1. Agricultural Act of 2014 Conservation Compliance and Crop Insurance March 12, 2014 Bruce Knight SCS Bill Wenzel IWLA Sam Willett NCGA

2. Agricultural Act of 2014 Conservation Compliance Background Broad agreement among agriculture, crop insurance and conservation groups Support for relinking conservation compliance with crop insurance premium subsidies Oppose Adjusted Gross Income test for crop insurance Agreement included in final law

3. Agricultural Act of 2014 Conservation Compliance Background Removal of direct payments Crop insurance increasing role as primary farm safety net Need for strong farm and natural resource safety net More defensible for taxpayer

4. Agricultural Act of 2014 Conservation Compliance + Crop Ins. Addresses conservation of two fragile lands Highly Erodible Land (HEL) Wetlands Involves 3 USDA agencies Farm Service Agency, Natural Resources Conservation Service, Risk Management Agency

5. Conservation Compliance and the 2014 Farm Bill March 12, 2014 Strategic Conservation Solutions Agricultural Act of 2014

6. Conservation Compliance Enacted in 1985 Farm Bill Linked Farm Program Benefits to management of certain fragile lands Estimated that compliance accounts for 25% of the soil loss reduction between 1982 and 1997 Highly Erodible Land (HEL) requires a conservation plan. Wetlands can be farmed, but cannot be drained.

7. Conservation Compliance 1985 – linked conservation compliance to crop insurance and farm program benefits 1990 – expanded wetlands coverage, expanded linkage to conservation programs, penalties modified to fit the violation 1996 – crop insurance was decoupled, provisions to allow a producer one year to come into compliance 2014 – conservation compliance again linked with crop insurance subsidies, as well as all programs within the commodity title (Title I)

8. Benefits Linked to Compliance in the 2014 Farm Bill Disaster Payments Conservation Programs Farm Storage Facility Loans Production Loans from USDA Marketing loans Crop insurance premium subsidies Both the Agricultural Risk Coverage and Price Loss Coverage options (which replaced direct payments) STAX: Stacked Income Protection for producers of upland cotton

9. Swampbuster Enforcement (Farm Programs) Filling, draining, dredging or leveling of wetlands prohibited after 1990. Farming of wetlands under natural conditions is allowed. Drainage of uplands and prior converted wetlands is allowed. Minimal effects and mitigation is allowed. No graduated penalties for intentional violations

10. Farmer Impact Fear of increased regulation Fear of regulatory creep Compliance cost is actually low and relatively easy for most farmers Uncertainty about crop insurance eligibility Uncertainty about changes in linkage to compliance

11. Implementation Conservation compliance is forward looking from February 7, 2014 (date of enactment) While farmers will be able to sign up for programs under the new Farm Bill for the current crop year, rules tying conservation compliance to eligibility for crop-insurance subsidies go into effect with 2016 crop year.

12. Rules and Regulations Crop insurance compliance will be developed by FSA, RMA and NRCS No significant changes are necessary for traditional compliance Released in 2014 Implemented in 2015? Impact the 2016 crop year in the case of crop insurance.

13. How Big is the Issue?

14. Producer Impacts of Enforcement

15. Conclusion Compliance is still not a gotcha program If you were in compliance in the past - no change. If you were out of compliance in the past – decisions to be made. Coalition efforts and cohesiveness will be important to help guide the regulatory process.

16. Bruce Knight Strategic Conservation Solutions 50 F Street, NW Suite 900 Washington, D.C. 20001 202-879-0801 (office) 202-213-3887 (mobile) bknight@stratconserve.com

17. CONSERVATION COMPLIANCE AND CROP INSURANCE Premium Subsidy Eligibility Highly Erodible Lands (HEL) Agricultural Act of 2014

18. Conservation Compliance Number one priority for most conservation groups Compliance is main source of protection for farmed wetlands and highly erodible land (HEL) Credited with protecting an estimated 3.3 million wetland acres and 140 million HEL acres 93% of producers in compliance

19. Compliance - Highly Erodible Land Requirements of 1985 Farm Bill largely unchanged Producers receiving farm program benefits who are farming land prone to erosion must develop and implement a conservation plan Producers must file an annual certification of compliance (AD – 1026)

20. Changes to HEL Requirements Agricultural Act of 2014 Producers subject to compliance for first time have 5 years to develop conservation plan NRCS will give priority to new producers who need assistance in developing and implementing conservation plans There are no clawback provisions for premium assistance repayment for violations Ineligibility for premium assistance only after Final Determination of violation

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22. Conservation Compliance and Producer Perspective Agricultural Act of 2014

23. Conservation Compliance – Producer Perspective Forward looking application of regulations and penalties Premium assistance cannot be withdrawn in year of violation No clawback on previous years assistance regardless of appeals process Compliance required to restore premium assistance for future crops

24. Agricultural Act of 2014 Conservation Compliance – Producer Perspective Tenant Protections No liability for land owner refusal to meet requirements Grace Period for newly covered farmers Five years for HEL and wetland compliance Two years for producers who drain wetlands to begin mitigation

25. Agricultural Act of 2014 Conservation Compliance – Producer Perspective Whole Farm subject to ineligibility in the event of violations Current allows wetland conversion with mitigation Question remains regarding impact on a producers other farms

26. Agricultural Act of 2014