Environmental markets should guide federal land use

The free-market idea that environmentalists should be allowed to bid for leases on federal land — competing in a market against cattle ranchers, loggers and oil companies, but aiming to conserve landscapes — was once considered fringe. But the concept is finally being treated seriously by the Bureau of Land Management (BLM), the largest public land agency and the overseer of one-tenth of all land in the United States.

Last week, the BLM closed public comments on a draft rule that would place conservation “on equal footing” with grazing and energy development — reversing the agency’s long history of giving leases only for traditional commodity uses. The rule’s key provision would grant the BLM the authority to issue “conservation leases” to promote land conservation and ecological restoration. 

The proposed rule builds from a recent analysis in the journal Science authored by a team of economists (including me) and law professors. We point out that environmentalists have been precluded from federal auctions for grazing land and minerals due to “use it or lose it” stipulations common both here and around the world. Conservationists generally cannot lease public resources with the intent to leave them be. Examples include the “diligent development requirement” of the 1920 Mineral Leasing Act, requiring lessees to have an intent to produce, and the Taylor Grazing Act of 1934, which requires allotments to be grazed rather than left idle. 

Use-it-or-lose-it rules are antiquated. They were put in place more than a century ago to encourage development of the American frontier. Today, they prevent willing buyers from expressing their preferences for conservation via market bidding as they readily do on private lands.

The proposed BLM rule, if implemented to truly support markets, can modernize federal land policy. Markets would reduce land-use conflict by giving people an alternative way to pursue conservation rather than pushing for it via more regulation, top-down administration and litigation — which “is a no-win for everyone,” admits a practitioner at a large environmental group. Competitive markets are already in use on state trust land across the American West, where managers have a legal mandate to maximize revenue and thus consider all competing bids. Open bidding gives state land managers credible information about which uses are highest value rather than having to rely on lobbying pressure to gauge this, as is done in the federal arena. 

To reduce conflict and improve federal land management, the final BLM rule will need to follow two market-supporting principles. First, the agency must honor existing grazing and mineral rights. If conservation leasing is used as a political and administrative tool for undoing previous commitments, it will simply provoke more conflict. Any erosion in the security of traditional leases may prompt future efforts to erode rights created by conservation leases, leaving us with the same political football that true markets with secure rights could end.

Second, voluntary markets, not politics, must set prices for conservation leases. Auctions for leases with open participation achieve this. The final rule should also allow for voluntary agreements that use existing grazing and mineral rights as a basis for private contracting. A conservation group should, for example, have the ability to negotiate with a lease-holding rancher to alter grazing practices to benefit wildlife, reduce predator conflicts or restore wetlands.

Allowing markets to operate on federal land would put different American values on more equal footing, thereby reducing conflict. This might harm some political and special interests in the short run, but the change will be a win-win for free markets and for the environment.

Dominic P. Parker is an economist at the University of Wisconsin-Madison, a senior fellow at the Property and Environment Research Center, and the Ilene and Morton Harris visiting fellow at Stanford’s Hoover Institution.