Payments for Stewardship Services on Private Lands that Deliver Multiple Public Benefits: 

A New Approach to Agricultural Policy 

A preliminary draft concept paper reflecting discussions of 

Red River Land Stewardship Working Group

 Convened and facilitated by
The Consensus Council 

Contact:

Brad Crabtree
The Consensus Council
1003 E Interstate Avenue, Suite 7
Bismarck, ND 58501
Tel:  (701) 224-0588 ext. 101 
Fax:  (701) 224-0787 
crabtree@agree.org

September 13, 1999

Background

In establishing the International Flood Mitigation Initiative (IFMI), Consensus Council staff met with staff of the Federal Emergency Management Agency (FEMA), Environmental Protection Agency (EPA), Department of Agriculture’s Natural Resource Conservation Service (USDA-NRCS) and the North Dakota Congressional delegation regarding programs that compensate producers for flood mitigation and related land stewardship services they provide. 

These discussions suggested an opportunity to integrate programs, or at least pool funding, from several federal agencies to reward owners/operators who undertake land stewardship measures on marginal lands.  Through a flexible, integrated payments system, the different goals inherent in each agency’s mission could be achieved simultaneously:  enhanced farm income, flood mitigation, water quality, conservation, recreation, tourism and other public benefits.  Given the deepening agricultural crisis in the upper Midwest and continued anxiety over flooding, it was felt that the Red River Basin offered an excellent laboratory for piloting an approach that could increase farm income and the region’s flood mitigation capacity at the same time. 

Following the launch of IFMI, the Council organized and facilitated three conference calls in the winter of 1999, followed by two meetings in May and June of 1999.  These calls and meetings involved representatives of EPA, FEMA and NRCS, staff of U.S. Senator Byron Dorgan and Congressman Collin Peterson, the North Dakota State University Extension Service, an active farmer, a Manitoba natural resource management consultant, and Council staff.  This preliminary draft report reflects discussions of this informal “Red River Land Stewardship Working Group.” 

Upon further revision, Council staff will present this report to IFMI participants for their review.  It is hoped that the efforts of the Land Stewardship Working Group will lead to IFMI recommendations on a new and innovative mechanism(s) for compensating stewardship services on private lands.  Any IFMI recommendations would likely be made to Minnesota, North Dakota and South Dakota Congressional delegations, U.S. federal agencies, and corresponding Canadian authorities. 

Finally, this paper addresses the U.S. context, whereas IFMI is also a binational endeavor.  Through IFMI, the Council anticipates broadening this discussion to include a comparable dialogue in Manitoba with the assistance of IFMI’s Canadian staff. 

A New Vision for Agricultural Policy:  
Compensating Private Stewardship Services for Public Benefit

Many concerns bring the Land Stewardship Working Group together.  The Working Group recognizes the lack of incentives for producers to take actions that would help downstream communities reduce the risk of flood disaster.  Where incentives do exist, they do not necessarily achieve the full spectrum of potential public benefits—benefits that go well beyond reduction of flood damages. 

The Working Group also believes that the present rural crisis requires fundamental rethinking of the safety net in agricultural policy and that we must find innovative ways to achieve economic sustainability for producers and small rural communities.  One participant described it as the need for “a new paradigm expressing a different approach to public investment on private lands to enhance and accomplish economic, social and environmental benefits.” 

In this context, participants believe that any restructuring of the safety net also must benefit the public at large by fostering environmental, economic and social sustainability through sound stewardship of private lands.  Such a linkage would make for good public policy and broaden the political constituency for increased federal income support to agricultural producers.  As evidence, the group pointed to the critical role of environmental groups in supporting reauthorization of the Conservation Reserve Program in return for environmental enhancements to the Program. 

Similarly, the Working Group is excited by the potential for entirely new economic and social opportunities that could emerge from an integrated system of financial payments to private landowners/operators for services rendered to the public.  For example, flood mitigation storage and retention projects on marginal land could support farm-scale irrigation, enabling farmers to shift to higher-value crops at a time of historically low commodity prices.  Or, federal payments for retirement of marginal farmland and restoration of wetlands, riparian areas and grasslands could boost outdoor recreation and even tourism opportunities, generating needed commercial activity and economic diversification in rural areas. 

In summary, the Working Group’s discussion reflected a shared commitment to a new vision for agricultural policy that:

•         Recognizes a changed political environment for agriculture by shifting away from traditional farm programs toward targeted incentives that encourage owners/operators to steward private lands in ways that benefit the public at large;

•         Changes the traditional emphasis of farmers’ relationship with the government from that of receiving payments for production (or not producing) to delivering a broad range of compensated land stewardship services;

•         Creates a single, flexible incentive system that enables partnering among agencies and supports a broad menu of options capable of achieving multiple benefits for the public and producers alike; 

•         Increases farm income by rewarding landowners/operators financially for actions which provide flood mitigation, environmental and recreational benefits, while also reducing exposure to repetitive farm losses from flooding and creating opportunities for irrigation and high-value crops; and

•         Includes compensated retirement of marginal lands to restore the landscape’s natural functions of storing, reducing or slowing run-off, thereby improving water quality, enhancing conservation and reducing damaging peak flood events.

Public Support

During June and July, IFMI organized six community meetings throughout the Red River Basin of the U.S. and Canada.  About 350 citizens, ranging from urban professionals to rural farmers, attended the meetings. American and Canadian Red River Basin citizens consistently identified the following as priorities: 

•         Implementation of a basinwide system of water storage and retention in tributary watersheds (support for such a system even extended to rural meeting participants, albeit with greater concern expressed regarding the need for appropriate compensation);

•         Development of greenways/riparian corridors along the Red and its major tributaries, extending from South Dakota to Lake Winnipeg and jointly planned and managed by the Basin’s political jurisdictions for flood mitigation, recreation, tourism and conservation benefits; and

•        Compensation of landowners/farmers for storing water and carrying out other activities on their lands that benefit downstream communities.

The IFMI community meetings clearly indicate, at least within the Red River Basin, strong public support for the vision and overall direction recommended by the Working Group. 

Win-Win-Win-Win:
Optimizing Stewardship of Private Lands for Producer and Public Benefit

Growing complexity and rapid change increasingly overwhelm the influence of traditional government policy.  Thus, there is growing recognition of the need to “super-optimize” public policy by developing fundamental, flexible, and cost-effective tools that yield multiple and mutually reinforcing benefits.

The approach to stewardship of private lands outlined above illustrates dramatically the opportunity for super-optimization.  A broadly-conceived and flexible policy of compensating owners/operators for services of storing, retaining and slowing water and restoring natural ecological function to agriculturally marginal lands has the potential to generate a host of positive and mutually reinforcing outcomes.  In its discussions, the Working Group identified a series of interrelated and beneficial results for agriculture, flood mitigation, the environment, and tourism and recreation:

Agricultural Benefits

•         Provide financial incentives for comprehensive stewardship services provided by landowners/operators;

•         Create opportunities for expanded irrigation and high-value crop production;

•         Diversify, stabilize and increase farm income by allowing producers to concentrate production on prime agricultural soils, while receiving payments for retiring and restoring marginal, unprofitable land;

Flood Mitigation Benefits[1]

•        Support mitigation measures on private lands that store, reduce or slow run-off;

•         Reduce repetitive damage to crops through retirement of marginal, flood-prone land;

•         Decrease potential flood damages to urban areas by reducing peak flood events downstream;

Environmental Benefits

•         Enhance conservation of wetlands, grasslands, and riparian areas;

•         Improve water quality;

•         Provide opportunities for endangered species restoration;

•         Increase carbon sequestration through conservation tillage practices and restoration of wetlands, grasslands and riparian areas;

Tourism and Recreation Benefits

•         Develop greenways and riparian corridors with trail systems for hiking, bicycling, canoeing, birdwatching, skiing, etc.;

•         Enhance hunting and fishing habit and local commercial income from those activities (e.g., sales of supplies and equipment, fees and leasing, and guiding and outfitting); and

•         Provide camping and other recreational sites, bed and breakfasts, restaurants, and other income-generating services for visitors.

A Flexible Menu of Stewardship Options: 
Tailoring Payments to Local Needs and Opportunities

The Working Group sees the need for a wide variety of options supported by a comprehensive payment system.  They identified the following menu of options:

•         Widespread, small-scale storage through low-head dikes and micro-dams (there is a lack of public support for large-scale impoundments and other structural measures);

•         Dike set-backs and restoration of river meanders to recreate a natural floodplain;

•         Water spreader systems [need further explanation];

•         Off-stream storage and ponding combined with farm-scale irrigation of high-value crops;

•         Restoring wetlands, including the creation of mudflat wetland habitats,  and drawing down some of the accumulated run-off to create storage capacity for the following spring run-off (latter increases flood mitigation role of wetlands);

•         Restoration of native prairie as buffer strips or as upland reaches of catchment areas to slow runoff and increase absorption of water in the soil profile;

•         Creation of greenways or riparian corridors to increase the floodplain capacity of rivers and streams and enhance environmental, recreational and tourism values; and

•         Alternative tillage and cropping to enhance moisture retention and slow run-off, reduce producer input costs, and increase farm income.

[this list needs additions and refinement—review Minnesota Flood Damage Reduction Work Group report for description of options]

Participants argued firmly against a prescriptive approach that might preclude local innovation.  Therefore, there would be no rigidly predetermined mix of strategies and measures that a landowner/operator might undertake.  One or even all of the options listed above might be applicable in a given farm operation. 

Characteristics of a Successful Approach

Participants identified a number of characteristics that they see as essential to a streamlined and integrated incentives system:

•         Adaptive, resilient, and sustainable;

•         Local participation in planning and decision-making;

•         Opportunities for unusual partnerships, including nonprofit groups working together with farmers and government agencies;

•         Long-term commitments—structures that work every year to provide services (but not necessarily so lengthy a timeframe that producers resist participating);

•         Regional flexibility;

•         Benefit/incentive flexibility;

•         Viable for owners/operators, affordable for governments;

•         Reliance on scientific and analytical tools in determining local options;

•         Demonstrable enhancement of environmental values;

•         Rewards owners/operators who already practice sound land stewardship;[2] and

•         Different than business as usual—innovative and outside the box.

Farm the Best, Restore the Rest:
A “Whole Farm Management” or “Conservation Agriculture” Approach 

It was suggested that the particular mix of stewardship options be determined through careful interdisciplinary analysis of individual farm operations within a target watershed at the request of the landowner.  Systematic assessment of soils and productivity could identify prime and marginal lands within a single farm operation.  Such analysis helps producers concentrate their time and costly inputs on the most productive soils while receiving alternative payments to retire marginal land that may actually cost them money to cultivate.  As one participant put it, farm the best, restore the rest, and get paid for it.  This approach of optimizing the mix of income-generating uses for prime farmland and marginal land is referred to as whole farm management or conservation agriculture.

Even in the highly productive Red River Valley, the percentage of cultivated land far exceeds the percentage of farmland classified as prime [insert Roger’s RR county soils data as a footnote].  As the largest land use in the Basin by far, the agricultural landscape affords great scope for enhancement of flood mitigation, water quality management, conservation, outdoor recreation and tourism.  In fact, marginal farmland often has higher economic value under alternative uses, creating the possibility of increased financial returns through diversification of the landscape and, therefore, diversification and greater stability in farm income.

Better Returns for Farming with Public Benefits:
Linking Small-Scale Irrigation with Flood Mitigation and Conservation

Irrigating farmland in the Northern Plains allows farmers to shift from comparatively low-value dryland crops such as cereals to high value crops such as potatoes and vegetables.  This can mean the difference between profit and loss, especially with the low prices of recent years.  Higher-value crops also open the door to new value-added processing industries as well.

Farmers and environmentalists have traditionally been at odds over irrigation because it can come at an environmental price.  Farmers typically use greater quantities of fertilizers and chemicals on irrigated acreage.  And the profit margins possible with irrigation can create an incentive to plow under native prairie or to irrigate on soils that are ill-suited and susceptible to salinization.

If approached in the context of conservation agriculture (with careful analysis of soils and other measures to mitigate potential harm), expanded irrigation and high-value crop production can be pursued with reduced environmental impact while achieving other public benefits as well.

For example, in Manitoba and, to a lesser extent, North Dakota, farmers are experimenting with excavating ponds and filling them with water pumped from spring run-off (offstream storage).  They then draw these ponds down during the summer for irrigation.  Farmers near Winkler, MB have shifted from dryland to irrigated potato production on small acreages irrigated by these seasonal ponds.  In so doing, they have created temporary spring storage while enhancing overall farm income with a high-value crop. 

One participant noted that the availability of financial incentives would allow landowners/operators to apply this approach more widely, contributing to temporary water storage capacity in tributary basins.  Moreover, this kind of small-scale, low-cost irrigation could help transform the economics of individual farm operations without what some perceive as negative impacts of large-scale irrigation projects.

Another participant suggested a somewhat different example of temporary storage and habitat conservation that might present producers with irrigation opportunities.  Mud-flat wetlands (wetlands that dry during the summer and leave behind habitat for shore birds and other wildlife) have been largely lost to agricultural uses in Minnesota.  However, they are marginal lands, subject to inundation and inferior yields, so the State of Minnesota is experimenting with retiring them, storing water in the spring and then drawing it down during the summer.  The summer draw-down has two beneficial effects: creating valuable mud-flat habitat and assuring flood storage capacity in anticipation of spring runoff the following year.  With the appropriate financial incentives, producers could begin to restore mud-flat habitats and use the summer draw-down for on-farm irrigation purposes.

Potential Partners

In keeping with the Working Group’s emphasis on local participation, the following organizations were suggested as necessary partners in planning, decision-making and implementation of pilot projects under a new incentive system (not an exhaustive list):

•         Individual owners/operators and farm organizations;

•         Corps of Engineers (water management and flood control structures), EPA (water quality, wetlands and climate change), FEMA (flood mitigation), Fish and Wildlife Service (endangered species recovery and habitat conservation), USDA (natural resource management, farm program administration),

•         State water management, resource management, and environmental quality agencies;

•         Local water management entities;

•         Environmental groups (e.g., Audubon and Sierra Club); and

•         Conservation groups (e.g., Ducks Unlimited and The Nature Conservancy).

Review of Existing Programs and Statutes

There was a difference of view as to whether existing programs and statutes were sufficiently flexible to deliver the kind of compensation system sought by the Working Group.  Some felt strongly that a linking, consolidation or restructuring of programs and funding was necessary for success. 

EPA, FEMA and NRCS staff were tasked with exploring that question and met last June in Denver.  They assessed the following programs/sources of funding: 

FEMA’s 404 Hazard Mitigation Grants Program and Predisaster Mitigation Funds:  HMGP funds floodplain acquisitions and projects related to flood protection with a 75/25 federal-state cost share.  States set priorities and determine projects.  FEMA predisaster mitigation funds are discretionary and support Project Impact initiatives in communities, as well as IFMI in the Red River Basin.  However, predisaster Congressional appropriations are very limited as contrasted with funding of disaster response and recovery.  An amendment to the Stafford Act would likely be required for FEMA to allocate funds from a Presidentially-declared disaster to such purposes [is that accurate?].

USDA-NRCS’s Wetland Reserve Program (WRP), Emergency Watershed Program (EWP), Emergency Watershed Restoration Program? (EWRP) and Public Law 566: 

WRP, EWP and EWRP deliver technical assistance, planning and construction design, and financial management assistance at a 75/25 cost share.  These programs provide easements and payments up to 30 years.  P.L. 566 has a provision allowing for incentive payments and easements on frequently flooded lands.  This provision has never been funded.[3] 

EPA 319 (Clean Water Act):  EPA 319 funds are limited to improving water quality in “impaired waters.”  Although water quantity considerations cannot be used as a criterion in 319 projects, restoration of wetlands and riparian areas and “on the ground” planning and implementation work could clearly contribute to flood mitigation.  States determine “impaired” waters and prioritize use of 319 funds.

Agency staff in Denver concluded that the programs they examined individually lacked the necessary flexibility to achieve the multiple objectives identified by the Working Group, but that there was merit in pursuing a pilot project(s) that draws on all of these programs.  They also suggested drafting model legislative language that could be wrapped into a larger farm bill that would facilitate integrated pilot projects. 

Subsequently, the Working Group found out that the State of Minnesota, in cooperation with local watershed districts and environmental groups, has begun cobbling these programs and others together for more comprehensive pilots.  However, Minnesota representatives indicated that such an effort involves jumping through many hoops and does not produce a seamless whole, thus lending weight to the recommendation to pursue legislative changes. 

The Conservation Reserve Enhancement Program and the Conservation Farm Option:  
Viable Mechanisms?

In the last Working Group meeting, two more programs emerged in discussion:  the Conservation Reserve Enhancement Program (CREP) and Conservation Farm Option (CFO).  

Conservation Reserve Enhancement Program

CREP has three major advantages:   a huge national cap of 5 million acres, noncompetitive selection of acreage, and no requirement of annual federal appropriation.  The disadvantage is that current regulations do not permit using enrolled CREP acres for temporary water storage. 

The State of Minnesota has negotiated with FSA for greater flexibility on a pilot basis.  State and local governments have undertaken a pilot on the Minnesota River, utilizing CREP.  It is one of five pilots approved nationally by FSA.  The agency has allowed the retirement of up to 100,000 acres of marginal farmland, grassland and pastured hillsides as grass and riparian buffers for water quality, flood mitigation and recreation.   

The federal share is $80 million and the State’s is $34 million.  Through the Reinvest in Minnesota Program (RIM), the State comes in with a one-time cash payment at the end of the CRP contract to purchase a permanent easement.  The landowner can use the land for commercial purposes such as hunting, recreation and, in some cases, raising trees, but cannot crop it.

One Minnesota participant noted that the CREP option is available through 20002.  He suggested that the three states that make up the Red River Basin ought to get together and discuss joint initiatives to exploit this opportunity.  In this context, participants noted the political difficulty of permanent easements in North Dakota.[4]  Another mentioned a further potential limitation in that there must be significant State leadership and financial participation—as evident in Minnesota—for CREP to work.

Since the June meeting, staff of Congressman Collin Peterson spoke with FSA staff in Minnesota.  FSA staff expressed a willingness to consider further use of CREP for flood mitigation and related purposes as long as several conditions were met:

•         No double federal payment to producers;

•         Storage is strictly temporary, with enrolled acres remaining in grass; and

•         Efforts proceeded on a pilot basis.

FSA staff indicated further concern about establishing national precedents for longer-term water storage, given the potential for abuse in other regions of the country. 

Conservation Farm Option 

The Federal Agriculture Improvement and Reform Act of 1996 established the CFO, which was authorized in the 1985 farm bill, to be administered by the Commodity Credit Corporation of USDA.  The CFO has yet to be funded by Congress.

According the final rule in the Federal Register, the CFO, if funded, would consolidate payments to owners/operators through CRP, WRP, and the Environmental Quality Incentives Program (EQUIP).  The program would provide a single contract, conservation farm plan, and “payment for implementation of innovative and environmentally-sound methods for addressing natural resource concerns.”  NRCS would supervise program management and planning, including technical support for conservation planning, while FSA would take responsibility for program administration , its contracts and payments.  Eligible CFO participants would be producers of wheat and feed grains, who have contract acres enrolled in the CCC and meet the eligibility requirements of CRP, EQUIP and WRP.  Contracts are 10 years, with 5-year extensions available.

CFO participation would be determined in two steps.  First, pilot project areas would be selected based upon proposals submitted by producers or groups of cooperating producers.[5]  Second, individual producers would submit applications within the chosen pilot project areas. 

Staff of the North Dakota Wetlands Trust have analyzed the CFO and see it as a more viable and flexible tool than other existing mechanisms for promoting conservation agriculture and land stewardship practices.  They are currently discussing the CFO with the North Dakota Congressional delegation and staff regarding a potential appropriation that would fund a pilot project area. 

A Further Agenda:  
Pilot Projects and Federal Legislation 

After considerable discussion at the last meeting, the Working Group agreed to pursue two basic directions:

•         Integrated pilot projects on the ground in Minnesota, North Dakota and South Dakota; and

•         federal legislation to foster a more integrated system for compensating landowners/operators for the public benefits of land stewardship services they provide on private lands.

It was felt that practical pilot efforts must proceed because they take several years to get off the ground.  At the same time, no one is fully satisfied with the ability of existing federal statutes and programs to foster integrated approaches.  The Group agreed that growing attention to the farm crisis and the potential endorsement by an influential group like IFMI presented key opportunity to push a legislative agenda in Congress. 

At the end of the June meeting, the Working Group agreed to proceed with the following tasks:

•         Draft a discussion paper;

•         Arrange for a sub-group to consider draft legislation/legislative language;

•         Identify and document promising precedents to support what we are trying to achieve; and

•         Draft proposed pilot projects.

The following agenda for further discussion is proposed: 

Discussion Paper

Future versions of this document will reflect further evolution of the discussion. 

Proposed Next Steps:

•         Council staff will revise this draft based on comments and suggestions at the September 14th meeting, by email and by phone on how to improve this first draft.

•         IFMI staff will use a revised draft to initiate exploration of the same issues on the Canadian side of the Red River Basin.

Legislation

There are uncertainties regarding legislation.  Do our objectives require fundamental reform of existing programs and statutes to allow for greater flexibility and multiple objectives, slight modification of rules governing an existing program such as CREP, or an appropriation for a presently unfunded program such as CFO?  The answer to this question will also determine whether an amendment to existing legislation will suffice, or separate legislation needs to be introduced.

Proposed Next Step

•         Council staff will circulate a revised version of this paper among Minnesota and North Dakota Congressional staff, seeking their input on how to proceed.

•         Council staff will draft model legislative language in cooperation with Congressional staff for their use and for review and recommendation by IFMI.

•         IFMI staff will explore legislative opportunities in Canada.

Pilot Projects and Case Studies

The Working Group needs to further clarify what it is trying to achieve through pilot projects.  Several existing pilots in Minnesota (Minnesota River, Hay Creek and Wild Rice) were discussed and are already underway.  The Colfax watershed was proposed for a potential pilot in North Dakota, although it was noted that there would be little downstream flood mitigation benefit.

Proposed Next Steps 

•         Working Group develops agreed criteria for considering potential pilot projects.

•         IFMI proceeds with the suggestion at the last meeting of convening representatives of the three States, federal agencies, Congressional staff and stakeholders to discuss joint pilot projects (but adding participation of Canadian authorities and stakeholders).

•         Draft summaries of proposed pilots with potential sources of funding identified.

•         Present criteria and summaries of potential pilots to IFMI for consideration and recommendations.