Counting Nuggets: BLM District Profitability

• Receipts and Costs
• Grazing Management
• Timber Management
• Recreation
• Minerals
• Conclusion

While we previously audited the Butte District, this is the Institute's first look at each individual BLM district, and it may be the first time anyone has taken a close look at district-by-district agency finances. The difficulties we experienced in gathering the data suggests that no one even in the BLM has ever compared receipts and costs for each district and resource.

Then there is the problem of where the receipts go. Some are kept by the BLM, usually to be spent on the resource that produced them. But some minerals receipts kept by the BLM are spent on grazing. Should they be counted as a cost of grazing or a cost of minerals?

More receipts are turned over to the states or counties, and even more are dedicated to the Bureau of Reclamation. The reclamation fund probably should not be counted as a cost of resource management, but the payments to states might be. After all, these are payments in lieu of taxes, and nearly everyone considers taxes to be a cost. But the formulas for distributing receipts vary dramatically by land type (table one), so county payments are often far different from taxes collected from private landowners.

                       U.S.     Bureau    Counties
                     Treasury Reclamation  /States   BLM
                                 Timber
                           Non-Salvage Sales
Public Domain           20          76         4
O&C Lands*              50                    50
Coos Bay Wagon*         25                    75
                             Salvage Sales  
Public Domain                        4                  96
O&C Lands*                          50                  50
Coos Bay Wagon*                                         25

                                Grazing
Bankhead-Jones          25                    25        50
Taylor Grazing
Section 15                                    50        50
Section 3               37.5                  12.5      50

                              Recreation
Normal                                                 100
Demo Projects                                          100

                               Minerals
Alaska                  10                    90
Taylor Grazing Act
  Section 15                                  50        50
  Section 3             37.5                  12.5      50
Other P.D.              10          40        50
Grasslands              25                    25        50
*   In fiscal years 1994 through 2003, 100 percent of the 
    receipts from non-salvage timber went to the Treasury, 
    and 100 percent of salvage went into the FEHRF. Congress 
    then gives most of the Treasury receipts back to the 
    counties in "special payments."

On top of these costs are several sorts of overhead. First, the state offices sometimes have large budgets for these same items: forest management, range, etc. We added these to the district costs proportionate to the size of the district budgets. For example, if the Boise District spent a quarter of district forestry funds in Idaho, then we added a quarter of the state office's forest management funds to Boise's costs.

The districts also have a line item for general administration (which the BLM calls "workforce and organizational support"). We used a similar formula to divide this among the resources: If forest management made up 10 percent of a district's budget for management of lands and resources, then we counted 10 percent of general administration as a part of that district's forest management costs. The minerals costs also include an appropriate share of the Minerals Management Service's costs of collecting receipts for minerals leasing on BLM lands.

For each of the four resources, the downloadable tables show total receipts, the share kept by the BLM, and the costs attributable to that resource. The net revenues--receipts minus costs minus share kept by BLM--are a first approximation of the profitability of each resource.

The tables also show how much money goes to states, counties, and the reclamation fund. Subtracting these from net revenues leaves a net to the U.S. Treasury. Still, this net to the Treasury is probably less useful as a measure of profitability than the net revenues column.

Although we collected data for the fiscal years 1994 through 1996, only fiscal year 1996 results are reported here. The other years' information will be posted on the Thoreau Institute web page (see page 2).

One district, Medford, reported a slight positive return. But it reported no range costs, which is unlikely, so it is fair to say that no districts make money on range management.

This is partly due to the politically determined grazing fee, which is well below market value. But BLM managers have not been hesitant to spend on range all of the money Congress will give them. There is clearly no pressure or incentive to produce a profit.

One curiosity is the $82,000 in range costs reported by the Northern District in Alaska, with no receipts, and no cattle. This money is used to manage an Alaskan Native-run reindeer program on the Seward Peninsula.

In 1996, most of the receipts, or $76 million, went to the U.S. Treasury. However, $74 million were then transferred from the Treasury to the counties with Oregon and California lands. The total amount of receipts that went to states and counties combined was $75 million.

The BLM gets to keep 96 percent of all salvage sale receipts, and 100 percent of salvage sale receipts in western Oregon, in its Forest and Ecosystem Health Restoration Fund (FEHRF). This fund received $6 million in 1996. The reclamation fund gets 76 percent of public domain timber receipts, or $8 million in 1996.

The Treasury gets 20 percent of public domain timber receipts. This figure was apparently chosen in the belief that 20 percent would cover the costs of timber sales. In reality, timber costs exceed 100 percent of receipts on almost every district outside of Oregon. Although three districts outside of Oregon reported positive net returns in 1996, the nets were small and it is likely that no district timber program outside of Oregon is regularly profitable.

Despite reductions in timber sales due to the spotted owl, most western Oregon districts remain profitable before making payments to counties. Western Oregon counties historically get half of BLM timber receipts, and part of the Northwest Forest Plan calls for these payments to stair-step down until 2003. This means that, in 1996, county payments accounted for close to 100 percent of gross timber receipts on several western Oregon districts.

Not counting payments to counties and the reclamation fund, the overall BLM timber program produced a profit of $42 million--almost all of which came from five Oregon districts. Despite the profitability of those Oregon districts, it appears that BLM timber managers, like BLM range managers, face no pressures or incentives to earn a profit.

Districts may not get back exactly the amount of money they collect on recretion. But effectively, the BLM gets to keep all of its recreation revenues. The agency also lets districts keep 100 percent of revenues collected under the recreation fee demonstration program.

The BLM spent $33 million managing recreation in 1996. Since the agency effectively keeps all of its receipts, this has to be counted as a total loss.

The most profitable districts earned most of their mineral revenues on oil & gas, which accounted for 55 percent of total BLM mineral collections, and coal, which accounted for 34 percent.

Mineral's profitability can be attributed to several factors:

• First, Congress does not let the agency keep a large or unlimited share of receipts, as it does for grazing, recreation, and some timber salvage sales.
• Second, Congress does not regulate prices of all minerals to well below market value, as it does for grazing and most recreation. Hardrock minerals are an exception, of course.
• Finally, minerals are not a renewable resource, so the BLM cannot convince Congress to give it huge appropriations for "investments" in future productivity, as it does for grazing and timber.

A combination of political pressures and incentives for profitability would greatly improve the BLM's environmental record as well as its fiscal performance.