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The first two weeks of the U.S. Supreme Court’s new term are important ones for agriculture. The Court will hear arguments in two critical cases: the “Sackett” wetlands case and a challenge to California’s animal welfare law, Proposition 12. The new term for the Supreme Court (SCOTUS) begins October 3, with the Sackett case up as the Court’s first hearing. The Court will hear the Proposition 12 case on October 11. We focus this article on the Sackett case and will preview the Proposition 12 case next week.
The Sackett wetlands case, round 1. The Sacketts may have become household names across the country in 2012, after the U.S. EPA prohibited Michael and Chantell Sackett from building a home on land they had purchased near Priest Lake, Idaho. The Sacketts had filled wetlands on the property in preparation for construction, but the EPA issued a compliance order prohibiting further filling or construction and requiring restoration of the site. The agency claimed authority to do so by declaring the wetlands to be “navigable waters of the United States” subject to the Clean Water Act (CWA). The Sacketts challenged the order and EPA’s authority over their land. However, lower federal courts declined to hear the case, believing the compliance order was not yet a “final agency action” that could be reviewed since the EPA had not yet enforced the order. The case proceeded to its first appearance before SCOTUS, where the Court held that the compliance order was indeed a final agency action that could be reviewed in court.
Back in court. The Sackett case returned to the lower courts for determining whether the EPA had authority over the Sackett property. The issue became a common one for CWA cases: whether the Sackett wetlands were “waters of the United States” that fall under the CWA and the EPA’s authority. The challenge of that issue, however, is determining which “test” to apply to the situation. A court establishes a “test” as a framework for analyzing an issue. Over the years, courts have struggled to agree on a clear test for determining when a wetland qualifies as “waters of the United States” that are subject to the CWA. At this time, there are two competing tests developed by the Supreme Court: the “significant nexus” test advocated by Justice Kennedy and the “continuous surface connection” test proposed by Justice Scalia. Both the Trump and Biden administrations have also attempted to clarify the proper test by way of agency rulemaking, but those efforts are now tied up in litigation and revised rulemaking.
The Ninth Circuit decision. The Sacketts are now before SCOTUS for a second time because they believe the Ninth Circuit Court of Appeals did not use the proper test in their case. The appellate court applied the “significant nexus test,” which states that wetlands are “waters of the United States” when there is a “significant nexus” between the wetlands and navigable waters, as determined when the wetlands “either alone or in combination with the similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other cover waters more readily understood as ‘navigable.’” The significant nexus test represents a broader definition and would subject more wetlands to EPA authority than Justice Scalia’s test. Many argue that it’s also unclear and creates uncertainty for landowners.
The SCOTUS appeal. The question the Sacketts now raise with SCOTUS is whether the significant nexus test applied by the Ninth Circuit was the proper test to use for its wetland determination. The Sacketts argue that it isn’t. They also urge SCOTUS to adopt an alternative test akin to Justice Scalia’s test in Rapanos v. U.S., which states that wetlands should have a “continuous surface connection” to “relatively permanent, standing or flowing bodies of water” to be deemed “waters of the U.S.” The Scalia test, by requiring a continuous surface connection between wetlands and “permanent” waters, would narrow the extent of wetlands that are subject to the Clean Water Act.
Predictions. The Supreme Court surprised many when it announced its decision to once again review the Sackett case. Given the changes to the composition of the Court since it heard the Rapanos case back in 2006, a logical prediction is that the Court will not only set aside the Ninth Circuit’s application of the significant nexus test, but will also adopt Justice Scalia’s test as the proper way to determine when a wetland is a “water of the United States” subject to EPA jurisdiction under the Clean Water Act. We won’t know whether those predictions will become truth until sometime in 2023, when we can expect another Sackett decision from the Court.
Listen to the arguments in Sackett v EPA at 10:00 am on Monday, October 3 on the SCOTUS website at https://www.supremecourt.gov/oral_arguments/live.aspx or watch the arguments on sites like https://www.c-span.org/supremeCourt/.
For people who are concerned about potential long-term care (LTC) costs, LTC insurance may be an option. Several insurance companies sell these policies that pay out to cover some or all LTC costs. There are many different types of policies and coverages available. For example, some coverages may start soon after LTC is needed while some coverages will not begin to pay for a longer period, sometimes as long as one year. Also, some policies are combined with a death benefit so that the policy holder can be sure that at least some benefit will come from the policy. The following are some, but not all, of the terms and conditions to consider when exploring a LTC insurance policy:
Duration of Benefits. Most policies cover at least one year and may cover up to five. Policies that cover more than five years are no longer available. Obviously, a longer-term policy is preferable but that must be balanced against the higher premiums.
Benefit Triggers. The LTC policy will only start to pay out when certain triggers, or conditions, are met. Before paying out, most policies require the policy holder to need assistance with at least two of the following activities: bathing, dressing, toileting, eating, transferring and continence. Be sure to understand what conditions are required for payout to be triggered.
Waiting Period. Policies will include a waiting period. The waiting period may be a few days or as long as one year. The longer the waiting period the lower the policy premiums will be.
Daily Benefit Amount. A LTC policy will include a daily benefit amount. Some policies may pay 100% of the daily LTC costs. Other policies may only cover 50% of the LTC costs. The policy can be used to cover only that portion of LTC costs that income does not.
Inflation Protection. Like any cost, LTC costs will increase over time. Some policies will have inflation adjustment built in and automatically increase over time. Other policies will offer the holder the ability to increase the coverage to keep up with inflation but this will also increase the premium. It is important to know what type of inflation adjustment provision is in a policy.
Depending on the type of policy and robustness of coverage, LTC policies can be expensive. Not everyone will be able to fit LTC policy premiums into their budget. Also, not everyone is insurable. People with significant pre-existing health care issues may not be able to obtain a LTC policy.
If a policy can be obtained to cover all LTC costs or at least cover the deficiency that income does not cover, all assets will be protected. Therefore, the owner can keep all their assets and continue to enjoy and use them for the remainder of their lives. LTC insurance policies, in many ways, provide the most flexible LTC plan.
It is worthwhile to at least explore incorporating a LTC insurance policy into a LTC management plan. Many insurance agents and financial advisors can provide free estimates for policies without too much difficulty. They can also help with a risk assessment to determine what policy may be needed for a given circumstance. Before assuming that assets must be gifted or transferred to protect them, the possibility of LTC insurance should be explored.
End-of-life decisions and directives can be one of the hardest parts of estate planning. However, having an advanced directive can save your loved ones much stress and anguish in an already difficult time. The end-of-life directives are typically completed as part of the estate planning process but can be done at any time, independent of the estate planning process.
An end-of-life directive can be included in a Health Care Power of Attorney (HCPOA). The HCPOA is a document that identifies a person (Agent) who has authority to act for someone (Principal) when the Principal is not able to act for themselves. An end-of-life directive in a HCPOA gives the Agent authority to withdraw artificial life support. However, the Agent is only permitted to withdraw life support if two physicians have determined that the Principal is permanently unconscious.
A Living Will can also be used as the end-of-life directive. This document states that in the event two physicians have determined a person to be permanently unconscious, the physician or hospital is directed to withdraw artificial life support. The Living Will is essentially a person’s statement that they do not want to be kept on life support.
There are usually two different lines of thinking when it comes to deciding between the HCPOA and Living Will for the end-of-life directive. Generally, the decision to use the HCPOA as the end-of-life directive sounds something like: “this is a really important decision, I want a family member involved”. With a Living Will, the thought is: “I don’t want to burden my family with the end-of-life decision, I don’t want to be kept on life support”.
There is no right or wrong answer as to whether to use a HCPOA or Living Will as the end-of-life directive. However, it is important to make the decision and have an end-of-life directive in place. In an already difficult and stressful time, the end-of-life directive will lessen the burden on your loved ones by expressly stating your wishes as to artificial life support.
Normally, it is advisable to have an attorney draft legal documents. However, the HCPOA and LW are documents that can be completed without the assistance of an attorney. A few years ago, the medical community and legal community cooperated to develop a standard form for the HCPOA and Living Will. These documents can be downloaded from the internet and completed relatively easily. The HCPOA can be downloaded at https://my.clevelandclinic.org/-/scassets/files/org/medicine-institute/health-care-power-of-attorney-form.pdf?la=en and the Living Will can be downloaded at https://my.clevelandclinic.org/-/scassets/files/org/medicine-institute/ohiolivingwill.pdf?la=en . Each document includes an explanation and instruction section.
If you do not have an end-of-life directive in place, do your loved ones a favor and complete one now. Having an end-of-life directive will help your loved ones deal with a difficult situation a little more easily.
Did you know yellow grove bamboo is on Ohio’s “noxious weeds” list? We’ve seen an increase in legal questions about bamboo, a plant that can cross property boundaries pretty quickly and create a neighbor dispute. Weeds often cause neighbor issues, which is why Ohio has a set of noxious weed laws. The laws aim to resolve problems around yellow grove bamboo and other species designated as “noxious weeds.”
The noxious weeds list
The Ohio legislature designated shatter cane and Russian thistle as noxious weeds years ago, then granted the Ohio Department of Agriculture (ODA) the authority to determine other noxious weeds that could be prohibited in Ohio. Since that time, the noxious weed list has grown to include 31 weed species. Two of the species, yellow grove bamboo and grapevines, are noxious weeds only if not managed in a certain way. The list includes the following:
Talking about noxious weeds
Since noxious weeds can be harmful to all, the hope is that all landowners will manage noxious weeds effectively and reduce the possibility that the weeds will invade a neighbor’s property. But for many reasons, that isn’t always the case. When it appears that noxious weeds on a neighbor’s property are getting out of hand, first try to address the issue through neighbor communications. A “friendly” discussion about the weeds might reveal helpful information that can reduce the neighbor conflict. Maybe the neighbor has recently sprayed the weeds or isn’t aware of the weeds. Maybe the neighbor’s tenant is responsible for managing the land. Or, as is sometimes the case, maybe the suspected plants aren’t actually noxious weeds. Good communication between the neighbors could bring a quick resolution to the situation.
Agronomic help with noxious weeds
Knowledge and management might be the solution to a noxious weeds problem between neighbors. For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.
Help with noxious weeds
Knowledge and management might be the solution to a noxious weeds problem between neighbors. For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.
Legal procedures might be necessary
If communication isn’t helpful or possible, the laws establish procedures for dealing with noxious weeds. Different procedures in the law apply for different weed locations.
- If the weeds are in the fence row between two properties, a landowner has a right to ask the neighbor to clear the row of weeds within four feet of the line fence. If the neighbor doesn’t do so within 10 days, the landowner may notify the board of township trustees. Once notified, the trustees must visit the property and determine whether the fence row should be cleared. If so, the trustees must hire someone to clean up the fence row. The costs of the clearing are then assessed on the neighbor’s property taxes.
- If the weeds are on private land beyond the fence row, a landowner can send written notice of the noxious weeds to the township trustees. A letter describing the type and location of the weeds, for instance, would serve as written notice. Once the trustees receive a written notice, they must notify the neighbor to cut or destroy the weeds or alternatively, to show why there is no need for such action. If the neighbor doesn’t respond to the trustees and take action within 5 days of the notice being given, the trustees must order the weeds to be cut or destroyed. The cost of destroying the weeds is then assessed on the neighbor’s property taxes.
- If the neighbor is a railroad, the railroad must cut or destroy noxious weeds along the railway between June 1 and 20, August 1 and 20, and if necessary, September 1 and 20. If a railroad fails to do so and the township trustees are aware of the problem, the trustees may remove the weeds and recover costs in a civil action against the railroad. While the law doesn’t state it, a landowner may have to document whether the railroad follows the required cutting schedule and notify the trustees if it does not.
- If the neighbor is the Ohio Department of Natural Resources or a park owned by the state or a political subdivision, the landowner must provide information about the noxious weeds to the township trustees. The trustees then notify the county Extension educator, who must meet with a park authority and a representative of the soil and water conservation district within five days to consider ways to deal with the problem. The Extension educator must report findings and recommendations back to the township trustees, but the law doesn’t require the trustees to take action on the report. Apparently, the hope is that the problem would be resolved after considering ways to deal with it.
What if the neighbor leases the land?
We mentioned that sometimes a neighbor might not be tending to noxious weeds because it’s actually the responsibility of the neighbor’s tenant under a leasing arrangement, such as a farmland lease or a solar lease. These types of leases should state which party is responsible for noxious weeds. Note that the law recognizes the possibility of a leasing situation by requiring the trustee to notify the “owner, lessee, agent, or tenant having charge of the land” when the weeds are on private land and the “owner or tenant” when the weeds are in the fence row. The “or” in these provisions can be problematic though, as that doesn’t require the township to notify both the neighbor and tenant. A landowner might need to ask the trustees to communicate with both the neighbor and its tenant so that the parties are both aware and can resolve which is responsible for managing the noxious weeds according to the leasing arrangement.
For more information about noxious weeds, refer to our law bulletins in the property law library on https://farmoffice.osu.edu. For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.
When going through the estate planning process, determining and implementing the terms and conditions of the will or trust consume the most time. However, some thought and consideration should be given to the Power of Attorney (POA) documents that are typically completed at the same time as the will or trust. The POA documents designate who may act on behalf of someone who is alive but unable to act for themselves. These documents are very important, especially for those people who are operating farms and businesses.
There are generally two types of POAs – financial and health care. The financial POA is sometimes called a General Power of Attorney or Durable Power of Attorney. Regardless of the name, the financial POA designates who may act (Agent) on behalf of the person who is incapacitated (Principal). Most financial POAs give the Agent full authority to manage any and all assets owned by the Principal. Due to this broad authority, the financial Agent has significant power and control and thus should be someone in whom the Principal has complete confidence and trust.
It is possible to limit the scope of authority for the financial POA. Perhaps the Principal gives authority to the Agent to manage all assets except real estate so that the Agent cannot sell any of the Principal’s farmland. Or, perhaps the Principal gives authority to manage all non-farm assets to one person and authority to manage all farm assets to another person. The POA can be customized to meet the goals and objectives of the Principal.
One of the more important terms of the financial POA is when it become effective. There are basically two options: the POA can become effective when the Principal becomes incapacitated or become effective immediately upon execution of the POA. Let’s discuss the advantages and disadvantages of each.
Having the POA become effective only when the Principal becomes incapacitated ensures that the Principal will maintain full control over their assets while they maintain capacity. The Agent has authority over the Principal’s assets only after the Principal has become incapacitated. Typically, incapacity is determined by a physician after an examination of the Principal.
A logical question is: why would you ever want your POA to become effective until you become incapacitated? There are two reasons. First, a person who becomes mentally incapacitated is usually the last person to know it. That is, people with dementia or other mental problems will usually not admit they are unable to make decisions for themselves. Additionally, getting the person who may be incapacitated to visit a doctor to be examined for incapacity may be very challenging. So, making the POA effective upon signing may save the Agent much frustration and grief by not having to get an incapacity determination from a doctor.
Consider the following example. Bill is not married and names his niece, Cathy, as his financial POA. Bill has always been a little suspicious of everyone so he causes his POA to become effective only upon his incapacity. Bill develops a medical condition where he becomes unconscious and thus is obviously incapacitated. Cathy’s authority as Bill’s Agent becomes active and she can begin managing his assets and paying his bills.
Let’s change the scenario a bit to show why the time of effectiveness is important. Bill starts to show signs of dementia and begins to make bad decisions with his money. Bill starts giving his money away to unscrupulous people and making poor business decisions. Cathy sees this happening but cannot convince Bill to see a doctor for a capacity determination. The more Cathy asks about seeing a doctor, the more upset Bill becomes because “there is nothing wrong with me, it’s my money I can do what I want with it!”. By the time Bill is actually deemed to be incapacitated by a doctor, much of his hard-earned wealth has been squandered.
The second reason to consider having the financial POA effective upon execution is convenience. Sometimes, someone may be perfectly healthy but due to travel or a busy schedule may need someone to act on their behalf.
In this example, Bill has named Cathy as his POA and the POA is effective immediately. Bill is in the process of selling a farm and the closing has been scheduled in the middle of Bill’s long-awaited vacation. Instead of changing his vacation plans, Cathy can attend the closing and sign the documents on Bill’s behalf.
What if someone does not have a financial POA? Without a POA, a guardian will likely need appointed for the incapacitated person. A guardian is appointed by the probate court. Family members can request to serve as the guardian, but it is ultimately up to the probate judge as to who will serve as the Agent. Some attorneys serve as guardians.
Being a guardian can be challenging. The guardian is required to take classes on the duties and obligations of being a guardian. Also, an annual accounting must be provided to the court showing every dollar of income collected and every dollar spent. It is much easier on friends and family to name them as the Principal in a POA rather than going through the process of having a guardian appointed by the court.
While financial POAs are relatively simple documents compared to a will or trust, they are nonetheless an important component of an estate plan. It is best to have the POA drafted by an attorney to be sure the terms and conditions match the goals and objectives of the client. Any adult who does not currently have a financial POA should get one at their earliest convenience to prevent their family and friends from having to deal with a guardianship.
In the next post we will discuss Health Care Power of Attorneys and Living Wills.
We often think of farm leases in terms of an unrelated landowner leasing to an unrelated tenant. However, leases can play an important role among related parties. It is common practice to incorporate long-term leases into an estate plan to help protect the farming heir and help keep the land in the family. In this article, we will discuss how and when to incorporate long-term leases into an estate plan.
Parents may find themselves in a situation where they would like an off-farm heir to inherit a farm but they also want to keep the land base together for the farming heir. The parents realize that the off-farm heir, upon inheriting the farm, could sell the farm or lease the farm to another farmer. A long-term lease is one solution to this dilemna.
Consider the following example: Mom and Dad operate a dairy farm and own 500 acres. They would like Andy, their son, to inherit Greenacre, a 100-acre parcel that sits next to the dairy operation. Bill, their other son, will continue to operate the dairy operation after Mom and Dad’s death. Bill must be able to farm Greenacre because it is critical to the dairy operation for corn silage production and for manure application.
This is a common example where the parents want an off-farm heir to inherit a farm but also realize that the farm is critical to the viability of the farm operation’s future. If Andy inherits Greenacre without any conditions, he could simply sell or lease the farm to a neighbor, possibly causing Bill’s dairy operation to faulter. Essentially, the ability for Bill to continue farming is contingent upon what Andy does with Greenacre.
A long-term lease may solve Mom and Dad’s dilemma. Mom and Dad could have Andy inherit Greenacre but require him to lease it back to Andy for a term of years. This allows Andy to inherit the farm but protects Bill’s land base for his dairy operation.
Using the same example as above: Mom and Dad establish a trust. The trust gives Greenacre to Andy but as a condition of him receiving Greenacre he must lease it to Bill for 20 years. The trust also provides other lease terms including how the lease rate is determined and occasionally updated.
Mom and Dad have now met both goals: Andy received Greenacre and Bill can continue to use Greenacre for his dairy operation. Bill will pay rent to Andy for the use of Greenacre for the term of the lease.
When using long-term leases, a common question is: how long should the lease be? Generally, the lease should be long enough to protect the farming heir’s farming career. This may cause the lease to be 10 years long or perhaps the lease will be 50 years long.
When using long-term leases, we need to consider the effect on the off-farm heir. The off-farm heir, in reality, has little control over the land because the lease essentially makes the land unmarketable. Few people will want to buy a farm that has a 20-year lease on it. Therefore, the off-farm heir receiving the farm may be disappointed that the only benefit they receive from the land during the term of the lease is a lease payment. Using the example above, if Andy thought he could immediately sell Greenacre and build his dream house in Florida he is going to be disappointed.
Using long-term leases to keep the land base together for the farming heir significantly impedes the off-farm heir’s ability to control the land they receive. However, for many farm families, allowing for a viable farming operation for future generations is of prime importance and limiting the off-farm heir’s ability to control their own farm may be a necessary outcome. It also may be beneficial for Mom and Dad to inform the off-farm heir that their land will be subject to a lease to avoid disappointment and surprises.
Like all estate planning strategies, long-term leases are another tool in the estate planning toolbox. For some plans, long-term leases should be kept in the toolbox. For other plans, long-term leases may be a critical part of the estate plan. The impact on both the farming heir and the non-farming heir is an important factor when considering using long-term leases in a succession plan. Be sure to consult with an attorney to determine if a long-term lease may be right for you.
The siting of renewable energy projects on Ohio farmland is a divisive issue these days, pitting neighbors against neighbors and farmers against farmers. Some support expanding renewable energy capacity while others oppose losing productive farmland or changing the rural landscape. A common question arising in this conflict is this: when can a county or township say “no” to a proposed renewable energy development? Several new laws, old laws, and recent court cases can help answer this question, although the answer is not always clear.
The “public utility exemption” from zoning. A long-standing provision of Ohio law that limits county and township land use power is the “public utility exemption” from zoning. Ohio Revised Code Sections 303.211(counties) and 519.211 (townships) specifically state that counties and townships have no zoning authority “in respect to the location, erection, construction, reconstruction, change, alteration, maintenance, removal, use, or enlargement of any buildings or structures of any public utilities.” The historical reason for this exemption is to keep local regulations from interfering with the provision of public utility services to Ohio residents. But what is a “public utility”? The exemption does not define the term, leaving Ohio courts to determine what is and is not a public utility on a case-by-case basis. More on that later.
New powers in Senate Bill 52. Effective in October of 2021, Senate Bill 52 gave new powers to county commissioners over certain renewable energy developments, setting aside the “public utility exemption” in those situations. The new law states that counties can designate restricted areas where wind and solar development is prohibited and can prohibit an individual proposed wind and solar facility or limit its size. These new powers, however, apply only to facilities with a single interconnection to the electrical grid and beyond a certain production size. For solar facilities, that size is 50 MW or more of energy production and for wind facilities, it’s 5 MW or more. Facilities that aren’t connected to the grid or are beneath those amounts are not subject to the new powers granted in S.B. 52. Additionally, facilities that had reached a certain point in the state approval process aren’t subject to the new law. Several Ohio counties have already established restricted areas or worked with townships to determine whether the county will approve individual projects as they come forward.
Authority over “small wind farms.” New wind power development in Ohio a decade ago led to the “small wind farm” provision in Ohio Revised Code Sections 303.213 (counties) and 519.213 (townships). This law allows counties and townships to use their zoning powers to regulate the location and construction of publicly and privately owned “small wind farms,” regardless of the public utility exemption. A “small wind farm” is any wind turbine that is not subject to Ohio Power Siting Board jurisdiction, meaning that it produces less than 5 MW of energy. Some counties and townships have utilized this provision of law to establish setback distances for wind turbines in residential areas.
The “bioenergy” exemptions. Yet another Ohio law limits county and township zoning authority over bioenergy facilities. Found in the “agricultural exemption from zoning” statute, Ohio Revised Code Sections 303.21(C) (counties) and 519.21(C) (townships) states that county and township zoning cannot prohibit the use of any land for biodiesel production, biomass energy production, electric or heat energy production, or biologically derived methane gas production if the facility is on land that qualifies as “land devoted exclusively to agricultural use” under Ohio’s Current Agricultural Use Valuation program and if, for biologically derived methane gas, the facility does not produce more than 5 MW or 17.06 million BTUs of energy. Ohio now has several facilities that fit within this exemption from zoning authority.
Two recent cases examine when a renewable energy facility a “public utility.” The “public utility exemption” from county and township zoning was at issue in two similar Ohio cases concerning biodigesters, facilities that process manure and other solid wastes into methane gas that is used to generate electricity. The most recent is Dovetail Energy v. Bath Township. The township claimed that the Dovetail biodigester located on farmland in Greene County was an “industrial use” that violated township zoning regulations. The owners argued that the biodigester was exempt from township zoning under both the “public utility” exemption and the “bioenergy” exemption.
The case reached the Second District Court of Appeals, which focused a large part of its analysis on the issue of whether the biodigester is a “public utility” that is exempt from township zoning under Ohio Revised Code 519.211. Relying on earlier cases from the Ohio Supreme Court, the court explained that an entity is a public utility if “the nature of its operation is a matter of public concern” and if “membership is indiscriminately and reasonably made available to the general public” as a public service.
The court analyzed the “public service” and “public concern” factors for the Dovetail biodigester, examining first whether Dovetail provides a public service, which requires a showing that the facility indiscriminately provides essential goods or services to the public, which has a legal right to demand or receive the goods or services, and that the goods or services can’t be arbitrarily withdrawn. Because Dovetail generates electricity that is sold into the wholesale energy market and used to provide energy to local utilities and customers and because Dovetail is also required to provide renewable energy credits that it cannot arbitrarily or unreasonable withdraw, the court concluded that the facility is a “public service.”
Factors determining whether Dovetail’s operation is also a matter of “public concern” that the court analyzed included whether Dovetail “serves such a substantial part of the public that its rates, charges and methods of operation become a public concern.” The court looked to Ohio’s incentives for renewable energy development, the lack of competition in the electric grid, the “heavy” regulatory environment for Dovetail, and its payment of public utility taxes as indications that Dovetail and the energy it produces are “public concerns.” Meeting both the “public service” and “public concern” components, the appeals court agreed with the lower court’s ruling that Dovetail is a public utility and is exempt from Bath Township zoning regulations.
The Dovetail decision echoes an earlier decision in the Fifth Appellate District, Westfield Township v. Emerald Bioenergy, where the appellate court examined a biodigester on farmland in Morrow County and found that the township could not regulate it because it is a “public utility.” The court cited factors such as Emerald’s provision of electric to the general public through interconnection agreements that distribute the energy to the energy grid, its lack of control over which customers receive or use the energy, its renewable energy credit requirements that can’t be arbitrarily or unreasonably withdrawn, its acceptance of waste from any customer, its governmental regulations and oversight, and its public utility taxes. The court also noted that it need not address the “bioenergy” exemption because it found the enterprise to be a “public utility.”
Both townships in the Dovetail Energy and Emerald Bioenergy cases requested a review of the decision by the Ohio Supreme Court. But the Supreme Court decided not to hear either case, although several of the justices dissented from that decision in each case. Without further review by the Supreme Court, the appellate court decisions stand.
What do these cases mean for solar energy facilities under 50 MW? Recall that S.B. 52 allows counties to prohibit or restrict solar facilities that are 50 MW or higher, but no other law addresses solar facilities with a single interconnection point to the energy grid that produce less than 50 MW. Would such a facility be a “public utility” under the public utility exemption? As with Dovetail and Emerald, a court would have to examine the solar facility and determine whether “the nature of its operation is a matter of public concern” and if “membership is indiscriminately and reasonably made available to the general public” as a public service. If so, a county or township could not use zoning to prohibit or regulate the location or construction of the solar facility.
Learn more about renewable energy laws in the Farm Office Energy Law Library at https://farmoffice.osu.edu/our-library/energy-law.
Farm neighbor laws have been around nearly as long as there have been farm neighbors. From trees to fences to drainage, farmers can impact and be impacted by their neighbors. In the spirit of managing these impacts and helping everyone get along, our courts and legislatures have established a body of laws over the years that allocate rights and responsibilities among farm neighbors. Explaining these laws is the goal of our new series on farm neighbor laws.
Here’s a timely farm neighbor problem that we’ve heard before: Farmer’s soybeans are looking good and Farmer is anxious for harvest. But some neighbors drive their ATV into the field and flatten a big section of Farmer’s beans. What can Farmer do about the harm?
Ohio’s “reckless destruction of vegetation law” might be the solution. The law, Ohio Revised Code Section 901.51, states that “no person, without privilege to do so, shall recklessly cut down, destroy, girdle, or otherwise injure a vine, bush, shrub, sapling, tree, or crop standing or growing on the land of another or upon public land.” This law could provide a remedy if its three components fit Farmer’s situation:
- Destruction or injury to a vine, bush, shrub, sapling, tree, or crop on the land of another
- No privilege
A key requirement of the law is “recklessness.” Under Ohio law, a person is “reckless” if the person acts with heedless indifference to the consequences or disregards the risk that the person's conduct is likely to cause a certain result. For example, if the neighbors were out driving the ATV at night and simply didn’t care where they were and that their actions could be harming Farmer’s property, that behavior is likely to rise to the level of “recklessness.” Alternatively, if another driver ran the neighbors off the road and the neighbors tried but could not avoid going into the bean field, their behavior isn’t likely to be deemed “reckless.”
A second requirement is destruction or injury to vegetation on another’s land. In the unlikely event that Farmer’s soybeans aren’t actually injured or destroyed, the law wouldn’t apply. Note that the law doesn’t just apply to a crop like soybeans, but also includes other vegetation such as vines, bushes, shrubs, and trees, recognizing that all of these types of vegetation have value for a landowner.
The final requirement is “without privilege to do so.” Privilege in the context of this law means “permission.” As long as Farmer didn’t tell the neighbors they could drive their ATV through his field, Farmer could prove that the neighbors did not have privilege or permission to cause the destruction and injuries to Farmer’s beans.
So what? The law clearly prohibits the neighbors from recklessly destroying Farmer’s beans, but what happens if they do? The law also addresses this question by stating that a violator of the law is liable “in treble damages.” Attorneys always take notice of treble damages language because it requires the damages award to be tripled after a judge or jury determines the amount of the actual harm. This tripling of damages is intended to punish the person for their “recklessness.” So, if a jury decided that the value of Farmer’s lost beans is $1,000, the treble damages would result in a $3,000 award against the neighbors due to their reckless destruction of Farmer’s crop.
There is also a criminal element to the law. The law states that a violator is also guilty of a fourth-degree misdemeanor. That would require a criminal proceeding by the local law enforcement, and the result could be no more than 30 days in jail and up to $250 in fines.
If the reckless destruction law doesn’t apply, Farmer would need to look to other mechanisms for resolving the harm. If the neighbors were trespassing, trespass laws could provide a remedy but wouldn’t award treble damages. Or the Farmer’s property insurance might address the harm. But if the neighbors destroyed Farmer’s beans by behaving recklessly, the reckless destruction of vegetation law can help resolve this farm neighbor issue.
Find the “reckless destruction of vegetation” law at Ohio Revised Code Section 901.51.
In prior posts, we discussed Long-Term Care (LTC) costs and the risks that those costs can have on keeping farm assets in the family. For those people needing LTC, the average cost is around $150,000. However, some people will require nursing home services for many years which could cause costs to be $500,000 or more. A strategy some people implement to protect their assets from LTC costs is gifting. We will discuss both the advantages and disadvantages of gifting.
The idea behind gifting is to transfer the assets to children or other beneficiaries before the assets must be spent on LTC costs. The person transferring the assets is intentionally trying to make themselves lack the resources to take care of themselves and rely on Medicaid to pay for their care. This strategy sounds simple, but it has many aspects, both good and bad, that must be considered.
First, Medicaid imposes a penalty for improper transfers. An improper transfer is any transfer of an asset for less than fair market value. Medicaid looks back five years for any improper transfers and disqualifies the applicant for one month for each $6,905 of improper gifts made. Improper transfers prior to the five-year lookback period are not penalized.
For example, if a gift of $100,000 was made in the last five years, the applicant will be ineligible for Medicaid for 15 months after application. If a gift of $1,000,000 was made, the applicant will wait five years to apply for Medicaid and then will not be required to report the gift because the five-year penalty period expired.
In addition to overcoming the five-year look back period, making a gift requires the owner to give up all ownership and control, including income produced by the gifted asset. This creates the risk that the original owner cannot protect the gifted asset from financial or legal mishaps of the person receiving the gift. This risk is a significant factor that should be considered when contemplating a gift.
Consider the following example. Dad owns 200 acres of land and is concerned he will be forced to sell the land if he incurs LTC costs. To protect the land, Dad gifts the land to Daughter. After Daughter receives the land, she causes an automobile accident and is liable to the injured party for $1,000,000. Her auto insurance only covers $250,000 in liability so she must sell some of the land received from Dad to pay the injured party.
This example illustrates the risk of giving up ownership and control of assets when gifting. In future articles we will discuss strategies to overcome this risk using irrevocable trusts and/or LLCs.
Tax implications are another factor to consider when gifting. The IRS allows large gifts to be made without a gift tax being owed provided a gift tax return is filed. Instead of taxing the gift, the IRS reduces the giftor’s federal estate tax exemption by the value of the gift which is reported on the gift tax return. Also, the person receiving the gift receives the same tax basis as the giftor rather than receiving a stepped-up tax basis to fair market value if they were to receive the same asset as an inheritance.
Using the same example as above, the value of the land gifted to Daughter was $2,000,000. Dad would file a gift tax return and his federal estate tax exemption would be reduced from $12,060,000 to $10,060,000. No tax is owed but Dad’s estate exemption limit is reduced by the amount of the gift. Let’s assume Dad paid $200,000 for the farm when he first bought it. Daughter will receive the farm with a $200,000 tax basis. If she would have inherited the farm instead, she would have received the farm with a $2,000,000 tax basis. The loss of stepped-up tax basis when gifting is a significant factor to consider.
For a thorough discussion on the tax implications of gifting, see the law bulletin “Gifting Assets Prior to Death” at go.osu.edu/farmplanning.
The biggest benefit of a gifting strategy is its simplicity. Land can be transferred with a simple deed, money can be transferred by check, and machinery and livestock can be transferred with simple paperwork. It is usually relatively easy to transfer assets by gift. Also, the gifting can be done quickly to get the five-year lookback period started.
Gifting assets is one of several strategies to protect assets from LTC costs. While the process of gifting is relatively easy, the implications of gifting are significant and extensive. Anyone considering a gifting strategy to protect assets should consult their legal and tax advisors to determine if gifting is the best strategy.
Solar and wind energy development is thriving in Ohio, and most of that development will occur on leased farmland. Programs in the newly enacted federal Inflation Reduction Act might amplify renewable energy development even more. The decision to lease land for wind and solar development is an important one for a farmland owner, and one that remains with a farm for decades. It’s also a very controversial issue in Ohio today, with farmers and community residents lining up on both sides of the controversy. For these reasons, when a landowner receives a “letter of intent” for wind or solar energy development, we recommend taking a careful course of action. Here are a few considerations that might help.
Purpose and legal effect of a letter of intent. Typically, a letter of intent for renewable energy development purposes is not a binding contract, but it might be. The purposes of the letter of intent are usually to provide initial information about a potential solar lease and confirm a landowner’s interest in discussing the possibility of a solar lease. Unless there is compensation or a similar benefit provided to the landowner and the letter states that it’s a binding contract, signing a letter of intent wouldn’t have the legal effect of committing the landowner to a solar lease. But the actual language in the letter of intent would determine its legal effect, and it is possible that the letter would offer a payment and contain terms that bind a landowner to a leasing situation.
Attorney review is critical. To ensure a clear understanding of the legal effect and terms of the letter of intent, a landowner should review the letter with an attorney. An attorney can explain the significance of terms in the letter, which might include an “exclusivity” provision preventing the landowner from negotiating with any other solar developer for a certain period of time, “confidentiality” terms that prohibit a landowner from sharing information about the letter with anyone other than professional advisors, “assignment” terms that allow the other party to assign the rights to another company, and initial details about the proposed project and lease such as location, timeline, and payments. Working through the letter with an attorney won’t require a great deal of time or cost but will remove uncertainties about the legal effect and terms of the letter of intent.
Negotiating an Option and Lease would be the next steps. If a landowner signs a letter of intent, the next steps will be to negotiate an Option and a Lease. It’s typical for a letter of intent to summarize the major terms the developer intends to include in the Option and Lease, which can provide a helpful “heads up” on location, payments and length of the lease. As with the letter of intent, including an attorney in the review and negotiation of the Option and Lease is a necessary practice for a landowner. We also recommend a full consideration of other issues at this point, such as the effect on the farmland, farm business, family, taxes, estate plans, other legal interests, and neighbor relations. Read more in our “Farmland Owner’s Guide to Solar Leasing” and “Farmland Owner’s Solar Leasing Checklist”.
New laws in Ohio might prohibit the development. A new law effective in October of 2021 gives counties in Ohio new powers to restrict or reject wind and solar facilities that are 50 MW or more in size. A county can designate “restricted areas” where large-scale developments cannot locate and can reject a specific project when it’s presented to the county. The new law also allows citizens to organize a referendum on a restricted area designation and submit the designation to a public vote. Smaller facilities under 5-MW are not subject to the new law. Several counties have acted on their new authorities under the law in response to community concerns and opposition to wind and solar facilities. Community opposition and whether a county has or will prohibit large-scale wind and solar development are additional factors landowners should make when considering a letter of intent. Learn more about these new laws in our Energy Law Library.
It's okay to slow it down. A common reaction to receiving a letter of intent is that the landowner must act quickly or could lose the opportunity. Or perhaps the document itself states a deadline for responding. A landowner shouldn’t let those fears prevent a thorough assessment of the letter of intent. If an attorney can’t meet until after the deadline, for example, a landowner should consider contacting the development and advising that the letter is under review but meeting the deadline isn’t possible. That’s a much preferred course of action to signing the letter without a review just to meet an actual or perceived deadline.
For more information about energy leases in Ohio, refer to our Energy Law Library on the Farm Office website at https://farmoffice.osu.edu/our-library/energy-law.