UPDATE: On February 4, 2016, President Obama proposed a permanent reauthorization of the Land and Water Conservation Fund in his 2017 budget request. If approved by Congress, the fund would receive $900 million annually to fund recreation and conservation of public lands. The LWCF was previously re-authorized for the next three years as part of Congress’ year end budget bill, which passed in December of 2015. Source: The Hill.
This technical piece provides background and a policy recommendation to reauthorize the expired Land and Water Conservation Fund, a mechanism to fund public land acquisition and recreation in the United States. The Act to authorize the fund expired in September 2015.
The Land and Water Conservation Fund (LWCF) Act of 1964 authorized the appropriation of up to $900 million annually for public land acquisition and support of state recreation programs. Funding was derived from offshore oil and gas royalties and had to be approved annually by Congress. In September 30, 2015, the Act expired. In the 50 years since its passage, the Fund has raised $16.8 billion and provided economic and ecological benefits to society. The returns on investment of the Fund has been at least 4 to 1. Several bills to reinstate the LWCF have been proposed recently. The PARC (Protecting America’s Recreation and Conservation) Act would reinstate the Fund but reduce spending on federal land acquisition and increase spending for state recreation and offshore oil exploration. Bills to permanently reauthorize the LWCF have also been proposed in the House (H.R. 1814) and Senate (S. 338). Based on the analysis of these policy alternatives, I recommend that Congress permanently authorize the LWCF by passing H.R. 1814/S. 338. This will allow society to realize the maximum benefits and avoid the risk of a future funding gap.
Background of the Land and Water Conservation Fund
To address the market failure of the undersupply of public lands (generally a public good), the Land and Water Conservation (LWCF) Act was passed in 1964[i]. This Act established a funding mechanism which allocated a portion of revenues from oil and gas drilling in the Outer Continental Shelf and directed that funding to public land acquisition and recreational activities. [ii] The law allowed the Fund to raise up to $900 million annually. The level of funding was determined and approved by Congress each year. Historically, Congress had approved only portion of the LWCF; the fund could have raised $36.2 billion to date, but only $16.8 billion was allocated to the Fund itself.[iii] The remainder was diverted to other appropriations in the general federal budget. The LWCF appropriated funding toward three purposes: land acquisition by the four federal land management agencies (the National Park Service, Fish and Wildlife Service, Bureau of Land Management, and Forest Service), matching grants for states to support recreational activities, and other federal programs.[iv] On September 30, 2015, the LWCF expired. Several bills to reinstate the LWCF with modifications or with a permanent funding mechanism have been proposed in Congress in 2015.
Benefits and Costs of the Land and Water Conservation Fund, 1965 – 2015
The Land and Water Conservation Fund allocated over 41,000 individual funds[v] which have contributed to the protection of 4.5 million acres of federal[vi] and 2.6 million acres of state and local lands[vii]. These public lands are located in all 50 states, the District of Columbia and US territories in 98% of counties in the United States.[viii] In terms of political feasibility, the LWCF is supported by a coalition of state, local, and national conservation and recreation organizations[ix] and received bi-partisan support in Congress from 1965 to 2015.
The LWCF is a primary source of funding for the four federal land agencies which provide recreational opportunities to the American public. Recreation contributes to the economy directly and indirectly; park-goers spend money at local tourism outlets (hotels, restaurants) and purchase recreational equipment to support their activities. The Fish and Wildlife Service estimated that recreational activities related to wildlife hunting on public lands contributed $3.7 billion to the economy in 2011 alone.[x] The Federal Interagency Council on Recreation found that recreational activities on public lands (national parks, wildlife refuges, forests, and others) supported 880,000 jobs in 2012 alone[xi].
Funding for the LWCF is generated from the royalties (e.g. revenues) from offshore oil and gas drilling activities. Royalties that must be paid from offshore drilling activities in the U.S. range from 12.5 to 18.75% and are determined by a law separate from the LWCF.[xii] A portion of these royalties (up to $900 million annually) has gone to the LWCF while a majority of the remainder goes to the US Treasury. The other funds from oil royalties support the Historic Preservation Fund, the states where the oil operation was leased, and other allocations.[xiii] Royalties are charged whether or not the LWCF exists. Hence, a change in the law to reinstate or cancel the LWCF does not affect oil company’s profit margins nor the price of oil. Without the LWCF, the revenues that would normally cover the fund are used within the general federal budget.
A 2010 report analyzed the return on investment of the LWCF and found that for every dollar spent through the fund, there was a $4 return in economic value.[xiv] This value was estimated based on a suite of ecosystem services provided by lands acquired through the LWCF including water quality protection, habitat provision, carbon sequestration, erosion control, aesthetics, and others. This does not include direct economic values for recreation, tourism, historical resources, and those other benefits which cannot be valued in dollar terms including existence and bequest value. Hence, the return on investment in the LWCF is likely greater than four to one.
Policy Alternative 1: Reinstate the LWCF with modifications with the PARC Act
The PARC (Protecting America’s Recreation and Conservation) Act was introduced in the House in October 2015. This Act aims to reauthorize the LWCF at the same level ($900 million annually) for the next seven years but reforms the allocation by reducing funding for federal land acquisition (not more than 3.5% as compared to the previous 60%), and increasing funding for state recreation projects (not less than 45% as compared to the previous 25%).[xv] The PARC act also allocates funding toward promoting offshore energy exploration, innovation and education (not less than 20%) as well as other programs.[xvi] The breakdown of these allocations suggests that the PARC Act would eventually indirectly increase offshore drilling, but would not increase the amount of royalties diverted to the LWCF itself. This effects the efficiency of the Fund in society; by promoting additional drilling and carbon emissions, the externality of carbon pollution will be less internalized with the PARC Act than with the original LWCF.
The political feasibility of the PARC Act is currently low. Although it has been promoted by the chair of the House Committee of Natural Resources, it is opposed in the house Democrats and many Republicans[xvii] as well as by the White House.[xviii] In addition, it is opposed by prominent advocacy groups. John Gardner from the National Parks Conservation Association stated that “the PARC Act does not remotely constitute a reauthorization of LWCF, as it seeks to systematically dismantle the program and, for purposes of federal land acquisition, render it effectively worthless.”[xix]
Policy Alternative 2: Reinstate the LWCF with permanent funding
Efforts to reinstate the LWCF with permanent funding have been introduced in Congress: H.R. 1814 in the House (which currently has 196 cosponsors) and S. 338 in the Senate (which currently has 18 co-sponsors). These bills would reinstate the LWCF and allow for permanent funding; this would avoid the need for Congress to annually reauthorize and approve the fund. The only allocation specification that the bill makes is that “not less than 1.5% …be used for projects that secure recreational public access to Federal public land.”[xx] The remainder of the appropriations would remain as in the original LWCF.
Benefits of these bills are expected to be in line with the historical benefits as provided by the LWCF – at least a 4 to 1 return on investment. The benefits provided by the LWCF from 1965 to 2015 is a testament to the likely success of a permanent reauthorization and dedicated funding of the program. If passed, permanent reauthorization would avoid future gaps in the flow of funds from LWCF as there has been since September 2015. In addition, the political feasibility is high with bipartisan support in Congress and the support of a large coalition of organizations.[xxi] It is unclear in the language of the bill whether there would be guaranteed full funding ($900 million) annually. If it is not guaranteed, then an inconsistent funding stream of a future LWCF constitutes a limitation of its effectiveness.
To correct the market failure of the undersupply of public lands and to provide net benefits to society, the LWCF should be reinstated with permanent funding (H.R. 1814/S. 338). These bills avoid the limitations of the PARC Act which would contribute to the externality of carbon pollution. Benefits of permanent reauthorization of the LWCF outweigh the costs to society by at least 4 to 1. Passage of S. 338 and H.R. 1814 is possible given the bi-partisan support from both chambers of Congress and from the Executive Branch. Language in the bill should be clarified as to whether the fund will be guaranteed to be financed fully ($900 million annually). Permanent authorization would avoid a gap in the funding stream. A complete, consistent, and permanent funding of the LWCF would deliver maximized net social benefits to the American public.
[i] Act of September 3, 1964; P.L. 88-578, 78 Stat. 897. 16 U.S.C. §§460l-4, et seq
[ii] Hardy Vincent, Carol. 2014. Land and Water Conservation Fund: Overview, Funding History, and Issues. Congressional Research Service. Retrieved from https://www.fas.org/sgp/crs/misc/RL33531.pdf (accessed 12/1/2015).
[v] Walls, Margaret. 2009. Federal Funding for Conservation and Recreation: The Land and Water Conservation Fund. Resources for the Future. Retrieved from http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-BCK-ORRG_LWCF.pdf (accessed 11/27/2015).
[vi] Zinn, Jeffrey. 2005. Land and Water Conservation Fund: Current Status and Issues. Congressional Research Service Report for Congress. Retrieved from http://nationalaglawcenter.org/wp-content/uploads/assets/crs/RS21503.pdf (accessed 12/2/2015).
[vii] Walls, Margaret. 2009. Federal Funding for Conservation and Recreation: The Land and Water Conservation Fund. Resources for the Future. Retrieved from http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-BCK-ORRG_LWCF.pdf (accessed 11/27/2015).
[x] Based on calculation from report: 4.9 million people hunting on public lands in 2011 multiplied by trip expenditures per hunter of $762. Source: U.S. Department of the Interior, U.S. Fish and Wildlife Service, and U.S. Department of Commerce, U.S. Census Bureau. 2011 National Survey of Fishing, Hunting, and Wildlife-Associated Recreation
[xi] Federal Interagency Council on Recreation. 2014. Fact Sheet on Outdoor Recreation Jobs and Income.
[xii] Government Accountability Office. 2010. Federal Oil and Gas Leases: Opportunities Exist to Capture Vented and Flared Natural Gas, Which Would Increase Royalty Payments and Reduce Greenhouse Gases. Retrieved from http://www.gao.gov/new.items/d1134.pdf (accessed 12/2/2015).
[xiv] Trust for Public Land. 2010. The Return on Investment from the Land and Water Conservation Fund. Retrieved from https://www.tpl.org/return-investment-land-and-water-conservation-fund (accessed 11/29/2015).
[xv] House Committee on Natural Resources. 2015. The Protecting America’s Recreation and Conservation Act (PARC). Retrieved from http://naturalresources.house.gov/uploadedfiles/nr_parc.act_11.6.2015.pdf (accessed 12/1/2015).
[xvii] Henry, Devin. 2015. GOP infightiS.ng breaks out over conservation bill. The Hill. Retrieved from: http://thehill.com/policy/energy-environment/259728-gop-in-fighting-breaks-out-over-conservation-bill (accessed 11/29/2015).
[xviii] Cama, Timothy. 2015. Obama official objects to GOP conservation bill. Retrieved from http://thehill.com/policy/energy-environment/260588-obama-official-objects-to-gop-conservation-bill (accessed 11/22/2015).
[xix] Retrieved from https://www.npca.org/articles/892-position-on-the-parc-act.
[xx] S. 338 – A bill to permanent reauthorize the Land and Water Conservation Fund. Retrieved from https://www.congress.gov/bill/114th-congress/senate-bill/338 (accessed 12/1/15).