Voluntary Grazing Permit Buyout Legislation:
Price Per AUM
Both voluntary federal grazing permit buyout bills (H.R. 3324
and H.R. 3337) propose to pay ranchers $175 per AUM (animal unit month) to retire
their grazing permits or leases. Some conservationists object to this price
and some object to paying for permits/leases at all. This paper discusses those
objections and explains why paying above fair market value (FMV) is both justified
and desirable. Following are common concerns and responses to paying above FMV
to retire grazing on federal public lands.
Concern: Why pay at all for permits/leases? Grazing permits do not convey
grazing rights but only privileges that may be amended or revoked without compensation
at any time.
Response: Although federal management agencies are authorized to amend or
revoke grazing permits/leases without compensation, they rarely do, as amending
or revoking a permit is often time consuming and expensive, both fiscally and
politically. Offering to buyout grazing permits would be well worth the time,
effort and cost involved.
Concern: Permit buyout will create a property right in grazing permits
Response: No, it will not create any property right whatsoever. Both
bills explicitly prevent such an interpretation. Permits and leases will still
be amendable or revocable without compensation as they are now. It is also likely
that revocation or modification of permits and leases to protect resource values
may occur more often if a buyout program was established because local land
managers would know that the grazing permittees/lessees have a financial out
in case of permit/lease reductions. The wise rancher would opt for buyout long
before any such reduction became official.
Concern: Current efforts to negotiate third-party buyouts of grazing
permits have suffered due to the high price set in the buyout bills. Conservation
organizations negotiate buyouts at FMV but when ranchers hear of the higher
price set in the bills, they demand that price instead.
- There are a few examples where third-party buyout negotiations have stalled
over price per AUM since introduction of the buyout legislation. However,
there have also been cases in which the third-party conservation organization
was able to talk the permittee into accepting a lower price. This involved
explaining to the permittee that 1) nonprofit organizations are prohibited
by the Internal Revenue Code from enriching private parties beyond the purposes
of their organization (essentially limiting third-party buyouts to FMV); 2)
it could be years (if ever) before the buyout bills are enacted; and 3) there
is no guarantee that the price in the legislation as introduced will be maintained
in subsequent versions of the bill(s).
- This effect will become more pronounced as the bill(s) approach enactment.
However, if a rancher is willing to hold out for the higher, legislated price,
he/she should help lobby for the legislation's passage.
- Under current law, third-party buyouts are not permanent and entirely dependent
on the cooperation of the managing agency/administration. A higher price is
justified if it comes with statutory certainty that buyouts will be permanent.
Concern: Paying above FMV is bad policy and sets a bad precedent.
- The status quo is bad policy. Taxpayers are currently subsidizing below
fair-market-value giveaways of public lands forage and the resultant ecological
damage. Why not devote funds that would otherwise be spent on grazing subsidies
and use them to end the resource damage once and for all?
- Using a set price like $175/AUM would actually be cheaper for taxpayers
and simpler for the government than paying FMV for each permit/lease. Paying
FMV would require a separate appraisal for every permit/lease relinquished
for buyout. Such appraisals would not only take time and money, but would
also be contentious and open to challenge that could increase costs and further
delay permit retirement.
- Ranchers can already get FMV by selling their permits to other ranchers.
At FMV, what would compel a rancher to sell to a conservation organization
or the government rather than to another rancher? And what would encourage
them to take the initiative to lobby for buyout legislation?
- Setting a high price ensures that all permits will be covered by the buyout
program. For some permits, FMV is $35/AUM and those permittees would be happy
to sell for $50/AUM. However, at a legislated buyout price of $50/AUM, permits
with a FMV of $80/AUM would continue to be bought and grazed by other ranchers
- FMV is defined as the mutually agreed upon price where neither the buyer
nor the seller are compelled to act. The federal government is not a typical
seller (it has a political tradition of subsidizing public lands grazing to
the tune of $500 million annually-$28/AUM per year, depositing only $7 million
annually from grazing fees in the federal treasury). A compelling case exists
for the seller to buy its way out of this costly political obligation. Paying
$175/AUM has a benefit-cost ratio of 4.95-1, a return on investment of 16.2%,
and a simple payback period of 6.1 years, while the environmental benefits
would be priceless.
- Neither is the federal government a typical buyer of federal grazing permits.
When the federal government buys a permit/lease (as opposed to another rancher
or corporation), it then becomes politically possible to designate Wilderness
or other protected areas where it was previously impossible due to resistance
from public lands grazing permittees.
- If these bills do set a precedent, it will be much better than that already
set by the Conservation Reserve Program which continually pays above fair
market value "rent" for conservation on private lands rather than
offering a one-time payment for permanent conservation like buyout or conservation
- Paying above FMV may not be justified to achieve other conservation goals,
but in the specific case of public lands grazing, paying a premium is the
politically pragmatic, economically feasible, socially just, and fiscally
prudent way to promote environmental protection.
- No matter how you slice it, passage of either one of these bills would be
a huge victory for the environment, especially in these times.
Concern: It would take money away from other programs.
Response: As evidenced by the deficit, the federal budget is not a zero-sum
game. Support for permit buyout in the public lands ranching community is growing
stronger every day. With permittees and conservationists lobbying for the same
program, which also happens to be a good investment, Congress will find the
additional money necessary to retire grazing permits/leases. When lobbying for
increased NEPA funding, do we worry that it will take money away from ESA enforcement?
Concern: Make the polluter pay.
Response: The status quo for public lands grazing is that taxpayers pay
the polluter to continue trashing the environment. Conservationists have attempted
to raise the federal grazing fee (but not close to fair market value) and failed
Paying $175 per AUM:
1. ensures all allotments will be covered
2. encourages rancher participation both in the legislative
process and in the resultant permit buyout program,
3. is fiscally justified because it ends ongoing subsidies
for public lands ranching, and
4. can foster conservation alliances with the ranching