Timber: The Federal Government has been in the timber business for over 85 years. Since 1899, the Forest Service and Bureau of Land Management have sold over 456 billion board of feet of timber valued at about $20 billion. Early timber sales were to encourage western settlement and economic development. In the 1930s the management emphasis shifted to maintaining stable communities. More recently environmental protection and economic efficiency have become management goals. Logging in or near wetland areas can bring about drainage, changes in the vegetation, erosion (particularly from road construction), and if logs are floated downstream, the leaching of harmful organic chemicals into the water. By attaching environmental constraints to silviculture prescriptions and the design and construction of roads, monitoring the results, and making any necessary changes in the constraints, the adverse effects of timber harvesting activities on wetlands can be reduced.
Rangeland: The Forest Service and the BLM administer livestock grazing on approximately 307 million acres of public rangeland in the west. In the 11 western States, 48 percent of the land is federally owned and about 75 percent of that is grazed by domestic livestock, so federally-permitted grazing occurs on 36 percent of the land. The BLM administers about 57 percent of the public rangeland, while the Forest Service administers about 43 percent of these lands. Because grazing is so widespread in an arid and sensitive environment, it can have significant impact on riparian wetlands. If not managed appropriately, livestock consume and trample riparian vegetation, compact the soil so that native plants cannot return, and contaminate streams with wastes and sediments. With the loss of vegetation erosion ensues.
Energy: The Mineral Management Service (MMS) oversees the leasing of oil and gas tracts in the outer continental shelf (OCS). These leasing arrangements govern a large portion of current domestic oil and gas exploration, and are major sources of revenue for the Federal Government. Oil and gas leasing is conducted through a competitive bidding system in which the Federal Government receives cash bonuses at the time of the bidding, as well as royalties when and if production begins. A portion of these revenues are deposited in the Land and Water Conservation Fund (LWCF), and a significant portion of LWCF is used to purchase wetlands.
The oil and gas industry conducts activities in coastal environments which support OCS exploration and development. These activities can convert shallow wetlands to deepwater and can contaminate wetlands with chemicals and brine, if not properly regulated. However, MMS does not have direct regulatory authority over coastal wetlands. Industry activities in support of OCS exploration and development that affect coastal wetlands (such as pipeline and navigation canals) are regulated by State and other Federal agencies.
There is some onshore oil and gas production in coastal wetland areas which is regulated by BLM. BLM incorporates safeguards in drilling permits in wetland areas which are designed to prevent environmental degradation.
Peat production, primarily for energy, may occur on Forest Service lands, but is primarily conducted on private lands. It receives favorable treatment from some Federal policies. Peat mining often requires drainage and causes oxidation of peaty soils, contaminating wetlands with nitrates.
To further the development of timber, rangeland, and energy, the Federal Government has instituted some non-neutral policies that may serve to stimulate more development and, consequently, more adverse wetlands effects than would occur otherwise.
Prompted by a growing environmental ethic and the combined effect of a number of environmental statutes (principally the Clean Water Act, the National Forest Management Act, and the National Environmental Policy Act), the Forest Service and BLM have developed management practices for timber harvesting and road construction which can greatly diminish the frequency and extent of such environmental incidents. Logs can be elevated in order to reduce surface impacts which could lead to erosion.1 To reduce ground disturbance, skid trails can be designated or logging activities can be restricted to periods when the ground is frozen or snow-covered. Buffer zones and directional felling (felling away from the stream course) is particularly useful in riparian areas. Roads can be located so as to minimize construction impacts, and vegetation can be maintained on steep slopes traversed by roads. During road construction, overburden can be removed to a storage area (rather than piled beside the road), and used to restore the site following completion of timber harvesting.
Timber contractors build roads according to specifications established by the Forest Service or the BLM. The Forest Service reimburses timber contractors for all road construction costs when the service life of the road extends beyond the individual timber sale. Reimbursement is in the form of "purchaser road credits" which can be used to pay for harvested timber. BLM timber contractors receive no such reimbursement, and hence their bids for timber tracts are net of all road construction as well as any other costs required to get the timber to market. Providing that the bidding is competitive, the difference in procedures should affect neither the net return to the Government nor the contractors' profits.2
Timber Harvests and Multiple-Use Management: Timber harvests may result in degradation of wetlands and other environmental components if the logging and associated activities are not conducted properly. In 1992, the Forest Service adopted a new guiding management philosophy termed "ecosystem management." Through the application of ecosystem management principles, national forests are managed to provide multiple uses. The objective is to produce a variety of resources and values through the sustained management of diverse, healthy, and productive ecosystems. According to the Forest Service, this management philosophy is having a substantial effect on the way timber sales are designed and carried out. The Forest Service is currently examining different options to determine the best way to monitor economic information related to all forest management activities and to use this information in combination with biological and social information to make resource allocation decisions.
Non-economic considerations sometimes constitute the primary motivation for conducting Federal timber sales.3 Neither the Forest Service nor the BLM are required by law to cover the cost of timber sales with sales revenues,4 and timber has been and is sold at prices that are not sufficient to cover associated costs. Because Federal forests are managed for multiple uses, allocating costs among resource categories can be quite difficult, and in any particular instance, determining whether a timber sale was uneconomical may be impossible. There are numerous joint production costs associated with managing the forests which cannot be separated into individual resource categories. These joint costs lead to the production of joint benefits, some of which cannot be measured in monetary terms and would not be reflected in timber sales revenues. Nonetheless, since the minimum sale price established for timber does not include most of the Government's costs of managing the forests and administering the sales, the process can and does result in sales that do not cover all costs.5
In the course of this study, wetland impacts from logging activities on Federal lands were identified in Southeastern Alaska, in western riparian areas, and in the North Carolina pocosins. Although numerous factors affect the amount of timber harvested from Federal lands, it is likely that some wetland impacts associated with timber sales in these areas would have been avoided if uneconomic sales had not been conducted. Several Federal timber sales have been curtailed in recent years, largely due to judicial rulings addressing environmental and multiple-use concerns. This reduction in sales has likely affected a reduction in wetland impacts associated with logging and road construction.
With ANILCA, Congress also established a permanent appropriation, the Tongass Timber Supply Fund, which gave the Secretary of Agriculture access to $40 million annually to maintain the annual 450 mmbf harvest. From 1982, when the Timber Supply Fund dollars became available, through 1987, the Tongass received $234 million to prepare timber sales, manage timber, develop harvest technology, and build roads prior to sales. Road-building, at $150,000 per mile, was the largest expense, and the cost sometimes exceeded the value of the timber to which the road led. In addition, ANILCA authorized a $5 million revolving low interest loan fund for harvesters of National Forests in Alaska to acquire new equipment and design new technologies for timber harvest.
The Tongass Timber Reform Act of 1990 ended the non-competitive nature of the pricing practices on the Tongass, terminated some timbering subsidies, and mandated that logging be conducted in a more environmentally sound manner. The most significant aspects of the Act relative to timber harvesting and impacts on wetlands are the elimination of both the automatic $40 million appropriation to the Tongass Timber Supply Fund and the mandate to harvest 4.5 billion board feet of timber from Tongass every decade. The TTRA requires that the existing long-term contracts be modified so that the price for standing timber be comparable to what it would have been under competitive bidding.
About 27 percent of the 18 million acres in Southeastern Alaska are classified as wetlands. At a maximum, about 12 thousand acres could be affected as a direct result of logging activities in the Tongass. Although this is a small amount in a region which is rich in wetlands, inappropriate methods of timber harvesting and associated activities can impair streams and estuaries which are important for anadromous fish, and threaten income and employment from fisheries and tourism. The TTRA contains two important features to protect wetlands and fisheries: it prohibits commercial logging in certain key fish and wildlife habitats, and establishes a 100-foot minimum buffer zone adjacent to both sides of anadromous fish streams and their fish-bearing tributaries.
These programs are legitimate governmental activities, but financing mechanisms are available (e.g., earmarked excise taxes, recreational fees) which would result in the program costs being borne by the beneficiaries rather than taxpayers in general. Indeed, the Forest Service already funds some of its research with nonfederal funds from cooperative research organizations (universities, public and private research organizations, and industry). In FY 1992, the Forest Service research budget was $180.5 million, of which $37.8 million was provided by cooperators.
The Food, Agriculture, Conservation, and Trade Act of 1990 (FACTA) authorized the creation of the Forest Stewardship Program, funded by the U.S. Forest Service, to provide technical assistance and recognition to landowners engaged in conservation activities on non-industrial, private, forest lands. A companion program also authorized by the FACTA is the Stewardship Incentive Program (SIP). This cost-sharing program is a cooperative effort among the U.S. Forest Service, the Agricultural Stabilization and Conservation Service (ASCS), and other agencies. The ASCS accepts applications from landowners and distributes the funds. Among some of the approved SIP practices are reforestation and afforestation, and riparian and wetland protection and improvement.
The Farmer's Home Administration (FmHA) aids the forest industry by offering: farm ownership loans to buy or develop forest land; refinancing of forest land, soil, and water loans for improving forest resources; and operating loans to help with normal costs of producing, harvesting, and processing forest products. Previously, these loans could be used to cover drainage costs, but if properly enforced, Swampbuster should preclude that. The 1985 Food Security Act included a new feature that, at the Secretary's discretion, allows delinquent farmers to reamortize loans and delay repayment if they plant at least 50 acres of softwood timber. This feature also offers an incentive to replace native hardwoods with softwood plantations.
Both the Forest Service and the BLM administer livestock grazing programs on the lands that they manage. Together they administer 87 percent of the Government's rangeland.
The BLM and the Forest Service regulate grazing on public lands by granting 10-year permits or leases that specify the number of animal unit months (AUMs) of grazing allowed each season on a particular tract (called an allotment). The grazing program has been criticized for exceeding the carrying capacity on some parts of the range, especially in riparian wetlands.
Grazing fees on public land are less than those for comparable private land.7 Ranching is a business, and ranchers would prefer to graze their animals as cheaply as possible. Thus, ranchers sometimes exert pressure on BLM and Forest Service field personnel to set AUMs higher or liberalize grazing constraints on their allotments. The BLM and the Forest Service maintain that stocking levels are determined entirely by resource conditions. The agencies' limited enforcement resources together with the expanse of the range make it difficult to ensure that abuses do not occur.
Cattle tend to put great pressure on riparian wetlands, using them heavily for shade, access to water, and foraging. Thus, BLM and Forest Service management practices can significantly influence the condition of wetlands on the public range. In 1988, the General Accounting Office (GAO) conducted a study of the condition of and management practices on Federal riparian areas (GAO 1988). The GAO found that some deteriorated areas had been restored, but noting a bias towards ranchers and against riparian area protection at the management level, concluded that progress would probably continue to be slow.
In 1990, BLM adopted a formal riparian policy to protect, enhance, and restore riparian areas and to mitigate adverse impacts to these areas. Further, BLM completed an analysis of the resources needed to implement the policy (BLM 1990). The analysis provides a blueprint for future riparian wetland management, outlining goals, strategies, and funding requirements. Fencing riparian areas, limiting grazing to winter use when cottonwoods are leafless and do not tempt cows, placing water and salt away from riparian areas, assigning a ranger to key riparian areas, and promoting a riparian wetland information brochure are all strategies that BLM is exploring. BLM is accelerating its riparian area management, and is now spending $12 million annually on this activity. The Forest Service also is implementing a national strategy for protecting, restoring, and managing riparian ecosystems. The program includes inventory and assessment of riparian condition, modification of existing Land and Resource Management Plans, and restoration of riparian functions and values throughout the National Forest System.
As one of its principal resource management initiatives, the Administration intends to make major revisions to BLM regulations and policy governing rangeland management.8 Principal items addressed in the proposed rule are:
The Administration also intends to adopt other changes necessary to make BLM and Forest Service rangeland management regulations and policies more comparable.
industry: the deduction for intangible drilling costs and the percentage depletion allowance, the latter benefit having been greatly reduced in recent years. The deduction for intangible drilling costs, allowing rapid write-offs of expenses related to oil and gas production, was introduced into the tax code through a series of administrative rulings by the Treasury Department, and then sanctioned by Congress in 1954. The deduction allows the owner to take an immediate tax deduction for "intangible" expenses -- labor, fuel, power, material, supplies, and tools -- associated with drilling and preparing an oil or gas well for pumping. The deduction was not available for "tangible" costs such as expenditures for pipe, tanks, and pumps used in an oil or gas rig. For most other types of construction projects, intangible costs can be deducted, but they have to be spread over the number of years that the facility will be used. In constrast, a full deduction can be taken for intangible drilling costs in the year the expenditures are made. This tax code provision is thought to be a significant factor in offsetting the costs of canal dredging and access road construction in Louisiana and pipeline construction in Alaska.
In 1926, Congress enacted percentage depletion to establish a rule-of-thumb measure for depreciation in the value of a well as its oil or gas is pumped out. Investment in the resource was considered to be a capital investment. The depletion allowance was arbitrarily set at 27.5 percent of production. The allowance bore no relation to actual costs and permitted tax-free recovery that in some cases vastly exceeded the amount invested in the property. Producers were allowed to deduct 27.5 percent of gross income from taxable income, with a limit on the deduction equal to 50 percent of taxable income.
In 1969, tax reform cut the oil and gas depletion allowance to 22 percent. In 1975, the depletion allowance was discontinued for all but independent producers. The reform phased in a lowered allowance for independents, leaving it at a permanent level of 15 percent by 1984 for the first 1000 barrels of oil and the first 6 million cubic feet of gas produced daily. These measures greatly reduced economic incentives to engage in marginal oil and gas exploration and production. The depletion allowance for independents may promote wetland loss in coastal Louisiana.
The Tax Reform Act of 1986 further diminished the tax incentives associated with oil and gas exploration and production by limiting both the percentage depletion allowance and the expensing of intangible drilling costs for purpose of calculating the alternative minimum tax. However, amendments to the tax code in 1992 granted relief from this provision to independent producers.
In 1990, hardrock minerals worth at least $1.2 billion were extracted from Federal lands. The known, economically recoverable reserves of hardrock minerals on Federal lands were estimated to be worth $64.9 billion (GAO 1992).
A mining company must stake a claim to secure a deposit against others. Although a claim may not exceed 160 acres, a mining company may stake an unlimited number of claims. A claim may be kept indefinitely so long as at least $100 of work is conducted on it annually and the company files an annual notice of work performed. Should a mining company wish to purchase the surface rights as well (a procedure known as patenting a claim), it may do so by demonstrating to the Government the existence of a mineral deposit that can be produced with a reasonable prospect of being profitable and paying a fee of $2.50 to $5.00 per acre, depending on the type of claim. However, the expense of developing the necessary geologic, engineering, and economic data often discourages companies from patenting claims.
Schanz, John, et. al. 1986. The Subsidization of Natural Resources in the United States, 86-588 ENR. The Library of Congress, Congressional Research Service, 45 pp.
Report of the Secretaries of Agriculture and the Interior. 1986. Grazing Fee Review and Evaluation, Final Report, 1979-1985. Department of Agriculture, Forest Service and Department of the Interior, Bureau of Land Management, Washington, D.C., 99 pp.
U.S. General Accounting Office. 1988. Public Rangelands: Some Riparian Areas Restored but Widespread Improvement Will Be Slow, GAO/RCED-88-105, Washington, DC, June 30, 85 pp.
U.S. General Accounting Office. 1990. Process for Appraising Timber Offered for Sale Needs to Be Improved, GAO/RCED-90-135, Washington, DC, May 2, 50 pp.
U.S. General Accounting Office. 1992. Natural Resource Management Issues, GAO/OCG-93-17TR, Washington, DC, December 12, 35 pp.
U.S. Department of the Interior, Bureau of Land Management. 1990. Riparian-Wetland Initiative for the 1990's, Washington, DC, 60 pp.
The wetland maps are used by local, State, and Federal agencies as well as by private industry and organizations for many purposes: comprehensive resource management plans, environmental impact assessments, facility and corridor siting, oil spill contingency plans, natural resource inventories, habitat surveys and other uses. The National Wetlands Inventory has produced over 32,000, 1:24,000-scale and 1:63,360-scale wetland maps covering 74% of the lower 48 States and 24% of Alaska.11 More than 1,450,000 copies of these maps have been distributed by NWI. Information on the availability of NWI maps may be obtained by calling 1-800-USA-MAPS; in area code 703 the phone number is 648-6045.
The NWI is also constructing a digitized, geographically referenced wetland database. All map data are stored in a common, ground-based, geographic reference system. These digital data are being used for such applications as resource management planning, impact assessment, wetland trend analysis and information retrieval. To date, more than 6,000 National Wetlands Inventory maps, representing 11.5 percent of the continental United States, have been digitized. Statewide databases have been built for New Jersey, Delaware, Maryland, Illinois, Indiana, and Washington, and are in progress for Minnesota, Virginia, South Carolina, South Dakota, and Florida. NWI digital databases are also available for portions of 33 other states. Copies of database files can be purchased at cost from the NWI offices in St. Petersburg, Florida. To order NWI digital wetland data, call 1-800-USA-MAPS. In area code 703, call (703) 648-6045.12
In addition to detailed wetland maps and databases, the Fish and Wildlife Service is directed by law to produce a series of reports on the status and trends of wetlands in the coterminous United States. The second report, Wetlands Status and Trends in the Conterminous United States, mid-1970s to mid-1980s is currently available. The report is updated at 10-year intervals. The first status and trends report described wetland gains and losses in the conterminous United States from the mid-1950s to the mid-1970s. These reports provide statistical estimates of wetland acreage for the coterminous U.S. and an indicator of overall trends (gains or losses) in wetland resources.
With two exceptions,13 the wetland definitions adopted by all four agencies in 1989 were identical: they all included three basic elements for identifying wetlands -- hydrology, vegetation, and soils. The 1989 Manual provided a single, consistent approach to identifying and delineating wetlands from a multi-agency, Federal perspective. A uniform approach has obvious advantages to the regulated public, for if Federal agencies utilize different definitions of wetlands, the public is uncertain of its rights and obligations, and both the environment and development suffer.
The 1989 Manual proved controversial, however. Regulated groups complained that it included too much land as jurisdictional wetlands. After about a year of implementation and an elevating level of public discussion, the four agencies initiated a revision process. In August, 1991, the Administration proposed revisions to the manual. The proposed revisions tightened the (hydrologic, vegetative, and soils) criteria for identifying wetlands, and thereby significantly reduced the number of areas that qualified as jurisdictional wetlands. Criticism from the scientific and environmental community followed immediately.
At the direction of Congress (EPA's FY93 appropriations bill), the National Academy of Science is studying the wetland identification/delineation issue. The Academy estimates that the earliest date it can complete its report is September, 1994. In the interim, Congress directed the Corps, through the FY92 and FY93 appropriations bills, to revert to its 1987 wetlands delineation procedures for determining jurisdictional wetlands under Section 404. EPA has joined the Corps in using the 1987 manual, and Interior, while not formally adopting the 1987 manual, has agreed to defer to the delineation decisions of the regulatory agencies for purposes of Section 404.
2 The Government uses two methods for appraising timber for sale: the transaction evidence method and the residual value method. Under the transaction evidence method an appraisal price is based on an average for comparable timber sales. With the residual value method, timber in the area designated for harvesting is evaluated by working backward from the selling price of the end-products which it is anticipated will be made from the timber. All cutting, road construction, hauling, and milling costs together with an allowance for profit and risk are deducted from the market value of milled lumber. The residual constitutes the appraised or advertised price. The Government does not sell timber below this price. Under both appraisal methods, a bidding process determines the stumpage fee to be paid by the timber contractor. If the bidding is aggressive and competitive, the relative accuracy of the two appraisal methods is irrelevant. Both should result in the public receiving fair market value for its timber and contractors receiving normal profits. The accuracy of the appraisal becomes important when bidding is not competitive.
3 In FY93, 23.5 percent of the wood harvested from national forests resulted from management actions that generated wood as a by-product, e.g., establishing a firebreak or engaging in wildlife management. The sale of the timber helps defray the cost of such actions, but the actions would have occurred even if the sale of the timber proved uneconomical.
4 Section 4(a) of The Multiple-Use Sustained-Yield Act of 1960 indicates that "combinations of uses that give the greatest dollar return" should not be given precedence over "the combination that will best meet the needs of the American people."
5 See footnote 2 for a description of how timber tracts are appraised, minimum bids established, and sale prices determined.
6 Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.
7 Ranchers argue that it is misleading to interpret the grazing fee differential between public and private land as a subsidy, because the lands are not equivalent. They cite numerous differences between public and private land that could legitimately lead to differential charges for grazing. The way in which the west was divided between public and private lands resulted in public lands being the less productive areas. Permittees face restrictions on predator control not encountered by private leaseholders. Public lands are more remote and less accessible, making livestock management more expensive. Environmental considerations and multiple-use management requirements constrain livestock-related decisions. Public rangeland improvement costs are shared by permittees, generally on a fifty-fifty basis. On private land, the landowner would bear these expenses, and the cost would be reflected in a higher rental fee. All these arguments have merit. Nonetheless, the grazing fee formula suffers from a downward bias and consistently results in a fee below market value (USDA and DOI 1986).
8 See Department of the Interior, Advanced Notice of Proposed Rulemaking, 43 CFR Parts 4, 1780, and 4100, Federal Register, August 13, 1993, pp. 43208 - 43231. The Department anticipates publishing proposed rules in 1994.
9 A separate rulemaking is planned in order to develop criteria for qualifying for this discount. In the absence of such a rule, the base value will be $3.50 rather than $3.96.
10 There is an exception for emergencies.
11 Mapping priorities are based principally on the needs of the Service and other Federal and State agencies. High priority is given to the coastal zone (including the coastline of the Great Lakes), prairie wetlands, playa lakes, floodplains of major rivers and other areas that support the goals of the North American Waterfowl Plan. The NWI produces wetland maps at a rate of 5% per year in the lower 48 States and at 2% annually in Alaska. The NWI will have to increase the rate of map production in Alaska to approximately 12 percent of the State annually to comply with the new mandates in the Wild Exotic Bird Conservation Act Amendments to the Emergency Wetlands Resources Act. By law the NWI is required to complete the mapping for the remainder of the contiguous United States by September 30, 1998 and by September 30, 2000 for Alaska and noncontiguous portions of the United States. All maps will be in digital format by September 30, 2004.
12 The data are provided on magnetic tape in MOSS export, DLG3 optional, or GRASS format. Other products, available at cost from the database, include acreage statistics by quad, county or study area, and color-coded wetland maps.
13 The Fish and Wildlife Service includes nonvegetated areas in its definition of wetlands. The SCS excludes from its definition lands in Alaska which have a high potential for agricultural development and a predominance of permafrost soils.