Order Code RS21740
Updated July 7, 2004
CRS Report for Congress
Received through the CRS Web
Implementing the
Conservation Security Program
Barbara A. Johnson
Analyst in Agriculture and Natural Resources Policy
Resources, Science, and Industry Division
Summary
The Conservation Security Program (CSP) was first authorized in the 2002 farm
bill (§2001, P.L. 107-171). Though the farm bill set no funding limits on CSP,
appropriators limited FY2004 CSP funding to $41.4 million (P.L. 108-199). On June
21, 2004, the Natural Resources Conservation Service (NRCS) published a sign-up
notice for the first round of CSP (69 FR 34533), opening enrollment from July 6, 2004,
through July 30, 2004. Only producers located in certain watersheds are eligible. (See
[http://www.nrcs.usda.gov/programs/csp/2004_CSP_WS/watersheds04.html] for a map
of eligible areas.) Once NRCS receives applications, it will place them in “enrollment
categories” and fund categories in priority order until funding is exhausted. Critics
maintain that prioritizing funds using watersheds and enrollment categories is
inconsistent with the CSP authorization, which did not mention prioritizing funds.
NRCS contends it has been forced to prioritize funds due to the FY2004 funding limit
and maintains that its CSP implementation will ensure effective use of available funds.
Also on June 21, NRCS released an interim final rule for CSP (69 FR 34502). The
rule adopted many enrollment procedures proposed in a May 4, 2004, notice (69 FR
24560) and a January 2, 2004, proposed rule (69 FR 194). NRCS is seeking comment
on its interim final rule through September 20, 2004. House and Senate Agriculture
subcommittees held hearings on CSP in spring 2004. This paper will be updated as
necessary. (For a full discussion of CSP as enacted, see CRS Report RS21739, The
Conservation Security Program in the 2002 Farm Bill
.)
Background on CSP
CSP in the 2002 Farm Bill. The Conservation Security Program (CSP) is a new
agricultural conservation program created in the 2002 farm bill (P.L. 107-171). It
provides incentives for farmers to pursue conservation and helps pay for conservation
practices. Unlike other NRCS programs, it pays for conservation on land that remains in
production and makes eligible a wide range of farm lands (cropland, pastureland,
rangeland, grassland, prairie land, tribal lands, and forested lands incidental to an
agricultural operation). Under CSP, NRCS may pay farmers to conserve at least one
Congressional Research Service ˜ The Library of Congress

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resource (air, soil, water or others) on a portion of their farms; the greater the farm area
covered and the more resources conserved, the higher the potential payments.1 The
statutory provisions in the farm bill place no acreage or funding limits on the CSP, and
state that “in entering into conservation security contracts ... [NRCS] shall not use
competitive bidding or any similar procedure.”2 At the time of enactment, the
Congressional Budget Office estimated that CSP would cost $2.0 billion over ten years.
CSP is funded by the Commodity Credit Corporation.3 (For more detailed information
on the CSP created under the 2002 farm bill, see CRS Report RS21739.)
Subsequent Congressional and Administrative Actions on CSP. During
the 2002 farm bill debate, some raised concerns about potential costs of CSP and the
wisdom of devoting unlimited funding to a new, unproven program, but pressures to
complete action on the farm bill overcame those concerns. In 2003, CBO revised its
estimate of CSP costs to $6.8 billion over ten years, and the FY2003 Consolidated
Appropriations Resolution limited spending for CSP to $3.7 billion through FY2013.4
The FY2004 Consolidated Appropriations Act eliminated this ten-year cap but established
an FY2004 CSP funding limit of $41.4 million.5 NRCS has stated it will fund 3,000
contracts in FY2004.6 In March 2004, CBO revised its estimate of CSP costs to $8.9
billion over ten years (2004-2014). For FY2005, the administration has requested $209
million, which would also be a funding cap, as CBO estimates an unlimited CSP program
would cost $282 million in FY2005.
On June 21, 2004, NRCS published an interim final rule (69 FR 34502) and a sign-
up notice (69 FR 34533). The FY2004 sign-up for CSP will be open from July 6, 2004
to July 30, 2004, for producers in eligible watersheds. NRCS’s interim final rule laid out
a framework for prioritizing spending by implementing CSP in certain watersheds on a
rotating basis; requiring producers to meet strict eligibility criteria; sorting applications
into enrollment categories; and reducing certain CSP payments. (This approach was
outlined in a January 2, 2004, proposed rule7 and proved controversial, since the farm bill
included relatively broad eligibility criteria and did not include prioritizing funds. NRCS
received over 20,000 specific comments on the proposal). NRCS is accepting comments
on its interim final rule through September 20, 2004. In May 4, NRCS published a notice
1 CSP includes three levels, or “tiers,” of participation that are capped at $20,000, $35,000, and
$45,000 annually. Tier I contracts last for five years; Tier II and Tier III contracts last for five
to ten years.
2 P.L. 107-171, §2001. In some NRCS programs, producers bid competitively by indicating their
willingness to accept a lesser payment, increasing their chances that NRCS will accept their bid
for a program contract.
3 The CCC, a wholly owned government corporation, is essentially the financing institution for
the USDA’s farm price and income support programs and, more recently, conservation programs.
4 P.L. 108-7, Division N, Title II, §216.
5 P.L. 108-199, Division A, Title VII, §752.
6 Natural Resources Conservation Service, “Conservation Security Program Notice,” June 21,
2004, 69 FR 34533. Of those contracts, NRCS states that approximately 45% will be in Tier I,
45% in Tier II, and 10% in Tier III.
7 69 FR 194.

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stating it would proceed with its proposed approach for FY2004, and detailed how it
would select watersheds.8 NRCS also released a map identifying the 18 watersheds across
the country in which farmers will be eligible for FY2004 CSP signups. To access the
map, see [http://www.nrcs.usda.gov/programs/csp/2004_CSP_WS/watersheds04.html].
Both the Senate and the House have held hearings this year on CSP. During a May
11, 2004, hearing by the Senate Agriculture Committee’s Forestry, Conservation, and
Rural Revitalization Subcommittee, NRCS defended its proposed CSP implementation
as a way to achieve environmental benefits within available funding (citing as program
constraints both the FY2004 funding limit and a statutory provision limiting NRCS’s
“technical assistance” to producers to 15% of CSP annual funds).9 Congressional
proponents strongly criticized NRCS’s argument that the technical assistance limit would
pose problems, and stressed that the program is not capped past FY2004. Witnesses from
sustainable agriculture, commodity, livestock, and farmers’ groups decried NRCS’s plan
to limit CSP spending by watersheds, though some agreed with NRCS that the FY2004
funding limit complicates CSP implementation. During a June 15, 2004, hearing by the
House Agriculture Committee’s Subcommittee on Conservation, Credit, Rural
Development, and Research, the subcommittee chair noted NRCS’s FY2004 funding
predicament, and the subcommittee ranking member noted that CSP could cost billions
of dollars in the future. Farmers’ groups cited CSP’s potential as a “green box” program
as well. (See “Issues for Congress” at the end of this paper for a discussion of “green
box” programs.)
FY2004 Enrollment Process for CSP
The FY2004 enrollment process will include strict eligibility criteria and will
prioritize CSP funding by watershed area and by enrollment categories. NRCS calls this
approach “rewarding the best and motivating the rest,” but critics think the strict
requirements may dissuade farmers from participating.10
Producer Eligibility Requirements. The farm bill set fairly general guidelines
for eligibility in the CSP. Producers must share in the risk of production, contribute to
farm operations in a manner commensurate with revenues received, develop an approved
Conservation Security Plan that details conservation activities to be implemented, and
sign a Conservation Security Contract. The interim final rule requires further steps:
Inventory of Resources. The interim rule requires producers to complete a self-
assessment, including a “Benchmark Condition Inventory,” prior to applying to CSP.
This details the type of agricultural operation, land uses, existing conservation practices,
resource concerns, and the producer’s willingness to do additional conservation in the
future. NRCS will use this to determine the producer’s eligibility, place the producer in
an enrollment category (see below), and determine appropriate CSP tier of participation.
8 69 FR 24560.
9 “Technical assistance” refers to conservation planning, design, and implementation assistance
that NRCS provides to producers, including assisting producers to enroll in NRCS programs.
10 Quote from Conservation Security Program Advance Notice of Proposed Rulemaking and
Request for Comments, USDA/NRCS, 68 FR 7720.

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A producer must also submit documents for 2002 and 2003 to show stewardship
completed, including fertilizer, pesticide and nutrient application schedules, tilling and
grazing schedules.
Treatment of Soil and Water. While the farm bill required producers to treat at
least one resource under CSP, the interim final rule requires producers to treat two
resources — soil and water quality — before applying to the program.11 Additional
eligibility criteria are included in NRCS’s June 21, 2004 sign-up notice.
Prioritizing Applicants for Funding. NRCS has designated certain watersheds
in which producers are eligible to apply to CSP. On May 19, 2004, NRCS released a map
identifying these watersheds.12 NRCS estimates that it will take eight years for CSP to
rotate through all US watersheds.13
Ranking Watersheds. For FY2004, NRCS ranked over 2,000 watersheds
nationwide, based on concentrations of eligible land uses; intensity of inputs such as
pesticide, fertilizer, and manure; and prevalence of historic and recent conservation
efforts. Once watersheds were ranked, NRCS prioritized them further by selecting 18
watersheds it considers to be “improving.” It is unclear why NRCS chose to prioritize in
this fashion, or whether NRCS will prioritize similarly in future years. Critics may argue
that this approach will not reward those producers who are practicing the best
conservation.
Placing Applicants in Enrollment Categories. The June 21 sign-up notice
lays out eight separate enrollment categories (“A” through “H”) for each type of eligible
land — rangeland, pasture, and cropland (cropland categories also cover orchards,
vineyards, horticultural crops, and hay land). Applicants’ willingness to perform
additional conservation is also a factor; any applicant unwilling to perform additional
conservation will be placed in category “H,” the lowest priority for funding. While all
applications that qualify would be placed in an enrollment category, categories will be
funded nationally in priority order (beginning with category “A”) until funding is
exhausted. The notice also specifies subcategories for funding if all applications in a
category cannot be funded.
Conducting Periodic Sign-Ups. The interim final rule opens CSP for sign-ups
only at certain times. The farm bill did not specify whether sign-ups were to be
continuous or periodic.
11 According to the NRCS, determining soil quality involves evaluating the amount of organic
matter in the soil, its fitness as a seedbed, and other factors. Assessing water quality involves
evaluating the level of pesticides, nutrients, turbidity or other contaminants in water.
12 See map of watershed under “CSP Watersheds — Watershed Information, 2004” at [http://
www.nrcs.usda.gov/programs/csp/].
13 Notice, “Conservation Security Program,” NRCS, 69 FR 24560.

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Summary of FY2004 CSP Enrollment and Funding Process
(1) May 19: NRCS selected watershed areas (based on land use, input intensity and past
and current conservation practices) where producers may apply for CSP. Eighteen
watershed areas have been selected for FY2004.
(2) June 21: NRCS published a sign-up notice with eligibility and contract requirements,
enrollment categories, and payment information. A producer meeting eligibility
requirements may complete a self-screening questionnaire (including a Benchmark
Condition Inventory) and provide stewardship documentation to determine whether he has
met minimum conservation standards for CSP. If so, he can apply to CSP.
(3) NRCS determines whether applicant qualifies. If applicant qualifies, NRCS
determines what level of participation is appropriate for applicant, and places applicant in
an enrollment category.
(4) Funding will be distributed to each succeeding enrollment category until funding is
exhausted.
Source: 69 FR 34502.
CSP Contract Payments. The CSP contract payment is by statute composed of
three components: stewardship payments,14 payments for new and existing practices, and
payments for enhancement activities that go beyond minimum contract requirements. The
farm bill limits total contract payments to $20,000 for a Tier I contract, $35,000 for a Tier
II contract, and $45,000 for a Tier III contract. However, NRCS has further limited the
total contract payment to a percentage of the stewardship payment. This latter limit was
not mentioned in the farm bill.15
Stewardship Payment. This is a payment tied to the number of acres enrolled
in CSP. The farm bill sets the stewardship payment component at 5%-15% of land rental
rates, depending on the tier of the contract. The proposed rule would reduce this to
1.25%-11.25%, significantly reducing this part of the CSP payment.
Payments for New and Existing Practices. The farm bill restricts payments
for new and existing practices to not more than 75% of the practice cost (this rises to 90%
for beginning farmers and ranchers). Under the farm bill, CSP cannot pay for some
practices, such as animal waste treatment facilities. The June 21 sign-up notice specifies
which practices are eligible. Existing practice payments will be 25% of the stewardship
payment, and new practice payments will be cost-shared at not more than 15%.
Enhancement Payments. The farm bill lists five activities a participant can
carry out that qualify for enhancement payments, including implementing multiple
conservation practices; addressing local conservation priorities; participating in on-farm
research; participating in a watershed or regional conservation plan; and assessing and
evaluating conservation activities. The interim final rule specifies only two types of
enhancement components as “available” in this sign-up. It is unclear why NRCS has
chosen this approach in the rule.
14 These are called “base payments” in the farm bill, but NRCS has renamed them “stewardship
payments” in response to comments that the term “base”could lead to confusion with “base
acres” used in farm programs.
15 In the interim final rule, NRCS limits the total contract payments to 15%-40% of the
unadjusted stewardship payment, depending on the tier of participation.

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Issues for Congress
A central issue for Congress is whether NRCS’s implementation of CSP is consistent
with congressional intentions. On one hand, congressional authorizers crafted CSP as an
entitlement program with unlimited funding; on the other, congressional appropriators
limited that funding in FY2004. (Although there is no limit after FY2004, appropriators
retain the option of imposing limits in the future.) Authorizers specified broad eligibility
criteria in the farm bill, but NRCS created strict procedures within those criteria that
applicants must follow in order to qualify. NRCS argues that the statutory 15% limit on
CSP technical assistance will constrain CSP implementation, but congressional CSP
proponents have disputed that. The interim final rule also placed further limits on CSP
payments that were not envisioned in the farm bill.
Congress may also be interested the basis for NRCS’s selected eligible watersheds
and enrollment categories. The May 4 notice describes a complex watershed selection
procedure in which NRCS ranks watersheds in several ways before prioritizing them. It
is not a transparent process, and consequently it is unclear precisely how NRCS selected
the 18 watersheds eligible for FY2004.
Another issue for Congress may be CSP’s potential status as a “green box” program
under the World Trade Organization (WTO) structure. In WTO parlance, “green box”
programs (which pay producers for environmental services) are not subject to reductions
under the WTO. CSP spending appears likely to be classified as a “green box” program.
Given that the United States and other countries have proposed to reduce direct subsidies,
some view “green box” programs like CSP as the type of farm support most likely to
survive future international negotiations, particularly in light of the June 19 WTO
decision (the WTO ruled that U.S. cotton support payments are unfair to Brazilian cotton
producers and artificially lower the world price of cotton). Some witnesses for the House
Agriculture subcommittee hearing noted CSP’s “green box” potential as a possible
advantage to the program.
Finally, implementing CSP will involve a change in NRCS culture, which has
traditionally focused on engineering individual conservation practices rather than planning
and assisting producers with whole-farm conservation. Although NRCS has previously
raised the whole-farm planning idea, CSP is the first program to implement it.