Are the Oregon Ranchers Just Looking for More Subsidies?

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Are the Oregon Ranchers Just Looking for More Subsidies?

January 4, 2016

When you own 28 percent of all the land640 million acres — in the United States, you're likely to end up with some neighbors who don't care for how you do business.

This past weekend, a group of armed protesters took over a federal building in rural Oregon in protest over the jailing of two ranchers who have been feuding with federal officials for years over the use of land and the use of controlled burns in rural areas.

The American Prison State 

The two ranchers, Dwight and Steven Hammond, were sentenced on October 7 to five years in prison for arson. The Hammonds had initially been sentenced to much shorter terms, but the US government, always enthusiastic in its drive to put people in cages for long periods of time, demanded that the Hammonds serve five years each. It's difficult to see why monetary restitution and fines could not simply be employed in this case, but in the United States, lengthy prison sentences are seen as a solution to a nearly endless list of infractions.

A detailed reading of the facts in the matter do indeed suggest that the Hammonds were indeed capricious in their setting of fires and may have endangered the lives of firefighters on neighboring lands. But, given than no one was injured, a five year prison sentence should raise the eyebrows of anyone who possesses a sense of proportionality.

Even more disturbing is the fact that the Hammonds were prosecuted using a 1996 anti-terrorism law, even though the fire obviously had nothing at all to do with terrorism.  Notes Think Progress: “the federal anti-terrorism law that prosecutors used to punish the fires includes mandatory minimum sentences of 5 years for fires that damage public property but cause no injury or death. After a series of appeals, the Hammonds were re-sentenced in October of 2015 to the full five years required by that 1990s statute.”

This is a helpful demonstration of how laws justified on grounds of going after terrorists or mobsters (i.e., the RICO Act) are eventually turned against ordinary people who commit ordinary legal infractions.

Federal Grazing Leases Are a Sweet Deal for Ranchers

The Hammonds don't deserve hefty prison sentences. But they may not deserve our sympathies otherwise. 

While the event that touched off the current stand-off was the imprisonment of the Hammonds, the issue stems from a larger issue of use of federal lands, and in many ways, the current conflict harks back to 2014's Bundy Ranch standoff precipitated by the Bundy family's refusal to pay federal grazing fees.

[RELATED: “Ranchers and Empire in the American West“]

Those who have been around a while may recall that both cases are reminiscent of the so-called Sagebrush Rebellion of 1970s and 1980s.

There is always the temptation to immediately side with whomever it is that's on the receiving end of the federal governmen'st heavy-handed court system and regulatory state. However, in none of these cases have the private sector ranchers been advocating for anything we might call “free markets.”
Indeed, the federal grazing programs have long been a subsidy scheme for a small number of favored ranchers.

We often hear about grazing fees as if there were some kind of ordinary market transaction going on between ranchers and federal land bureaucrats. But, this is hardly an apt description of what's going on.

In fact, federal grazing fees have virtually nothing at all to do with any functioning marketplace, and we can see this in the fact that fees have been essentially unchanged since 1978. In this research paper from the early 1990s, the author notes that federal law set the federal grazing rate at $1.23 per “animal  unit month” (AUM). The rate has hardly changed since then. As of early 2013, the Bureau of Land Management and the Forest Service were charging $1.35 per AUM. That's an increase of 9.7 percent over more than 30 years.

How much have actual market rates for commercial real estate and animal feed increased since 1978? I'm going to guess it's more than 9 percent. If we look at the CPI, for example, we find that it has increased about 238 percent between 1978 and 2013.


Ranchers who use federal lands are getting an excellent deal. They are getting such a good deal, in fact, that we might say they are being subsidized by everyone else.

After all, it's considerably cheaper to lease grazing land from the Forest Service (FS) and Bureau of Land Management (BLS) than from anyone else. An analysis by the Congressional Research Service concluded that while federal grazing lands cost under $2 per AUM,


State and private landowners generally seek market value for grazing; in 2004, state fees ranged from $1.35 to $80 per AUM and private fees ranged from $8 to $23 per AUM.4 In 2010, state grazing fees continued to show wide variation, ranging from $2.28 per AUM for Arizona to $65-$150 per AUM for Texas. Moreover, some states do not base fees on AUMs, but rather have fees that are variable, are set by auction, are based on acreage of grazing, or are tied to the rate for grazing on private lands.5 The average monthly lease rate for grazing on private lands in 11 western states in 2011 was $16.80 per head.

Influential ranchers are well aware of the advantages of federal control of grazing lands. This is why many ranchers have opposed state-level efforts to have state agencies take over federal lands. The Missoulian reported in September 2014:

The U.S. Bureau of Land Management manages 7.8 million acres of land in Montana and all but a few hundred thousand acres are leased for grazing at the incredibly low rate of $1.34 for enough forage to feed an animal for a month. The U.S. Forest Service also leases grazing land for the same low price. 

Montana also leases grazing land using the same forage formula, but the state charges no less than $11.41, with the possibility of the price being driven higher by competitive bidding. 

The price difference between the state and federal government, as well as the difference in leasing terms, has ranchers pulling back on the reins as Republicans, who have made a state takeover of federal lands part of their party platform, ride ahead.

And Montana's grazing prices are relatively cheap. KCET reports that a 2005 GAO study found that “rancher-friendly Texas” was charging $150 per AUM on some of its state lands.

Unlike the Federal government, private landowners and most states have to balance their budgets most of the time, which leads to higher lease rates all around. The rock-bottom lease rates mean the federal government runs at a loss. According to the CRS:

BLM and the FS typically spend far more managing their grazing programs than they collect in grazing fees. For example, the GAO determined that in FY2004, the agencies spent about $132.5 million on grazing management, comprised of $58.3 million for the BLM and $74.2 million for the FS. These figures include expenditures for direct costs, such as managing permits, as well as indirect costs, such as personnel. The agencies collected $17.5 million, comprised of $11.8 million in BLM receipts and $5.7 million in FS receipts.  

However, it's hard to claim that securing a federal grazing lease is not a bargain for the rancher. This is especially true when we consider that these leases are not sensitive to up-bidding from other ranchers. That is, ranchers who currently hold 10-year federal leases do not have to compete with other ranchers to renew their lease. According to the General Accounting Office:

Under FLPMA, the Taylor Grazing Act, and the Granger-Thye Act, BLM’s and the Forest Service’s permits and leases are set for not more than 10 years and can be renewed without competition at the end of that period, which gives the permittee or lessee a priority position against others for receiving a permit or lease — a position called “preference.”

In the real world (and in the world of state-level and private-sector grazing) people who want to lease lands must compete with others who might bid up the price of the lands in question. This is not the case with BLS and Forest Service lands which shield the current holder of the lease from competition.

Thus, it should surprise no one when powerful ranchers become concerned about possible privatization of lands or state takeovers of federal lands. Such changes could mean an end of the gravy train.

The Problem of Federal Lands

But why do we keep hearing about these perennial conflicts with federal land management bureaucrats? Well, the answer might lie in the fact that the federal government owns so many acres in western states:


The Federal government owns a majority of the land in five US states, and the current standoff is taking place in a state where the federal government owns nearly 53 percent of all land.

And, only a tiny portion of this goes to “national defense” agencies. Of the 640 million acres owned by the Federal government, only 14 million of these acres are administered by the Department of Defense. Nearly all of these lands are administered by agencies dedicated to wildlife, forestry, and other natural resource management.

Thus, it should be no surprise when we hear that, yet again, some ranchers are having problems with the nation's largest landowner: the federal government.

The federal government likes to pretend that federal lands belong to “all of us” and that they are “your” national forests. But, of course, they are not “yours” or “ours” at all. They fact that federal lands were closed with armed guards stationed at the entrances during the last government shut down tells you all you need to know about whether or not these lands belong to you.

As Ilana Mercer recently noted, “the public” cannot own property at all:

“The public” is an abstraction. In logic, an abstraction cannot possess property. To borrow from libertarian political philosopher Murray Rothbard, “There is no existing entity called 'society'— there are only interacting individuals.” To say that “society” should own property in common is essentially to say that “government bureaucrats” should own property, in our case, at the expense of the dispossessed homesteader.

On the other hand, it's best to not jump to conclusions about who the “homesteaders” are. During the Bundy standoff, many advocates for free markets were claiming that the Bundy family had “homesteaded” the disputed land, and that it should be handed over to them. Given the realities of federal grazing leases, however, this is not at all clear. Given that the Bundys did not have to compete with other ranchers for leases and that they were likely leasing at below-market rates (a subsidized price that the Bundys even refused to pay) it's not at all clear that the Bundys would in fact be the rightful owners in an unhampered market.

The details of the Hammond case are still coming out, but if the Hammonds have been enjoying a deal similar to that of the Bundys, it's unclear as to why the protestors — who are occupying a building they have obviously not homesteaded — should get a free pass with principled free-market advocates. In cases like these, we often find that the resistance to federal control is  just a desire to trade in federal bureaucrats for more local bureaucrats who are on friendlier terms with the ranchers in question, and more open to their demands for continued subsidies.

Decentralize Now 

As I've noted in the past, a decentralization of land ownership down to more localized levels is a good thing. There's nothing special about the state level, though, and while moving to state-level public lands is a step in the right direction, it is only that.

For example, free-market critics of those who want to reduce the extent of federal lands often correctly  point out that the anti-federal activists aren't really for private ownership. They just want state control instead of federal control. One might ask “what's so special about state lands?” It's a fair question, and the answer should lie not in mindless appeals to the US constitution, but in the fact that state government are closer to the people, more likely to respond to local concerns, and more responsible to the people who are actually affected by how government-owned lands are used.

And yes, there's nothing magic about the state level. If political realities did not preclude it, “public lands” such as national parks should be further decentralized to become “county parks” or even lands owned by even more local entities such as private homeowners associations and municipalities. The City of Denver, for example, owns 14,000 acres (22 square miles of land) outside the city limits as part of a system of mountain parks for the use of Denver taxpayers.  If one has a problem with how these lands are used, it's a lot cheaper and easier to take a trip to city hall and get a meeting with council members than it is to hire a DC lobbyist to influence a Senate full of multimillionaires two thousand miles away.

“The public” is indeed an abstraction, and it becomes more of an abstraction the larger “the public” gets. Any sort of communal ownership, whether it's a local government or a green belt owned by a homeowners association, comes with its own set of problems. But the worst possible model of all may be a block of 600 million acres controlled by a set of unaccountable bureaucrats living far away from the lands they control.

There is indeed a big problem with the status quo. Will rushing to the aid of freeloading and negligent ranchers change anything for the better? It's unlikely.

Note: The views expressed on are not necessarily those of the Mises Institute.

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