Order Code RS22040
February 3, 2005
CRS Report for Congress
Received through the CRS Web
Environmental Quality Incentives Program
(EQIP): Status and Issues
Carol Canada
Technical Information Specialist
Resources, Science, and Industry Division
Jeffrey Zinn
Specialist in Natural Resources Policy
Resources, Science, and Industry Division
Summary
The Environmental Quality Incentives Program (EQIP) provides farmers with
financial and technical assistance to plan and implement soil and water conservation
practices. EQIP was enacted in 1996 and most recently amended by the Farm Security
and Rural Investment Act of 2002 (Section 2301 of P.L. 107-171). It is a mandatory
spending program (i.e., not subject to annual appropriations), administered by the
Natural Resources Conservation Service (NRCS). EQIP is guaranteed a total of $6.1
billion from FY2002 through FY2007 from the Commodity Credit Corporation (CCC),
making it the largest conservation cost-sharing program.1 Issues about EQIP that the
109th Congress may explore, especially in appropriations discussions or as it starts to
consider the next farm bill, include clearing the pending backlog of applications and
measuring the program’s accomplishments. This report will be updated as circumstances
warrant.
Background
The Environmental Quality Incentives Program (EQIP) is the principal source of
cost-sharing assistance for agricultural producers who wish to implement soil and water
conservation practices. Participation is voluntary. In addition to cost-sharing assistance,
EQIP also provides participants with technical assistance and incentive payments. EQIP
was created by the Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104-
127, April 4, 1996) to replace four conservation cost-share programs repealed in the same
1 The CCC is administered by a Board of Directors from agencies of the Department of
Agriculture. It has no staff, and all work done on its behalf is performed by staff of agencies
within USDA. For EQIP, NRCS provides the staff.
Congressional Research Service ˜ The Library of Congress

CRS-2
law. These were the Great Plains Conservation Program, the Agricultural Conservation
Program (ACP), the Water Quality Incentives Program, and the Colorado River Basin
Salinity Control Program.
EQIP Program Today
EQIP is currently administered by the U.S. Department of Agriculture’s Natural
Resources Conservation Service (NRCS) under a final rule, published in the May 30,
2003, Federal Register.2 This rule implements amendments to the program enacted in the
Farm Security and Rural Investment Act of 2002 (Section 2301 of P.L. 107-171, May 13,
2002), commonly referred to as the 2002 farm bill. EQIP’s legislative mandate is to
optimize environmental benefits. NRCS implemented this by establishing national
priorities to reflect the nation’s most pressing natural resource needs and emphasizing off-
site benefits to the environment. NRCS considers these national priorities in allocating
funds to states and establishing cost-share and incentive payment levels. The national
priorities are:
! Reduction of nonpoint source pollutants in impaired watersheds,
(consistent with Total Maximum Daily Loads,3 or TMDLs), reduction of
groundwater contamination, and conservation of ground and surface
water resources;
! Reduction of emissions that contribute to air quality impairment
violations of National Ambient Air Quality Standards;
! Reduction of soil erosion and sedimentation from unacceptable levels on
agricultural land; and
! Promotion of at-risk species habitat conservation.
NRCS also has identified state and local priority natural resource concerns that
support the national priorities. These state and local priorities are used as guidelines by
states when selecting which producers will receive EQIP assistance, since applications
continue to exceed available funds.
How EQIP Works
Producers with eligible land can apply by submitting an EQIP plan that describes the
conservation and environmental purposes that the producer will achieve by using one or
more USDA-approved conservation practices. Eligible land includes cropland, rangeland,
pasture, private non-industrial forest land, and other farm or ranch lands as determined
by USDA. Of the total authorized spending each year, 60% is allocated to livestock (both
confined and grazing) practices.
USDA-approved conservation practices are categorized as either structural or land
management practices. Structural practices involve the establishment, construction, or
2 “Environmental Quality Incentives Program Final Rule,” Federal Register, vol. 68, no. 104,
May 30, 2003, pp. 32337-32355.
3 For more information on TMDLs, see CRS Report 97-831, Clean Water Act and Total
Maximum Daily Loads of Pollutants
, by Claudia Copeland.

CRS-3
installation of a site-specific measures, such as animal waste management facilities,
livestock water developments, and capping abandoned wells. Land management practices
require site-specific management techniques and methods, such as nutrient management,
irrigation water management, and grazing management. The goal of all practices is to
conserve, protect from degradation, or improve soil, water, or related natural resources
in the most cost-effective manner.
NRCS partners with units of federal, state, and local governments, and interest
groups, to coordinate information and resources that address both local and national
priorities. In addition, the producer can receive technical assistance from NRCS, state,
local, or federal conservation offices, or approved third party providers to develop an
EQIP plan and, after approval, to implement it. The local conservation district will
review the plan and then decide whether or not to select the plan for EQIP funding. If
approved, USDA will provide cost-share payments or incentive payments to help the
producer offset the cost of the practice. Participants are eligible to receive cost-share
payments for both constructing structures and implementing land management practices.
In addition, they may be eligible to receive incentive payments from implementing certain
higher-priority practices, such as developing comprehensive nutrient management plans.
Contracts are in effect from one to ten years. They are capped at $450,000 each, and
total payments per person or entity over the life of the 2002 farm bill (through FY2007),
regardless of the number of farms or contracts, is also $450,000. Individuals or entities
with an average adjusted gross income (AGI) of $2.5 million for the three years prior to
the contract period are ineligible, unless they received 75% of their AGI from farming,
ranching, or forestry. USDA will pay up to 75% of the projected cost of each practice;
however, limited resource producers and beginning farmers and ranchers4 can be paid up
to 90% of the projected cost. Initial payments are made the year in which the contract is
signed.
EQIP Funding
The 2002 farm bill funded EQIP at a total of $6.1 billion in mandatory funds from
the CCC through FY2007 (Section 2701). Of the $6.1 billion, $5.8 billion is to be used
to fund the cost-share portion of EQIP. The program, which had previously been
authorized at $200 million annually, was to receive $400 million in FY2002, $700 million
in FY2003, $1 billion in FY2004, and $1.2 billion in FY2005. The program would have
automatically received these amounts if Congress had not acted to reduce funding through
annual appropriations legislation. However, Congress has limited funded to less than the
authorized level each year. Funding was authorized at a total of $3.1 billion between
FY2002 and FY2005, but Congress limited it each year, providing a total of $2.296
4 A limited resource producer or rancher is a person with direct or indirect gross farm sales of
not more than $100,000 in each of the previous two years (to be increased starting in FY2004 to
adjust for inflation using the Prices Paid by Farmers Index as compiled by the National
Agriculture Statistics Service) and a total household income at or below the national poverty
level for a family of four, or less than 50% of county median household income (to be determined
annually using Commerce Department data), in each of the previous two years. A beginning
farmer or rancher is an individual or entity who has not operated a farm or ranch for more than
10 years duration.

CRS-4
billion. This is a reduction that is less than 4% below the authorized total.5 For the
remaining two years of this farm bill, $1.2 billion is provided in FY2006 and $1.3 billion
is provided in FY2007. Congress increased funding in response to the large backlog of
producer demand that was documented during the 2002 farm bill debate.
As shown in Table 1, the same three states have received the most EQIP funds each
year. The leading state is Texas, which has received between 7.5% and 9% of the total.
The higher portion has been allocated in each of the past two years. The next highest
states have been California followed by Colorado each year. Below these three largest
states, the amounts are very similar for several states. In FY2004, for example, the next
four states were Nebraska ($29.6 million), Minnesota ($29.4 million), Montana ($28.4
million), and Kansas ($28.1 million).
Table 1. EQIP Allocations for the Three Largest Recipients,
FY1998-FY2004
($ million)
State
1998
1999
2000
2001
2002
2003
2004
National, Total
$198.2
$174.0
$176.6
$199.9
$387.0
$626.7
$908.3
Texas
$16.3
$13.4
$13.3
$15.2
$28.7
$57.7
$78.6
California
$7.8
$8.1
$7.8
$9.2
$19.1
$48.6
$57.0
Colorado
$6.4
$7.5
$7.0
$7.1
$14.4
$25.6
$36.9
Source: USDA, NRCS.
New Programs under EQIP
Two sub-programs, both enacted in the 2002 farm bill, are implemented through
EQIP. Competitive Conservation Innovation Grants (CIG) are intended to leverage
federal investment, stimulate innovative approaches, and accelerate technology transfer
in environmental protection and agricultural production. They are authorized in FY2003
through FY2006, from funding provided for EQIP. NRCS determines funding levels each
year. The grants must not exceed 50% of the project cost, with matching funds provided
by state and local governments and private organizations. The program operated under
an interim final rule in FY2004 and is under a final rule in FY2005. CIG was funded at
$15 million for FY2004, and made awards totaling $14.3 million to 41 applicants.
Applications are being solicited for FY2005.
The Ground and Surface Water Conservation (GSWC) program provides cost-share
and incentive payments to producers where the assistance will result in a net savings in
ground or surface water resources in the producer’s agricultural operation. Funding is
authorized as a separate amount in addition to EQIP at $25 million in FY2002, $45
million in FY2003, and $60 million for each year from FY2004 to FY2007. Congress
limited funding to $51 million in both FY2004 and FY2005. In addition, producers in the
Klamath Basin in California and Oregon continue to receive money from a separate and
additional $50 million authorization between FY2002 and FY2007 for ground and surface
water conservation activities.
5 By contrast, the 1996 farm bill authorized funding at a total of $1.0 billion between FY1997
and FY2002, but it was limited to a total of $897 million, almost 90% of the authorized total.

CRS-5
Selected Policy Issues
EQIP enjoys widespread support in the farm community and among this
community’s supporters in Congress as it continues to be the major source of cost-sharing
funds to help producers implement conservation practices that address specific resource
and environmental problems. Major issues that might be discussed in the 109th Congress,
and in anticipation of the next farm bill, include the backlog of interest that is not being
met at current funding levels, and assessing more precisely what is being accomplished
through the EQIP program. In addition, future funding may become an issue if
reconciliation occurs with the FY2006 budget, leading to possible reductions in funding
for mandatory programs in future years.
Applications Backlog
The volume of applications for EQIP funding has presented a perennial challenge to
NRCS. While funding has grown, the number of applications has grown as well, and the
gap between the supply of funds and the demand for them expanded rapidly in 2002 and
again in 2003 (data for 2004 will be released with the FY2006 budget request in February
2005). As shown in Table 2, the number of EQIP applications received remained fairly
constant from FY1998 through FY2001, as did the number of contracts signed and the
backlog of pending applications. In FY2002 and FY2003, the number of applications,
contracts, and backlog all grew rapidly. Between FY1998 and FY2001, NRCS awarded
contracts to approximately one-third of the applicants, but that declined to 22% in
FY2002 and to only 15% in FY2003. The result is that even with much more funding
than in earlier years, the backlog is much larger than it has been, and if the backlog was
a major justification for higher funding in the 2002 farm bill debate, it may be an even
stronger argument in the next farm bill debate.
While the backlog is large, more detailed information is not currently available on
the characteristics of the applications in that pool. Of particular interest may be whether
there are any agricultural regions where a much smaller portion of applications are being
funded, whether some practices are more likely to remain in the backlog than others, and
whether some applications stay in the backlog for a much longer time period than others.
Table 2. Total Applications, Contracts, and Backlog Applications
for EQIP
Fiscal Year
Total Applications
Contracts (% of
Backlog Applications
applications)
1998
54,816
19,758 (36.0%)
35,058
1999
51,877
18,847(36.3%)
33,030
2000
53,961
16,249(30.1%)
37,712
2001
47,461
17,684(37.3%)
29,777
2002
90,312
19,817(21.9%)
70,495
2003
204,313
30,251(14.8%)
174,062
Source: NRCS, USDA.

CRS-6
Measuring EQIP Accomplishments
NRCS can provide considerable information about length of EQIP contracts, which
conservation practices are being installed, and their design and maintenance standards.
However, relatively little is known about what is actually being accomplished through
EQIP contracts, or how enduring those accomplishments are after the contract ends.
Among the questions that NRCS is trying to address for all its conservation activities,
including EQIP, are how to evaluate performance, how to measure environmental
changes, how to evaluate cost effectiveness, which methods to use to identify
environmental effects, and which types of data should be collected to measure output.
NRCS has recently initiated a national review of its conservation accomplishments called
the Conservation Effects Assessment Project (CEAP) to develop better answers to all
these questions. While it has committed several million dollars annually to this effort,
few results will be available before the next farm bill debate begins.
Regarding EQIP specifically, NRCS has proposed to periodically review state-
prepared reports to determine how the program is being delivered at the state and local
level. NRCS will require states to prepare reports describing EQIP implementation and
accomplishments tied to performance measures. This information will be available to the
public from the NRCS website. Of particular interest may be livestock production
practices, which receive 60% of total funding each year. Policy makers may seek more
information about the development and adoption of Comprehensive Nutrient Management
Plans, especially by Confined Animal Feeding Operations, referred to as CAFOs. CAFOs
are large livestock operations; the minimum number of animals varies with the type of
animal. Some have expressed concern that the effects of CAFOs on the environment and
public health have not been adequately assessed, and may seek to address those concerns
in the next farm bill.