80 • Wetlands: Their Use and Regulation 



ment assistzmce, the farmer would have lost money 

 in 5 of the 16 years investigated, and profits would 

 have been less than $10/acre in 4 additional years. 



Using economic multiplier analysis, the Nebras- 

 ka study then estimated the impact on the State 

 economy of investment expenditures made to drain 

 and convert wedands for expanded agricultural use 

 and of new crop production resulting from this con- 

 version. Based on estimates of the annual wetland 

 acreage lost each year and on the types of profitable 

 conversions that occurred in the Rainwater Basin, 

 the study concluded that the income resulting from 

 converting wetlands in the Rainwater Basin to ir- 

 rigated corn is less than 0.000072 percent of State 

 personal income and around 0.000056 percent of 

 the personal income in the 17-county Rainwater 

 Basin area. 



Other examples of converting Rainwater Basin 

 wedands to irrigated alfalfa with reuse systems and 

 to dryland wheat farming resulted in losses in net 

 annual revenue per acre over the 16-year average, 

 regardless of Federal cost-sharing assistance. 



Farmers Home Administration Loans. — Pro- 

 grams administered by the Farmers Home Admin- 

 istration (FmHA) have been noted as having a po- 

 tentially adverse effect on wetlands. For example, 

 FmHA personnel stated in interviews with an OTA 

 contractor that FmHA operating loans have been 

 used for wedand conversion even in the recent past. 

 FmHA agrees that wetland conversions should not 

 be financed through FmHA, but there are practi- 

 cal problems in implementing such a policy. FmHA 

 published draft regulations to comply with Execu- 

 tive Order 1 1990 and other environmental laws in 

 1982. These regulations, when finalized, will dis- 

 allow approval or funding of any proposals that 

 would directly or indirectly result in conversions 

 of wedands. Implementation is expected to vary be- 

 tween States and counties, since decisionmakers at 

 the State and local levels have broad discretion in 

 making a loan decision. Although loan applicants 

 may be required to have SCS farm-conservation 

 plans that would provide for the protection of wet- 

 lands, it is not clear to what extent the farm plans 

 will have to be implemented to receive FmHA assis- 

 tance. 



Federal Disaster Payments and Crop In- 

 surance. — Recent congressional and USDA policy 

 changes exclude high-risk areas from disaster 

 payments and subsidized crop insurance. Specific 

 areas that are excluded from coverage are being 

 mapped in each county. Although wedands are not 

 specifically excluded from coverage under the pro- 

 gram (the Federal Crop Insurance Agency that ad- 

 ministers the program hasn't issued regulations for 

 complying with Executive Order 1 1990), areas such 

 as wetlands that are subject to unacceptably high 

 risks from flooding or excess moisture generally are 

 excluded. If an area is subject to flooding as fre- 

 quendy as every 4 to 5 years, it is unlikely to receive 

 either disaster payments or subsidized crop insur- 

 ance. In some areas of the country, for instance, 

 especially the Missouri and Mississippi River Ba- 

 sins, certain flood plain and wetland areas are ex- 

 cluded from coverage because of the high risk of 

 crop loss to flooding. Also, some wetlands in Min- 

 nesota are excluded because of the high risk of sum- 

 mer flooding. 



Commodity Programs. — While the actual im- 

 pact of price supports and target prices have pro- 

 bably not been significant in encouraging wetland 

 conversions, they have been criticized for the follow- 

 ing four reasons. 



1 . Commodity programs have the potential to 

 increase crop prices above the level that would 

 prevail without the programs. These artificial- 

 ly high prices might encourage farmers to in- 

 crease their amount of land in crops by con- 

 verting wetlands. However, these artificially 

 high prices stUl are relatively low and only go 

 into effect when market prices drop to the 

 average cost of production. Even with the ar- 

 tificially higher price, a farmer with average 

 production costs is unlikely to be in a finan- 

 cial position to undertake costly conversions. 

 However, because larger farmers may have 

 production costs lower than the national aver- 

 age and are more likely to participate in the 

 commodity programs, commodity programs 

 may aid some larger farmers in their conver- 

 sion efforts. 



