Report No.: GAO/OGC-93-17TR Date: December 1992
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Author: United States General Accounting Office
Addressee: Transition Series
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CONTENTS
Natural Resources Management Issues
Setting Priorities Under Budgetary Constraints
- Cumulative Shortfall at the Department of the Interior
- Forest Service's Assets Continue to Deteriorate
- Corps' Water Resources Projects Are a Vital, but Aging, National
Resource
- Significant Staffing and Funding Shortfalls Have Been Reported
Ensuring a Better Return for Natural Resources
- Hardrock Minerals
- Federal Water
- Recreation lands
- Public Rangelands
- Timber
- Inland Waterways
- Sharing Revenues With States and Counties
Balancing the Conservation and Use of Natural Resources
- The Endangered Species Act
- The Clean Water Act
- Wildernesses
Related GAO Products
- Setting Priorities Under Budgetary Constraints
- Ensuring a Better Return for Natural Resources
- Balancing the Conservation and Use of Natural Resources
Transition Series
- Economics
- Management
- Program Areas
Office of the Comptroller General
Washington, DC 20548
December 1992
The Speaker of the House of Representatives
The Majority Leader of the Senate
In response to your request, this transition series report discusses major
policy, management, and program issues facing the Congress and the new
administration in natural resources management. These issues include (1)
maintaining facilities and lands and staffing programs under increasing
budgetary constraints, (2) seeking a better return for the sale or use of
natural resources, and (3) establishing national policies for natural
resources in the 1990s.
The GAO products upon which this report is based are listed at the end of the
report.
We are also sending copies of this report to the President-elect, the
Republican leadership of the Congress, the appropriate congressional
committees, and the designated heads of the appropriate agencies.
Vital for economic, ecological, and cultural reasons, natural resources on
federal lands comprise vast reserves of fuels and other minerals, timber,
rangeland, water, habitat for fish and wildlife, recreation areas, areas of
scenic beauty, historic and cultural sites, and artifacts. Managing and
protecting these resources, as well as managing the vast
infrastructure--including buildings, roads, trails, bridges, developed sites,
water and sewer systems, dams, and other facilities on federal
lands--associated with them, are primarily the responsibility of the
Department of the Interior, the Department of Agriculture's Forest Service,
and the U.S. Army Corps of Engineers. Together, these agencies hold and are
responsible for almost 30 percent of the country's land surface, rights to
minerals beneath even more of the country and beneath 1.4 billion acres of
ocean floor, and 12,000 miles of commercial navigation channels. For fiscal
year 1993, budget authorities for managing natural resources total about $16.6
billion. In fiscal year 1992, these resources generated an estimated $6.9
billion in receipts to the federal government.
In our 1988 transition report, we concluded that the most pressing overall
need at that time was for the Department of the Interior to become a more
effective steward by better balancing competing demands on the natural and
cultural resources it is legislatively mandated to foster, protect, and
preserve. We pointed out that billions of dollars would be needed to stop the
continued deterioration of, and prevent possibly irreversible damage to, the
nation's natural and cultural resources. Though the Department of the Interior
and other responsible agencies have not always agreed with our positions, a
number of changes have been made. Budgetary constraints, however, will slow
the pace of change and will require difficult trade-offs among important yet
competing priorities.
Our 1988 report also concluded that the Department of the Interior had not
always fulfilled its fiduciary responsibility of collecting the revenues due
the government or taken advantage of opportunities to increase revenues. Since
then, various amendments have been proposed and bills introduced to ensure a
better return for the sale or use of natural resources on federal lands. With
few exceptions, however, these reforms have not been enacted. According to
estimates prepared by the Congressional Budget Office, legislation to ensure a
better return could generate an additional $4.5 billion in revenues and
savings in fiscal years 1993 to 1997.
Finally, a number of key decisions about the management of the nation's
natural resources have been left to the 103rd Congress. Resolving the issues
involved will go a long way in establishing national policies for natural
resources in the 1990s.
SETTING PRIORITIES UNDER BUDGETARY CONSTRAINTS
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The management of the nation's natural resources is at a crossroads. While the
infrastructure on federal lands that is associated with natural resources is
expanding yearly, the existing infrastructure and lands, approaching $200
billion in value, are in a growing state of disrepair. At the same time,
agency staff are being asked to assume increasing responsibilities and to
perform more duties. As a result, existing maintenance and reconstruction
standards are being compromised and trade-offs are being made among important
yet competing work priorities.
Although annual appropriations for managing natural resources have increased
in recent years, these increases have not been large enough to make a dent in
the needs for the infrastructure and staffing. Moreover, in fiscal year 1993,
appropriations for managing natural resources dropped by 1.3 percent from the
previous fiscal year, and the Budget Enforcement Act of 1990 will require
substantial cuts to discretionary spending in fiscal years 1994 and 1995 with
no allowance for new or deferred needs. As a result, the new administration
now faces a difficult choice: It must find new sources of funding for the
agencies responsible for managing natural resources and/or find ways for these
agencies to operate more efficiently, or it must make further cutbacks in the
services they provide and/or their standards for maintaining facilities and
lands.
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CUMULATIVE SHORTFALL AT THE DEPARTMENT OF THE INTERIOR
In 1988, we reported a $1.9 billion cumulative shortfall in funds for park
maintenance. In its fiscal year 1993 budget request, the Department of the
Interior reported that the deferred maintenance of parks will now cost over
$2.1 billion. In addition, the Department identified a growing backlog in the
maintenance and reconstruction of the Bureau of Land Management's (BLM) $400
million infrastructure of facilities. Additional funding requirements include
-- an unquantified need for improvements to the 337 dams built by the Bureau
of Reclamation since 1902;
-- an estimated $27 billion shortfall between (1) the estimated costs to
reclaim lands around surface coal mines abandoned before 1977 and (2) the
fees collected for this purpose when the authority to collect such fees
expires in 2004; and
-- an estimated $283 million to reclaim about 280,000 acres of abandoned,
suspended, or unauthorized hardrock mining operations on federal lands.
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FOREST SERVICE'S ASSETS CONTINUE TO DETERIORATE
As we reported from September 1989 through January 1991, the Forest Service
will require
-- at least $644 million to eliminate the backlog of maintenance and
reconstruction of trails and developed recreation sites and
-- millions of dollars more to develop and maintain special recreation and
wilderness areas in accordance with current standards.
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CORPS' WATER RESOURCES PROJECTS ARE A VITAL, BUT AGING, NATIONAL RESOURCE
By the turn of the century, many of the structures in the Corps of Engineers'
vital, but aging, $125 billion inventory of water resources projects will have
reached their design life, according to the Corps. The major structures have
an average age of 33 years, and 12 percent of the projects are over 50 years
old. As a result, major rehabilitation projects will become increasingly
important and costly in the near future.
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SIGNIFICANT STAFFING AND FUNDING SHORTFALLS HAVE BEEN REPORTED
We, as well as others, have identified significant shortfalls in the staffing
and funding for natural resources management, including the following:
-- In 1987, 267 National Park Service unit managers reported needing a
35-percent increase in maintenance staff to eliminate the growing backlog
of deferred maintenance.
-- In 1990, BLM reported needing a 50-percent increase in its range management
budget to restore riparian areas damaged by overgrazing, detect and deter
unauthorized grazing, and collect and analyze data to determine appropriate
grazing levels. BLM also has reported needing additional staff and/or
resources to (1) verify oil and gas production, (2) complete and implement
legislatively mandated land-use plans and related environmental impact
statements used to guide the management of the public lands, and (3)
implement the objectives envisioned for wildlife in the land-use plans that
have been completed.
-- In recent years, the Fish and Wildlife Service (FWS) has pointed to
insufficient staffing or resource constraints as a primary reason for its
inability to (1) list, in a timely manner, about 600 domestic species for
which it has adequate information to support their protection under the
Endangered Species Act and (2) even minimally deter crimes against
wildlife. Moreover, many of FWS' special agents are deskbound for months at
a time because of insufficient operating funds.
-- In 1991, we reported that despite recent increases in the Forest Service's
appropriations, funding and/or staffing levels were not sufficient to (1)
bring recreational sites up to the condition called for by the Service's
development plans and maintenance standards, (2) conduct the monitoring
necessary to identify improper grazing and devise remedies, or (3)
implement wildlife-beneficial actions included in approved land-use plans.
-- Funding and staffing shortfalls have adversely affected the federal
government's efforts to control the use of wetlands. The shortfalls have
inhibited enforcement activities, impeded the Corps' ability to establish
wetlands' boundaries, and often precluded the Corps from meeting
established goals for timely processing permits for projects that may alter
wetlands. Budgetary constraints have also hampered the ability of the
Environmental Protection Agency, FWS, and the Department of Commerce's
National Marine Fisheries Service to visit proposed project sites, comment
on permit applications, and follow up on the Corps' decisions about permits
to see if their recommendations were adopted.
ENSURING A BETTER RETURN FOR NATURAL RESOURCES
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For the agencies managing natural resources, one alternative for addressing
the declining condition of the nation's natural resources and related
infrastructure is to obtain new sources of funding. It seems reasonable to
expect that in these times of budgetary constraints, the federal government
should (1) seek a better return for the sale or use of the mineral, renewable,
and other natural resources on its lands;
2) cover programs' costs to the extent reasonable and make some programs
revenue producers rather than contributors to the national debt, as they are
now; and
3) provide a revenue base that can be used to better manage and improve
federal lands so that they will remain a viable public resource in the future.
According to estimates prepared by the Congressional Budget Office (CBO),
legislation to ensure a better return for the sale or use of natural resources
on federal lands could generate an additional $4.5 billion in revenues and
savings in fiscal years 1993 to 1997. Legislative precedent exists for
returning revenues to the managing agencies or units to supplement, rather
than supplant, yearly appropriations. This could help reduce the need for
further cutbacks in the services provided and/or the standards to which the
facilities and lands are maintained.
We believe that the Congress and new administration should consider a number
of situations in which it appears that the government could receive a better
return, including the following:
-- Valuable federal lands continue to pass into private ownership for a
fraction of their value. Over the last 120 years, the federal government
has sold about 3.2 million acres of public lands, or an area about the size
of Connecticut, under the patent provision of the Mining Law of 1872. This
provision allows holders of economically minable claims to obtain all
rights and interests to both the land and the minerals by patenting them
for $2.50 or $5.00 an acre--an amount that approximated the fair market
value for western grazing land and farmland in 1872. As a result, some
patent holders have reaped huge profits at the government's expense. For
example, between 1970 and 1983 the government received less than $4,500 for
20 patents that in 1988 were estimated to be worth between $13.8 million
and $47.9 million.
-- The government receives no financial compensation for hardrock minerals
extracted from federal lands. In 1990, hardrock minerals worth at least
$1.2 billion were extracted from federal lands, while the known,
economically recoverable reserves of hardrock minerals that remained on
federal lands were valued at $64.9 billion.
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FEDERAL WATER
-- Some farmers have taken advantage of a loophole in the Reclamation Reform
Act of 1982, as amended, by reorganizing their large farming operations
into multiple, smaller landholdings to be eligible to receive additional
federally subsidized irrigation water. The act limits to 960 the maximum
number of owned or leased acres that individuals or legal entities, such as
partnerships or corporations, can irrigate with federal water at rates that
exclude any interest on the government's investment in the irrigation
component of its water resources projects. The act has not, however,
stopped the flow of federally subsidized water to land above the 960-acre
limit that is being operated as one large farming operation. Consequently,
the federal government is not collecting the revenues to which it would be
entitled if the multiple landholdings were considered collectively as large
farms subject to the act's 960-acre limit. The foregone revenues from one
large farming operation alone are about $2 million a year. Such revenues
are likely to remain uncollected unless the act is amended.
-- By the end of fiscal year 1990, after receiving water from the Central
Valley Project (CVP) in California's Central Valley Basin for over 40
years, irrigators had repaid only $10 million, or 1 percent, of the over $1
billion in construction costs that they owe the federal government.
Amendments to the CVP's purposes in 1986 require irrigators and other users
to pay their share of the federal investment in the CVP by 2030. Under the
terms of the long-term water contracts currently being renewed by the
Secretary of the Interior, the Bureau of Reclamation can adjust each water
district's rates annually to meet the deadline. While the Bureau may
ultimately recover its construction costs by 2030, the dollars that
eventually flow to the U.S. Treasury could be worth much less than if they
had been repaid sooner--as inflation decreases the money's value and as
opportunities to use the money for other, productive purposes, such as
reducing the federal debt, are lost.
-- Estimates of the current cost of federal water subsidies are substantial.
For example, the Department of the Interior reported that irrigation
subsidies throughout the 17 western states totaled $534 million in 1986,
while the Bureau of Reclamation placed the cost at $2.2 billion. (Estimates
differ because of different definitions of an irrigation subsidy, different
interest rates used to calculate the subsidies, and different methods for
compounding unpaid interest.) Much has changed in the West since the
subsidies were established in 1902, and it is not known whether the
subsidies are still warranted or whether irrigators could pay more of the
cost of the water delivered.
-- The use of federally subsidized water to produce federally subsidized crops
results in the federal government's paying double subsidies. According to
the Department of the Interior, between 1976 and 1985, an average of 38
percent of the acreage served by the Bureau of Reclamation nationwide was
used to produce crops that are also eligible for subsidies through the
Department of Agriculture's commodity programs. The Department of the
Interior estimated that irrigation subsidies used to produce subsidized
crops throughout the 17 western states totaled $203 million in 1986. Other
estimates are higher. For example, the Bureau of Reclamation placed the
figure at $830 million.
-- In 1989, according to available financial information (which was complete
for about 60 percent of the 9,000 concession agreements identified by six
federal agencies), the federal government received about $35 million in
concession fees from gross concession revenues of about
1.4 billion. This amount represents an average return to the government of
about 2 percent.
-- Under land-use agreements with nonfederal public entities, the Bureau of
Reclamation has agreed to the long-term use of some of its lands with no
compensation to the federal government. The nonfederal public entities, in
turn, develop and lease the lands to private commercial operators in
exchange for a percentage of their gross revenues. For example, the Bureau
agreed that the city of Scottsdale, Arizona, could use about 760 acres of
its land for 75 years for recreation development. The city developed two
major recreation facilities on the land and subsequently leased them to
private commercial operators. The operators of these facilities generated
about $24 million in gross revenues from 1988 through 1990, and the city
was entitled to receive about $1.5 million in compensation. Although Bureau
headquarters officials were unable to tell us the extent to which the
agency has used these agreements, we identified three other similar
agreements in Arizona that the Bureau had approved.
-- Improved pricing of user fees at recreational sites could help defray
direct costs to the government, shift the cost burden from the taxpayers in
general to the beneficiaries of the services, and alleviate overcrowding at
many sites. Entrance and user fees are charged at some sites, but the fees
generally cover only a small portion of the costs for the services provided
to visitors. For example, in 1992, the National Park Service spent an
estimated $220 million on services for visitors but recovered only an
estimated $60 million in fees. According to CBO, requiring federal land
managing agencies to charge fees to cover the costs for services would
generate $170 million in fiscal year 1993 and $950 million over 5 years.
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PUBLIC RANGELANDS
-- The fees charged ranchers to graze livestock on public lands do not cover
either the government's cost to manage the grazing program or the cost to
better manage and improve the lands so that they will remain a productive
public resource in the future. Thus, the fees may represent a subsidy for
many of the ranchers who graze livestock on about 268 million acres of
public lands. CBO estimates that an annual increase in grazing fees not to
exceed 33.3 percent a year, with the fees reaching fair market value in
years, would increase federal receipts by approximately $120 million over
fiscal years 1993 to 1997.
-- The government does not always recover its expenses for preparing and
administering sales of timber, resulting in below-cost sales. For example,
in fiscal year 1990, under our most conservative definition of costs, $35.6
million in such expenses went unrecovered. These expenses range as high as
$112.2 million when all costs are considered. While the Forest Service has
acted to reduce losses from below-cost timber sales, many such sales are
still not subject to review. CBO estimates that the net savings in federal
budget outlays over fiscal years 1993 to 1997 would be about $230 million
if all future timber sales were eliminated in three of the Forest Service's
nine regions where, on average over the last decade, cash expenditures have
exceeded cash receipts by a 3:1 ratio.
-- The government does not impose user fees that are high enough to recover
the cost of operating and maintaining the nation's system of inland
waterways. CBO estimates that taxpayers, not users, paid $700 million of
the about $800 million that the Corps of Engineers spent to construct,
operate, and maintain the nation's system of inland waterways in fiscal
year 1991. According to CBO, imposing user fees high enough to recover the
cost of operating and maintaining the system would reduce the federal
deficit by $350 million in fiscal year 1993 and by $1.9 billion through
fiscal year 1997. CBO also notes that higher fees would increase
efficiency. Reducing subsidies to water transportation should (1) improve
the allocation of resources by leading shippers to choose the most
efficient transportation route rather than the most heavily subsidized one
and (2) encourage more efficient use of existing waterways, reducing the
need for new construction to alleviate congestion.
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SHARING REVENUES WITH STATES AND COUNTIES
-- Federal land-managing agencies typically do not deduct the full costs of
their programs from the gross receipts that the programs generate before
the agencies share the receipts with states and counties. Sharing federal
receipts on a gross, rather than a net, basis sometimes causes the costs of
the programs to exceed the federal government's share of the revenues.
According to CBO, changing revenue-sharing from a gross-receipt basis to a
net-receipt basis would reduce net federal outlays by $1.05 billion over
fiscal years 1993 to 1997.
BALANCING THE CONSERVATION AND USE OF NATURAL RESOURCES
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The most difficult challenge concerning natural resources that faces this or
any other Congress and administration is fulfilling the federal government's
responsibilities as a steward of the nation's natural resources by providing
the proper balance between their use and conservation for future generations.
Achieving this balance has been likened to steadying a pendulum that could
swing between two extremes--irresponsible consumptive use and preservation to
the exclusion of all other uses.
Where this pendulum rests at any given time depends, to a large degree, on
policy decisions. The 102nd Congress has left some thorny legislative issues
for the next Congress, among them the Endangered Species Act, the Clean Water
Act, and various proposals to designate additional areas as wilderness.
Resolving these issues will go a long way in establishing national policies
for natural resources in the 1990s.
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THE ENDANGERED SPECIES ACT
Since 1966, when the first act was passed to protect species threatened with
extinction, the pendulum has periodically swung between increased protection
and the need to soften the law's economic impact. Under the Endangered Species
Act of 1973, economic factors may not be considered in listing a species as
endangered or threatened or in consultations with federal agencies proposing
activities that may affect listed species; these actions must be based solely
on biological data. Economic and other nonbiological factors, however, may be
considered when making other decisions, including designating habitat critical
to the species' protection and granting exemptions from the act's protective
provisions.
The June 1990 listing of the Northern spotted owl and the listing's current
and potential impact on commercial logging in the old-growth forests of the
Pacific Northwest and the listing of three species of Columbia River Basin
salmon in fiscal year 1992 and the potential economic costs associated with
their protection have again riveted national attention on the act's
reauthorization. Spending authorization for the Endangered Species Act expired
at the end of fiscal year 1992. Rather than reauthorize the act for 5 years,
as it has often done in the past, the Congress authorized spending for 1 more
year under the Department of the Interior's fiscal year 1993 appropriations
bill and appropriated money for the National Academy of Sciences to study the
act. Ultimately, the new Congress will have to decide the extent to which
economic and other nonbiological factors, including the need to compensate
owners whose property loses value because of the act, should be considered in
making decisions about endangered and threatened species.
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THE CLEAN WATER ACT
Controversy over proposals to amend section 404 of the Clean Water Act of
1977--to better balance the need to protect wetlands with the rights of
private property owners--delayed the reauthorization of the act. Although
section 404 is just 1 of at least 25 federal laws that affect wetlands, it
provides the primary legislative authority behind federal efforts to control
their use and has become a major regulatory and environmental issue in recent
years.
Wetlands provide vital habitat for fish and wildlife and offer numerous other
benefits. However, according to the Fish and Wildlife Service (FWS), the
contiguous 48 states lost an estimated 53 percent of their original 221
million acres of wetlands over the 200 years from the 1780s to the 1980s. FWS'
most recent estimates suggest that these states continue to lose about 290,000
acres of wetlands each year.
The section 404 program requires landowners and developers to obtain permits
issued by the Corps of Engineers to dredge or fill navigable waters, including
wetlands. The program has become the target of farmers, developers, oil
companies, and other private landowners who believe that the program has
intruded too far into their decisions about how to use their land and that the
process for obtaining permits is time-consuming, costly, and inconsistently
administered by the Corps. Environmentalists and some state officials, on the
other hand, are concerned that current proposals for defining wetlands would
result in the loss of millions of acres previously regulated as wetlands.
During the 102nd Congress, major revisions to section 404 were proposed that
seek to stem the loss of remaining wetlands without creating severe economic
hardship for private developers and property owners. In the appropriations
bills for both fiscal year 1992 and fiscal year 1993, the Congress banned the
Corps from using its more expansive 1989 definition of wetlands in favor of a
more narrow 1987 one, and the latter bill appropriated funds for the National
Academy of Sciences to study how to define wetlands and how to categorize them
according to their function and value. As with the Endangered Species Act, the
103rd Congress will ultimately have to decide how best to balance the
protection, restoration, and creation of wetlands with the need for sustained
economic growth and development.
Economics will also play a key role in congressional deliberations on
designating additional areas as wilderness. Because the Wilderness Act of 1964
generally prohibits such things as motorized equipment, buildings, roads,
commercial enterprises, and aircraft landings in wilderness, some believe that
designating areas as wilderness is detrimental to the economy. Others believe
that doing so is a necessary step for preserving federal lands in an
undisturbed condition for present and future generations.
Nowhere has this use-versus-conservation debate been more visible than in the
conflicting efforts to open the Arctic National Wildlife Refuge's
1.5-million-acre "coastal plain" to exploration for oil or to designate it as
wilderness. After 2 years of work, the 102nd Congress sent to the President,
and he signed, major energy legislation that did not include the opening of
the refuge to development, despite arguments that (1) drilling there could
create 200,000 jobs and provide $125 billion in revenues for the federal
government and the state of Alaska and (2) the 800-mile-long Trans-Alaska
Pipeline System that is the primary means for delivering nearly 25 percent of
the nation's domestically produced oil could shut down within the next 10 to
30 years unless a new oil field is developed in the refuge. Meanwhile, efforts
to have the refuge's coastal plain designated as wilderness were also
unsuccessful.
Bills that would have designated the Arctic National Wildlife Refuge's coastal
plain as wilderness were not the only such bills not to make it through the
102nd Congress. Left unfinished was work on at least five additional bills to
designate wilderness areas in Montana, Colorado, Utah, and the California
Desert, as well as additional areas in Alaska. Also unresolved was the
accompanying issue of state water rights in wilderness areas. Our review of
studies on the effects of designating additional areas in Utah as wilderness
led us to conclude that the likely effect on Utah's economy has not been
adequately quantified. As a result, policy decisions on this issue in Utah,
and possibly in other states, will have to be based primarily on subjective
judgment rather than on objective economic data.
