8. THE POLITICAL ECONOMY OF NATURAL RESOURCE MANAGEMENT (SPRING 2002)

1
8. THE POLITICAL ECONOMY OF NATURAL RESOURCE
MANAGEMENT (SPRING 2002)

• Larry D. Sanders

Dept. of Ag Economics Oklahoma State
University
2
INTRODUCTION

• Purpose
• to become aware of the political economy of
  natural resource management
• Learning Objectives. To understand/become aware
  of
• 1. the concept of political economy.
• 2. the political economy of agriculture and the
  environment.
• 3. the political economy of forest/public land
  policy.
• 4. the political economy of habitat/biodiversity
  policy.
• 5. the nature of US incentive enforcement
  systems.

3
The Political Economy of Environmental Natural
Resource Issues

• Theories/concepts that treat systems as
  integrated relationships of economic, political
  social institutions
• Institutional mechanisms to affect the
  environment natural resources have evolved over
  time

Political Institutions
Economic Institutions
Social Institutions
4
Political Economy--Basics

• Market failure historically leads to the
  protective response
• Government intervention
• Private sector seeking advantage or market power
• Government failure may lead to reversion to the
  market or refinement of government institutional
  mechanisms
• Private failure often leads to market
  concentration
• Models/theories
• Public Choice--politicians maintain position
• Rent-seeking--interest groups seek govt support
• Capture theory of regulation--firms control
  process

5
The Political Economy of Agriculture the
Environment

• Environmental Policy
• Point vs. Nonpoint
• Property Rights
• Incentives vs. Regulations
• Government Support a Reality
• But evolving as a Social Contract
• Depression-Era Support Gone
• Idealized Farm Image Persists
• Budget Deficit Reduction top goal for 1990s
• W/budget surplus, crisis funding for ag returned
  to near-record highs
• Environmental Concerns Persist

6
The Social Contract with Agriculture the
Environment--Focus on Farm Bills

• 1. 1985 Farm Act
• --Conservation Reserve Program (CRP)
• --Conservation Compliance (CC)
• --Sodbuster
• --Swampbuster
• 2. 1990 Farm Act
• --Continue CRP
• --Wetlands Reserve (1 mil. ac.) (WRP)
• --Water Quality Incentives Program (WQIP)
• --Pesticide users regulations

7
Social Contract (cont.)

• 3. Pesticide Regulation
• --Federal Insecticide, Fungicide Rodenticide
  Act (FIFRA)
• --Endangered Species Act (ESA)
• --Federal Environmental Pesticide Control Act
  (FEPCA)
• --Food Quality Protection Act (FQPA)
• 4. 1996 Farm Act (expires 2002)
• --new CRP, WRP
• --Environmental Quality Incentive Program
  (EQIP)
• --Conservation Farm Option (CFO)

8
1996 Federal Agriculture Improvement Reform
Act Conservation Reserve Program (CRP)

• CRP maintained at 36.4 mil. ac.
• New enrollments permitted with rental rates at
  fair market value
• Early Out permitted w/restrictions
• 1. Payment rates
• --Avg local cash rental rate by soil type
• --Oklahoma rates by county vary
• --Panhandle 13-36 --Western OK 15-48
• --Eastern OK 17-58
• 2. State designated 10 of cropland as
  conservation priority area

9
1996 FAIR--REVISED CRP RULES

• 3. Eligibility
• --EI gt 8 or conservation compliance HEL
  definition
• --Planted/Considered Planted 2 of 5 past crop
  years
• --Owner, operator, tenant of eligible land for 1
  year
• 4. Selection Process
• a. Applicant meets w/NRCS to determine max
  rental rate
• b. Applicant estimates a bid lt max rate
• c. Agency evaluates/selects highest
  environmental
• benefits to bid levels
• d. Per person total CRP payments limited to
  50,000

10
REVISED CRP RULES FOR 1997 (continued)

• Note on ENVIRONMENTAL BENEFITS
• An index developed that considers
• Soil erosion
• Water quality
• Wildlife habitat (temp. or permanent)
• Bid level
• Conservation priority area
• Conservation compliance requirements

11
REVISED CRP RULES FOR 1997

• Continuous Signup 10-15 yr. contracts (same
  eligibility not subject to environmental index
  county limit waived)
• Filter strips/grass waterways
• Riparian buffers/salt tolerant vegetation
• Shelter belts/shallow water areas for wildlife
• Living snow fences
• Acreage w/in designated wellhead area
• Field windbreaks

12
CRP UPDATE (Feb 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 current land in CRP--994,559 ac 32.43/ac
• OK (OSU-NRCS) 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

13
Environmental Quality Incentive Program (EQIP)

• Cost share, incentive payments technical
  assistance 5-10 yr. plan
• Moderate/small livestock producers (100 mil.)
• Combines several recent ag land environmental
  programs (100 mil.)
• Replaces most NRCS assistance w/competitive bid
  process

14
Conservation Farm Option (CFO)

• Pilot Program for producers w/govt support
  contracts (Production Flex Contract-PFC)
• Develop implement 10-15 yr. plan
• In exchange for CFO payments, producers forego
  participation in/payments under CRP, WRP, EQIP
• Payment equivalent to foregone payment plus PFC
  payment

15
Other Key Environmental Provisions

• Conservation Compliance
• Continued
• Self-Certification
• Wetlands Conservation Program
• Improvements in Mitigation Allowance
• Pilot Wetlands Bank/No-net Loss
• Farmland Protection--170-340,000 ac.
• Wildlife Habitat Incentive Program
• Cost-share 10 yr. agreements

16
Wetlands Reserve Program (WRP)

• WRP capped at 975,000 ac. new enrollments
• 1/3 Permanent Easements
• 1/3 30-year/less Easements
• 1/3 Wetland Restoration w/cost-share

17
Farmland Protection--State/Local

• 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 98)
• State initiatives

18
Crop Residue Management (CRM)

• Government Intervention
• Conservation Compliance Highly erodible land
  (1985 Farm Act)
• Supported Compliance, other environmental
  programs (1990 Farm Act)
• CRM action plan (1991)
• Conservation Farm Option, other programs (1996
  Farm Act)
• Ongoing educational technical assistance by
  NRCS, FSA, landgrant programs (extension
  research)

19
Grazing--Common Property Issues

• A major use of public lands (BLM, FS, NPS)
• Predates government management
• Ecosystem stress forced govt. intervention
• Taylor Grazing Act (1934)--management system for
  non-FS public lands by BLM right-to-use based
  on
• prior use
• commensurability (sufficient alt. lands
  off-season)
• dependency (insufficient alt. lands in-season)
• grazing fee (permits, head, area, other
  restrictions)

20
Forest/Public Land Policy

• Pinchot vs. Preservation vs. Development
• 1891-Forest Reserve Act (public forest reserves
  from public land Western US)
• 1897-Forest Organic Act (establishes national
  forest system for water flow timber
  sustainability)
• 1905-USFS established
• 1911-Weeks Act (okays purchase of private land
  for national forests Eastern US)

21
Forest/Public Land Policy (cont.)

• 1916-National Park Organic Act (creates NPS
  system to conserve scenery, wildlife, historic
  objects)
• 1960-Multiple Use Sustainable Yield Act (MUSYA)
  (adds watersheds, recreation, wildlife, fishing,
  hunting, soil concerns to national forests)
• 1964-Wilderness Act (begins preservation of
  unique natural areas)
• 1968-Wild Scenic Rivers Act (preservation of
  unique rivers)

22
Forest/Public Land Policy (cont.)

• 1974-Forest Rangeland Renewable Resources
  Planning Act (RPA) (creates planning process)
• 1976-National Forest Management Act (adds
  economic, wildlife, wilderness recreational
  uses to USFS planning)
• 1980-Alaska National Interest Lands Conservation
  Act (ANILCA)(adds 13 national parks, 16 wildlife
  refuges, 56 mil. Ac. To wilderness system)
• 1970s-1980s-added to wilderness system thru US
• 1990s-move to privatize some national forest areas

23
Habitat/Biodiversity Policy

• Endangered Species Act (ESA) under review
• Criticisms
• Species over Humans
• Ignores Economics
• Taking of Property Rights
• Response
• Species Critical to Ecosystem
• Economics may favor Species
• Property Rights Evolve

24
ESA (1973)--Background

• Expired 1992, but most statutes in effect until
  repealed
• Primary Goal Conservation of endangered,
  threatened species their ecosystems
• Key Elements
• Listing
• Protections, Prohibited Activities Enforcement
• Relief/exemption from sanctions

25
ESA--Process

• 1. Listing
• Species based solely on biological considerations
• Requirement of designation of critical habitat
  must consider economic impacts potential sites
  may be excluded if opportunity costs too hi
• 2. Regulatory Constraints
• Protects listed species against taking (harming
  or degrading habitat) private land not protected
• Prohibits federal actions that jeopardize species
  or adversely modify habitat
• Cant consider economics

26
ESA--Process (cont.)

• 3. Regulatory Relief
• --Allows granting of permits to take listed
  species
• --Incidental/conditional to approved
  conservation plan
• --Economics may be considered
• --Exemption possible

27
ESA--Property Rights

• Some claims that ESA is unconstitutional taking
  private property rights w/o compensation
  (violates Fifth Amendment of Constitution)
• Property rights always evolving, subject to
  limitations, not inalienable nor absolute
• Current ESA reform bills may ignore historic
  precedence, but do contribute to debate on
  redefinition of rights by society
• ESA was amendment of property rights standard
  practice to not compensate when prohibiting a
  bad courts very cautious

28
ESA--Administration Proposals (95-96)

• Early identification of allowable activities by
  FWS NMFS (exempt from take prohibitions)
• Expedite habitat conservation planning
  (HCP)--streamline permitting process, especially
  for lo- medium impact cases
• No Surprises policy--if unforeseen
  circumstan-ces, no further penalty if landowner
  under HCP
• Small landowners exemption--if used as residence
  5 ac./less, or negligible effect
• Market mechanisms being considered

29
Incentive Enforcement Systems

• Incentive for polluting firms to self-report
  or self-monitor
• Govt monitoring collection of penalties
• Benefits Less govt cost More flexibility
  privacy for firms
• By 96, 18 states some federal programs
• Industry coalitions paper mills, chemical/
  energy/waste management companies
• Environmental groups generally skeptical

30
EPA Self-Monitoring Policy

• Reduced penalties for firms self-reporting
  taking corrective action
• Eliminates punitive penalties if no major health
  hazard

31
EPA Enforcement

• Emissions inspection once/yr
• Requires firms to submit water pollution
  discharge records compliance
• Random hazards difficult to monitor
• toxic waste
• nonpoint source water pollution
• proper chemical use/container disposal
• Chemical sales relatively easy to monitor
• Education jawboning are key
• Sanctions penalties, criminal/civil prosecution

32
1990 Clean Air Act Amendments--less federal
court time/expense

• Penalties up to 200,000
• Appeal to Administrative Law Judge
• Field Citations up to 5,000/day for serious
  violations
• Emergency actions threats to environment and/or
  threats to human health
• fines 5,000 - 25,000/day
• criminal penalties up to 5 years
• 10,000 reward for citizens who report
• Self-reporting required

33
Citizen Suits

• Private citizens who are harmed may sue polluters
  in many cases
• Expands enforcement efforts
• May force compliance, require damages
  restitution, impose sanctions
• Evidentiary requirements make it difficult
• Often counter political power of firms/industry