Ch. 4— Wetland Programs That Affect the Use of Wetlands • 79 



conservation deduction for drainage costs, the de- 

 preciation for drainage tile, and the investment tax 

 credit for the tile — the increment to income for each 

 drained acre would be considerably lower for farms 

 with taxable household incomes in the $12,000 to 

 $20,000 range. The value of the tax incentives in- 

 creases as income rises, up to a certain level that 

 easily is exceeded by large farming enterprises. 



Partial budgets were used in a detailed study of 

 drainage costs in Minnesota (6). The budgets in- 

 cluded gross returns, production costs, and amor- 

 tized drainage costs. Drainage costs ranged from 

 $35 to $260/acre, depending on the size of the wet- 

 land and topography. Annual net returns in the 

 prairie-pothole region varied considerably, with a 

 high of $29 to a loss of $10/drained acre. Inclusion 

 of property-tax effects (including Minnesota's tax 

 credit) and State and Federal income taxes were 

 occasionally large enough to offset a before-tax loss 

 on the drainage investment. In the prairie-pothole 

 region, net returns per year after taxes generally 

 ranged from $0 to $20/acre. Income tax generally 

 had the effect of reducing losses where before-tax 

 returns were negative, and decreasing gains in areas 

 where before-tax returns were positive. Deductions 

 for drainage costs are taken prior to the returns 

 from future commodities grown on the drained 

 area, thereby resulting in a positive effect in early 

 years (2). 



Cost-Sharing and Technical Assistance. — The 



USDA ACP provides payments to farmers of up 

 to 80 percent of the cost of construction of a wide 

 variety of conservation practices. Practices for 

 which cost-sharing is offered axe developed by farm- 

 er-elected committees at the county level in con- 

 sultation with county program development groups 

 and are subject to the approval of a State commit- 

 tee. Other Federal programs such as the Great 

 Plains Program provide similar assistance on a re- 

 gional basis. Many States also have programs that 

 may cover a portion of the non-Federal costs for 

 projects supported by Federal cost-sharing pro- 

 grams. 



Although direct drainage of wetlands is not 

 funded under ACP, eligible practices for funding 

 by these programs include actions that can lead to 

 wetland drainage and filling. For example, in Ne- 

 braska, eligible practices for irrigation water con- 



servation include dugouts, reuse pits, land level- 

 ing, irrigation ditch lining, and underground pip- 

 ing. Restrictions on the use of these Federal funds 

 for wedand conversion include prohibitions on 

 funding activities with the primary purpose of 

 bringing new lands under irrigation, such as chang- 

 ing the surface area or depth of some types of wet- 

 lands and installing systems where the bottom of 

 the pit is below the ground water surface. However, 

 implementation of these provisions is difficult. 



Administering agencies and their local agents 

 have considerable discretion in interpreting and ap- 

 plying these restrictions. Program restrictions are 

 particularly difficult to implement in areas such as 

 the Rainwater Basin where the condition of wet- 

 lands varies from year to year, depending on sea- 

 sonal and annual precipitation. Decisionmakers 

 may be under considerable pressure from their 

 neighbors to approve a project and to determine 

 that an area is not a wetland. Available evidence 

 and discussions with many people indicate that 

 some cost-sharing still is used for wedand drainage. 

 However, it generally is agreed that the implemen- 

 tation of the cost-sharing programs are increasingly 

 responsive to policies to protect remaining wedands 

 (3). In fact, many thousands of acres of wetlands 

 have been created or improved with technical 

 assistance from SCS. 



The importance of cost-sharing assistance in a 

 farmer's decision to convert wedands was analyzed 

 in OTA's Nebraska case study (3). It provided an 

 analysis of the profitability of the different conver- 

 sion activities in Nebraska and concluded that most 

 conversions have questionable profitabUity. Gov- 

 ernment cost-sharing of $ 1 9 . 86/acre/yr for produc- 

 ing irrigated corn on wedands drained with the in- 

 staUation of a reuse-pit system resulted in a 16-year 

 average annual net revenue per acre of $30.32, ver- 

 sus $10.46 without Government cost-sharing. Pro- 

 duction of irrigated corn on smaller, shallower wet- 

 lands that could be filled by leveling was the most 

 profitable at $57.24 for the same period of time with 

 Government cost-sharing assistance of $5.88/acre/ 

 yr. These returns were considered to be modest. 

 However, even with the Government cost-sharing, 

 a farmer would have lost money in 2 of the 1 6 yeau-s 

 investigated, and profits would have been less than 

 $10/acre in 3 additional years. Without Govern- 



