Conservation Policy: Farmland and Grazing Land Protection Programs

Overview Background Working-Land Conservation Programs Land Retirement Programs Farmland and Grazing Land Protection Programs Compliance Provisions for Soil and Wetland Conservation Recommended Readings Recommended Data Related Links

Conversion of agricultural and rural lands to urban uses—including residential, commercial, and industrial development—is on the rise. Data from the National Resources Inventory indicate that developed land increased 2.1 million acres per year, on average, between 1992 and 2002, versus 1.4 million acres per year during the previous decade. However, this annual rate represents barely 0.2 percent of the Nation's 1.03 billion acres of cropland, grassland, pasture and range, suggesting little threat to the Nation's capacity to produce food and fiber. Nevertheless, about a third of the value of U.S. agricultural output is produced on the 16 percent of cropland that is subject to urban development pressure.

Though the conversion of agricultural and rural lands to urban uses does not threaten our Nation's capacity for agricultural production, some localities face reduced agricultural production capacity as well as losses in amenities associated with agriculture due to farmland conversions.

Farmland provides a number of rural amenities, including open space, scenic views, rural agrarian character, wildlife habitat, and other environmental services. These nonmarket benefits are not typically accounted for in the land market, as landowners are seldom able to extract payment from anyone for providing these amenities. Consequently, landowners may not take the social value of these amenities into account when considering whether to develop land for urban-related purposes. Though land moves into and out of different uses for a variety of reasons, cropland conversion to urban uses tends to be permanent, as it is typically economically infeasible to revert back to farming. Thus, the losses of amenities are irreversible.

Similarly, the ecological benefits that are lost when native grasslands and rangelands are converted to cropping uses have raised awareness of the need for intervention to protect these environmental services. Grazing lands support a rich biodiversity of plant and animals species, while providing important ecological functions involving hydrologic systems and carbon sequestration. Besides supporting livestock production, ecosystem services provided by grazing lands can support other activities that contribute to rural economies, such as hunting and fishing, wildlife viewing, and other ranch-based recreation.

Rising cropland conversion rates have motivated growing public financial support for farmland protection at the Federal level to supplement State and local efforts. Grazing land protection has also been gaining attention as a Federal conservation priority, to protect native grasslands from conversion to cropland or urban uses. Federal funding for farmland protection occurs primarily through two programs—the Farmland Protection Program and the Grassland Reserve Program.

Federal Programs

Farmland Protection Program

Despite State and local prerogatives in land use management and a growing number of farmland protection programs administered at State and local levels, the Federal Government is increasingly engaging in efforts to protect farmland from conversion to urban uses. Federal efforts to protect farmland began with the Agriculture and Food Act of 1981, which required Federal agencies to evaluate the impact of federally funded programs that converted farmland to nonagricultural uses, and to consider alternative actions that would lessen the adverse impacts. Direct Federal involvement in permanent farmland protection did not begin until 1996, when the USDA Farmland Protection Program (FPP) was established. Through FPP, the Federal government provided matching funds to eligible entities (State, tribal and local governments) to purchase agricultural conservation easements to protect prime topsoil. The easements restrict the land from being converted to non-agricultural uses. The FPP distributed about $53 million in matching funds across 28 States over 1996-2001.

The 2002 Farm Security and Rural Investment Act (2002 Farm Act) reauthorized the FPP (renaming it the Farm and Ranch Lands Protection Program), and provided matching funds up to 50 percent of the appraised fair market value of easements on qualified, privately owned agricultural land (with the remainder of the value contributed through payments from the eligible entity and donations of part of the easement value by landowners). It also expanded the set of entities eligible to sponsor applications for funding to include nongovernmental organizations (primarily land trusts). Farm and Ranch Lands Protection funding for the 5-year period 2003-2007 was $448 million, with eligible entities in 49 States receiving funding.

The Food, Conservation, and Energy Act of 2008 (2008 Farm Act) authorized further increases in spending, with mandated funding set at $743 million over the 5-year period from 2008-2012. If actual spending is realized at authorized levels, annual spending will increase more than 75 percent annually. Also, FPP's purpose for limiting nonagricultural uses was broadened from its original focus on protecting topsoil, to preserving the agricultural uses and conservation values of land. FPP continues to provide matching funds of up to 50 percent of the fair market value of the easement, and allows more flexible terms regarding payments from eligible entities and landowner donations. Previous limitations on impervious surfaces of 2 percent of the easement area (up to 6 percent under certain conditions) were also relaxed in the 2008 Farm Act; eligible entities can now specify limits on impervious surfaces with the approval of the Secretary of the Department of Agriculture.

The agency administering the program, USDA's Natural Resources Conservation Service (NRCS), allocates program funding to its State offices. The criteria used in making the FPP allocations have historically included the overall loss and percent loss of total farmland and farmland with prime, unique, and important farmland soils in the State, the degree of development pressure, estimates of demand for the funds, and the contributions and performance of eligible entities. Cooperating entities submit parcels for consideration to the individual State offices. The NRCS State offices score the parcels based on National and State ranking criteria. The ranking criteria include factors that assess the parcel's land quality, farm and ranch viability, county-level development pressure and other State-specific factors. The State offices rank the scored parcels and select the highest ranked parcels for which the State office has funding. NRCS State offices then develop cooperative agreements obligating the funds with the cooperating entities associated with the selected parcels. The cooperating entities are responsible for administering the easement acquisition process, monitoring the easement, and enforcing the conservation easement deed.

Grassland Reserve Program

The Grassland Reserve Program (GRP), first authorized in 2002 and extended under the 2008 Farm Act, is the primary Federal program for grazing land conservation. The program is designed to protect grasslands for livestock grazing and other uses from conversions to cropland and urban uses, and promote sustainable grazing practices. Under the current legislation, participating landowners voluntarily sell cropping and/or development rights under permanent easements, or via long-term rental agreements (10, 15, and 20 years) with annual payments. An approved grazing management plan is required for all enrolled lands, with cost-sharing provided for use of approved restoration practices, when applicable. Program funding of $230 million was spent over FY 2002-07, with a total enrollment cap of 2 million acres nationwide. The 2008 Farm Act authorizes an additional 1.22 million acres of enrollment during FY 2009-12.

Historically, GRP has enrolled eligible grassland under rental agreements of 10, 15, 20, or 30 years, 30-year easements, or easements of maximum duration allowed under State law. Under the 2008 Farm Act, 30-year rental agreements and 30-year easements are no longer authorized. The 2008 Farm Act also changes cost-share rates for grassland restoration practices. Prior to 2008, GRP participants could receive cost-sharing of up to 75 percent of restoration costs on restored grassland and up to 90 percent on virgin grassland. Under the 2008 Act, restoration cost shares are capped at 50 percent, with an annual payment limitation of $50,000. The 2008 Farm Act also removed the prohibition to disturb the soil.

Like FPP, GRP funds grazing land protection through a two-stage process. In the first stage, NRCS allocates GRP program funding to States, which in most years has been based on the number of grazing operations, pasture and range acres under threat of conversion, and biodiversity considerations. Once funds are allocated to States, State NRCS offices award funds to eligible entities for easement purchases based on State criteria.

State Trends in Farmland Protection

State and local governments spend millions of dollars annually on voluntary programs to protect farmland, with most attention given to protecting farmland from conversion to developed uses. Direct government outlays occur through State and county purchase of development rights (PDR) programs (otherwise known as purchase of agricultural conservation easement, or PACE, programs). Twenty-one States have funded easement purchases in State-level PDR programs, and at least 57 local jurisdictions operate separate programs in 18 States. The average easement cost in State PDR programs was over $2,300 per acre, and over $3,000 per acre in local PDR programs. PDR expenditures are generally one-time expenditures to restrict development permanently or for an extended (25-30 year) period, with some programs allowing landowners to elect payments in installments.

The most active State and local PDR programs exist in the Northeast. Maryland, Massachusetts, New Jersey, and Pennsylvania account for 92 percent of State-level PDR expenditures to date and 71 percent of the acres preserved in State programs through May 2008 (up from 76 percent and 58 percent in 2004, respectively). Especially active programs elsewhere include county-level programs in Sonoma County, CA; Gallatin County, MT; and Douglas County, CO.

On a cumulative basis, State PDR programs have preserved nearly 1.8 million acres of farmland at a cost of nearly $4 billion since the late 1970s. Local PDR programs have independently preserved an additional 326,000 acres of farmland for about $1.2 billion (in 2000 dollars). These cost estimates exclude the income tax benefits that landowners may qualify for if they sold development rights at less than their market value.

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The amount of land preserved through PDR programs represents only about 2 percent of the 94.7 million acres of cropland that ERS estimated to be subject to some degree of development pressure in 1995. ERS estimated the total cost of preserving this cropland subject to development pressure to be as much as $130 billion, in 1995 dollars.

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In addition to direct purchases of easements, States forgo over $1 billion in annual tax receipts through preferential assessment programs. ERS estimated that when capitalized at 4 percent, the total value of U.S. public expenditures on preferential assessment was $27 billion (1995 dollars). These implicit subsidies (from forgone tax revenues) ranged from about $25,000 annually in Wyoming to $218 million annually in California.

The high costs of permanently preserving farmland through government funded easement programs have generated support for locally sponsored transfer of development rights (TDR) programs, largely in places where urban development pressures are the major driver in land use change. While the sponsoring jurisdiction faces fewer costs, garnering taxpayer support in areas targeted to receive the urban densities being transferred is difficult, as is balancing the supply of and demand for development rights. Almost 100 local jurisdictions have passed TDR ordinances through 2007 (up from 50 in 2000), but not all of these jurisdictions have been actively preserving land. A survey of 64 of these TDR programs revealed that only 27 have individually preserved more than 100 acres.

In some regions, land trusts are particularly engaged in preserving farmland. These private, nonprofit organizations accept donations of conservation easements on farmland and environmentally sensitive land. The donations benefit landowners in the form of Federal and, for some, State income tax deductions. In Colorado, South Carolina, and Virginia, formal markets are developing that allow a landowner who donates an easement but cannot use the State tax credit to sell the unused credit to a third party. In addition, private land trusts often assist in administering public and private funding for land easement acquisition.

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Are Easement Programs Effective?

Because they result in permanent (or long-term, i.e., 25-30 year) restrictions on nonfarm development, easement programs are considered to be more effective in preserving agricultural lands and providing intended benefits than agricultural zoning, preferential assessment, or other land use management tools. However, the actual effect of these programs on land conversion rates and patterns is uncertain. While the number of acres preserved can be counted, these programs may simply shift development pressures—and cropping pressures in the case of virgin grasslands—elsewhere. Also, issues concerning compliance with and enforcement of easement restrictions over the long term can arise.

An often-cited argument in support of PDR programs to protect farmland from development is that they help keep farmland affordable for new farmers. In theory, once the development rights have been sold, the market value of the preserved land will reflect only its value in a farming use, and may be significantly lower than its residential market value. However, a recent study found little evidence that easement restrictions significantly lowered preserved farmland prices. It could be that landowners who farm as a recreational pursuit are outbidding "traditional" farmers for the land.

To help counter urban development pressures on farmland, States have begun to implement "smart growth" strategies. Smart growth is a catch-all phrase to describe a number of land use policies for influencing the pattern and density of new development. Without prohibiting development outside designated areas, smart growth policies use incentives and disincentives to direct new development to existing urban areas with appropriate infrastructure. PDR programs are one tool used to meet these goals. The effectiveness of smart growth will depend on how the incentive effects of new policies differ from pre-existing policies.

Links For More Help

For information about preserving specific parcels of land you can contact:

Land Trust Alliance (LTA)—LTA serves as an umbrella organization for local and State land trusts, and provides a listing of land trusts and other supporting entities operating at a State or county level. The site provides access to an online directory for contacting a land trust by name or county.

Federal Farmland Protection Program and Grassland Reserve Program—For questions about preserving agricultural land through FPP or GRP, contact your NRCS State office. To find your State office, choose your State from this page, then once redirected to the State's NRCS page, choose 'contact us' from the gray toolbar (at top).