24,753
Ottawa 324.7
Harper 64,364.4
Alfalfa 9,662
Grant 17,086.6
Kay 3,547.4
Osage 1,126.4
Craig 484.8
Nowata 179.7
Washington
Noble 1,316
Delaware 49
Woodward 23,034.5
Rogers 0
Garfield 5,171.3
Major 16,027.8
Mayes 0
Pawnee
Ellis 63,415.9
\Payne 291.3
Tulsa 118.7
Dewey 19,243
2,313.4 Logan
Kingfisher 4,706.6
Wagoner 102.8
Adair 0
Creek 0
Blaine 6,928.8
Cherokee 0
Lincoln 581.3
Roger Mills 24,024.1
Okmulgee 572.9
Custer 5,505.3
Muskogee 553.1
Oklahoma 0
Canadian 2,157
Sequoyah 0
Okfuskee 385.9
Beckham 49,030.2
Washita 4,636
McIntosh 0
Cleveland 0
Haskell 457.3
Caddo 7,498.2
Grady 2,262.7
Seminole230.2
Pottawatomie 587.7
Greer 34,902.2
McClain 77.8
Hughes 173.9
Kiowa 4,968.2
Pittsburg 22
Latimer 0
Garvin 46
LeFlore 0
Pontotoc 63.6
Comanche 894.8
Jackson 21,399.1
Coal 73
Harmon 51,665.3
CRP Acreage as of April 30, 2002 1,024,842.3 59
Counties Average Rental Rate - 32.45 Total
Contracts - 8568
Stephens 1,498.9
Murray
Tillman 13,843.5
Cotton 5,619.1
Pushmataha 0
Johnston 0
Atoka 0
Jefferson 9,812.3
Carter 250
McCurtain 1,065.3
Bryan 3,320.8
Choctaw 0
Love 712.9
Marshall 295.3
32
Farm Bill Update FSRIA 02--Conservation
Programs

• Quadruples EQIP
• Conservation Security Program (Harkin) 2 billion
  total
• Fy05
• US 14,516 applications 10.1 mil. Ac.
• OK 234 apps 105,820 ac.
• Adds 4 bil acres to CRP, WRP

33
An Evolving Conservation Philosophy

• Previous programs focused on protecting
  environment/natural resources compensating
  producers/landowners
• New philosophy is shifting toward working
  farmland with a conservation ethic (increase from
  current 7 to new 40 of program costs)
• Farmers and ranchers should manage farmland to
  provide cheap, high quality food and fiber and
  environmental amenities (e.g. clean air and
  water, wildlife habitat, open space, sequestered
  carbon).

34
Conservation Programs

• TOTAL 17.1 billion for 2002-2007
• CRP 39.2 (36.4) million acre cap- 1.517 billion
• Conservation Security Program - 2 billion
• Environmental Quality Incentives Program- 9
  billion
• Wetland Reserve Program 2.6 (1.1) million acre
  cap - 1.726 billion
• Grassland Reserve Program 2 million acres
  254 million
• Farmland Protection Program - 1 billion
• Wildlife Habitat Incentive Program - 700 million
• Small Watershed Rehabilitation Program - 275
  million

35
Conservation Programs - Summary

• CRP/WRP if you cant manage land to meet
  environmental restrictions
• EQIP if you need technical or financial
  assistance to manage land
• Other Programs to preserve desired landscape
• CSP if you want to try new management
• FPP protect against urban sprawl
• GRP protect fragile grasslands
• WHIP maintain or improve wildlife habitat

36
Energy Title(Title IX, FSRIA02)

• 1.Federal Procurement of biobased products
• 2.Biorefinery development grants
• 3.Biodiesel fuel education programs
• 4.Energy audit and renewable energy development
  program
• 5.Renewable energy systems and energy efficiency
  improvements
• 6.Hydrogen and fuel cell technologies
• 7.Biomass research and development
• 8.Cooperative research and extension projects
• 9.Continuation of bioenergy program

37
Energy Title

• Key provisions
• Federal agencies required to procure biobased
  products.
• Biobased products will be purchased to the
  maximum extent possible.
• Energy from bio-mass including ag crops and
  animals waste.
• Energy from renewable sources, wind, solar,
  biomass or geothermal or hydrogen produced from
  water or biomass

38
Bio-Based Preference

• Key Points
• Each federal agency required to have specs for
  bio-based products within one year.
• Optional, allows some wiggle room to opt out.
• Labeling for bio-based products.
• Office of Federal Procurement Policy coordinated
  program.
• Preference in contracting goes to item with
  highest bio-based product.
• 6 million

39
BIO Refinery Grants

• Key Points
• Grants to defray cost of development and
  construction of bio-refineries.
• Farmers, national lab, institutions of higher ed,
  state or local agency, tribe, consortium.
• Govt cost not to exceed 30 of cost.

40
Bio-Diesel Fuel Education Program

• Key Points
• Grant to educate public and government about the
  benefits of bio diesel.
• 1 million/year.

41
CCC Bio-Energy Program

• Payments to eligible producers to encourage
  increased purchase of eligible commodities for
  purpose of expanding production of bio-energy and
  supporting new production capacity for bioenergy.
• Contract required
• Producers lt 65K gallons reimbursed 1 feedstock
  unit for every 2.5 feedstock units of commodity
  used for increased production
• Producers 65K or more gallons 1 feedstock unit
  for every 3.5 feedstock units.
• No farmer gets more than 5 of total funds
• Proration allowed
• Total authorized 150M/yr. 2003-06 0 in 2007

42
Other Energy Provisions

• Energy Audit and Renewable Energy Audits Grant
• Cost share govt pays 75.
• Renewable Energy Purchase Grants
• Loan and Loan guarantees for farmers to purchase
  renewable energy systems or to make energy
  efficiency improvements.
• Grant not to exceed 25 of cost.
• Grant and Loan not to exceed 50 of cost of
  system.
• Must be cost effective.
• 75 million

43
Other Energy Provisions

• Hydrogen Cells and Fuel Cells
• Sec. Ag. to work with Sec. Energy to disseminate
  info.
• Biomass Research and Development
• Reauthorizes the Biomass Research Development
  Act of 2000
• CCC gives 5M 2002 14M 2003-2007
• Additional authorized 49M 2002-2007.
• CSREES Carbon Sequestration Research Extension
• Such sums as are necessary are authorized .

44
Energy Policy in FSRIA02--2005 update

• Biomass Research Development
• Oct 05 11 research, development demo projects
  selected to receive 12.6 mil.
• Cost share brings total to 19 mil.
• Joint effort USDA DOE
• Noble Foundation, Ardmore 670,166