Issue Brief- U.S.

Grazing Fees
John Surmeyer
CSS 383
4-25-2012

U.S Grazing Fees

Controversy concerning public land grazing permits has been around since the beginning
of federal government land management agencies. There is a clash between the private rancher
and the land management agency. Currently a rancher must purchase the permit that will allow
access to grazing rights on public land. The agencies that are responsible for governing the land
as well as selling the permits are the Bureau of Land Management (BLM) and the United States
Forest Service. There are many different viewpoints regarding the grazing fee issue. At one end
of the spectrum some believe grazing should be open to whomever at no cost, at the other end
some believe there should not be any grazing on public land and it should be managed in its
natural state. Currently the two agencies govern nearly 300 million acres of rangeland in the
western United States.
The Federal grazing fee applies to Federal lands in 16 Western states. The fee is applied
to public lands managed by the BLM and the U.S. Forest Service. In 1978 congress enacted the
Public Rangelands Improvement Act (PRIA, PL 95-514). According the act the fee is calculated
using a set formula that considers several variables. Under this formula the grazing fee cannot
fall below $1.35 per animal unit month (AUM). An AMU is defined as the amount of forage
needed to sustain one cow and her calf, one horse, or five sheep or goats for a month. Grazing
fees vary from year to year depending on several factors, including current private grazing land
lease rates, beef cattle prices, and the cost of livestock production. Essentially the fee rises, falls,
or stays the same based on market conditions.

The enactment of PRIA set a grazing fee formula to determine the fair market value of
grazing on public land. The formula is as follows: Grazing Fee t+1 = $1.23 X (FVI t + BCPI t PPI t) 100. Where FVI = Forage Value Index, or an index of private grazing lease rates in the 11
western states. BCPI = Beef Cattle Price Index, or an index of cattle prices. PPI = Prices Paid
Index, or an index of the prices paid by producers to purchase inputs, with using 1694-1968 as
the base period for all inputs (Rimbey & Torell, 2011).
A study conducted by the USDI and USDA in 1977 collected the different costs of
grazing livestock on public and private lands. The evidence was compelling, the one major
aspect keeping public land grazing less expensive was the subsidized public grazing permit. The
data collected can be seen in the following table.

.
Federal grazing fees are essential to maintain a balanced and sustainable ecosystem. The
issue arose initially because rangeland in the western United States was an open access resource.
Before the Taylor Grazing Act in 1934, a rancher was able to graze as many cattle for as long as
he saw fit on public land. This led to the tragedy of the commons; since the land was nonexcludable but rival ranchers saw that if they did not take advantage of what was available
someone else would. This mindset had terrible effects on western rangelands including
overgrazing, soil compaction and watershed damage. To counteract this negative externality the
federal government stepped in to manage public lands.

The government chose a Command and Control style of policy. They sought to control
the land that was being grazed and to manage the number animals that were allowed onto that
land. To do this the BLM and Forest Service divided land into plots which turned the land into
an excludable good, that would then be opened up for private grazing if certain conditions were
met. These grazing rights are also inter-transferable, meaning that one is able to sell their rights
to another. The agencies use several techniques to help achieve or maintain a healthy public
land. By using this direct public action style of policy, agencies can help balance the difference
between private costs and social benefits.
What needs to be considered are the values that are placed on public land by the rancher
as well as society. The rancher may rely on public land for his familys livelihood. And others
may place value in recreational opportunities, wildlife existence, cultural and spiritual views as
well as other intrinsic values. These different values can be extremely difficult to pin a monetary
value to. Land management agencies are required to manage the land in a way that ensures the
long-term health and productivity of the land and to create multiple environmental benefits.
Managing public lands while incorporating all viewpoints can lead to a controversial situation.
Federal land management agencies are directed to collect a fair market value for livestock
grazing under the Federal Land and Policy Management Act of 1976 ( Collins, Constantino,
1990 ). The most common method to collect the market value is the comparable market
approach. In this approach fair market value is defined as the price at which a publicly provided
good would be exchanged in a competitive marketplace. The issue arises however regarding the
comparability of a competitive market place and a federal government created market place
where the government controls the quantity and price of the permits. The difference in markets
and valuation methods make it difficult for all parties to agree on a fair price for an AMU.

Another aspect that makes Grazing permits in the west an issue is that it is difficult to
quantify a ranchers willingness to pay to graze on public land. One has to take into account
transportation costs, cost per AMU, loss due to predation, and other economic and non-economic
costs. The cost of an AMU has risen dramatically here in the Northwest which has the firmest
pasture markets. Public grazing rights have gone up an average of 26% in the last year in
Washington State to $12.10 an AMU, mainly due to a shortage in hay caused by a shift in land
use to corn and canola production that are backed by perverse government subsidies (Fritz,
2008). However this cost is still lower than the cost for grazing rights on private land.
Where large controversy resides is in the sale of grazing rights between private buyers.
Because supply of grazing permits is limited this drives up the price when they are traded in a
competitive market. While the government may subsidize public land for grazing to keep it
lower than private costs it does not recognize investments one pays for grazing rights and the
interest on the investments as a true cost. The extra cost of obtaining grazing rights and the
interest on the investment is what keeps the cost about equal between private and public grazing
permits (Workman, 1988). This fact is not taken into account in the 1977 study conducted by the
USDA and USDI in the table previously seen. If it had we would see that the total costs to be
about equal between the two land types.
Many who do not support the grazing permit prices; say the fees are too low. That the
low price set for public grazing permits is a handout from the government. They argue that the
price set for grazing on public land should equal the price to graze on private land. This
argument I believe is flawed, the low price is set to counteract the higher operating and
transaction costs that come with grazing on public land. This is evident in the table shown above.
Environmental agencies such as the Natural Resources Conservation Service and the

Environmental Protection Agency support the idea that the cost should reflect the opportunity
costs as well. If livestock are put onto public land then the rancher is responsible for paying for
the forgone opportunities of the land. If grazing fees were to recoup the costs of livestock
grazing on BLM and Forest Service lands, the BLM would need to charge $7.64 per AUM and
the Forest Service would have to charge $12.26 per AUM (Nezzaro, 2005) However research by
Lambert and Obermiller support that livestock production interests have sought to have a fee
implemented that does not exceed the economic value of public land forage available for use in
their ranch operations (1-2). It is easy to understand both parties viewpoints. It boils down to
whose viewpoint should carry more weight during public policy making.
There have been alternative fee structures suggested, the most popular being the
McGregor Range. However this style would not be effective in western rangeland management.
The McGregor range suggests that public grazing permits should be auctioned off to the highest
bidder (United States Bureau of Land Management, Caballo Research Area, 1990).
A style such as this would be very controversial and would drive many small ranchers out of
business. That could turn the market purely into corporate agriculture. Auctioning to the highest
bidder has been done with inter-transferable quotas in the water market in several countries such
as Chile and New Zealand, with the best results being merely short term. This style of fee
structure does not offer the stability or equity required for livestock management in the west.
Overwhelmingly the most effective way to manage public land grazing is thru the use of grazing
fees using the previously mentioned formula.
There is a large misconception people have regarding public grazing rights. People think
that low grazing fees lead to overgrazing. It is true that low fees would want to make ranchers

put more livestock on the land, and economically speaking setting a low price will lead to
overconsumption. But ranchers must comply with regulations set by either the BLM or Forest
Service regarding the maximum amount of livestock the land can sustain, while also preserving
the environment. Even though the fee may be lower than what is attainable, regulation requires
that sustainable grazing practices are being followed.
Normally Grazing rights are on a ten year period that can be renewed. This is a
very effective way to manage public land and its privileges. By giving the rancher a greater
period of time to graze the cattle on public lands, it gives them a pseudo property right. Ranchers
will see that by managing the number of cattle and grazing rotations they will be preserving their
personal benefit from the land. This turns what was once a social cost into a private cost. In other
words the rancher will manage the land responsibly so that it will have a higher productivity and
avoid instances like the tragedy of the commons.
There are many positive externalities of public land grazing that are overlooked and are
difficult to quantify. Through proper management practices invasive species can be controlled as
well as habitat restoration. Diminishing the number of invasive plant species allows for natural
flora to come back and thrive. The increased natural flora can also help larger natural species
such as elk, deer and upland game animals. The fences put up to contain livestock also provide
assistance in protecting riparian areas. Non-use values such as these are difficult to place a price
tag on but should also be considered in the U.S. grazing fee debate.
Command and Control styles of policy can be very controversial. Even as the government
tries to mix types of policy making it is still a very top down regulated style. Not all parties will
be content, but the Forest Service and Bureau of Land Management are multiple use agencies

and are directed to provide for some commercial use of the lands, and are expected to provide
resources such as food and fiber for the benefit of the Nation. The current system protects against
majors problems such as overgrazing, watershed destruction and soil compaction. Although
other values may not be protected by the use federal grazing fees the net benefit to society is
being maximized.

Works Cited
Collins, A., & Constantino, G. (1990). Fair grazing fees on public lands. Rangeland, 12(5), 278279.
Fritz, M. (2008). Where will it end?. Beef, (10)3, 22
Nezzaro, R. (2005). Livestock grazing. Report to Congressional Requestors, (pp.1-3).
Obermiller, F., & Lambert, D. (1984). Costs incurred by permittees in grazing livestock on
public lands in various western states. Manuscript submitted for publication, Department of
Agriculture and Natural Resource Economics, Oregon State University, Corvalis, Oregon.
Rimbey, N., & Torell, L. (2011). Grazing costs: Whats the current situation?. Manuscript
submitted for publication, Agricultural Economics, University of Idaho, Moscow, Idaho.
Retrieved from http://www.cals.uidaho.edu/aers/PDF/AEES/2011/GrazingCost2011.pdf
United States Bureauof Land Management Caballo Research Area. (1990). Resource
management plan amendment: Mcgregor range. (pp. 10-15). Michigan: University of Michigan
Library.
USDI and USDA. 1977. Study of fees for grazing livestock on federal lands: A report from the
Secretary of Interior and the Secretary of Agriculture. October 21, 1977. Washington, D.C.
Workman, J. (1988). Federal grazing fees: A controversy that wont go away. Rangeland, 10(3),
128-130.