LETTER FROM DEPARTMENT OF AGRICULTURE

DEPARTMENT OF AGRICULTURE, Washington, D. C., December 19, 1957.

Hon. CLINTON P. ANDERSON,

United States Senate.

DEAR SENATOR ANDERSON: In accordance with the suggestion made in our reply to your letter of September 10 requesting our views with respect to acreage limitation provisions of reclamation law, we are enclosing a statement prepared by economists in this Department. This statement concludes that the present 160-acre limitation, or any other fixed acreage, is not equally appropriate for all irrigated areas. The statement suggests that principles be adopted which could be used in determining the sizes of arms on each reclamation project which would be reasonably efficient in the use of labor, capital, and land resources, and which would provide farm families with income opportunities comparable to those they might obtain for similar effort and skill in other occupations. Such a policy would require that studies be made for each project under consideration to determine the size of farm most appropriate for the project and for each major land type within a project. Studies of this kind were made in connection with development of the Columbia Basin project, but the objectives in that study were a maximum number of settlement opportunities consistent with an acceptable level of living.

The implementation by the Congress of such a policy could be either in terms of general guides to be used by administering agencies in establishing maximum size farm units, or in terms of a project-byproject approval of such varying acreage limitations after study and recommendation on each proposed project.

We trust that the enclosed statement will be of some assistance in your consideration of this important question.

Sincerely yours,

TRUE D. MORSE, Under Secretary.

SIZE OF FARMS ON FEDERAL RECLAMATION PROJECTS

THE PROBLEM

The matter of establishing limitations on size of farms on Federal reclamation projects has been of concern to the Congress, to administrative agencies, to agricultural and community leaders, and to farmers on reclamation projects, for many years. A great many hearings and discussions have been held and studies made on this question by the Congress, by administrative agencies, and by a wide range of other groups and individuals. It would be impossible quickly to summarize the great volume of literature bearing on this question. However, a brief review of the major actions by the Congress may be helpful for purposes of this statement.

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Two major restrictions were contained in the original Reclamation Act of 1902: (1) Public lands on reclamation projects could be homesteaded in tracts of 40 acres, but not more than 160 acres; and (2) rights to the use of water from Federal reclamation projects on land in private ownership was limited to tracts not exceeding 160 acres in any one ownership.

Almost as soon as the reclamation law was passed these provisions occasioned difficulty. The original limitation on acreage in the 1902 Reclamation Act was modified by the Warren Act of 1911, which provided that water could not be delivered to landowners outside the reclamation project boundaries in excess of that amount needed to irrigate 160 acres.

In 1922 the Secretary of the Interior appointed a special committee to study some of the economic problems of Federal reclamation projects. This committee, known as the Fact Finders, reported to the Congress in Senate Document 92, 68th Congress, 1st session. The Fact Finders staff emphasized that a major reason for delinquencies in payments on Federal reclamation projects was that speculation in land made it difficult for the landowner to pay both the speculative price and the construction charges required of the project. As a means of protecting the Federal investment in reclamation projects, the Department of Interior Appropriation Acts for 1925 and 1927 provided that repayment contracts with water users on certain projects contain provisions prohibiting the sale of land on these projects at a price in excess of that approved by the Secretary of the Interior. The Omnibus Adjustment Act of 1926 amended these provisions to apply to the sale of land only in excess of 160 irrigable acres per individual. These acts had the effect of limiting unwarranted increases in land prices on reclamation projects and of reaffirming the notion of 160 acres as a limit on the size of farms.

During recent decades a number of exemptions have been made by the Congress to the 160-acre limitation provisions of the original Reclamation Act. Administrative decisions have been made to the effect that the 160-acre limitation applies to an individual rather than to a family group. In 1933 the Colorado-Big Thompson and Truckee storage projects were exempted from the provisions of legislation and administrative rulings. In 1952 the 160-acre limitation was further modified by the San Luis Valley project authorization, which permitted an owner to receive water sufficient to irrigate 480 acres. In 1956 limitations were lifted on parts of the proposed East Bench project in Montana and throughout recent years other exemptions have been made.

Any examination of the question of size of farm on reclamation. projects should clearly set forth the fact that current provisions in reclamation law relate to ownership limitation rather than to limitations of size of operating units. The policy has been that water could not be delivered to land in excess of 160 irrigable acres in any one ownership (320 acres for husband and wife). To the extent that this reflects on limitation of acreage, it applies to landownership rather than to size of operating farms. On the Columbia Basin project, for example, present farm operating units average a little more than two ownership units. Farm operators have gained control of more land through leasing than they are permitted to own to achieve efficiency in scale of operations and to increase total incomes.

In congressional debates on the original reclamation law and in a great many congressional hearings since that time, the objectives of Federal reclamation have been made abundantly clear. There is a wide area of agreement to the effect that Federal reclamation should provide opportunities for ownership of farms by families who settle on them. A second broad objective which is widely accepted is that the benefits to accrue from Federal reclamation should be distributed widely among farm families.

Thus the idea has been generally accepted that a primary purpose of Federal reclamation is to provide opportunity for the establishment of owner-operator farm homes, with enough land to provide an adequate level of living for the farm family.

The 160-acre tract of land as a farm unit is deeply embedded in the customs, legislation, and administrative policies of this country. More than a century ago preemption claims to public lands were set at this figure. The Homestead Act of 1862 originally established 160 acres as the size of a farm. This figure was further affirmed by the Reclamation Act of 1902, which has since been reestablished by legislation, administrative decisions, and public policies, generally.

Even though there is a wide area of agreement that the objective of Federal reclamation is to establish family-size farms and that the benefits should be widely distributed, there is considerable question whether 160 acres, or any fixed acreage, fairly implements this policy. For instance, a 160-acre irrigated farm in western Montana is quite different from a farm of the same acreage in the San Joaquin Valley of California. A 160-acre farm in the one area may be quite inadequate to provide a farm family with an acceptable income, whereas in the other the same acreage may be a large business if intensively operated. Furthermore, the needs of different farm families vary considerably. A farm that would support one family adequately might be quite inadequate for other. The adequacy of a farm changes with changing technology. At the time when many of the early reclamation projects were established, when farmers irrigated with a shovel and farmed with horses, 160 acres or even a smaller acreage might have been an efficient sized farm. Today, however, with tractor operation, with siphon tube irrigation, with better land leveling, and with many other technological advances, one farm operator and the farm family can efficiently operate a much larger acreage than formerly.

It is apparent that wide variations of climate, soils, crop adaptability, and other factors occur among irrigation projects. This variation leads to the conclusion that Federal legislation regarding farm size should be oriented largely to setting up basic guides and objectives. That is, each project must be considered separately in terms of size of farm that would be most appropriate, considering the basic legislation for the project and its particular economic and physical characteristics.

Present Federal reclamation legislation permits partial operation in the above manner. However, two of these guides have long been questioned: (1) The upper limit set on ownership acreage; and (2) the maximization of farm numbers as reflected in establishment of minimum rates of return on farm resources, especially operator and family management and labor. These two guides have led to establishment of farm units that in some instances resulted in in

efficiency, low levels of income, and financial difficulties for farm families.

Closely tied to considerations of size of farm on reclamation projects is the question of costs of reclamation development and the extent to which costs are recaptured through the charges allocated to irrigation and the repayment of those charges by landowners. In most reclamation projects, and particularly on the better lands in such projects, there is a substantial increment in land values as a result of Federal reclamation over and above that which is recaptured through charges made to landowners for repayment of construction costs. The incidence of this irrigation incremental value varies widely among projects and among types and qualities of land within the same project. For example, data from the Columbia Basin project indicate that on the better lands the irrigation increment in land value approximates $100 an acre. On the poorer lands this increment is zero, or in a few instances may be a negative value.

Where substantial increments in land values accrue as a result of reclamation there is strong demand on the part of landowners to so arrange their landholdings as to capture for themselves as much of this incremental value as possible. As a matter of public policy, however, the principle is well established that this increment in value should be widely distributed.

One other fact should be kept in mind in connection with size-ofunit limitations on reclamation projects. The size and number of farm units has a direct bearing on the cost of the project water distribution system. Project construction costs are higher with more and smaller farms because water must be delivered to each farm. These higher construction costs generally are not passed on to project farmers because repayment charges are based on ability to pay rather than costs of the project.

Another factor should be kept in mind in considering acreage limitations on reclamation projects. That is the fact that on most current projects the primary purpose is to provide supplemental water to lands already irrigated and that most of these lands are in private ownership. The original reclamation law was designed primarily to develop irrigation projects for areas largely in public ownership. At present, however, relatively little public land remains to be developed under irrigation. Most of the new irrigation has been, and will be, for lands already in private ownership and already partially irrigated. Examination of the history of reclamation projects and of the needs for future reclamation leads to the conclusion that the primary problem is to find ways of establishing efficient family farms on projects and at the same time to distribute widely the incremental values created by reclamation. An arbitrary acreage limitation may not be the most. effective way to accomplish these objectives. An arbitrarily established limitation on acreage is not applicable to all irrigated areas and to all soil and climatic situations. To achieve the objective of establishing efficient and prosperous family farms and to prevent monopoly in capturing the incremental values from irrigation will require that principles be established which can be used on each project to set the size of farm. A number of study groups and hearings have reached the conclusion that acreage limitations be set project by project in line with established objectives, so that the intent of Congress could be accomplished more equitably.