Written by Ellen Essman and Peggy Kirk Hall
Many people are still working from home, but that hasn’t stopped legal activity in Washington, D.C. Bills have been proposed, federal rules are being finalized, and new lawsuits are in process. Here’s our gathering of the latest ag law news.
SBA posts Paycheck Protection Program (PPP) loan forgiveness application. We’ve been waiting to hear more about how and to what extent the SBA will forgive loans made under the CARES Act’s PPP that many farm businesses have utilized. The SBA recently posted the forgiveness application and instructions for applicants here. But there are still unanswered questions for agricultural applicants as well as talk in Congress about changing some of the forgiveness provisions, suggesting that loan recipients should sit tight rather than apply now. Watch for our future blog post and a discussion on the forgiveness provisions in our next Farm Office Live webinar.
House passes another COVID-19 relief bill. All predictions are that the bill will go nowhere in the Senate, but that didn’t stop the House from passing a $3 trillion COVID-19 relief package on May 15. The “HEROES Act” includes a number of provisions for agriculture, including an additional $16.5 billion in direct payments to producers of commodities, specialty crops and livestock, as well as funds for local agriculture markets, livestock depopulation losses, meat processing plants, expanded CRP, dairy production, other supply chain disruptions, and biofuel producers (discussed below). Read the bill here.
Proposed bipartisan bill designed to open cash market for cattle. Last week, Republican Senator Chuck Grassley and Democratic Senator Jon Tester introduced a bill that “would require large-scale meatpackers to increase the proportion of negotiable transactions that are cash, or ‘spot,’ to 50 percent of their total cattle purchases.” The senators hope this change would bring up formula prices and allow livestock producers to better negotiate prices and increase their profits. In addition, the sponsors claim ithe bill would provide more certainty to a sector hard hit by coronavirus. Livestock groups aren’t all in agreement about the proposal. You can read the bill here, Senator Grassley’s press release here and Senator Tester’s news release here.
New Senate and House bills want to reform the U.S. food system. Representative Ro Khanna from California has introduced the House companion bill to the Senate's Farm System Reform Act first introduced by Senator Cory Booker in January. The proposal intends to address underlying problems in the food system. The bill places an immediate moratorium on the creation or expansion of large concentrated animal feeding operations and requires such operations to cease by January 1, 2040. The proposal also claims to strengthen the Packers and Stockyards Act and requires country of origin labeling on beef, pork, and dairy products. The bill would also create new protections for livestock growers contracted by large meat companies, provide money for farmers to transition away from operating animal feeding facilities, strengthen the term “Product of the United States” to mean “derived from 1 or more animals exclusively born, raised, and slaughtered” in the U.S., and, similar to the Grassley/Tester bill above, require an increased percentage of meatpacker purchases to be “spot” transactions.
Lawmakers ask Trump to reimburse livestock producers through FEMA. In another move that seeks to help livestock producers affected by the pandemic, a bipartisan group of U.S. Representatives sent a letter to Donald Trump imploring him to issue national guidance to allow expenses of livestock depopulation and disposal to be reimbursed under FEMA's Public Assistance Program Category B. The lawmakers reason that FEMA has "been a valued Federal partner in responding to animal losses due to natural disasters," and that the COVID-19 epidemic should be treated "no differently." You can read the letter here.
More battling over biofuels. Attorneys General from Wyoming, Utah, Louisiana, Oklahoma, Texas, Arkansas and West Virginia have sent a request to EPA Administrator Andrew Wheeler to waive the Renewable Fuel Standard (RFS) because of COVID-19 impacts on the fuel economy. The letter states that reducing the national quantity of renewable fuel required would alleviate the regulatory cost of purchasing tradable credits for refiners, who use the credits to comply with biofuel-blending targets. Meanwhile, 70 mayors from across the U.S. wrote a letter urging the opposite, and criticizing any decisions not to uphold the RFS due to the impact that decision would have on local economies, farmers, workers, and families who depend on the biofuels industry. The House is also weighing in on the issue. In its recently passed HEROES Act, the House proposes a 45 cents per gallon direct payment to biofuel producers for fuels produced between Jan 1 and May 1, 2020 and a similar payment for those forced out of production during that time.
New USDA rule for genetically engineered crops. A final rule concerning genetically engineered organisms is set to be published this week. In the rule, USDA amends biotechnology regulations under the Plant Protection Act. Importantly, the new rule would exempt plants from regulation by the Animal and Plant Health Inspection Service (APHIS) if the plants are genetically engineered but the same outcome could have occurred using conventional breeding. For instance, gene deletions and simple genetic transfers from one compatible plant relative to another would be exempted. If new varieties of plants use a plant-trait mechanism of action combination that has been analyzed by APHIS, such plants would be exempt. You can read a draft of the final rule here.
Trump’s new WOTUS rule attacked from both sides of the spectrum. A few weeks ago, we wrote about the Trump Administration’s new “waters of the United States” or WOTUS rule. Well, it didn’t take too long for those who oppose the rule to make their voices heard. The New Mexico Cattle Growers Association (NMCGA) sued the administration, claiming that the new rule is still too strict and leaves cattle ranchers questioning whether waters on their land will be regulated. In their complaint, NMCGA argues that the new definition violates the Constitution, the Clean Water Act, and Supreme Court precedent. On the other side, the Natural Resources Defense Council (NRDC), along with other conservation groups, sued the administration, but argued that the new rule does not do enough to protect water and defines “WOTUS” too narrowly. Here we go again—will WOTUS ever truly be settled?
The Farm Office is Open! Join us for analysis of these and other legal and economic issues facing farmers in the Farm Office Team’s next session of “Farm Office Live” on Thursday, May 28 at 9:00 a.m. Go to this link to register in advance or to watch past recordings.
If you’ve been keeping up with the ag news lately, chances are you’ve heard a lot about the Renewable Fuel Standard (RFS). As a refresher, the RFS program “requires a certain volume of renewable fuel to replace the quantity of petroleum-based transportation fuel.” Renewable fuels include biofuels made from crops such as corn and soybeans. Lately, you may have heard discussion about a controversial new rule regarding the volumes of biofuels that are required to be mixed with oil. While all that talk has been going on, there has also been a lawsuit against the EPA for RFS exemptions given to certain oil refineries. Congress has been examining the exemptions as well. Having trouble keeping all of this RFS information straight? We’ll help you sort it out.
EPA proposes new RFS rule
As we explained in our last Ag Law Harvest post, available here, the Environmental Protection Agency (EPA) recently released a notice of proposed rulemaking, asking for more public comment on the proposed volumes of biofuels to be required under the RFS program in 2020 and 2021. Agricultural and biofuels groups are not pleased with the proposed blending rules, arguing that the way EPA proposes to calculate biofuel volumes would result in much lower volumes than they were originally promised by President Trump. (The original promise was made in part to make up for waivers the Trump EPA had given to oil refineries.) Conversely, EPA and the Trump administration contend that the proposed rule does meet the previously agreed upon biofuel volumes. A hearing on the proposed rule was held on October 30, where many agriculture and biofuels groups expressed their concerns. The oil industry was also represented at the hearing. Members of the oil industry feel that the cost of mixing in biofuels is too high. It is unlikely any deal was struck at the hearing, but there is still an opportunity to comment on the proposed rule if you wish. Comments are due on November 29, 2019. You can click here for commenting instructions, as well as for a link to submit your comment online.
Ag and biofuels groups sue the EPA
In the midst of the argument over how the volumes of biodiesel under the RFS will be calculated, another related quarrel has emerged. At the center of this dispute are exemptions EPA has given to “small refineries” in the oil industry. The number of exemptions given has increased drastically under the Trump administration, which in turn has lessened the demand for biofuels made from crops like corn and soybeans. On October 23, 2019, agriculture and biofuel groups filed a petition against the EPA in the U.S. Court of Appeals for the D.C. Circuit. In the petition, the groups ask the court to review a decision made in August 2019 which retroactively exempted over 31 small refineries from meeting their 2018 biofuels requirements. The petitioning groups include Renewable Fuels Association, American Coalition for Ethanol, Growth Energy, National Biodiesel Board, National Corn Growers Association, and National Farmers Union.
How does the small refinery exemption work?
Typically, an oil refinery would have to mix a set volume of renewable fuels, like biofuels, into their gasoline or diesel fuel. The volumes are set annually. Small refineries, which are defined as refineries where “the average aggregate daily crude oil throughput does not exceed 75,000 barrels,” can petition the EPA for an exemption from meeting their renewable fuel obligations. Exemptions are typically given temporarily if the refinery can show they would suffer economic hardship if they were made to blend their fuel with biofuel. A refinery seeking an exemption has to include a number of records showing their economic hardship in their petition, such as tax filings and financial statements. EPA’s website explaining the small refinery exemption is available here.
Why are ag and biofuel groups asking for judicial review?
Why are the groups we mentioned above upset about this particular set of small refinery exemptions? Well, first of all, the groups point to the brevity of the EPA’s decision. (The decision document can be found in the link to the petition, listed above.) The EPA’s decision document uses only two pages to explain their decision on 36 small refinery petitions. Because the decision was so short, the groups feel that EPA did not include the analysis of economic hardship for each refinery that they believe is required by the Clean Air Act and RFS regulations. Essentially, the groups argue that the EPA has not provided enough evidence or explanation for awarding the exemptions. You can read the groups’ press release explaining their reasoning here.
Underlying all of this is the fact that more small refinery exemptions means lower demand for biofuels. In fact, the ag and biofuel groups claim that due to the 31 exemptions made in August alone, 1.5 billion gallons of renewable fuel were not used. In addition, the 31 exemptions are just a few of many awarded by Trump’s EPA. By all accounts, since Trump took office, there has been a sharp increase in exemptions granted. EPA has data on the number of exemptions available here. The first year the Trump administration made exemptions is 2016.
Congress gets in on the action
It seems as though the House Subcommittee on Environment and Climate Change (part of the Committee on Energy and Commerce) is also worried about EPA’s exemptions, or waivers, for small oil refineries. On October 29, 2019, the Subcommittee held an oversight hearing entitled “Protecting the RFS: The Trump Administration’s Abuse of Secret Waivers.” In fact, in their memo about the hearing, the Subcommittee cited some of the same issues in the lawsuit we discussed above; namely the increase in waivers and the consequent effect on biofuel demand. Testimony was heard from both ag/biofuels and oil representatives.
In the hearing, the Subcommittee also considered the proposed “Renewable Fuel Standard Integrity Act of 2019.” The text of the bill is available here. The bill would require small refineries to submit petitions for exemptions from RFS requirements annually by June 1. Additionally, it would require information in the waiver petitions to be available to the American public. For information and documents related to the hearing, as well as a video stream of the hearing, click here.
What happens next?
As you can see, we’re playing a waiting game on three separate fronts. For the RFS rule, we’ll have to wait and see what kind of comments are submitted, and whether or not the EPA takes those comments into account when it writes the final rule. As for the lawsuit, all eyes are on the Court of Appeals for the D.C. Circuit. The court could determine that the law does indeed require EPA to include more information and analysis to explain their reasons for exemption. On the other hand, the court could find that EPA’s decision document is sufficient under the law. In Congress, we’ll have to wait and see whether the proposed bill gets out of the Committee on Energy and Commerce and onto the House floor. We will be keeping track of the RFS developments on all fronts and keep you updated on what happens!
Proposal would ensure that on-farm bioenergy activities qualify for CAUV and are exempt from zoning regulation.
A legislative proposal in the Ohio House of Representatives would include on-farm bioenergy production activities in two key provisions of Ohio law: qualification for differential tax assessment under the Current Agricultural Use Valuation program and exemption from local zoning authority. Representatives Pryor and Domenick introduced House Bill 485 in mid-April with assistance from the Ohio Department of Agriculture. The bill was referred to the House Agriculture and Natural Resources Committee, but no other action on the bill has taken place.
The proposal addresses "biodiesel production, biomass energy production, electric or heat energy production and biologically derived methane gas production" where at least 50% of the starting material or feedstocks are from the same tract, lot or parcel on which the energy production takes place. This 50% requirement targets on-farm energy production, where a farm is producing and processing the energy inputs, as long as no more than 50% of the supplementary inputs derive from other properties.
The bioenergy production activities that meet the 50% rule would be included in the CAUV' program's definition of "land devoted exclusively to agricultural use" in ORC 5713.30, thus guaranteeing eligibility for the CAUV property tax rate. The bioenergy production activities would also become part of the definition of "agriculture" for purposes of county and township zoning, ORC 303.01 and ORC 519.01. Because counties and townships have limited zoning authority over "agriculture," the proposal would ensure that a county or township could not use zoning authority to prohibit the qualifying bioenergy production activities.
H.B. 485 is available online, here.