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  March 2, 2004  David McKay Conservation Planning Team Leader Conservation Operations Division Natural Resources Conservation Service P.O. Box 2890 Washington, DC 20013-2890  COMMENT ON THE CONSERVATION SECURITY PROGRAM PROPOSED RULE  Dear Mr. McKay:  Please find below American Farmland Trusts (AFT) comments on the proposed rules for the Conservation Security Program (CSP) published in the Federal Register by the Natural Resources Conservation Service (NRCS). NRCS faced a difficult task in developing a rule for an entitlement program that was capped in Fiscal Year 2004. While the proposed rule provides a way to deal with the spending limits that CSP faced in FY 2004, it fails to provide guidelines that will allow for the long-term success of the program once the spending cap is removed. AFT believes that the program, however constrained by funding, must be national in scope, financially attractive to producers, and predictable if it is to meet Congress objective.  The final rule must encourage farmers and ranchers to participate in CSP, and ensure that those who do so have a good experience. Accordingly, AFT recommends that the many limitations imposed by NRCS in the preferred approach  the watershed limitation, the payment reductions, the enrollment categories, and additional eligibility criteria  be dropped from the final rule. Instead, NRCS should promulgate a rule that allows and encourages all eligible producers to participate in the program, and provides a method for limiting enrollment in years of budget caps that will not jeopardize the programs integrity. Creating a program that provides producers with adequate compensation for their conservation efforts will provide USDA with a way to eventually replace commodity payments with a system of conservation payments that offer greater economic and environmental benefits  The following comment consists of four sections:  I. GENERAL COMMENTS ON NRCS PREFERRED APPROACH  Addresses the five program elements identified by NRCS in its preferred approach.
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II. ALTERNATIVE PROPOSAL  Provides an alternative proposal for selecting CSP participants that will allow for the short- and long-term success of the program. III. COMMENTS ON THE REGULATION  Includes an overview of the issues associated with various sections of the proposed rules and recommendations for how the proposed rule can be improved. IV. COMMENTS ON THE ALTERNATIVE APPROACHES  Includes comments on the five alternative approaches proposed by NRCS.   I. GENERAL COMMENTS ON NRCS PREFERRED APPROACH  The following comments address the five general program elements identified by NRCS in its preferred approach.  1. Limited sign-ups: Conduct periodic CSP sign-ups  AFT will accept the assertion by NRCS that limited sign-ups will allow it to manage and deliver the program effectively. AFT is willing to support the use of limited sign-ups as long as there is at least one annually, it is not held during planting or harvest seasons, and the rule provides for the eventual transition to a continuous sign-up process.  2. Eligibility: Criteria should be sufficiently rigorous to insure that participants are committed to conservation stewardship. Additionally, eligibility criteria should ensure that the most pressing resource concerns are addressed.  NRCS proposed a rule that severely limits eligibility by identifying priority watersheds and requiring producers to address soil and water concerns. AFT supports a program that is open to all producers and that is consistent with the intent of Congress. If it becomes necessary to limit eligibility due to funding constraints, NRCS should use the lottery approach proposed by AFT in Section II. AFT believes that any attempts to identify resource concerns and prioritize watersheds should occur at the state level.  3. Contracts: Requirements should be sufficiently rigorous to ensure that participants undertake and maintain high levels of stewardship.  AFT opposes NRCS proposal to require participants to meet additional enrollment requirements not envisioned by the statute. AFT also opposes NRCS proposal to allow the Chief to prioritize funding to producers who undertake certain enhancement activities. AFT believes that NRCS can ensure that participants undertake and maintain high levels of stewardship by offering an incentive based payment system that allows producers to recover their costs and by requiring them to meet the resource concern goals outlined in their contracts.   
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4. Enrollment Categories: Prioritize funding to insure that those producers with the highest commitment to conservation are funded first.  AFT opposes the sections of the proposed rule that enable NRCS to create enrollment categories. Because Congress envisioned CSP as an entitlement program, limiting eligibility based on commitment to conservation or other categories is inconsistent with the statute. In years in which the program has a budget cap, AFT supports the use of a lottery system to select participants to enroll in CSP (See Section II). A lottery system would allow CSP to expand as its funding levels change.  5. Payments: Structure payments to ensure that environmental benefits will be achieved.  AFT opposes the payment limitations proposed by NRCS, which provide producers with little incentive to improve resource concerns or provide environmental benefits. AFT supports a payment system which: provides full funding for base payments, allows cost share for practice payments at 75% (and 90% for beginning farmers and ranchers and limited-resource producers), and encourages participants to undertake enhancement activities by offering payments that cover a producers cost of implementing conservation practices.   II. ALTERNATIVE PROPOSAL  While CSP is designed as an entitlement program open to all producers, the FY 2004 budget cap forced NRCS to develop procedures to limit the number of eligible participants. AFT believes that it is possible for NRCS to develop and implement a rule for CSP that addresses the short-term challenges facing the program without destroying its long-term potential.  AFT proposes the use of a lottery system as an alternative method for selecting CSP participants. This method would enable CSP to meet the broad goals set out for it by Congress while creating an equitable selection process that can respond to funding limitations. A lottery system would continue to use the system of limited sign-ups originally proposed by NRCS, but would not rely on priority watersheds, significant resource concerns, or enrollment categories. Interested producers would submit their name to NRCS for inclusion in the lottery. Once the sign-up period closes, NRCS would conduct state or regional lotteries. NRCS would determine the number of producers to select based on the amount of CSP funds available during that fiscal year. Once NRCS identifies a set of participants through the lottery, it can use technical assistance funds to help those producers complete benchmark condition inventories and develop conservation security plans.  This system would make CSP a national program by providing all interested producers with an equal opportunity to enroll. It would decrease the administrative costs required to select and identify participants, while allowing NRCS to focus its time and energy on
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assisting the producers who have been selected. It provides NRCS with a tool that can help it meet the short-term funding constraints it faces, while creating a rule that will allow for the long-term success of the program.    III. COMMENTS ON THE REGULATION  §1469.4 Significant resource concerns  Discussion: While this requirement enables the Chief to determine additional significant resource concerns based on conservation needs, it limits the role of State Conservationists who have first-hand knowledge of the conservation issues facing their state. The requirement also limits resource concerns to those listed in the NRCS technical guides.  Recommendation: NRCS should allow State Conservationists, with input from State Technical Committees, to identify resource concerns in their states. There may be regions of the country where the continued existence of farmland is a legitimate resource concern. AFT supports the addition of farm and ranch land protection to the list of resource concerns from which State Conservationists are able to choose.   §1469.5 (a)(3) Have control of the land for the life of the proposed contract  Discussion: This requirement unfairly penalizes farmers and ranchers in areas of the country where there is a reliance on short-term land rentals. It could potential exclude large numbers of participants and place an unfair financial burden on participants by requiring them to implement conservation practices for which they will not receive compensation. Requiring participants who lose control of the land to repay the funds they received for implementing conservation practices in the past, fails to acknowledge the environmental benefits that they provided.  Recommendation: NRCS should not require participants to demonstrate control of the land for the life of the contract. Participants should be able to provide a statement of intent to continue leasing the property signed by the property owner. Leased land should be included in a participants conservation plan, but the contract should allow for a modification of program payments should the participant lose control of the land. Participants who implement their conservation contracts in good faith, but who lose control of the land, should not have to repay all of the funds that they received.   §1469.5 (a)(4) Applicants must address nationally significant resource concerns of Water Quality and Soil Quality to the minimum level of treatment in order to enroll.  Discussion: This requirement conflicts with the original intent of the law by requiring producers to address resource concerns as a condition of eligibility. Congress envisioned
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CSP as a program that would provide financial incentives to participants to address resource concerns on their property, not just reward those who have already done so. Establishing soil quality and water quality as the required resources of concern may also exclude producers who have demonstrated a commitment to conservation by successfully addressing other resource concerns on their property.  Recommendation: NRCS should drop this requirement and return to the original intent of the law. Participants should be required to address resource concerns once they are enrolled in the program, not as a condition for enrollment. NRCS should allow State Conservationists, with input from State Technical Committees, to identify the significant resource concerns in their states.   §1469.5 (a)(6) Benchmark condition inventory  Discussion: The benchmark condition inventory provides both NRCS and participants with a tool to evaluate the effectiveness of the conservation practices implemented during the program. The benchmark condition inventory also encourages participants to think about the production systems and conservation practices used on their property. Participants should not have to complete a benchmark condition inventory if they have not been guaranteed funding.   Recommendation: AFT supports the use of a benchmark condition inventory to monitor the effectiveness of CSP contracts. Participants should be required to complete a benchmark condition inventory only after they have been accepted into the program and have been guaranteed funding. NRCS should provide technical assistance to participants as they develop the benchmark condition inventories.  This recommendation also applies to the following section of the proposed rule dealing with benchmark condition inventories:  - §1469.7 (a) Benchmark condition inventory   §1469.5 (a)(8) Secretarys ability to add additional eligibility criteria for each sign-up  Discussion: This requirement creates another hurdle for farmers and ranchers who want to enroll in the program. Producers may implement a certain set of conservation practices in order to meet the eligibility criteria for CSP, only to find that the next sign-up notice requires them to meet a different set of criteria. Instead of receiving recognition for their commitment to conservation, producers are likely to become disillusioned with the program.  Recommendation: NRCS should create a procedure for revising enrollment and contract requirements. All revisions should be subject to public comment before their scheduled
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implementation date. This process will enable NRCS to offer a program that provides actual conservation benefits and allow producers to develop conservation plans that meet established program requirements.  This recommendation also applies to the following sections of the proposed rule:  - §1469.20 (b)(1) The Chief will announce additional program eligibility criteria not listed in §1469.5 in each sign-up notice. - §1469.20 (b)(2) The Chief will announce additional nationally significant resource concerns that will apply in each sign-up notice. - §1469.21 (c)(1) Tier I contract requirement: additional requirements as required in the enrollment categories, over the part of the agricultural operation to be enrolled in CSP. - §1469.21 (c)(2) Tier II contract requirement: additional requirements as required in the enrollment categories and a significant resource concern as described in Section III of the NRCS FOTG other than the nationally significant resource concerns, to be selected by the applicant and approved by NRCS, over the entire agricultural operation. - §1469.21 (c)(3) Tier III contract requirement: additional requirements as required in the enrollment categories will be selected by the applicant and approved by NRCS, over the entire agricultural operation.   §1469.5 (c) The following land is not eligible for enrollment in CSP  Discussion: If NRCS includes only the portions of an agricultural operation that are eligible for CSP in the conservation security plan, thereby excluding land already enrolled in CRP, WRP, and GRP, then it will prevent effective resource planning from occurring on all of a participants land.  Recommendation: AFT supports effective resource planning and requests that NRCS require conservation security plans to cover the entire agricultural operation, including land currently enrolled in CRP or WRP. The statute passed by Congress allows producers to simultaneously participate in CSP and CRP or WRP if appropriate payment reductions and other adjustments are made to the conservation security contract of a producer. Participants should not be paid twice for undertaking the same conservation practice, but resource planning can only be effective if it includes the entire agricultural operation. NRCS should include CRP and WRP parcels in conservation security plans, but adjust the CSP payments for those parcels accordingly.   §1469.5 (e) Selection and funding of priority watersheds  Discussion: This requirement could have a negative impact on the very participants that the program intends to reward. Selecting watersheds based on their degree of
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degradation, could exclude producers who live in watersheds that are healthy because of the producers historic commitment to conservation.  Another potential problem associated with the watershed eligibility requirement is the availability of data for the 2,119 eight-digit hydrological units in the United States. Adequate water quality data is currently available for less than 50 of these watersheds, which clearly limits the ability of NRCS to effectively identify and prioritize watersheds.  NRCS has also indicated that producers who do not meet the eligibility criteria during the sign-up period for their watershed may need to wait up to nine years before they are eligible to enroll again. All producers should have an equal opportunity to enroll during each sign-up period instead of having the watershed in which they live determine their eligibility.  Recommendation: While AFT supports watershed planning, it objects to limiting and prioritizing producer eligibility for the program based on a national list of priority watersheds. NRCS should remove the priority watershed approach in order to meet the original intent of the statute to provide an open program that is national in scope. NRCS should adopt the lottery approach proposed by AFT in Section II above if funding constraints continue. If NRCS believes that priority watersheds are critical to the success of the program, then priority watersheds should be identified at the regional or state level. This will ensure that all regions of the country realize the benefits of the program.  While not for the purpose of determining program eligibility, AFT encourages NRCS to work at the watershed level to maximize the environmental benefits derived from CSP. NRCS should encourage producers in critical watersheds to enroll in the program so that it can evaluate the effectiveness of CSP efforts in those areas. NRCS should also encourage and reward producer collaboration at the watershed level through enhancement activities and payments.   §1469.6 Enrollment Categories  Discussion: The proposed enrollment categories create an additional layer of complexity and are not in line with the original intent of the statute. Under NRCS proposal, a producer could invest enormous time and effort completing a benchmark condition inventory and other paperwork before finding out that the enrollment category in which he or she has been placed will not receive funding.  Recommendation: AFT believes that the enrollment categories are another attempt to limit the scope of CSP and recommends that they be eliminated. Eliminating the enrollment categories would free up staff time and technical assistance funds that could be used to assist participants in developing conservation security plans. If NRCS determines that a system of categories is needed to effectively administer the program, then it should use the tier system, which provides a way to organize participants based on the conservation efforts they are willing to implement.
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 These recommendations also apply to the following section of the proposed rule dealing with enrollment categories:  - §1469.5 (d) Order in which categories will be funded   §1469.8 Conservation practices  Discussion: NRCS is proposing that the Chief provide a list of structural, vegetative, and land management practices and intensive management activities eligible for CSP payment. From this list, State Conservationists would be allowed to develop a targeted subset of eligible practices for use in their states. This approach could severely limit the number of practices that CSP participants can use to address resource concerns, and would prevent State Conservationists from promoting practices that provide real conservation benefits in their state, just because they do not appear on the national list.  Recommendation: AFT supports the creation of a broad list of eligible conservation practices that reflects the diversity of farming and ranching operations. Any determination of eligible practices should be carried out at the state level instead of the national level. State Conservationists should be able to select eligible practices from the full list of practices found in the NRCS field guide and not from an abbreviated list. State Conservationists should identify a sufficient number of practices that are appropriate for their state and that provide real conservation benefits. The list of eligible practices must also complement existing state programs.    §1469.20 (b) NRCS will publish a sign-up notice   Discussion: Rather than allow for a continuous sign-up process, NRCS proposes to hold periodic sign-ups for the program that would be determined based on funding availability. Placing restrictions on funding and eligibility during each sign-up period further limits the number of potential participants and is not in line with the intent of Congress.  Recommendation: AFT supports the use of limited sign-ups to deal with the uncertainties of program funding as long as there is at least one sign-up period annually and it is not held during planting or harvest seasons. The lottery approach proposed by AFT in Section II above would enable NRCS to account for funding uncertainties and provide all producers with an equal chance of receiving program funds.   §1469.20 (e) Selection of contracts  Discussion: NRCS proposes to place applicants into enrollment categories and determine which categories can be funded. This would require producers to complete a benchmark
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condition inventory and an application without any guarantee that they would receive funding.  Recommendation: AFT supports a program that affords all producers an opportunity to participate in CSP. Participation in CSP should be based on whether or not an application meets the eligibility criteria, not on the enrollment category in which it falls. NRCS should eliminate the enrollment categories and provide funding to all eligible applicants during each funding period.  As an alternative to enrollment categories, AFT suggests the use of a lottery to decide enrollment in years when the program budget is capped. During a sign-up period, all producers interested in participating in the program would submit an initial application to NRCS. NRCS would randomly select producers from those who had applied, the number of producers selected to be dictated by the amount of funding available. The lottery should be conducted at the regional or state level, in order to ensure some participation in all regions of the country. Producers selected through the lottery would receive technical assistance in order to complete their application.      This recommendation also applies to the following section of the proposed rule dealing with funding of selected categories:  - §1469.20 (b)(6) An estimate of the total funds NRCS expects to obligate under new contracts during a given sign-up, and an estimate for the number of enrollment categories and contracts NRCS expects to be able to fund      §1469.21 (e)(3)(i) A conservation security contract must include  Recommendation: AFT requests that NRCS remove the words any additional so that it reads, comply with sign-up requirements  .   §1469.21 (c) CSP participants must address the following resource concerns to the minimum level of treatment by the end of their CSP contract  Discussion: The statute and the proposed rule differ on the number of significant resource concerns that participants must address during the life of a CSP contract. The standards proposed in the rule set the bar too high and restrict the number of eligible participants. The rule should not establish more stringent requirements than those required by the law.  Recommendation: AFT supports requiring participants to meet the program criteria outlined in the statute. While NRCS has the discretion to change the criteria, the significant resource concern requirements it has proposed go beyond what is reasonable. NRCS should require CSP participants to address the significant resource concerns required by their tier by the end of the third year of their contracts.  
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 §1469.21 (g) Contracts expire.Contracts are not renewable  Discussion: NRCS does not provide for renewals of conservation security contracts in the proposed rule even though the law allows them. This conflicts with the programs goal of recognizing producers who have demonstrated a commitment to conservation.  Recommendation: AFT supports the development of a process that allows participants to renew contracts after meeting certain requirements. Participants who want to renew their contracts would not be required to repeat the entire application process. NRCS should require a new benchmark condition inventory in order to determine the effectiveness of the conservation security plan that expired. Participants should develop a new conservation plan that allows for continued performance improvement.   §1469.23 (a) Base component of CSP payments  Discussion: While the base payment is not intended to cover the costs of implementing conservation practices, it should be high enough to encourage participation in the program. The application of a 0.1 reduction factor reduces the base payment to a level that is 0.5%-1.5% of the regional rental rate. AFT used the 1997 average farm size of 487 acres and the 2001 national average cropland rental rate of $71 per acre to calculate the value of payments that a Tier II participant would receive over 10 years if a 0.1 reduction factor is used.   $71.00 × (0.10 tier percentage) × (0.1 reduction factor) = $0.71 per acre  ($0.71 per acre) × (487 acres) = $345.77 per year  ($345.77 per year) × (10 years) = $3,457.70 over ten years   This low base payment value fails to reward producers for past conservation efforts and offers little to no incentive for them to enroll in the program.  The use of regional rental rates to calculate base payment rates leads to regional inequities. According to NRCS, the base payment is intended to compensate participants for applying benchmark conservation treatments. By using regional rental rates, NRCS is stating that conservation efforts in Iowa, where the National Agricultural Statistics Service (NASS) has calculated cropland rental rates at $122 per acre, are worth more than conservation efforts in New England where NASS is unable to calculate cropland per acre rental rates. NRCS should calculate base payments using a rate that better reflects the agricultural potential of the land.  NRCS has expressed concerns that base payments would not be compliant with the WTO green-box provisions if a reduction factor is not used. A close examination on Annex 2 of the WTO Agreement on Agriculture fails to demonstrate why NRCS believes it must apply a reduction factor. AFT requests that NRCS provide an explanation as to why it believes that a reduction factor is needed to be green-box compliant.
American Farmland Trust  March 2, 2004
 Recommendation: AFT supports providing participants with meaningful base payments that meet the intent of the statute. NRCS can achieve this by eliminating the reduction factor and using agricultural use land values or NRCS land capability classes to calculate base payments. Either of these approaches would provide participants with a meaningful and equitable reward for their past conservation efforts. If NRCS decides to use an economic measure to calculate base payments, AFT supports using regional or state average agricultural use land values. As an alternative, AFT also supports indexing the base payment rates to NRCS land use capability classes, thereby rewarding rather than punishing participants who have placed cropland in pasture as part of their conservation efforts.   §1469.23 (b) Existing practice component and §1469.23 (c) New practice one-time payments  Discussion:  NRCS has expressed its desire to keep the new and existing practice payments below those offered by other USDA cost-sharing programs. The economic analysis conducted by NRCS uses a cost share factor of 5% instead of the 75% allowed by law. Low cost share payments coupled with minimal base rate payments will discourage farmers and ranchers from enrolling in the program. If producers are forced to choose between receiving small payments for following the requirements of CSP and not participating at all, it is likely that they will choose not to participate.  Recommendation: AFT supports a system of new and existing practice payments that matches the 75% (and 90% for beginning farmers and ranchers and limited-resource producers) cost share rate allowed in the statute. Even though participants will not completely recover the cost of implementing conservation practices, the higher cost share value will encourage them to maintain existing conservation practices. These cost share rates would be green-box compliant with Annex 2 of the WTO Agreement on Agriculture. AFT also supports allowing participants to count their share of the cost of maintaining existing practices through in-kind sources, which is already allowed for new practice payments.   §1469.23 (d) Enhancement component of CSP payment  Discussion: The commentary to the proposed rule states that the enhancement provisions should be specifically designed to highlight effective conservation activities and demonstrate how more intensive management activities can improve natural resources. However, the economic analysis conducted by NRCS uses a 10% cost share for enhancement payments. This low cost share value is unlikely to encourage participants to adopt effective conservation practices.    Recommendation: AFT supports providing full cost recovery as well as recovery of lost income to participants who elect to increase their conservation performance. This will
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