Order Code RS21740
Updated November 23, 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 authorized in the 2002 farm bill
(§2001, P.L. 107-171), with no funding limits. In March 2004, the Congressional
Budget Office estimated CSP would cost $8.9 billion from 2005 to 2014. CSP was
limited to $6 billion from 2005 to 2014 in P.L. 108-324, with the $2.9 billion difference
used to pay for agricultural disaster assistance. In FY2005 appropriations, CSP has been
limited to $202.4 million as a one-year spending cap for FY2005 (H.R. 4818, Division
A, Title VII, §749). On November 2, NRCS announced that farms located in 202
watersheds nationwide will be eligible for CSP in FY2005. See [http://www.nrcs.usda.
gov/programs/csp/2005_CSP_WS/index.html] for a map of these watersheds.
The FY2005 signup will be the second CSP signup. The first signup took place in
July 2004. In August 2004, the Natural Resources Conservation Service announced it
had awarded 2,188 CSP contracts to producers in 18 watersheds nationwide. The 2004
signup was controversial because NRCS instituted strict eligibility criteria for
enrollment that were not included in the CSP authorization. NRCS contends it was
forced to prioritize funds due to a $41.4 million FY2004 CSP funding limit imposed by
Congress. Critics maintain that prioritizing funds is inconsistent with the CSP
authorization.
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, §2001).
It provides incentives for farmers to pursue conservation and helps pay for conservation
practices. Unlike some 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
Congressional Research Service ˜ The Library of Congress

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to an agricultural operation). Under CSP, NRCS pays farmers to conserve at least one
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 farm
bill places no acreage or funding limits on the CSP, and states 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 (CBO)
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 as
authorized by the 2002 farm bill, see CRS Report RS21739.)
CSP Appropriations, FY2002-FY2005. During the 2002 farm bill debate, some
raised concerns about the 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. CSP received no funding in FY2002. 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 to
pay for drought assistance.4 The FY2004 Consolidated Appropriations Act eliminated
this ten-year cap but established an FY2004 CSP one-year funding limit of $41.4 million.5
In March 2004, CBO revised its estimate of CSP costs to $8.9 billion over 10 years
(2005-2014), including $282 million in spending in FY2005 alone. In October 2004,
Congress limited CSP to $6.037 billion from 2005 to 2014.6 This allowed appropriators
to direct the resulting $2.9 billion in budget savings to fund agricultural disaster
assistance. The FY2005 Consolidated Appropriations bill, H.R. 4818, places a one-year
limit on CSP of $202.4 million (Division A, Title VII, §Section 741). (The FY2005
House Agriculture Appropriations bill (H.R. 4766) would have limited CSP to $194
million in FY2005; the companion Senate bill, S. 2308, placed no limits on CSP.)
Administration Implementation of CSP. On January 2, 2004, NRCS published
a proposed rule describing how it would prioritize the limited FY2004 funding. It
proposed to implement CSP in certain watersheds on a rotating basis; to require producers
to meet strict eligibility criteria; to sort producers’ applications into enrollment categories;
and to reduce certain CSP payments.7 This proved controversial, since the farm bill
included broad eligibility criteria and did not include prioritizing funds. NRCS received
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 Division B, §101, of the FY2005 Military Construction Appropriations bill (P.L. 108-324).
7 69 FR 194.

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over 20,000 specific comments on the proposed rule. On May 4, NRCS published a notice
stating it would proceed with its proposed approach for the 2004 CSP signup, 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]. On June 21, 2004, NRCS published an interim final rule (69 FR 34502) finalizing
its prioritization process for the 2004 CSP signup. NRCS accepted comments on the
interim final rule through October 5, 2004, and is in the process of writing a final CSP
rule.
Recent House and Senate Hearings. 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.)
Criteria Used in the FY2004 Enrollment Process
The FY2004 CSP enrollment process included strict eligibility criteria and
prioritized CSP funding by watershed area and by enrollment categories. NRCS calls this
approach “rewarding the best and motivating the rest,” but critics feared strict
requirements might dissuade farmers from participating.10 NRCS is now writing a final
CSP rule, and it is not clear whether these criteria will be included in that rule or whether
the FY2005 CSP signup will use them.
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
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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sign a Conservation Security Contract. The June 2004 interim final rule requires further
steps:
Producers Must Inventory Natural 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. In the FY2004 signup, NRCS used this to determine
the producer’s eligibility, place the producer in an enrollment category (see below), and
determine appropriate CSP tier of participation. Producers also had to submit documents
for 2002 and 2003 to show past stewardship, including fertilizer, pesticide and nutrient
application schedules, tilling and grazing schedules.
Producers Must Treat Both 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.
CSP Applications Prioritized. The June 2004 interim final rule established two
methods of prioritizing applications, neither of which was mentioned in the farm bill
statute. The first includes ranking watersheds nationwide by various criteria and selecting
certain of those watersheds to be eligible for CSP. The second involves placing
applications into various “enrollment categories” based on the applicant’s current
conservation efforts and willingness to do additional conservation.
Criteria for Selecting Eligible Watersheds. For the 2004 signup, NRCS
ranked over 2,000 watersheds nationwide, based on concentrations of eligible land uses;
intensity of pesticide, fertilizer, and manure use; 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” according to these criteria. It is
unclear why NRCS chose to prioritize in this fashion, or whether NRCS will prioritize
similarly in future years. Critics argue that this approach will not reward those producers
who are practicing the best conservation. A map of watersheds eligible for the FY2004
signup is at [http://www.nrcs.usda.gov/programs/csp/2004_CSP_WS/watersheds04.html].
The same process was presumably used to determine the FY2005 watersheds, and a map
of these is at [http://www.nrcs.usda.gov/programs/csp/2005_CSP_WS/index.html].
NRCS has estimated that it will take eight years for CSP to rotate through all US
watersheds.12
NRCS Places Applications 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’ current conservation and
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 Notice, “Conservation Security Program,” NRCS, 69 FR 24560.

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willingness to perform additional conservation were also a factor; any applicant unwilling
to perform additional conservation was placed in category “H,” the lowest priority for
funding. While all applications that qualify would be placed in an enrollment category,
categories were funded nationally in priority order (beginning with category “A”) until
funding was exhausted. The notice also specifies subcategories for funding if all
applications in a category cannot be funded.
Sign-Ups Are Periodic, Not Continuous. The interim final rule opens CSP
for sign-ups only at certain times, rather than continuously, as is the case with some CSP
programs. The farm bill did not specify whether sign-ups were to be continuous or
periodic.
Three Types of CSP Contract Payments. The CSP contract payment is by
statute composed of three components: stewardship payments,13 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.14
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 interim final rule reduced this to 0.25%-
0.75%, 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 specified
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 specified only two types of
enhancement components as “available” in the FY2004 sign-up. It is unclear why NRCS
has chosen this approach in the rule.
13 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.
14 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
have since limited that funding. Authorizers specified broad eligibility criteria in the farm
bill, but due to funding limits NRCS created strict procedures that applicants must follow
in order to qualify. NRCS argues that because the farm bill placed a statutory 15% limit
on CSP technical assistance, CSP implementation will be constrained. Congressional
CSP proponents have disputed this. 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 described 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 or the 202 watersheds eligible for FY2005.
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, which 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.