Renewable Energy

Solar panels iand corn growing in a field in Ohio
By: Peggy Kirk Hall, Wednesday, August 31st, 2022

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.

A group of ferrets laying next to each other.
By: Jeffrey K. Lewis, Esq., Thursday, December 30th, 2021

Did you know that a group of ferrets is called a business?  Ironically, we are in the business of ferreting out agricultural and resource law issues and providing you updates.  This edition of the Ag Law Harvest provides an update on recent court decisions from across the country that deal with the right to farm, food labeling, and conditional use permits for solar gardens. 

Right to Farm Act upheld in North Carolina.  Earlier this month, a three-judge panel on the North Carolina Court of Appeals upheld the constitutionality of North Carolina’s right to farm law.  In 1979, the North Carolina legislature enacted the Right to Farm Act (the “Act”).  In 2017 and 2018 the North Carolina legislature amended the Act by passing House Bill 467 and Senate Bill 711 (collectively referred to as “the Amendments”).  The Amendments sought to clarify and strengthen North Carolina’s right to farm law. The Plaintiffs argued that the Amendments violated North Carolina’s equivalent of the U.S. Constitution’s Fourteenth Amendment Due Process Clause and that the Act exceeded the scope of North Carolina’s police power.  The Court of Appeals disagreed.  The Court recognized North Carolina’s interest in promoting and preserving agriculture and that North Carolina has the authority to regulate such an interest. The Court found that the Act’s limitation on potential nuisance claims against those engaged in agriculture, forestry, and other related operations helps to protect North Carolina’s interest, and encourages North Carolina’s goal to encourage the availability and continued “production of food, fiber, and other products.”   The Plaintiffs also argued that the Amendments were “private laws” to specifically protect the swine industry in violation of North Carolina’s Constitution.  The Court found, however, that the Act and the Amendments are laws of general applicability that apply to all agricultural and forestry operations, not just swine producers.  Lastly, the Plaintiffs argued that because the language in House Bill 467 limited the amount of compensation that can be recovered in a nuisance action against agricultural and forestry operations, the Plaintiffs’ right to a trial by jury had been impaired and/or abolished.  The Court ruled, however, that North Carolina has the authority to “define the circumstances under which a remedy is legally cognizable and those under which it is not.”  The Court found that there are many examples where compensation and remedies are limited within North Carolina law and that House Bill 467 did not “impair nor abolish the right to a jury trial.” 

Where is the cacao?  A California man (“Plaintiff”) is suing Costco Wholesale Corporation (“Costco”) for allegedly mislabeling Costco’s “Chocolate Almond Dipped Vanilla Ice Cream Bars” (the “Product”).  Plaintiff argues that because of the Product’s packaging and name, he expected the Product’s chocolate would have been predominately derived from cacao beans.  Plaintiff asserts that chocolate is defined by the Food and Drug Administration (“FDA”) and California law “as prepared from ground roasted cacao bean” and that it must be “made chiefly from cacao beans with a small amount of optional ingredients.”  Based on this definition, Plaintiff claims that Costco’s packaging is misleading because the Product’s chocolate contains mostly vegetable oils and small amounts of ingredients derived from cacao beans.  In his Complaint, Plaintiff argues that federal regulations require Costco to label the Product as “milk chocolate and vegetable oil coating” rather than just “chocolate.”  However, the court found that neither of Plaintiff’s cited regulations support a viable theory of liability against Costco.  First, the court could not find Plaintiff’s definition of chocolate anywhere in the Code of Federal Regulations.  Secondly, the court held that there are no federal regulations that require a certain amount of cacao bean ingredients as opposed to vegetable oils to be used in “chocolate” and that there is no language mandating the labeling of Costco’s Product as “milk chocolate and vegetable oil coating almond dipped ice cream bars.” The court also dismissed Plaintiff’s claim that Costco engaged in consumer deception with its Product’s label.  The court found that a reasonable consumer would not have been deceived by the Product’s label and that if there were any questions about the ingredients of the Product, a consumer could have resolved those questions by looking for the ingredients list on the back of the Product’s packaging. 

Conditional use permits at the center of the Minnesota’s “solar system.”  Move over Sun because conditional use permits are at the center of attention in Minnesota, for now.  The Minnesota Court of Appeals has recently ruled against a county’s decision to deny two conditional use permits to build solar gardens in McLeod County, Minnesota.  Two subsidiary companies of Nokomis Energy LLC (“Plaintiff”) each applied for a conditional use permit (“CUP”) to build separate, one-megawatt solar energy facilities.  McLeod County considered the two CUP applications at public hearings.  Two neighboring landowners expressed concerns about stray voltage and the number of fetal deaths among their livestock.  The landowners claimed that the number of fetal deaths increased after other solar facilities were constructed nearby.  Plaintiff did not deny that solar gardens can produce stray voltage but proposed to alleviate those concerns by hiring only licensed professionals and to allow third-party oversight during construction.  Plaintiff also offered to conduct stray voltage testing before and after construction and indicated that it would accept any conditions set forth by county officials.  The county, however, denied both applications on the basis that the proposed sites are “prime farmland” and because the stray voltage would negatively affect livestock.  The court rejected the county’s assessment.  First, the court held that preserving prime farmland is not a sufficient legal basis for denying a CUP.  Second, the court ruled that the county cannot deny a CUP without first considering whether any proposed conditions would eliminate any concerns about the application.  Here, the court found that McLeod County’s failure to address Plaintiff’s proposals to eliminate the stray voltage concerns amounts to an unjust denial of Plaintiff’s CUPs.    

 

Thanks for reading and Happy New Year! 

Peregrine Falcon flying straight at camera.
By: Jeffrey K. Lewis, Esq., Friday, October 15th, 2021

Did you know that the fastest animal in the world is the Peregrine Falcon?  This speedy raptor has been clocked going 242 mph when diving.

Like the Peregrine Falcon, this week’s Ag Law Harvest dives into supply chain solutions, new laws to help reduce a state’s carbon footprint, and federal and state case law demonstrating how important it is to be clear when drafting legislation and/or documents, because any ounce of ambiguity could lead to a dispute.      

Reinforcing the links in the supply chain.  President Joe Biden announced that ports, dockworkers, railroads, trucking companies, labor unions, and retailers are all coming together and have agreed to do their part to help reduce the supply chain disruption that has left over 70 cargo ships floating out at sea with nowhere to go.  In his announcement, President Biden disclosed that the Port of Los Angeles, the largest shipping port in the United States, has committed to expanding its hours so that it can operate 24/7; labor unions have announced that its workers have agreed to work the additional hours; large companies like Walmart, UPS, FedEx, Samsung, Home Depot and Target have all agreed to expand their hours to help move product across the country.  According to the White House, this expanded effort will help deliver an extra 3,500 shipping containers per week.  Port and manufacturing disruptions have plagued retailers and consumers since the beginning of the COVID-19 pandemic.  Farming equipment and parts to repair farming equipment are increasingly in short supply.  The White House hopes that through these agreements, retailers and consumers can finally start to see some relief.  

California breaking up with gas powered lawn equipment.  California Governor Gavin Newsom recently signed a new bill into law that would phase out the use of gas-powered lawn equipment in California.  Assembly Bill 1346 requires that new small off-road engines (“SOREs”), used primarily in lawn and garden equipment, be zero-emission by 2024.  The California legislation seeks to regulate the emissions from SOREs which have not been as regulated as the emissions from other engines.  According to the legislation, “one hour of operation of a commercial leaf blower can emit as much [reactive organic gases] plus [oxides of nitrogen] as driving 1,100 miles in a new passenger vehicle.”  The new law requires the State Air Resources Board to adopt cost-effective and technologically feasible regulations to prohibit engine exhaust and emissions from new SOREs.  Assembly Bill 1346 is a piece of the puzzle to help California achieve zero-emissions from off-road equipment by 2035, as ordered by Governor Newsome in Executive Order N-79-20

U.S. Supreme Court asked to review E15 Vacatur.  A biofuel advocacy group, Growth Energy, filed a petition asking the U.S. Supreme Court to review a federal court’s decision to abolish the U.S. Environmental Protection Agency’s (“EPA”) rule allowing for the year-round sale of fuel blends containing gasoline and 15% ethanol (“E15”).  Growth Energy argues that the ethanol waiver under the Clean Air Act for the sale of ethanol blend gasoline applies to E15, the same as it does for gas that contains 10% ethanol (“E10”).  Growth Energy also claims that limiting the ethanol waiver to E10 gasolines contradicts Congress’s intent for enacting the ethanol waiver because E15 better achieves the economic and environmental goals that Congress had in mind when it drafted the ethanol waiver.  Growth Energy asks the Supreme Court to overturn the lower court’s decision and instead interpret the ethanol waiver as setting a floor, not a maximum, for fuel blends containing ethanol that can qualify for the ethanol waiver.  Growth Energy now awaits the Supreme Court’s decision on whether or not it will take up the case. Visit our recent blog post for more background information on E15 and the waivers at issue.  

When in doubt, trust the trust.  A farm family in Preble County may finally be able to find some closure after the 12th District Court of Appeals affirmed the Preble County Court of Common Pleas’ decision to prevent a co-trustee from selling farm property.  Dorothy Wisehart (“Dorothy”), the matriarch of the Wisehart family established the Dorothy R. Wisehart Trust (the “Trust”) in which she conveyed a one-half interest in two separate farm properties, both located within Preble County to the Trust.  Dorothy retained her one-half interest in the two farms which passed to her son, Arthur, upon her death.  Furthermore, upon Dorothy’s death, the Trust became an irrevocable trust with Arthur as the sole trustee.  The Trust had five income beneficiaries – Arthur’s wife and four kids.  The Trust specifically allowed for removal and replacement of the trustee upon the written request of 75% of the income beneficiaries.  In 2010, four of the five income beneficiaries executed a document removing Arthur as the sole trustee and instead placed Arthur and Dodson, Arthur’s son and one of the income beneficiaries, as co-trustees.  Arthur, however, argued that only Dorothy had the power to remove and appoint a new trustee and once Dorothy passed, no new trustee could be appointed.  In 2015, Dodson filed suit against his father after Arthur allegedly tried to sell the two farms and further alleged that Arthur breached his fiduciary duty by withholding funds from the Trust.  Dodson also asked the court to determine the issue of whether Dodson was validly appointed as co-trustee.  The common pleas court sided with Dodson and found that (1) the Trust held an undivided one-half interest in the farms, (2) Dodson was validly appointed as co-trustee, and (3) Arthur wrongfully withheld funds from the Trust, breaching his fiduciary duty as a trustee.  Arthur appealed, arguing that the case was not “justiciable” because the harms alleged by Dodson were hypothetical and no real harm occurred.  However, the 12th District Court of Appeals disagreed with Arthur.  The court found that the Trust expressly provided for the removal and appointment of trustees by 75% of the income beneficiaries.  Further, the court ruled that this case was justiciable because Dodson’s allegations needed to be resolved by the courts or else real harm would have occurred to the income beneficiaries of the Trust.  This case highlights perfectly the importance of having well drafted estate planning documents to help clear up any disputes that may arise once you’re gone.  

No need to cut the “GRAS” today.  Consumer advocates, Center for Food Safety (“CFS”) and Environmental Defense Fund (“EDF”), brought suit against the Food and Drug Administration (“FDA”) asking the court to overturn the FDA’s rule regarding “Substances Generally Recognized as Safe (the “GRAS Rule”).  According to the plaintiffs, the GRAS Rule subdelegated the FDA’s duty to ensure food safety in violation of the United States Constitution, the Administrative Procedure Act (“APA”), and the Federal Food, Drug, and Cosmetic Act (“FDCA”).  In 1958, Congress enacted the Food Additives Amendment to the FDCA which mandates that any food additive must be approved by the FDA.  However, the definition of “food additive” does not include those substances that are generally recognized as safe.  Things like vinegar, vegetable oil, baking powder and many other spices and flavors are generally recognized as safe to use in food and not considered to be a food additive.  Under the GRAS Rule, anyone may voluntarily, but is not required to, notify the FDA of their view that a substance is a GRAS substance.  There are specific guidelines and information that must be presented to back up a manufacturer’s claim that a substance is GRAS.  In any case, the FDA retains the authority to issue warnings to manufacturers and to stop distribution when the FDA believes that a substance is not a GRAS substance.  Plaintiffs claim that under the GRAS Rule, the FDA is subdelegating its duty by allowing manufacturers to voluntarily notify the FDA of a GRAS substance rather than requiring it.  However, the Federal District Court for the Southern District of New York found that the FDA did not subdelegate its duties because the FDCA does not require the FDA provide prior authorization that a substance is GRAS.  Further, the court held that the FDA has done nothing more than implement a process by which manufacturers can notify the FDA of GRAS determinations and the FDA can choose to agree or disagree.  The court reasoned that even if a mandatory GRAS notification procedure or prior approval process were in place, manufacturers could simply lie about what’s in their products and the FDA would be none the wiser.  The court also noted that mandatory submissions would consume the FDA’s resources which would be better spent evaluating higher priority substances.  The court ultimately concluded that the FDA’s GRAS Rule does not highlight a constitutional issue, nor does it violate the FDCA or APA.

By: Peggy Kirk Hall, Wednesday, October 13th, 2021

Large-scale wind and solar energy development has generated both opportunity and conflict across Ohio in recent years.  For several months, we monitored the progress of Senate Bill 52, a proposal intended to address community and landowner concerns about wind and solar facilities.  This past Monday marked the effective date for Senate Bill 52, passed by the Ohio Legislature in June, and we've been busy developing new resources to help explain the laws that are now effective. 

The legislation expands local involvement in the siting and approval of large-scale wind and solar facilities in several ways:

  • County commissioners may designate “restricted areas” where such facilities may not locate.
  • County citizens may petition for a referendum to approve or reject restricted area designations.
  • Developers must hold a public meeting overviewing a proposed facility in the county where it would locate.
  • County commissioners may prohibit or limit a proposed wind or solar facility after learning of it at the public meeting.
  • County and township representatives must sit on the Ohio Power Siting Board committee that reviews facility applications.

The new laws also require wind and solar developers to submit decommissioning plans and performance bonds to address removal of a facility at the end of its lifetime. 

Our two law bulletins and video series on Senate Bill 52 are now available.  The resources work through each part of Senate Bill 52 and explain which types of facilities will be subject to the laws.  You'll find the new resources in our energy law library on the Farm Office website at https://farmoffice.osu.edu/our-library/energy-law.

Farm Office team of David Marrison, Dianne Shoemaker, Peggy Kirk Hall and Barry Ward at OSU's Farm Science Review 2021.
By: Peggy Kirk Hall, Friday, September 24th, 2021

As it often goes with farming, the weather interfered a bit with Farm Science Review this year.  We missed seeing farmers and students from across the state gather for the show on Wednesday.  But even wind and rain didn’t stop our Farm Office team, above, from presenting Farm Office Live from the Review on Thursday.   I gave an update on Ohio legislation, as Ohio’s legislature is back from its summer break.   Here’s a summary of the legislation I discussed at our Farm Science Review program.

Bills passed and soon effective

S.B. 52 – Solar and wind facilities.  S.B. 52 passed several months ago and will be effective on October 11, 2021.  The new law will allow counties to designate “restricted areas” in a county where wind and solar projects may not locate and creates a county referendum process for a public vote on restricted area designation.  The law will also require developers to hold a public meeting in the county where a facility is proposed at least 90 days before applying for project approval with the Ohio Power Siting Board.  After the meeting, the county commissioner may choose to prohibit or limit the proposed project.  Another provision of the new law appoints 2 local officials from the proposed location to serve on the OPSB board that reviews a project.  And importantly for landowners, the new law requires a developer to submit a decommissioning plan to OPSB for approval with the application and to post and regularly update a performance bond for the amount of decommissioning costs.  Watch for our new law bulletins on S.B. 52, which we’ll publish soon.

Bills on the move

H.B. 30 – Slow-moving vehicles.  The bill passed the House on June 23, 2021, and just received its second hearing before the Senate Transportation on September 22, 2021.  It proposes revisions to marking and lighting requirements for animal-drawn vehicles to make the vehicles more visible and reduce roadway accidents.

H.B. 95 – Beginning farmers.   We’ve been hoping this bill aiding beginning farmers would continue to receive attention.  It would allow individuals to be certified as beginning farmers and create income tax credits for owners who sell land and agricultural assets to certified beginning farmers and for beginning farmers who attend approved financial management programs.  The bill passed the House on June 28, 2021 and was referred to the Senate Ways and Means Committee on September 8, 2021.

S.B. 47 – Overtime payThe Senate passed S.B. 47 on September 22, soon after returning from break.  It would exempt an employer from paying overtime wages for certain activities, including traveling to the workplace, actions before or after beginning principal work activities, or “de minimus” acts requiring insignificant time.  The bill sponsors state that it will bring necessary clarity to overtime pay in the era of more employees working unsupervised from home.

Bills newly introduced

H.B. 397 – Termination of Agricultural LeaseA bill that aims to bring certainty to farmland leases was introduced in the House on August 24, 2021 and referred to the Agriculture and Conservation Committee.  The proposal states that where a farm lease agreement does not provide for a termination date or a method for giving notice of termination, a landlord who wants to terminate that agreement must do so in writing by September 1.   Unless otherwise agreed in writing, the termination date would be either the date harvest or removal of the crops is complete or December 31, whichever is earlier.

H.B. 385 – Municipal waste discharges to Lake Erie western basin  Municipalities would be prohibited from discharging waste from treatment plants into Lake Erie under a new bill proposed by Rep. Jon Cross (R-Kenton).  The bill would require the Ohio EPA to revoke all existing NPDES permits for municipal treatment works or sewerage systems to in the western basin and prohibit any additional permits for that purpose.  It would also fine municipalities up to $250,000 per day for knowingly discharging waste into Lake Erie on the first offense and $1,000 per day for subsequent offenses, or to fine $100 million if the discharge amount exceeds 100 million gallons in a 12-month period. Introduced on August 6, 2021, the bill has been referred to the House Agriculture and Conservation Committee.

Catch a replay Farm Office Live from Farm Science Review at https://farmoffice.osu.edu/farmofficelive.  Register at that site to join us for the next Farm Office Live on October 13 at 7 p.m. or a repeat on October 15 at 10 a.m., whern the Farm Office team will digest the latest news and information on agricultural law and farm management issues that affect Ohio’s farm offices.

Ohio capitol building
By: Peggy Kirk Hall, Wednesday, July 14th, 2021

Following a flurry of activity before its break, the Ohio General Assembly can now enjoy a few lazy days of summer.  While the legislature spent much of its energy passing the state budget, it also moved several bills affecting agriculture.  Here’s the latest update on legislation that's moving down at the capitol.

Enacted bills

Solar and wind facilities.  We wrote earlier about S.B. 52, the wind and solar facility siting bill the legislature passed in late June.  Despite pressure to veto the bill, Governor DeWine signed the legislation on July 12; its effective date is October 9, 2021.  The new law requires developers to hold a public meeting in a community at least 90 days prior to applying for project approval, allows counties to designate restricted areas where wind and solar projects may not locate, sets up a referendum process for county residents to have a voice in restricted area designations, adds two community officials to the project review process at the Power Siting Board, and establishes rules for decommissioning of projects, including performance bonds.

Natural gas services.  While communities will have a say in siting wind and solar facilities after S.B. 52’s passage, the opposite will be true for natural gas services.  H.B. 201 guarantees that persons have a right to obtain natural gas and propane services, subject to municipal home rule authority and regulatory oversight.  The bill prohibits political subdivisions from limiting or preventing gas and propane services within its boundaries.  Governor DeWine signed the bill on July 1 and it becomes effective on September 28, 2021.

State budget.  It took a good while, but the governor signed the state budget bill, H.B. 110, on June 30 and it took effect on July 1.  Highlights of agricultural provisions in the bill include:

  • H2Ohio.  Requires state agencies that prepare the already mandated annual report on the H2Ohio fund to present the report to the Senate and House finance committees each year.  ORC 126.60(D).
  • Ohio Proud.  Allows the Ohio Department of Agriculture (ODA) to sell merchandise that promotes the Ohio Proud program, and to use proceeds for the Ohio proud, international, and domestic market development fund.  ORC 901.171(B) and (C).
  • Liming inspections.  Allows the ODA director to enter into agreements with private parties for the inspection, sampling, and analysis of liming material and allows those parties to enter onto private and public land for inspections.  ORC 905.59.
  • OSU Extension.  Establishes a farm production, policy, and financial management institute in OSU Extension to address the integration of farm production practices, agricultural marketing, farm policy, and financial management challenges for farm owners and managers, lending agencies, ag teachers, and OSU professionals and provides the institute $250,000 each year for two years. ORC 3335.38.
  • Farmers market inspections.  Removes the option for a farmers market to register and be inspected as a farm market with ODA.  ORC 3717.221(A) and (B).
  • Wine taxes.  Makes the 2 cents per gallon wine tax revenue credited to the Ohio Grape Industries Fund permanent.  R.C. 4301.43.
  • Southern Ohio Agricultural and Community Development Foundation.  At the end of 2021, abolishes the foundation and its board, which was established in 1998 through the Tobacco Master Settlement Agreement with tobacco manufacturers.  Any remaining funds will transfer to the Ohio Proud Marketing Fund. 
  • H2Ohio.  Appropriates $49.3 million each year to the H2Ohio program for 2022 and 2023.
  • Farmland preservation.  Allocates $500,000 for the purchase of agricultural easements in 2022 and 2023.
  • Soil and water phosphorus program.  Allocates $10.7 million in 2022 and 2023 for programs to assist in reducing phosphorus in the Western Lake Erie Basin.
  • SWCDs in Western Lake Erie Basin.  Allocates $3.85 million to support Soil and Water Districts in the Western Lake Erie Basin in complying with former S.B. 1 and assisting with soil testing, nutrient management plan development, manure management technologies, filter strips and water management.

Bills on the move

Beginning farmers.  H.B. 95 finally passed the House on June 28, 2021—it was introduced in February and lagged in the last legislative session.  The proposal allows individuals to be certified as beginning farmers either through USDA or a certification program by ODA, Ohio State or Central State.  Certification criteria includes: farming in Ohio less than 10 years, having a net worth of less than $800,000, providing a majority of labor and management for the farm, demonstrating adequate knowledge of farming, submitting projected earning and profits, demonstrating that farming will be a significant source of income, and participation in an approved financial management program.  The bill would establish two income tax credits, one for owners who sell land and agricultural assets to certified beginning farmers and another for beginning farmers that attend a financial management program.  The bill now requires Senate approval.

Slow-moving vehiclesH.B. 30 had its first hearing before the Senate Transportation committee on June 23.  The proposal passed the House in April.  The bill aims to increase visibility of animal-drawn vehicles by changing marking and lighting requirements.  The vehicles would have to display either an SMV emblem or reflective micro prism tape rather than reflective tape on the rear, a flashing yellow lamp at the top and rear, in addition to current lighting requirements.

Earning statements.  A bill passed by the House on June 16 has been referred to the Senate Small Business and Economic Opportunity Committee.  H.B. 187 would require all employers to provide employee with a written or electronic statement of the employee’s earnings and deductions for each pay period, to include total hours worked and hourly rate, total gross wages, amounts and purposes of addition or deductions from wages, and total net wages.  The bill also establishes a request and violation reporting system for employers who fail to provide the statements. 

New bills

Moratorium on animal feeding facilities.  A bill introduced by two representatives from northwestern Ohio would affect new and expanding animal feeding facilities in the Maumee watershed.  H.B. 349 would not allow the Ohio Department of Agriculture to approve a permit for a new construction or expansion of a “regulated animal feeding facility” if it is in the Maumee watershed and the director of ODA has determined that the spring load of total phosphorus for the Maumee River exceeded 860 metric tons and total dissolved reactive phosphorus exceeded 186 metric tons in the preceding calendar year. Regulated animal feeding facilities are those housing over 250 dairy cattle; 300 beef cattle; 3,000 piglets; 750 hogs; 25,000 egg layers; 37,500 meat chickens; 9,000 egg layers and meat chickens if on liquid manure handling system; 16,500 turkeys; 3,000 sheep and 150 horses.  H.B. 349 was referred to the House Agriculture and Conservation committee on June 16, 2021.

Farm Office Team on Zoom Webinar
By: Jeffrey K. Lewis, Esq., Wednesday, July 14th, 2021

"Farm Office Live" returns this summer as an opportunity for you to get the latest outlook and updates on ag law, farm management, ag economics, farm business analysis, and other related issues.  Targeted to farmers and agri-business stakeholders, our specialists digest the latest news and issues and present it in an easy-to-understand format.

The live broadcast is presented monthly.  In months where two shows are scheduled, one will be held in the morning and one in the evening.  Each session is recorded and posted on the OSU Extension Farm Office YouTube channel for later viewing.

Current Schedule:

July 23, 2021 10:00 - 11:30 am  December 17, 2021 10:00 - 11:30 am 
August 27, 2021 10:00 - 11:30 am  January 19, 2022 7:00 - 8:30 pm 
September 23, 2021 10:00 - 11:30 am  January 21, 2022 10:00 - 11:30 am 
October 13, 2021 7:00 - 8:30 pm  Februrary 16, 2022 7:00 - 8:30 pm 
October 15, 2021 10:00 - 11:30 am  February 18, 2022 10:00 - 11:30 am 
November 17, 2021 7:00 - 8:30 pm  March 16, 2022 7:00 - 8:30 pm 
November 19, 2021 10:00 - 11:30 am  March 18, 2022  10:00 - 11:30 am 
December 15, 2021 7:00 - 8:30 pm  April 20, 2022 7:00 - 8:30 pm 

Topics we will discuss in upcoming webinars include:

  • Coronavirus Food Assitance Program (CFAP) 
  • Legislative Proposals and Accompanying Tax Provisions
  • Outlook on Crop Input Costs and Profit Margins 
  • Outlook on Cropland Values and Cash Rents 
  • Tax Issues That May Impact Farm Businesses 
  • Legal Trends
  • Legislative Updates
  • Farm Business Management and Analysis
  • Farm Succession & Estate Planning
 

To register or to view a previous "Farm Office Live," please visit https://go.osu.edu/farmofficelive. You will receive a reminder with your personal link to join each month. 

The Farm Office is a one-stop shop for navigating the legal and economic challenges of agricultural production. For more information visit https://farmoffice.osu.edu or contact Julie Strawser at strawser.35@osu.edu or call 614.292.2433

The United States Supreme Court building
By: Peggy Kirk Hall, Friday, July 09th, 2021

Perhaps it’s an overused phrase but “sometimes you win, sometimes you lose” has relevance to agriculture lately.  It’s a fitting response to several new decisions from the federal courts.  Some of the decisions align with positions advocated by agricultural interests but others do not.  We wrote last week about a case in the “sometimes you lose” category--the Court’s ruling in favor of small refineries claiming exemptions from renewable fuels mandates.  Several members of Congress have already proposed legislation that would nullify the Court’s decision in that case.  A second loss came with a challenge to California’s animal welfare standards and a third with the court striking down a waiver of E15 ethanol blends.  The sole win came with a challenge to a California statute allowing union organizing activities on private property.  Here’s a summary.

California Proposition 12 – North American Meat Institute v. Bonta

The U.S. Supreme Court announced that it would not grant certiorari and review a decision by the Ninth Circuit Court of Appeals’ on California Proposition 12.  Voters approved Proposition 12, the “Prevention of Cruelty to Farm Animals Act,” in 2018.  The Act establishes housing standards for egg-laying hens, breeding hogs and veal calves and prohibits the confinement of animals in spaces that don’t meet the standards.  Business owners and operators in California may not sell meat or egg products from animals that are not confined according to the standards.  Standards for calves (43 square feet) and egg laying hens (1 square foot) became effective in 2020 while standards for breeding pigs and their offspring (24 square feet) and cage-free provisions for egg laying hens are to be effective beginning January 1, 2022.

The North American Meat Institute (NAMI) sought a preliminary injunction against Proposition 12 in 2019, arguing that it violates the Interstate Commerce Clause of the U.S. Constitution, which grants only Congress the authority to regulate commerce among the states.  NAMI claimed that the Act establishes a “protectionist trade barrier” that would protect California producers from out-of-state competition and control conduct outside of its state borders. 

Both the federal District Court and the Ninth Circuit Court of Appeals disagreed with NAMI.   The appellate court affirmed the District Court’s conclusions that Proposition 12 is not discriminatory on its face and does not have a discriminatory purpose or effect, as there was no evidence that the state had a protectionist intent and the Act treats in-state and out-of-state producers the same.  Nor does the Act try to directly regulate out-of-state conduct or impose burdens on out-of-state producers, but instead only precludes sale of meats resulting from certain practices, the courts concluded.  The federal government and 20 states joined NAMI in a request for a rehearing of the case by the full panel of judges on the Ninth Circuit but were unsuccessful.

NAMI turned to the U.S. Supreme Court, seeking a review of the case on the basis that the Ninth Circuit’s decision conflicts with holdings by other appellate courts and the U.S. Supreme Court.  The Supreme Court denied the request for review on June 28, offering no explanation for its decision.  The legal challenges to Proposition 12 do not end with that denial, however.  A separate case filed by the National Pork Producers Association and American Farm Bureau Federation is pending before the Ninth Circuit Court of Appeals.  It also argues that Proposition 12 negatively impacts interstate commerce and will increase consumer costs for pork and that the federal district court judge who dismissed the case failed to examine the practical effects the law would have on producers.  The Ninth Circuit heard the appeal in April, so we may see a decision in the next few months.

E15 waiver:  American Fuel & Petrochemical Manufacturers v. EPA

The D.C. Circuit Court of Appeals held in favor of a claim by the American Fuel and Petrochemical Manufacturers (AFPM) challenging a Trump Administration rule in 2019 that waived restrictions on summer sales of E15 due to higher fuel volatility in summer temperatures.  The decision could mean that current sales of E15 must end unless further legal challenges follow.

The 2019 Reid Vapor Pressure (RVP) waiver for E15 allowed fuel stations to sell 15% ethanol blends during the summer months rather than limiting those sales to 10% ethanol, a move that would increase ethanol sales.   As expected, the oil and gas refining industry responded to the waiver issuance with a legal challenge, arguing that the administration lacked the authority to grant the RVP waiver for fuels over 10% ethanol. 

The volatility waiver authority derives from the Clean Air Act, which establishes when the EPA may alter volatility limits through the waiver process and specifically allows the EPA to grant an ethanol waiver for “fuel blends containing gasoline and 10 percent denatured anhydrous ethanol” in Section 745(h)(4).  The EPA relied upon the ethanol waiver language in the Clean Air Act back in 1992 to waive volatility standards for E10.  But whether the EPA could use the Clean Air Act language to issue a waiver for ethanol beyond 10 percent is the question at the heart of the dispute.  The EPA and intervenors in the case representing biofuel interests claimed the language was ambiguous enough to allow the EPA to grant waivers for fuel with 10% ethanol or more.

In a unanimous decision, the Court of Appeals concluded that “the text, structure, and legislative history” of the Clean Air Act do not allow EPA to extend a waiver to E15.  The court found the statutory language straightforward, lacking any modifiers that would establish a range of ethanol blends rather than the 10 percent stated in the statute.  Legislative actions at the time also supported an interpretation that the 10 percent language addressed E10 and not ethanol blends in excess of 10 percent. 

The next critical question for this case is what the Biden Administration EPA will do with case and the E15 waiver.  A request for further review of the D.C. Circuit’s opinion is possible.  Or perhaps the EPA will pursue a legislative fix that increases the statutory reference from 10 percent to 15 percent ethanol.  And it’s always possible that no further action will occur and E15 summer sales will no longer be an option.

Union organizer access as a taking – Cedar Point Nursery v Hassid

In the “win” column for agricultural employers is a case that asks whether a state regulation granting access to private property for union activities is a “taking” of property under the Constitution.  The U.S. Supreme Court’s answer to the question is “yes,” although three of the Justices dissented from the majority opinion. 

A regulation formed under the California Agricultural Labor Relations Act of 1975 gives labor organizations a “right to take access” to an agricultural employer’s property “for the purpose of meeting and talking with employees and soliciting their support.”  The regulation requires agricultural employers to allow union organizers to be on the property up to three hours per day and four 30-day periods per year but cannot be “disruptive” and must provide written notice to employers.   An employer who interferes with the organizers can be subject to sanctions. 

After representatives from United Farm Workers accessed Cedar Point Nursery and engaged in disruptive conduct and sought to access Fowler Packing Company, both occasions without notice to the employers, the companies filed a lawsuit seeking an injunction from the federal District Court.  They argued that the regulation was a physical taking of their properties because it granted an easement to the union organizers, which required compensation under the Fifth and Fourteenth amendments of U.S. Constitution.

The District Court did not grant the injunction and held that the regulation is not a physical taking because it doesn’t allow the public a permanent and continuous right of access to the property for any reason.  The Ninth Circuit Court of Appeals affirmed that decision, agreeing that it wasn’t a physical taking, but a strong dissent argued that the union activities were a physical occupation and taking of property.  The agricultural companies sought but were denied a hearing before all of the Ninth Circuit judges, leading to a request for review granted by the U.S. Supreme Court.

The majority of the Justices concluded that the California regulation is a physical taking because it grants union organizers a right to invade an agricultural employer’s property.  Particularly important to the majority was the regulation’s removal of an owner’s right to exclude people from their private property, which is a “fundamental element” of property rights according to the Court.  The Court rejected the argument that the access must be continuous and permanent to be a physical taking and dispensed with claims that the holding could endanger regulations that allow government entries onto private land.  The Court’s holding was clear:  the access regulation amounts to simple appropriation of private property.

Read the court opinions in these three cases here:

Ninth Circuit’s Opinion North American Meat Institute v. Becerra/Bonta

American Fuel & Petrochemical Manufacturers v. EPA

Cedar Point Nursery v. Hassid

Solar panels in a field
By: Peggy Kirk Hall, Thursday, July 01st, 2021

Update:  Governor DeWine signed this bill on July 12, 2021 and it becomes effective on October 9, 2021.

It’s been a long and winding road to the Governor’s desk for Senate Bill 52, the controversial bill on siting and approval of large-scale wind and solar facilities in Ohio.  The bill generated opposition and concern from the outset, requiring a major overhaul early on.  A substitute bill passed the Senate on June 2 after six hearings and hundreds of witnesses testifying for and against the bill.  It took the House five hearings to pass a further revised version of the bill earlier this week, and the Senate agreed to those revisions the same day.  Now the bill awaits Governor DeWine’s action.  If the Governor signs the bill, it would become effective in 90 days.

S.B. 52 generates conflicting opinions on property rights and renewable energy.  It would grant counties and townships a voice in the siting and approval of large-scale wind and solar projects, allowing a community to go so far as to reject facility applications and prohibit facilities in identified restricted areas of the county.  Supporters of the bill say that new local authority would allow local residents to protect their individual property rights as well as the fate of the community.  On the other side, opponents claim that the bill interferes with the property rights of those who want to lease their land for solar and wind development and unfairly subjects renewable energy to stricter controls than other energy projects.

The bill itself is lengthy and a bit tedious but we’ve organized it into the following summary.  An important first step is to understand the types of projects subject to the law, so we begin with the definitions section of the bill.

Definitions – Ohio Revised Code 303.57

The bill defines several key terms used to identify the types of wind and solar projects and applications that would be subject to the new law:

  • “Economically significant wind farm” means wind turbines and associated facilities with a single interconnection to the electrical grid and designed for, or capable of, operation at an aggregate capacity of five or more megawatts but less than fifty megawatts, excluding any such wind farm in operation on June 24, 2008 and one or more wind turbines and associated facilities that are primarily dedicated to providing electricity to a single customer at a single location and that are designed for, or capable of, operation at an aggregate capacity of less than twenty megawatts, as measured at the customer's point of interconnection to the electrical grid.
  • “Large wind farm” means an electric generating plant that consists of wind turbines and associated facilities with a single interconnection to the electrical grid that is a “major utility facility.”
  • “Large solar facility” means an electric generating plant that consists of solar panels and associated facilities with a single interconnection to the electrical grid that is a major utility facility.
  • “Utility facility” means all of the above.
  • “Major utility facility” means (a) electric generating plant and associated facilities designed for, or capable of, operation at a capacity of fifty megawatts or more, (and also includes certain electric transmission lines and gas pipelines).
  • “Material amendment” means an amendment to an existing utility facility certificate that changes its generation type, increases its nameplate capacity or changes the boundaries outside existing boundaries or that increase the number or height of wind turbines.

 

Designation of utility facility restricted areas in a county – ORC 303.58 and ORC 303.59

The bill would allow the county commissioners to designate “restricted areas” within the unincorporated parts of the county where economically significant wind farms, large wind farms, and large solar facilities may not be constructed.  

  • The commissioners may take this action at a regular or special meeting.
  • The commissioners must give public notice of the meeting and proposed restricted areas at least 30 days prior, including to all townships, school districts and municipalities within the proposed restricted areas.
  • The restricted area designations shall not apply to utility facilities that were not prohibited by the commissioners in the county review under ORC 303.61, described below.
  • The restricted area designations become effective 30 days after the commissioners adopt the resolution unless a petition for referendum, described below, is presented to the commissioners within 30 days of adoption.
  • Once effective, a restricted area designation prohibits anyone from filing an application for a certificate or a material amendment to an existing certificate to construct, operate or maintain a utility facility in the restricted area.

 

Referendum on designation of utility facility restricted areas – ORC 303.59

If a county approves a restricted area, the bill sets up a referendum procedure to allow voters to have a say in the designation.  Residents may file a petition for referendum and request the county commissioners to submit the designation of a utility facility restricted area to a vote of the electors in the county.

  • At least 8% of the total vote cast for governor in the most recent election must sign the petition.
  • The petition must be presented to the commissioners within 30 days of the resolution adopted to designate the restricted areas.
  • Within two weeks of receiving the petition and no less than 90 days prior to the election, the county commissioners must certify the petition to the county board of elections, who must verify the validity of the petition.
  • The utility facility restricted area designation must be submitted to electors for approval or rejection at a special election on the day of the next primary or general election that occurs at least 120 days after the petition is filed.
  • If a majority of the vote is in favor of the restricted area designation, the designation shall be effective immediately.

 

County review of proposed wind and solar utility facilities -- ORC 303.61

Local residents and officials have expressed concerns that they’re the last to know of a proposed large-scale wind or solar development proposed for their community.  Under the bill, utility facilities must hold a public meeting in each county where the facility will be located within 90 to 300 days prior to applying for or making a material amendment to an application for a certificate from the Ohio Power Siting Board.

  • The facility applicant must give a 14 day advance written notice of the public meeting to the county commissioners and to trustees of townships in which facility would be located.
  • At the meeting, the facility applicant must present in written form the type of utility facility, its maximum nameplate capacity, and a map of its geographic boundaries.
  • Up to 90 days after the public meeting, the county commissioners may adopt a resolution that prohibits the construction of the facility or limits its boundaries to a smaller part of the proposed location.  If the county commissioners do not prohibit or limit the facility, the applicant may proceed with the application.

 

Ohio Power Siting Board Composition – ORC 4906.021 to ORC 4906.025

The bill also responds to concerns that community members do not have a voice in the facility approval process overseen by Ohio’s Power Siting Board (OPSB).  For every utility facility application or material amendment to an application, the bill would require the OPSB to include two voting “ad hoc” members on the board to represent residents in the area where the facility is proposed.

  • The ad hoc members shall be the chair of the township trustees and the president of the county commissioners in the township and county of the proposed location, or their elected official or resident designees, or a trustee and commissioner chosen by a vote of the trustees and commissioners if the application affects multiple townships and counties.
  • An ad hoc member or the member’s immediate family members cannot have an interest in a lease or easement or any other beneficial interest with the applicant utility facility and cannot be an intervenor or have an immediate family member who is an intervenor in the OPSB proceeding.
  • The ad hoc members must be designated no more than 30 days after the county or township is notified by the OPSB that the application has been submitted and meets statutory requirements.
  • An ad hoc member may not vote on a resolution by its county commissioners or township trustees to intervene in the application proceeding.
  • An ad hoc member is exempt from restrictions on ex parte communications with parties in the case but must disclose the date and participants of ex parte conversations and shall not disclose or use confidential information acquired in the course of official duties.

 

OPSB Authority – ORC 4901.101; ORC 4906.30

There are parameters in the bill for projects that the OPSB may not approve.  The OPSB may not grant a certificate for the construction, operation, and maintenance of or material amendment to an existing certificate for a utility facility in these situations:

  • If the utility facility is prohibited by a restricted area designation.
  • If the county commissioners have prohibited the utility facility by resolution.
    • Where the utility facility would be in multiple counties, the OPSB must modify a certificate to exclude the area of a county whose commissioners prohibited the facility.
  • For any areas outside the boundaries of the utility facility that were changed by action of the county commissioners.
  • If the facility has a nameplate capacity exceeding the capacity provided to the county commissioners, has a geographic area not completely within the boundaries provided to the county commissioners, or is a different type of generation than that provided to the county commissioners.

 

Decommissioning Plans for Utility Facilities – ORC 4906.21 to ORC 4906.212

The question of what happens to a facility when its production life ends has been another issue of voiced concern.  The bill establishes decommissioning procedures for facilities.  At least 60 days prior to commencement of construction of a utility facility, an applicant must submit a decommissioning plan for review and approval by the OPSB.

  • A state registered professional engineer must prepare the plan, and the OPSB may reject the selected engineer.
  • The plan must include:
    • A list of parties responsible for decommissioning of the utility facility.
    • A schedule of decommissioning activities, which cannot extend more than 12 months beyond the date the utility facility ceases operation.
    • Estimates of the full cost of decommissioning, including proper disposal of facility components and restoration of the land on which the facility is located to its pre-construction state, but not including salvage value of facility materials.
      • The estimate of the full cost of decommissioning a utility facility must be recalculated every five years by an engineer retained by the applicant.

 

Performance Bonds – ORC 4906.22 to ORC 4906.222

How to and who pays for facility decommissioning is also addressed in the bill.  Before beginning construction of a utility facility, the applicant must post a performance bond to ensure that funds are available for the decommissioning of the facility.

  • The utility facility must name the OPSB as the bond oblige.
  • The bond shall equal the estimate of decommissioning costs included in the facility’s decommissioning plan.
  • The bond shall be updated every five years according to the most recent costs of decommissioning the facility and shall increase if estimated costs increase but shall not decrease if estimated costs decrease.

 

OPSB Provision of Approved Application -- ORC 4906.31

Under the bill, local governments would formally know if a project receives OPSB approval.  The OPSB must provide a complete copy of an approved application for or material amendment to a certificate to each board of trustees and county commissioners in the townships and counties of the facility location.

  • The copy must be provided within 3 days of the OPSB’s acceptance of the application and filing fee payment by the applicant.
  • The copy may be in electronic or paper form.

 

Effect on Utility Facility Applications in Process – Sections 3, 4 and 5 of the Act

Many wind and solar facility projects are currently in process, so the bill addresses what happens to those projects should the law go into effect.

  • The new law would apply to all applications for a certificate or a material amendment to an existing certificate for an economically significant wind farm or large wind farm that is not accepted by the OPSB within 30 days after the effective date of the legislation. 
    • An application for an economically significant wind farm or large wind farm that is not approved within 30 days after the effective date would be subject to review by the county commissioners, who would have 90 days after the effective date to review the application and act according to the provisions of the new law.
  • If an application for a certificate or material amendment to a certificate for a utility facility has not been accepted by the OPSB as of the new law’s effective date, the OPSB must include “ad hoc” members in further OPSB proceedings on the application.
  • The new law would not apply to an application for a certificate or material amendment to a certificate for a large solar facility that, as of the effective date of the new law, is in the new services queue of the PJM interconnection and regional transmission organization at the time the application is accepted by OPSB and the applicant has received a completed system impact study from PJM and paid its filing fee.
    • If the facility has multiple positions in the PJM new services queue, all queue position in effect on the law’s effective date are exempt from the new law.
    • If the facility submits a new queue position for an increase in its capacity interconnection rights, the change shall not subject the facility to the new law as long as the facility’s nameplate capacity does not increase.

We’ll keep an eye on the Governor to learn where S.B. 52’s road will end.  Read the full text of S.B. 52 and further information about it on the Ohio General Assembly’s website.

Posted In: Renewable Energy
Tags: solar, wind, renewable energy
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Biorefining facility in Ohio
By: Peggy Kirk Hall, Tuesday, June 29th, 2021

The meaning of the word “extension” was at the heart of a dispute that made its way to the U.S. Supreme Court over small refinery exemptions under the nation’s Renewable Fuel Program (RFP).  The decision by the Supreme Court came as a bit of a surprise, as questions raised by the Justices during oral arguments on the case last Spring suggested that the Court would interpret “extension” differently than it did in its June 27 decision.

Congress established the RFP in 2005 to require domestic refineries to incorporate specified percentages of renewable fuels like ethanol into the fuels they produce.  Recognizing that meeting RFP obligations could be more difficult and costly for small-scale refineries, Congress included an automatic two-year exemption from RFP obligations in the statute for small refineries producing less than 75,000 barrels per day. 

The law also allowed the Secretary of Energy to extend an exemption for a small refinery an additional two years if blending of renewables would impose a “disproportionate economic hardship” and authorized a small refinery to petition the EPA for an “extension” of an exemption for the same economic hardship reason.  This leads us to the significance of the meaning of the word “extension”:  a small refinery that receives an extension of an exemption need not meet the RFP blending mandate for the period of the extension.

We likely all have opinions on what the word “extension” means, but what matters is what it means in the context of the statute that uses the word.  But the RFP statute doesn’t define the word.  The three small refineries that appealed the case to the Supreme Court argued that an extension is simply an increase in time.  The extension, they claimed, need not be directly connected to and occur just after an exemption.  The refineries had received the initial exemption from RFP blending, had a lapse of the exemption for a period, then later asked for and received an extension of the exemption from the EPA.   

A group of renewable fuel producers led by the Renewable Fuels Association disagreed with the refineries and defined “extension” to mean an increase in time that also requires unbroken continuity with the exemption.  They argued that the EPA could not grant a small refinery an extension if an exemption had already lapsed.  Theirs was the definition adopted by the Tenth Circuit Court of Appeals, which held that the refineries could not receive an extension because their exemptions had lapsed and made them permanently ineligible for an extension.

In its decision, the majority on the Supreme Court held in favor of the definition advanced by the small refineries.  Explaining that the courts must give a term its “ordinary or natural meaning” when Congress doesn’t provide a definition, the majority concluded that “it is entirely natural—and consistent with ordinary usage—to seek an “extension” of time even after some lapse.”  Examples the Court drew upon included a student seeking an extension for a paper after its deadline, a tenant asking for an extension after overstaying a lease, and the negotiation of an extension to a contract after it expires.  Additionally, federal laws such as recent COVID and unemployment legislation allow an extension of benefits following an expiration of those benefits, the Court explained.  The Court also pointed to dictionary meanings of the word and contextual clues within the RFP statute, such as language in the statute stating that a small refinery may “at any time” petition for an extension.

Justice Gorsuch, who wrote the majority opinion, was careful to refute the arguments offered in the dissenting opinion written by Justice Coney-Barrett, joined by Justices Sotomayor and Kagan.  Justice Coney-Barrett argued that a natural and ordinary reading of the RFP’s text and structure clearly indicate that an extension could not occur for an exemption that no longer exists.  Referring to the Tenth Circuit’s earlier holding, the dissent agreed that the “ordinary definitions of ‘extension,’ along with common sense, dictate that the subject of an extension must be in existence before it can be extended.”

Does the future of ethanol markets hang on the meaning of one word?  How will the decision affect the renewable fuels sector?  Many claim that Congress included the exemptions to help small refineries adjust to and adopt the renewable blending mandates, but not to indefinitely avoid those mandates.  Renewable fuel interests state that the exemptions have created a detrimental effect on the renewable fuels market.  On the other hand, small refineries claim that Congress did not intend to drive them out of business by forcing them to comply with renewable blending requirements but instead designed the exemption and extension to protect them from disproportionate economic hardship.   

How long the protection from RFP compliance remains in place for small refineries is a question many in agriculture are asking.  Based on the Court’s recent decision, it could be indefinitely.  Perhaps Congress should step in and clarify the meaning of that one simple word.

Read the Supreme Court decision in HollyFrontier Cheyenne Refining, LLC v Renewable Fuels Assn. here

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