Grain bins are “business fixtures” that are personal property not subject to real property tax, according to a decision issued today by the Ohio Supreme Court.
The court case arose when the Metamora Elevator Company challenged the Fulton County auditor’s inclusion of grain storage bins in the company’s real property valuation. Metamora filed complaints with the county Board of Revision, arguing that the grain bins are business fixtures that should not be included in the company’s real property assessment. The Board of Revision disagreed with Metamora and the company appealed to the Board of Tax Appeals (BTA).
The Fulton County BTA ruled in favor of the company, determining that grains bins are personal property and should not be taxed as real property. The BTA reduced Metamora’s real property value by nearly $1.1 million, the value of the grain bins. Fulton County requested a review of the BTA decision by the Ohio Supreme Court, which agreed to hear the case. The issue before the Court was whether the grain bins are “fixtures” or “improvements” that are subject to real property tax or whether they are not subject to real property tax because they are “business fixtures” that qualify as personal property.
Ohio Supreme Court’s reasoning
In its decision authored by Justice O’Donnell, the Supreme Court explained that the legislature amended the Ohio Revised Code in 1992 to clarify the historically “elusive” distinction between real and personal property in Ohio. The court stated that the changes expressed a clear intent to identify fixtures as real property while defining business fixtures as personal property, according to two of th revised sections of Ohio law:
- ORC 5701.02(A), which states that “real property” includes “land itself * * * and, unless otherwise specified in this section or section 5701.03 of the Revised Code, all buildings, structures, improvements, and fixtures of whatever kind on the land.”
- ORC 5701.03(B), which defines “business fixture” as “an item of tangible personal property that has become permanently attached or affixed to the land or to a building, structure, or improvement, and that primarily benefits the business conducted by the occupant on the premises and not the realty. Business fixture includes, but is not limited to, machinery, equipment, signs, storage bins and tanks, whether above or below ground, and broadcasting, transportation, transmission, and distribution systems, whether above or below ground.
“Our analysis need go no further than to apply the expressed intent of the General Assembly to the undisputed facts of this case,” said the Court, and concluded that the legislature clearly intended for the term “business fixture” to include storage bins, and therefore to define storage bins as personal property not subject to real property tax.
The Court rejected the two arguments advanced by the county, that property classification cases depend upon what constitutes an “improvement” under the Ohio Constitution and that it would be unconstitutional for the legislature to classify constitutional “improvements” such as fixtures or structures as personal property simply because the fixtures might be used in business. Because the grain bins related more to the personal business than to the land, based on the definition of “business fixture” in ORC 5701.03, the Court saw no conflict between the personal property classification and the Ohio Constitution.
Implications for agriculture
Fulton County may not be the only county that classifies grain bins as real property for tax purposes. Landowners who own grain bins should review their property tax records and determine whether the real property value includes the value of grain bins located on the parcel. If the property tax does incorporate grain bin values, consult with the county auditor to discuss the situation. Ohio law allows a county auditor to correct "clerical errors" made in the collection of real property taxes, although there is a question of whether inclusion of grain bins in the real property value constitutes a clerical error. Ohio law also provides remedies for taxpayers who have overpaid taxes; landowners should consult with a tax attorney for guidance on these remedies. Note that filing a complaint with the Board of Revision is not an option, as March 30 was the deadline for filing complaints for the current tax year.
The case of Metamora Elevator Co. v. Fulton Cty. Bd. of Revision, Slip Opinion No. 2015-Ohio-2807 is available on the Ohio Supreme Court’s website, here.
After much anticipation, the Federal Aviation Administration (FAA) has published proposed regulations that would govern the operation of drones used for agricultural and other activities. The proposal would allow farmers and ranchers to operate drones, referred to in the rule as “unmanned aircraft” and “unmanned aircraft systems” (UAS), subject to requirements intended to address public safety and national security concerns.
Under the proposed small UAS rule, operators must comply with a certification process, register and maintain aircraft, and follow limitations on aircraft operation. Of the proposed limitations, agricultural operators might have concerns about a “visual line-of-sight” rule requiring that operators have visual contact with aircraft, a flight ceiling of 500 feet above ground level and prohibitions against night flights. Additionally, the proposal fails to address privacy issues and the potential use of drones for surveillance activities on another person’s property.
The following provisions are the major components of the proposed rule, which would apply to unmanned aircraft weighing less than 55 pounds that are used for non-hobby and non-recreational purposes:
Operator Certification and Reporting
Certification. An operator of a UAS must have an “unmanned aircraft operator certificate with a small UAS rating,” which requires:
- Meeting eligibility requirements: the applicant is at least 17 years old, speaks English, has no state or federal drug offenses, has no physical or mental condition to prevent safe UAS operation, and the applicant’s identity is verified by the FAA.
- Passing an initial aeronautical knowledge test at an FAA-approved knowledge testing center, which covers: (1) applicable regulations relating to small UAS rating privileges, limitations, and flight operation; (2) airspace classification and operating requirements, obstacle clearance requirements, and flight restrictions affecting small UAS operation; (3) official sources of weather and effects of weather on small UAS performance; (4) small UAS loading and performance; (5) emergency procedures; (6) crew resource management; (7) radio communication procedures; (8) determining the performance of small UAS; (9) physiological effects of drugs and alcohol; (10) aeronautical decision-making and judgment; and (11) airport operations.
- Passing a recurrent aeronautical knowledge test every 24 months.
Reporting. An operator must report an accident to the FAA within 10 days of any operation that results in injury or property damage.
- Aircraft registration. A small unmanned aircraft must be registered with the FAA.
- Markings. A small unmanned aircraft must display nationality and registration markings.
- Aircraft condition. An operator must maintain a small unmanned aircraft in a condition for safe operation.
Pre-flight requirements. Before a flight, an operator must conduct a pre-flight inspection and assessment that includes:
- Inspection of the links between the unmanned aircraft and its control station.
- Verification of sufficient power to operate the aircraft at least 5 minutes beyond the intended operational time period.
- Assessment of the operating environment, including local weather conditions, local airspace and flight restrictions, locations of persons and property on the ground and other ground hazards.
- A briefing to all persons involved in the aircraft operation that addresses operating conditions, emergency procedures, contingency procedures, roles and responsibilities and potential hazards.
Visual line of sight requirement. An operator must maintain a “visual line-of-sight” with the unmanned aircraft, using only human vision that is unaided by any device other than glasses or contact lenses.
Use of visual observer. An operator may use “visual observers” to assist with the visual line-of-sight requirement.
- An operator and visual observer must maintain constant communication, which may be made through communication-assisted devices.
- The aircraft must still remain close enough to the operator for the operator to be capable of maintaining the visual line-of-sight.
Operating limitations. An operator must not operate an unmanned aircraft:
- More than 500 feet above ground level.
- More than 100 mph.
- After daylight, which is the time between official sunrise and sunset.
- When there is not minimum weather visibility of 3 miles from the aircraft’s control station.
- No closer than 500 feet below and 2,000 feet horizontally away from any clouds.
- Over any persons not directly involved in the operation and not under a covered structure that would protect them from a falling UAS.
- From a moving aircraft or vehicle, unless the moving vehicle is on water.
- Within Class A airspace; or within Class B, C, or D airspace or certain Class E airspace designated for an airport, without prior authorization from the appropriate Air Traffic Control facility.
- Carelessly or recklessly, including by allowing an object to be dropped from the aircraft in a way that would endanger life or property.
In the proposed rule, the FAA also presents the possibility of including regulations in the final rule for “micro-UAS,” or unmanned aircraft weighing no more than 4.4 pounds that are composed of “frangible” materials that yield on impact and present minimal safety hazards. The micro-UAS category would require operators to self-certify their familiarity with the aeronautical knowledge testing areas; would limit operation to: 1,500 feet within the visual line-of-sight of the operator, no more than 400 feet above ground, only in Class G (uncontrolled) airspace and at least 5 miles from an airport; and would allow flight over people not involved in the operation. The agency invites comments on whether to include a micro-UAS category in the final rule.
What’s not in the Proposed Rule?
Privacy concerns. Many in the agricultural community worry about the potential use of drones for surveillance activities that violate a property owner’s privacy. The FAA states that privacy concerns about unmanned aircraft operations are beyond the scope of this rulemaking and that “state law and other legal protections for individual privacy may provide recourse for a person whose privacy may be affected through another person’s use of a UAS.”
The agency also notes the recent Presidential Memorandum issued by President Obama, Promoting Economic Competitiveness While Safeguarding Privacy, Civil Rights, and Civil Liberties in Domestic Use of Unmanned Aircraft Systems (February 15, 2015), which requires the FAA to participate in a multi-stakeholder engagement process led by the National Telecommunications and Information Administration to develop a framework for privacy, accountability, and transparency issues concerning the commercial and private use of UAS in the NAS. The memorandum also requires agencies to “ensure that policies are in place to prohibit the collection, use, retention, or dissemination of data in any manner that would violate the First Amendment or in any manner that would discriminate against persons based upon their ethnicity, race, gender, national origin, religion, sexual orientation, or gender identity, in violation of law.” Read the Presidential Memorandum here.
External loads and towing operations. The FAA declined to propose new regulations for small unmanned aircraft with towing and external load capabilities. Instead, the agency invites comments, with supporting documentation, on whether external load and towing UAS operations should be permitted and whether their use should require airworthiness certification, higher levels of airman certification or additional operational limitations.
The FAA will accept public comments on the proposed small UAS rule until April 24, 2015. Issuing a final rule could take at least another year after the comment period closes. In the interim, FAA encourages operators to visit http://knowbeforeyoufly.org/ to understand current regulations for the use of small UAS, which remain in place until the FAA issues its final rule.
With fall quickly approaching, now is a good time to consider whether you should lease your land for hunting. Leasing your land for hunting can be beneficial by giving you an extra source of income as well as managing wildlife populations and decreasing crop damage. However, there are some considerations to make before granting that lease to someone.
Your first concern should be whether or not you would be liable for hunting accidents on your property. You likely wouldn’t be, thanks to Ohio’s Recreational User Statute. In certain situations, Ohio’s Recreational User Statute provides immunity from legal liability for someone harmed on your property during recreational activities. The types of recreational activities included in the Recreational User Statute include: hunting, fishing, trapping, camping, hiking, swimming, operating a snowmobile, all-purpose vehicle, or four-wheel drive motor vehicle, or engaging in “other recreational pursuits.”
Under the Recreational User Statute, those who lease nonresidential property for hunting do not have any duty to keep the premises safe, do not give any promises of safety by granting permission, and do not assume responsibility or liability for injuries caused by any act of the hunters.
Next, you should consider the lease itself. To create an enforceable lease, the lease must:
- Be in writing
- Identify the land being leased by legal description, address, and acreage
- Properly name the lessor (the owner of the land) and the lessee (the person leasing the land to hunt)
- Be signed by both parties
- Be acknowledged and certified by a notary public or local official if the lease is over three years
It is also important to consider what should be included in the lease. Some terms and conditions you should consider including are:
A description of the property
- Clearly defining what property is/is not included in the lease will set clear boundaries for the lessee
A description of what activities are/are not allowed
- Fishing, camping, tree stand or duck blind construction, etc.?
Allowance or restriction of sub-leasing
- Do you want to give permission to the lessee to sub-lease or is the lease strictly between you and the lessee?
Who is allowed to hunt or access the property
- Just the lessee? Or may the lessee bring guests? Is there a limit to the number of people allowed to hunt at any given time? Do you want the lessee to ask permission to bring guests?
Amount of payment and payment dates
- How much will you charge for the lease and when do you want paid?
- When will the lease end? On a specific date and/or if a violation of the lease agreement occurs?
- Limiting the number of deer that may be killed? Requiring a certain number of female deer killed?
Landowners reserving some rights to hunt on their land
- When leasing your land for hunting, you give up your right to hunt the land yourself unless you reserve some rights to hunt for yourself
What season is the lease in effect?
- Only deer, deer and turkey, etc.
Vehicle access to the property
- Where can vehicles drive and park on your property? What vehicles are permitted – will you allow ATV’s?
- Requiring hunters to maintain liability insurance
These are important considerations to think about including in a hunting lease, but this is not an exhaustive list. You should really consider what your goal is for leasing your land for hunting. Make sure the terms and conditions you include in your lease will help accomplish those goals. While hunting lease templates can be found online, you should consult with an attorney to create a hunting lease that will satisfy the goals and needs of your particular situation.
To read Ohio’s Recreational User Statute, visit: http://codes.ohio.gov/orc/1533.181
The Ohio House of Representatives gave final approval on May 21, 2014 to a bill initiated in the Senate that addresses invasive plants. As approved by both chambers, Senate Bill 192 grants regulatory authority over invasive plants to the Ohio Department of Agriculture (ODA). While ODA, Ohio EPA and Ohio's Division of Forestry already have programs in place to educate and assist in the identification and removal of invasive species, the new law clarifies that the director of ODA has "sole and exclusive authority to regulate invasive plant species in this state." This authority includes the identification of invasive plant species and the establishment of prohibited activities regarding invasive plants.
The bill defines "invasive plant species" as:
"plant species that are not native to this state whose introduction causes or is likely to cause economic or environmental harm or harm to human health as determined by scientific studies."
A committee amendment to the bill clarifies that the definition of invasive plant species does not include "cultivated plants grown as food or livestock feed in accordance with generally accepted agricultural practices, including all plants authorized by the animal and plant health inspection service in the USDA." In committee hearings, the Ohio Invasive Plants Council expressed serious concerns about this exclusion for cultivated crops. The group's concern is that ODA would not have authority to evaluate plants with invasive properties if they are grown for livestock feed. Other groups have raised similar worries about plants with invasive characteristics grown for biofuel production. The Ohio Farm Bureau submitted testimony supporting the exemption, stating that the federal government already regulates plants grown for agricultural crops.
The bill contains one exception to ODA's authority over invasive plant regulation. The director of Ohio EPA may continue to consider invasive plant species when evaluating applications and permits for wetlands under Ohio's Water Pollution Control Act. Once ODA develops invasive plant regulations, however, the EPA must refer to ODA's list of invasive plant species when reviewing wetland applications and permits.
Read S.B. 192 here.
A new bill in the Ohio Senate addresses several legal issues for Ohio agritourism operators. Senators Jones (R-Springboro) and Peterson (R-Sabina) introduced S.B. 334 on May 7. The bill would impact Ohio agritourism operators in regards to civil liability, property taxation, zoning regulation and amusement ride standards.
Civil Liability Protection
Following a similar trend in other states, the Ohio legislation would grant agritourism operators civil liability protection from claims for injuries that occur during agritourism activities. An operator would not be liable for harm that an observer or participant sustains during an agritourism activity if the harm is a result of the following conditions, which the law defines as "risks inherent in an agritourism activity":
(a) The surface and subsurface conditions of land;
(b) The behavior of wild or domestic animals;
(c) The ordinary dangers associated with structures or equipment ordinarily used in farming or ranching operations;
(d) The possibility of contracting illness resulting from physical contact with animals, animal feed, animal waste, or surfaces contaminated by animal waste;
(e) The possibility that a participant may act in a negligent manner, including by failing to follow instructions given by the agritourism provider or by failing to exercise reasonable caution while engaging in the agritourism activity that may contribute to injury to that participant or another participant.
The law does not extend civil liability immunity if an agritourism operator purposefully causes harm or if the provider's willful or wanton disregard for the safety of an observer or participant proximately causes harm to the person.
Tags: agritourism liability; agritourism; agritourism zoning; agritourism taxation; agritourism rides
Ohio farms that complement their agritourism activities with inflatable "bounce houses" and slides for kids to play on will soon be subject to new safety standards proposed by the Ohio Department of Agriculture (ODA). Based on its authority to inspect "amusement rides," ODA is proposing the regulations to ensure public safety through minimum standards for the operation and use of inflatable devices.
Inflatables haven't always been subject to ODA's "amusement ride" oversight. The Ohio legislature amended the definition of "amusement rides" in 2011 to include "inflatable devices," which gave ODA the added responsibility of inspecting and permitting the bounce houses. The regulations now proposed by ODA will provide safety standards that operators must meet before receiving a permit to operate an inflatable.
According to the proposal, owners or operators of inflatable amusement devices:
- Shall have the manufacturer's specifications on hand and available for ODA at the time of an inspection.
- Shall not inflate a device with flammable gases.
- May vary from the manufacturer's operating instructions or make alterations to the inflatable's design, only by doing the following:
1) Obtaining written permission for the variance or alteration from the manufacturer;
2) Submitting the written permission from the manufacturer to the department for approval; and
3) Being reinspected by ODA to ensure compliance with the revised manufacturing instructions or specifications.
ODA seeks comments on the proposed safety standards by February 18, 2014; learn more by visiting here.
Author: Peggy Kirk Hall, Asst. Professor, Agricultural & Resource Law
Litigation that arose from a drainage improvement project completed in 2002 has finally ended with a decision by the Ohio Supreme Court. The court announced today that it will not accept the case for review, which allows the ruling by the Third District Court of Appeals in favor of the Henry County Engineer to remain in place.
Richard and Rodney Rohrs sued the county engineer and several staff members in 2005 after a drainage project completed by the county flooded several acres of a farm field the Rohrs had rented from Gerald Westhoven. In the late 1990s, Westhoven approached the Henry County Engineer about flooding problems on Westhoven's farm and the possibility of cleaning out the open drainage ditch that ran between his land and the county road. The engineer proposed an alternative solution, to lay drainage tiles and fill the ditch, and offered to classify the work as a road safety improvement project to be handled through the engineer's budget rather than through the petition ditch process that would result in assessments on property owners.
The county engineer installed the new drainage system in 2002. Westhoven entered into a lease for the land with the Rohrs in the Spring of 2003. The Rohrs planted a tomato crop on the parcel; by July, part of the field was under water. After the harvest season, the county engineer and Westhoven attempted to locate a drainage tile that could be the source of the flooding but they could not find any tile in the flooded area. The county then installed a new catch basin near Westhoven's property to resolve the flooding problem, with plans to tie in any field tile that Westhoven might later discover on his land. The Rohrs continued to lease the farmland from Westhoven.
According to witness testimony, the cause of the 2003 flooding was a drainage tile and catch basin just south of Westhoven's property that had been cut off during construction of the road improvement project drainage system; the engineer's staff had filled the tile and catch basin because it did not appear to be a functioning tile and did not exist on any of the county's plans. Excavation on the Westhoven property several years later revealed a drainage tile located just 15 feet from the filled tile and catch basin. The newly discovered tile, which Westhoven had not previously reported to the engineer, had a seed bag stuffed into its outlet, which was near the filled catch basin. The Rohrs claimed that the engineer's staff had intentionally stuffed the seed bag into the functioning tile, while the engineer's staff claimed they did not know about the tile. The county surmised that the seed bag had been used in the previous filling of the tile and catch basin that they had believed to be non-functioning.
The Rohrs sought $70,000 for losses to their 2003 tomato crop as a result of the flooding. Their legal causes of action included several tort claims and violations of federal and state due process rights. They also asked the court for a writ of mandamus to order the county to compensate them for a partial "taking" of their property by the county engineer. The Henry County Court of Common Pleas, after seven years of litigation, rejected each of the Rohrs' claims.
The Rohrs appealed with no avail to the Third District Court of Appeals. The appellate court agreed with the trial court's conclusion that state law prevented tort liability for the flooding because the county was entitled to governmental immunity under Ohio Revised Code 2744.02(A)(1) i. The court stated that the Rohrs had failed to prove that any of the law's exceptions to governmental immunity applied to the situation. In response to the Rohrs' argument that the county had committed a partial "taking" of property, the appeals court agreed with the trial court that a "taking" had not occurred for three reasons: because the flooding was accidental and incidental rather than an intentional taking of property, because the alleged taking was not for a public use as required by the Constitution and because the Rohrs had other remedies for their harm, such as a tort claim against Westhoven and the failed tort claims against the county engineer. As such other remedies were available, the court also agreed with the trial court that the Rohrs failed to prove violations of their due process rights.
In their request for a review by the Ohio Supreme Court, the Rohrs focused on the lower courts' conclusions that a "taking" had not occurred. The Henry County Farm Bureau and the Ohio Farm Bureau filed a brief in support of the Rohrs, urging the Supreme Court to accept the case and review the takings issue. The Court today declined to accept the case by a vote of 5--2 with Justices Paul Pfeifer and Judith French dissenting. Without a review by the Ohio Supreme Court, the appellate court decision stands as the final resolution of the case.
The decision of the Third District Court of Appeals in State ex rel. Rohrs v. Germann is available here.
Peggy Hall, Asst. Professor, OSU Extension Agricultural & Resource Law Program
We often explain the Ohio Recreational User's Statute to farmland owners because the law provides liability protection when someone asks to hunt, fish, snowmobile or conduct other recreational activities on the farm. As long as the landowner grants permission for the use and does not receive a fee from the recreational user, the landowner does not owe a legal duty to assure that the premises are safe for the user. This immunity from liability encourages those who own non-residential land to open the land for recreational activities.
Landowners always have "what if" type questions when we explain this law. Recently, the Ohio Supreme Court answered one of those "what if" questions: what if I modify the property in some way and create a hazardous condition that causes an injury; does the Recreational User's Statute still protect me from liability? The Supreme Court's response: yes. But the court was not in complete agreement on the issue.
The accident at the heart of the case occurred when an 18 year old boy went sledding in a park owned by the City of Circleville, Ohio. The boy slid head first into a wooden railroad tie which the city had transported to the park from a construction site. The city planned to temporarily store the railroad tie and other construction debris at the park because no storage space was available at its maintenance facility. Upon hitting the railroad tie, the boy broke his neck and became paraplegic.
In its decision in the lawsuit filed by the boy, the trial court determined that the city was immune from liability because of the Recreational User's Statute, which grants recreational immunity to governmental as well as private landowners. The boy appealed the case to the Fourth District Court of Appeals, which affirmed the trial court's decision. The Ohio Supreme Court agreed to review the case.
The question before the court was whether the city's action of placing the railroad ties in the park created an exception from the immunity provided by the Recreational User's Statute. The boy's legal counsel argued that storage of the railroad ties and other construction debris in the park had changed the property's essential character so that it was no longer a recreational property and should not fall under the protection of the Recreational User's Statute. A majority of the court disagreed, concluding that the city’s alleged creation of a hazard on the premises did not affect the city’s immunity.
"We cannot accept as reasonable any contention that the presence of a railroad tie in a public park changes its essential character as a recreational space,” wrote Justice Sharon Kennedy. “Critics may claim that our decision reaches a harsh result. However, the language of the recreational-user statute is plain; a property owner owes no duty to a recreational user to keep the property safe for entry or use. Creating an exception to this immunity is a policy decision that comes within the purview of the General Assembly, not the courts. … [W]e will not create an exception by judicial fiat.”
Justice William O’Neill entered a dissenting opinion, joined by Justice Paul Pfeifer, who also wrote a separate dissent. “[L]et’s be accurate here — we are not talking about a single railroad tie," stated Justice O'Neill. "That tie that crippled this child was part of an overall scheme of disposal of huge mounds of debris that the city had incredibly decided to place in the middle of a recreational park! Cover it with a light dressing of snow, and the perfect killing field was created. . . . [T]he city made a decision to dump huge mounds of debris into a city-owned park. When it did that, it lost its “recreational user” immunity entirely."
In his dissent, Justice Pfeifer questioned the protection afforded by the Recreational User's Statute. The immunity provisions in those statutes, he stated, "provide unreasonable and unconstitutional protection to government entities that own property."
What does the Court's decision mean for agricultural landowners?
While the case did not involve an agricultural property, the decision does have impact for agricultural landowners. A few lessons from the case:
Affirmation of broad landowner immunity. The court's decision affirms the broad immunity afforded by Ohio's Recreational User's Statute. We often hear questions such as "but what if I left my equipment out in the field?" or "but what if they fall into that hole I just dug?" Based on the court's decision, the landowner has no duty to make the property safe and won't be liable for injuries caused by any "hazards" the landowner created on the property. Remember that this immunity applies to "recreational users"-- property visitors who have the landowner's permission to engage in recreational activities such as hunting, fishing and snowmobiling on non-residential property and who haven't paid the landowner for the recreational activity (with an exception for hunting lease payments; landowners may receive hunting lease payments and still retain recreational user immunity).
Take recreational permission seriously. This lawsuit arose because someone suffered a serious injury. Even with immunity protection, landowners should think twice about allowing recreational users on the property when highly dangerous situations are present. If there's a good chance that someone could suffer harm from the situation, avoid the potential of harm and simply don't grant permission for people to be on the property.
Immunity comes at a cost. While it can prevent landowner liability, the Recreational User's Statute can't stop a harmed party from taking the landowner to court. The city incurred not only the costs of defending itself through three court hearings, involving attorney fees and the city's time, but also the cost of negative publicity. Surely, more responsible land management decisions would have cost less and kept someone from suffering harm.
Confusion at Federal Level Leaves Farmers Unsure of SPCC Rule Compliance
Peggy Hall, Asst. Professor, OSU Extension Agricultural and Resource Law Program
A common joke among attorneys is that the answer to every legal question is "maybe," and that answer is appropriate when asking whether farms will be exempted from complying with the Oil Spill Prevention, Containment and Countermeasure (SPCC) rule.
May 10, 2013 was the compliance deadline for the EPA rule requiring SPCC plans for farms storing above a threshold amount of oil. But several legislators have spoken out against the regulation and intend to exempt most farms from its requirements. As we reported in an earlier post, legislators successfully delayed EPA's ability to enforce the SPCC rule against farms until September 23, 2013, and also drafted the legislation to exempt many farms from the SPCC rule. But while the Senate and House have each passed proposals with SPCC exemption language, they've used two different bills to do so--the Senate's Water Resources Development Act and the House's Farm Bill. Neither bill has passed both chambers and the SPCC exemption remains in limbo today, the date after which the EPA may begin enforcing the rule.
In mid-August, two sponsors of the exemption, Senators Inhofe (R-OK) and Pryor (R-AR), sent a letter to EPA Administrator Gina McCarthy regarding SPCC enforcement. The letter clarified that Congress plans to exempt most farms from the rule and suggested that the EPA should not attempt to retroactively enforce the rule back to the original compliance date of May 10, 2013. Time will tell whether the senators' letter will prevent EPA from penalizing farms that did not have an SPCC plan by May 10 but had an oil spill anytime after the May 10 compliance deadline.
What Should Farmers do about SPCC Plans now?
Farmers who have been waiting to see if Congress would exempt them from the SPCC rule have to make a decision: comply now or risk penalties for non-compliance. A few considerations may help the decision-making process:
- Operating without an SPCC plan carries financial risk. If a farm that is subject to the SPCC rule does not have a plan but does have an oil spill that discharges into a waterway, the farm will incur additional penalties for failing to have and implement an SPCC plan. These penalties vary depending upon the size of the facility and the severity of the spill; our research revealed recent fines ranging from $1,500 to over $55,000. Our research also shows the cost of an SPCC plan from a certified engineer or consulting firm to begin at around $1,000, with higher costs for larger farms.
- Only certain farms must comply with SPCC. Farms that store less than 1,320 gallons of diesel, gasoline, hydraulic oil, lube oil, crop oil or vegetable oil aboveground or less than 42,000 gallons below ground do not need an SPCC plan. All other farms might need an SPCC plan if it's possible that spilled oil could discharge into a waterway. To learn more about whether a farm is subject to the SPCC plan rule, visit here.
- Smaller, lower-risk farms can "self-certify" their SPCC plan. The SPCC rule allows farms with smaller oil storage and no history of significant oil spills ("Tier I farms") to create and implement an SPCC plan; other farms require certification by an engineer. The EPA provides a model template for Tier I farms on their website. Be aware, however, that preparing the plan requires some work: a thorough assessment of the farm's oil storage, selection and installation of appropriate containment measures and proper training and response practices. For those who don't want to prepare their own plan, consider a consultant. Consulting companies offer services such as assessment, consultation, plan development, certification and future inspections.
- A farm may be able to seek a compliance deadline extension. The SPCC rule allows a farm that couldn't meet the compliance deadline to submit a written request for an extension to the EPA regional administrator for the state where the farm is located. There are several reasons EPA may grant an extension: because a Professional Engineer (PE) isn’t available to create and certify a plan, if the farm is located in an area impacted by floods, or because facility modifications could not be completed before the deadline. For more on seeking an extension, visit this link.
- Insurance coverage may be at risk. Non-compliance with the law can negate insurance coverage; most insurers would likely deem the failure to have an SPCC plan after September 23, 2013 as "non-compliant."
- Oil storage containment is good risk management. Even without the SPCC rule, assessing and managing oil storage and handling practices on the farm can pay off. Consider the recent case of an Ohio farm with a leaking oil tank that polluted a nearby waterway; the farm paid over $15,000 in fines and cleanup costs.
While "maybe" is a good answer to whether Congress will exempt many farms from the SPCC rule, it isn't a good answer to whether farmers should ignore the SPCC regulation because of the confusion in Congress. For more on SPCC and agriculture, visit the EPA's web page.