HIGH PLAINS GRIFTERS
part 2 of 2
Concerned about the massive erosion washing billions of tons of soil off private lands each year, Congress in 1985 enacted several sweeping conservation measures. CRP was by far the biggest.
The idea was simple. In exchange for taking "highly erodible" cropland out of production, the government would pay a farmer rent for ten years. Under CRP, the average payout per acre came to about $40 a year. More than 36 million acres are currently enrolled in the program.
Mired in a deep economic slump, Colorado took advantage of CRP faster than any other state. In the first two years of signups, the state's farmers enrolled 1.3 million acres in the program; they eventually removed about 2 million acres from production. Of the ten counties in the country that receive the most CRP payments, five of them--Baca, Washington, Kit Carson, Weld and Kiowa--are in Colorado. And although the legislation specifically limited enrollment of a single county to 25 percent of its available cropland, more than a dozen Colorado counties exceeded that.
Congress tried to put other limitations on the program. For example, a single farmer was eligible for no more than $50,000 a year in CRP payments. But inventive farmers discovered that restriction was not difficult to get around.
Take Four MVR Farms, for instance. It had ten partners, so each of them qualified for close to the $50,000 limit. As a result, the company's total contract came to nearly a half-million dollars a year in CRP subsidies. In fact, for a time Colorado boasted the two largest CRP contracts in the country: Four MVR Farms and a farm in Baca County. (The Baca County contract was later broken up because of "inconsistencies," according to a county conservation worker there.)
In the ten years it has been in existence, the Conservation Reserve Program has enjoyed incredible support. That's primarily because, as advertised, it did prevent erosion.
"That's not just pie-in-the-sky," says Dean Loukonen, who works as a soil specialist in the Natural Resource Conservation Service's Eads field office, in Kiowa County. "The land here was deposited by the wind, and it can be blown away by wind. I remember times we'd call off board meetings because it was so dusty. We haven't seen that since CRP. So it did tie down the land."
The program also improved water quality. And it is tremendously popular with hunters, who have found that land left untouched by tractors and combines is a big attraction to deer and other game animals.
Yet, as the Conservation Reserve Program approaches its expiration date this year, critics have raised tough questions, starting with the cost. At $19 billion, "CRP is an expensive way to reduce the environmental problems linked to agricultural production," a 1993 report prepared by the General Accounting Office noted. "Other conservation initiatives use strategies that cover more acres of cropland, cost less, and provide more enduring benefits."
And by deciding to rent the land for a decade rather than buy it outright--in many instances for several times what the purchase price would have been--the government has painted itself into a corner. In local surveys, many farmers have said that if Congress votes not to continue the CRP payments, then they will plow up the land. That would start the erosion process all over again. "These guys aren't just [keeping the land idle] because they're nice guys," Loukonen points out. "There's got to be something in it for them."
Although it is talked about less often, the Conservation Reserve Program had another purpose: to bolster the sagging farm economy.
"According to USDA officials," the 1993 GAO report states, "it is important for CRP to meet its target enrollments to satisfy the program's other objectives, including curbing the production of surplus commodity crops and supporting farmers' incomes."
Put another way: "The other reason for CRP was to buoy really low wheat prices," explains Jim Miller, a spokesman for Colorado's Department of Agriculture.
The money being sent to farmers made the program popular with more than just environmentalists. Local bankers liked it, too. "There's no doubt that CRP has put money into the farmers' pocket," says Michael Lening, president of the Federal Land Bank in Lamar, in Prowers County. "One of the things we look at when we give a loan is the ability to repay. And CRP gave a steady income that farmers could rely on and that we could rely on. That definitely made a difference."
That steady flow of money has inspired many bankers and Main Street merchants to lobby hard to convince Congress to renew the program. Of course, for local communities to benefit from the Conservation Reserve Program as intended, the government money must be sent to local farmers. It hasn't always worked out that way.
Thanks to Four MVR's--and, for a brief time, Davis's--aggressive experiments in Colorado farming, by late 1985 the old Beaty ranch was eroding at a rapid enough rate to qualify for the government's sweeping new soil-conservation program. "If they'd kept it as a ranch," observes Harlan Fletcher, "there wouldn't have ever been any CRP on it."
In the fall of 1986, according to Department of Agriculture records, the Four MVR Farms partners agreed to idle nearly 12,000 acres for ten years, thus qualifying for $402,000 in annual CRP payments. Several months later, in March 1987, the Canadians sold the entire spread to a Missouri corporation called Interstate Agriservices, Inc. It was owned by a man named David Davenport.
Among Colorado agricultural officials, Davenport is a legend. A veterinarian by training, today he sells life insurance out of an office in Lee's Summit, a suburb southeast of Kansas City. He, perhaps more than anyone, recognized the value of land with generous CRP payments rolling in. And he's not ashamed of it.
"At one time," he says, "I controlled 50,000 acres of CRP land across the country. Thirty-three thousand to 34,000 acres of that was in Colorado alone, in Greeley, Kit Carson, Springfield." At one point, he adds, government subsidy checks from CRP provided him with about $3 million a year.
Davenport's biggest check was for the old Beaty ranch, a property that he says was only worthwhile because of the government contract. "The value of that land was lousy, about $75 to $80 an acre," he remembers. "But with the advent of CRP, it enhanced to $170 or $180 an acre. The CRP contract more than doubled the value of the land."
With a little digging, Davenport discovered more government subsidies for his new Lincoln County ranch. They came in the form of something called the 0/92 program.
The years between 1981 and 1985 were a magical period for American farmers. That was the window of time that Congress decided was crucial in determining who would be eligible for huge agricultural subsidies that became law as part of the 1985 Farm Bill.
For rural landowners, the key to millions of dollars in government aid was what is known as a crop base. That's the land government officials calculate has been worked enough to be considered farmland for the purpose of future subsidies.
Fortunately for Davenport, establishing a crop base was not a particularly onerous task. In fact, the two years' worth of crops planted by Four MVR Farms was enough to establish a crop base on thousands of acres of land that the Canadians had been unable to enroll in CRP due to the $50,000-per-person limitation.
That base proved lucrative. When Davenport purchased the Lincoln County land, crop prices were depressed. Congress decided that one way to help farmers earn a living was to cut the supply of crops, which would raise prices. So it enacted the 0/92 program to provide an enticement for farmers not to produce.
Here's how it worked: The government calculated a farmer's base, the projected yield of an imaginary crop on that base and a good market price to peg the value of what the farmer might have earned if everything had gone well. Then it paid him 92 percent of this virtual harvest.
Davenport qualified 3,100 acres of the old Beaty ranch for the 0/92 program. As a result, according to Agriculture Department records, between 1987 and 1988 he received $67,000 in government payments for not farming the land he had no intention of working in the first place.
Meanwhile, Davenport got busy lining up his CRP payments. This required some maneuvering. The toughest restriction to overcome was the $50,000-per-farmer payment limitation. Tom Wingfield, now Colorado's acting executive director of the Consolidated Farm Service Agency, remembers how Davenport worked the deal.
First, he says, Davenport formed a partnership called, coincidentally, Four MVR Farms--the same name as the Canadian company he purchased it from. "I believe he did that to deliberately confuse things," Wingfield says. Davenport replies that he selected the name "for no reason; I just did it." Also coincidentally, Davenport's Four MVR Farms had ten partners, thus making it eligible for all of the land the ten Canadians had placed in the program.
All that was fine. What local agriculture officials didn't like was that, even though Davenport had ten partners, all of the government's CRP payments seemed to be going to Davenport. Even Davenport concedes that his partners "didn't do anything--they just collected the money."
This might not have been discovered if Davenport hadn't tried to get even more cash out of the Conservation Reserve Program. Although the Canadians' original 12,000-acre contract was worth a hefty $402,000 in annual CRP payments, Davenport calculated he could do better. He requested the government send him a $472,000 yearly CRP subsidy check.
When they got the request, Wingfield says local ag officials revisited the file. They found yet another coincidence: Davenport's contract with his ten partners seemed to have the land reverting back to him at the exact time the CRP contract was due to expire. That left officials with the distinct impression that the only purpose of Davenport's partners was to funnel CRP payments to Davenport for the life of the program.
Federal officials launched an investigation. After a lengthy review, they agreed that all the CRP money was going not to the ten partners, but only to Davenport. So instead of giving Davenport the bigger subsidy he'd requested, they reduced the CRP payment to $50,000--the limit for a single person. They also requested that Davenport refund some of the $400,000 he'd already received.
Davenport appealed. In late 1989 the Department of Agriculture and Davenport reached a settlement: He could keep the money, about $450,000. But he had to withdraw from the CRP contract.
Davenport gave up the Beaty ranch in lieu of foreclosure in September 1989. On the same day, it was turned over to another Missouri concern, Colorado Farms, which has owned it ever since.
Like Davenport's Four MVR Farms, Colorado Farms has ten partners. Unlike Davenport's organization, "they were more careful" about meeting the USDA's requirements for CRP payments, says Bill Fritzler, who directs the Lincoln County Consolidated Farm Service Agency.
Colorado Farms' registered agent, Tom Otke, lives in Chillicothe, Missouri, a town of about 9,000 people ninety miles northeast of Kansas City. He owns a series of retirement homes in the area. One of them, Indian Hills, is in Chillicothe itself.
Otke did not return numerous phone calls. Still, while no one from Colorado Farms is talking, various Agriculture Department contracts show that Colorado Farms has done well by its Lincoln County investment.
Start with CRP payments. Government records show that for every year starting in 1989, when it purchased the old Beaty ranch for $2.2 million, the Missouri partnership has received $472,000. After the 1995 CRP check arrives this October, that will total up to just over $3.3 million.
In addition, Colorado Farms has continued to receive the 0/92 payments that Davenport qualified the land for in 1987. Three years ago the USDA changed the program to 0/85--meaning it pays only 85 percent of the money the land might have earned if it were producing good crops. Nevertheless, according to government records, the partners of Colorado Farms have collected a total of $138,500 between 1989 and 1995.
And that isn't all of the taxpayer money the government has spent on the Beaty ranch. The CRP's goal was to reduce erosion, so landowners had to agree to plant native grasses and trees on the enrolled property. Because the Lincoln County spread is such a huge piece of ground, and because the Canadians plowed up so much of it, the job wasn't easy. Replanting was required every year from 1987 through 1991.
Today the ranch looks spectacular. A tour of the sprawling property during a sun-soaked morning reveals a beautiful cover of blue and sideoats gramas, switchgrass and western wheat. Blue, yellow and orange wildflowers are fanned by a soft breeze. "You're seeing this country with its Sunday clothes on," says Paul Jenkins. "We've had quite a bit of moisture lately." A lone antelope moves across the horizon.
Such bliss doesn't come cheap. Government records show that replanting the old Beaty ranch has cost about $738,000. The government keeps such records, because in addition to the annual rental payments, as part of the Conservation Reserve Program it agreed to shoulder half the costs of reseeding. So covering the Beaty ranch with its splendid natural blanket cost taxpayers another $370,000.
In retrospect, it all seems silly. "It was definitely a pretty shady deal from anybody's standpoint, even if it was happenstance," says Dean Loukonen, the Kiowa County soil technician. "To break it out of grassland and then two years later pay to plant it over again--it's just ludicrous from a taxpayer's standpoint."
"The taxpayers are throwing money down a rathole on this land," adds John Beaty. "That thing would've done all right as a cattle ranch. We've had an unbelievable run in the cattle business lately. If I was still on there, I'd be doing great, and without any government subsidies."
Instead, it looks as though the government will keep paying. If Congress decides not to renew the Conservation Reserve Program, whoever owns the Beaty ranch could simply plow it under again. Once established, agricultural bases are permanent, so the owners would continue to receive the 0/85 payments. The farm could also become eligible for "deficiency payments," in which the government makes up the difference between actual market prices for crops and what it determines the crops should cost.
Or CRP could be extended, which seems more likely. The question is now being tackled by the Resource Conservation, Research and Forestry Subcommittee of the House Agriculture Committee. The subcommittee is chaired by Colorado's own Representative Wayne Allard, who has more than a passing interest in CRP.
According to an analysis of the program performed last year by a Washington, D.C., organization called Environmental Working Group, Allard's district in eastern Colorado receives more CRP money than all but four other Congressional districts. By the time the original program expires at the end of this year, about $821 million in direct government payments will have flowed to people who own farmland in his Fourth Congressional District.
One of Allard's employees, Doug Benevento, is the staff director of the subcommittee. He predicts that the Conservation Reserve Program will be extended for another decade, although it may be scaled back slightly. "CRP has been very important to the Plains region, because it has reduced soil erosion a great deal," he says. "We think it's a good program."
So, apparently, do the owners of Colorado Farms, who stand to qualify for another ten years of lucrative CRP subsidies. Recently, the Missouri company put the land up for sale, according to Ernie Hammer, the Otero/Crowley County conservation officer. Hammer says he considered trying to buy the place for ranching. It was listed for $3 million. But several months ago, with CRP appearing increasingly likely to continue, the asking price was bumped up to $5 million.
end of part 2
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