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Department of Interior

Recommendations and Actions

DOI05: Obtain a Fair Return for Federal Resources

BACKGROUND

The Federal Land Policy and Management Act of 1976 established a policy that "the United States receive fair market value for use of the public lands and their resources unless otherwise provided for by statute.''[Endnote 1] Programs regulating the uses of federal lands, however, often lose money and fail to provide incentives for good land stewardship. Federal grazing and hard rock mining programs have historically operated at a loss to the taxpayers. Moreover, fees from communication sites on federal lands (radio and television towers, mobile radio, microwave antennas, etc.) have not reflected the true value of these unique resources.

The federal government should institute policies which guarantee fair return for the commercial sale or use of mineral, renewable and other natural resources. Revenues gained from these fees should cover program costs, if possible, and provide additional funds to better manage the land base. Whenever possible, the fee structure should include incentives to encourage good land stewardship practices. Federal policy should be fair to the taxpayers as well as to livestock permitees, mining operators, and owners of communications sites.

The current formula for setting grazing fees on federal lands was established in 1986 by Executive Order 12548. Grazing fees are measured in Animal Unit Months (AUMs). The Bureau of Land Management (BLM) in the Department of the Interior (DOI), authorizes 10 to 11 million AUMs per year, and the Department of Agriculture's Forest Service (USFS) authorizes approximately 7.5 million AUMs annually. The grazing fee is currently set at $1.86 per AUM, which results in annual receipts of about $33.5 million.

The Secretaries of the Interior and Agriculture issued a draft grazing reform proposal on August 9, 1993. The proposed policy would replace the existing grazing fee formula and establish a new fee of $4.28 per AUM. The new fee would be phased in over three years to lessen the impact on ranchers. After the phase-in period, annual adjustments to the fee could not exceed 25 percent of the previous year's fee. The new proposal also includes the following provisions:

--replacing Grazing Advisory Boards, composed of grazing permittees and lessees, with Resource Advisory Councils, which would have a more diverse membership and move toward more comprehensive range management strategies;

--developing National Rangeland Standards and Guidelines;

--establishing federal ownership of permanent range improvement structures on public lands; and

--establishing public ownership of water rights on BLM lands.

Hard rock mining is another area in which the federal government does not receive fair return. There are currently two bills in Congress that would reform the Mining Law of 1872. These bills (H.R. 322 and S. 775) differ in their approaches to reform items such as rental fees, royalties, bonding, and patenting. The Administration is seeking compromise legislation that would result in new federal revenues from rents and royalties. The Administration supports the following provisions in a mining reform bill:

--Elimination of patenting on mining claims. The patenting provisions of the 1872 Mining Law allow claimants to gain title to federal lands for as little as $2.50 per acre.

--Collection of a royalty on hard rock mining. Coal operators on federal land currently pay a 12.5 percent royalty. Both congressional reform bills contemplate a lower royalty rate on hard rock mining.

--Creation of a trust fund, to be supported from federal revenues generated by the royalties paid by industry, that would pay for the cleanup of lands damaged by past mining practices.

--Use of the land planning process to determine which lands are unsuitable for certain types of mining activity.

--Requirement of operation and reclamation plans and mandatory bonding for mining operators.

Fees for communication sites on federal lands are another example where the taxpayers do not currently receive fair return. BLM has approximately 1,500 communication right-of-way authorizations that generate $1.5-2.0 million in annual rental payments. USFS has approximately 6,000 communication authorizations which generate about $1.9 million per year. The rental fees for most authorizations have not been changed for more than four years. In addition, BLM and USFS do not have an accurate inventory of the users within existing facilities. In some instances, holders of right-of-way authorizations have subleased them to others, while the government receives no additional rent.

Previous efforts by BLM and USFS to update the rental schedule resulted in industry groups seeking congressional relief. Over the last four years, Congress has limited BLM and USFS authority to increase communication use fees. However, the 1994 Budget Reconciliation bill authorizes a 10 percent increase in communication-site fees for fiscal year 1994.

ACTIONS

1. The Administration should establish a formula for grazing of federal land at a fee level that is fair to both the taxpayers and the livestock permittees.

A new regulation implementing the grazing reform proposals announced on August 9, 1993, should be issued after public comment has been received. The revised fee schedule should be implemented using existing collection systems and procedures.

2. The Administration should support hard rock mining reform legislation.

A reform package should establish a royalty on hard rock mining and create a trust fund to pay for reclamation of lands damaged by past mining activities. It should also eliminate patenting of mining claims and require operation plans and mandatory bonding for mining operators.

3. The Administration should develop regulations, which should be implemented by fiscal year 1995, establishing a new rental schedule for communications sites.

The rental schedule should be based on fair market value. BLM should coordinate development of the schedule and administrative procedures with the USFS to ensure uniform application by both agencies. The new rental schedule should be easy to implement, reduce current administrative costs, and allow users to anticipate changes in payments.

IMPLICATIONS

Federal land use policy has been a very contentious issue in western states. Successful resolution of these problems will require a process of consensus- building and public involvement. Interior Secretary Babbitt recently held a series of public meetings on the grazing issue, providing a good model for developing support. The government's costs in administering a revised mining law will increase in the areas of regulatory development, permitting and reclamation, inspection and enforcement, abandoned mine lands, and administrative-judicial review. The Minerals Management Service would carry out all royalty management functions of mining law reform.

Implementing a new rental schedule for communications sites would result in better identification of unauthorized users and also generate revenue from users who are now paying little or no rent.

FISCAL IMPACT

The new grazing fee of $4.28 per AUM would be phased in over three years. The fee would be $2.76 per AUM in the first year and $3.52 per AUM in the second year. Fiscal year 1995 is probably the earliest that the new regulations could be put into effect. Thus, implementation of a revised grazing fee, assuming a total of 18 million AUMs sold annually, would increase total receipts by $176.6 million over six years. Current law provides that 50 percent of grazing revenue be returned to the Range Improvement Account, which is used by the managing agencies for rangeland improvements. An additional 25 percent of grazing revenues are returned in payments to states and counties. No changes in BLM operating expenses are anticipated because of the new fee approach.

The House mining law reform bill (H.R. 322) would place a royalty of 8 percent on all minerals extracted from federal land, beginning in 1998. The Senate bill (S. 775) would authorize a 2 percent net royalty on the mineral value. The General Accounting Office has estimated that the gross value of mineral production on federal land in 1991 was $1.2 billion. If an 8 percent royalty were imposed on a gross value of $1.2 billion, receipts would be $96 million. Because mining reform legislation has yet to receive congressional approval, accurate estimates of new revenue from royalties cannot be made at this time. The 1994 Budget Reconciliation bill includes a $100 annual rental fee for mine operators, which will produce about $50 million in annual receipts.

USDA estimates that a new fee schedule for communication sites on USFS lands would produce an additional $23 million annually.[Endnote 2] The new fees for USFS sites should be phased in over three years to lessen the impact on permit holders. DOI estimates that a new fee schedule for communication sites could produce an additional $1 million per year on BLM lands. BLM would spend about $500,000 in administrative costs to implement the rental schedule. These administrative costs include development of an automated billing system, with the capability of producing consolidated billings for major users, and associated personnel training. After three years, costs should decline dramatically.

    Budget Authority (BA), Outlays, and Revenues
	       (Dollars in Millions) 
 
 Fiscal Year
 
	1994   1995   1996   1997   1998   1999   Total
 
 BA*
	0.0       12.2     22.4   32.6     32.6     32.6   132.4
 
 Outlays
          0.0       12.2     22.4   32.6     32.6     32.6   132.4
 
 Revenues**
         50.2       72.8    92.2  111.5   111.5  111.5   549.7
 
 Change in FTEs
	0             0         0       0          0         0          0

* Note: The increase in budget authority reflects mandatory contributions to the Range Improvement Account and payments to states resulting from increased grazing fees.

** Note: Revenue totals reflect the annual rental fee for mine operators, the increase in gross revenue from the grazing reform proposal, and the net increase in revenue from communication site rental fees.

ENDNOTES

1. Public Law 94-579, Federal Land Policy and Management Act of 1976, Sec. 102, a, 9.

2. U.S. Congress, Senate, Subcommittee on Public Lands, National Parks and Forests, Committee on Energy and Natural Resources, "Concerning Communication Site Fees," statement by George Leonard, Associate Chief, USDA Forest Service, March 23, 1993.

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