PERC proposes reforms of environmental policy

Published September 1, 2001

PERC-The Center for Free-Market Environmentalism, a Bozeman, Montana-based policy research group, is proposing a series of changes in Interior Department and Forest Service policies to make those agencies more supportive of free-market environmentalism.

In Conservative Conservation: Proposals for the New Century, PERC associates offer recommendations for endangered species protection, recently declared monuments, federal grazing permits, recreation fees, and federal water projects.

“Modest reforms, especially in Interior Department and Forest Service policies, could bring about major advances in achieving environmental goals,” according to the PERC proposals. Such reforms could be readily implemented by the Bush administration and Congress, the Center believes.

Central to the PERC proposals is the realization that positive incentives, rather than regulatory prohibitions, best ensure sound environmental stewardship. Free market environmentalism “recognizes that markets–voluntary choices–can encourage cooperation and provide positive incentives for good stewardship. . . . These incentives are more effective when they come in the form of the market carrot rather than the regulatory stick.”

Endangered species

One example of the high cost of relying on government prohibitions, rather than free-market incentives, to advance environmental interests is the Endangered Species Act (ESA). “The Endangered Species Act has preserved only a few species, cost billions of dollars, and encouraged efforts to avoid regulations,” PERC observes.

A primary reason the ESA has failed to produce its intended results is that citizens are penalized, rather than rewarded, for endangered species residing on their property. The federal government offers no reward, incentive, or compensation for species protection, but threatens severe penalties for citizens who disrupt endangered species. As a result, citizens who might otherwise encourage nearby endangered species to reside on their property instead seek to make their property inhospitable.

As an example of this, PERC notes a study on timber harvesting in North Carolina. The study showed that trees close to colonies of endangered red-cockaded woodpeckers were logged long before they matured, while trees farther away were harvested much less frequently. “Landowners appear to be making sure that the trees do not become potential woodpecker habitat. Thus the act provides the wrong incentives.”

As a better solution, PERC proposes conservation rental contracts as the primary tool for applying the Endangered Species Act. Under such a contract, “a landowner could agree to produce an increase in the number of endangered species on his or her property, essentially agreeing to a production contract. Alternatively, the landowner could give up some development or activity such as logging or building for a specified period, perhaps also agreeing to specific conservation measures, such as prescribed burns or creating wildlife food plots.”

The idea is to reward citizens for specific voluntary achievements. Not only would voluntary contracts eliminate the current incentives to destroy potential habitat for endangered species, it would reward rather than punish those citizens best situated to protect endangered species. Moreover, voluntary contracts would ensure that the federal government, rather a few individual citizens, assumes the economic costs of protecting valued species.

National monuments

PERC points out that another forum in which regulatory prohibitions have backfired is the designation of national monuments. Controversy surrounding such designations reached new heights with the Clinton administration’s designation of vast land tracts as “national monuments” under the Antiquities Act of 1906. Although the Clinton administration’s strategy was designed to prevent development of scenic wilderness, PERC notes “it left the door wide open for the same managerial uncertainty that makes our national parks both fiscally and environmentally troubled.”

Designating an area as worth preserving is one thing, but coming up with the resources for such preservation is another, observes PERC. “Degraded resources and huge maintenance backlogs characterize such crown jewels as Yellowstone, Yosemite, and Glacier,” the Center notes. Adding a host of new national monuments, each with its attendant maintenance and costs, is untenable without the voluntary cooperation of private citizens.

To encourage voluntary cooperation and funding for the preservation of national monuments, PERC proposes a federal land trust for each recently designated national monument with proven value for both commodity use and environmental preservation.

“Under this approach, each monument would be governed by a board of trustees appointed by the president,” notes the PERC report. “The board would have a fiduciary–that is, legally accountable–responsibility to maintain the unique environmental, cultural, and recreational values of the monument.”

The expenses of preserving these values would be covered by revenues earned from commodities and recreation. Each trust would generate funds for conservation while also allowing continuation of traditional uses of the land, such as energy development, recreation, and grazing. “It would give managers incentives to choose the most appropriate use of each land segment while taking into account the overall objectives established for each site,” reasons PERC. Arbitrary “best-use” or “balanced-use” determinations would be replaced by market incentives tied to environmental stewardship.

Precedents for land trusts are common in both the private and state government sectors. PERC notes a successful example in the National Audubon Society’s management of the Rainey Wildlife Sanctuary in Louisiana.

The Rainey Preserve, a refuge for snow geese, wading birds, ducks, and other wildlife, had natural gas wells operating on its property from the early 1950s until 1999, when the site ran out of economically retrievable quantities of natural gas. The natural gas wells earned Audubon roughly $25 million in royalties, which were reinvested in environment conservation efforts.

“By requiring special exploration and extraction techniques, Audubon ensured protection of wildlife habitat while producing natural gas and earning significant revenues,” noted PERC.

The voluntary incentives of a federal land trust policy similar to the Audubon Society’s Rainey Preserve would similarly advance the goals of environmental protection, PERC proposes. Revenues generated from recreational fees paid by visitors or economic development fees would ensure that funding shortages endemic under the current regulatory framework would no longer deprive national monuments of necessary maintenance and upkeep. Utilizing the free market, national monument preservation can be characterized by mutual cooperation rather than government prohibitions.

Grazing permits

“For over a century, conflicting interests have battled over the use and management of the millions of acres of grazing land controlled by the Bureau of Land Management and the United States Forest Service,” PERC asserts. The use and price of the grazing land is currently more a product of political pressure than economic and environmental factors.

As a result, “Today’s grazing practices affect the biological health and long-term productivity of the land resource. Reform must begin by recognizing that resources are better managed if the decision makers bear all the costs and receive all the benefits of their actions.”

To facilitate responsible stewardship of grazing land, PERC proposes the government sell the permanent property rights to the current permit holder. The price of the property rights would reflect the future value of the grazing fees, and title to the property would clearly define the ecological requirements for maintaining the right, such as the conditions for access, fire and weed control, livestock predators, water rights, and other nongrazing aspects. Penalties for not following the permit conditions would be established.

Private ownership would result in landowners making rational economic choices on whether or not to graze domestic livestock, while protecting environmental values spelled out in the sale documents. The costs of meeting expected ecological considerations would be reflected in the cost of the property, and the landowner would have financial incentives to efficiently meet environmental considerations. Grazing and other nongrazing uses would therefore be determined by free-market forces rather than arbitrary dictates of a federal agency.

Recreation fees

“We propose that the federal ‘Fee Demonstration Program’ be made permanent and expanded to all federal lands that are used for recreation,” proposes PERC. The Center notes that the fee demonstration program, which Congress enacted in 1996, is a good example of the success of local management and user financing of federal lands.

The fee demonstration program allows federal officials to charge user and visitor fees and retain 80 percent of the revenue for local management. Local managers have discretion to use the fees as they see fit. The Bureau of Land Management, Fish and Wildlife Service, Forest Service, and National Park Service currently participate in the program.

The program works because local managers are more knowledgeable about park popularity and upkeep needs than Congress, which had previously held the purse strings. For example, PERC notes that in 1996 Yellowstone park managers closed the popular Norris campground and two museums to save $70,000 in operating expenses–even though the campground alone brought in $116,000 in revenues the previous year. “The managers ignored the revenues because they went to the national treasury, not to the park for use in Yellowstone.”

With a permanent fee demonstration program in place, “managers would begin to design fee structures that reduce congestion and would develop attractive pricing options, including those for visitors hiking through land managed by different agencies. Expanding the program to include all federal recreation areas would motivate managers to give resource stewardship priority over politics and to keep prices low while still increasing revenues.”

Water management

Water shortages are a recurring problem in much of the nation, observes PERC. Causes include drought, over-pumping of aquifers, expanding urban demands, and endangered species mandates. Exacerbating the problem is the fact the market is not allowed to function well.

Government has typically subsidized water prices, leading to an artificially high demand. “Continued federal subsidies, however, won’t solve water problems. In fact, they have created many.” Artificially high demand strains water supplies and invariably causes environmental problems, PERC asserts.

To solve this problem, PERC proposes the federal government eliminate subsidies for water projects and transfer water projects to private ownership. Private water markets reflecting the true economic and ecological costs of water usage would restore incentives for consumers to conserve water and utilize it efficiently. Not only would the market ensure efficient water usage, the resultant conservation and increased stream flows would benefit endangered species and water-dependent ecological interests.

For more information . . .

Copies of “Conservative Conservation: Proposals for the New Century” can be obtained through PERC at 888/406-9532, and at their Web site at