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Even with most of the country shut down, the U.S. EPA and the Supreme Court last week released an important rulemaking and a decision, respectively, regarding how parts of the Clean Water Act will be interpreted going forward. On April 21, 2020, the EPA and the Department of the Army published the Trump administration’s final rule on the definition of “waters of the United States” (WOTUS) under the Clean Water Act (CWA). Then, on April 23, the Supreme Court released its long awaited opinion determining whether or not pollutants from a point source, which are released and then carried by groundwater into a navigable water, must be permitted under the CWA.
Trump’s new WOTUS
If you recall, we explained this final rule in January when the draft version was released. Basically, the Trump administration wanted to repeal and replace the Obama administration’s 2015 WOTUS rule (explained here) because the administration felt that it was overreaching in the waters it protected. The Trump administration did repeal the 2015 rule, and replaced it with the old 1986/1988 version of the WOTUS rule while they worked on the new version. (See an explanation of the 1986/1988 language here.)
So what is included in the administration’s new definition? The following are defined as WOTUS, and therefore subject to the CWA under the new rule:
- The territorial seas, and waters which are currently used, or were used in the past, or may be susceptible to use in interstate or foreign commerce, including waters which are subject to the ebb and flow of the tide;
- Lakes and ponds, and impoundments of jurisdictional waters; and
- Adjacent wetlands.
Importantly, the new rule also includes an extensive list of what waters are not WOTUS, and therefore will not be protected by the CWA:
- Waters or water features that are not identified in the definition of WOTUS, above;
- Groundwater, including groundwater drained through subsurface drainage systems;
- Ephemeral (caused by precipitation) features, including ephemeral streams, swales, gullies, rills, and pools;
- Diffuse stormwater run-off and directional sheet flow over upland;
- Ditches that are not territorial seas, waters used in foreign commerce, or tributaries, and those portions of ditches constructed in some adjacent wetlands;
- Prior converted cropland;
- Artificially irrigated areas, including fields flooded for agricultural production, that would revert to upland should application of irrigation water to that area cease;
- Artificial lakes and ponds, including water storage reservoirs and farm, irrigation, stock watering, and log cleaning ponds, constructed or excavated in upland or in non-jurisdictional waters, so long as those artificial lakes and ponds are not impoundments of jurisdictional waters that are connected the territorial seas, or waters used in interstate or foreign commerce;
- Water-filled depressions constructed or excavated in upland or in non-jurisdictional waters incidental to mining or construction activity, and pits excavated in upland or in non-jurisdictional waters for the purpose of obtaining fill, sand, or gravel;
- Stormwater control features constructed or excavated in upland or in nonjurisdictional waters to convey, treat, infiltrate, or store stormwater run-off;
- Groundwater recharge, water reuse, and wastewater recycling structures, including detention, retention, and infiltration basins and ponds, constructed or excavated in upland or in non-jurisdictional waters; and
- Waste treatment systems.
Currently, the 1986/1988 rules are the law of the land until this new rule goes into effect on June 22, 2020. While this is the so-called “final” rule, chances are that it will be anything but final. Like Obama’s 2015 rule, this new 2020 rule will probably be subject to lawsuits, this time from environmental groups and some state governments. If you want to know more about WOTUS, our colleagues at the National Ag Law Center have created a very helpful timeline that explains all the different definitions of waters of the United States.
U.S. Supreme Court determines the scope of a “point source”
The CWA requires the polluter to obtain a permit from the EPA if pollutants are being discharged from a point source into navigable waters. Under the CWA, “point source means any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged.” The term “navigable waters” is defined as “the waters of the United States, including the territorial seas.”
In County of Maui, Hawaii v. Hawaii Wildlife Fund et. al., the United States Supreme Court was tasked with determining whether water treated by the County of Maui, which is pumped into the ground water and then travels about half a mile before it goes into the Pacific Ocean, requires a point source permit from the EPA. Ultimately, in a 6-3 majority led by Justice Breyer, the court decided that yes, in this case, a permit would be required. However, that does not mean that every conveyance through ground water will have the same outcome.
So, how did the court come to this conclusion? First, Justice Breyer examined the meaning of the word “from” in the CWA. Remember that the definition of a point source “means any discernible, confined, and discrete conveyance…from which pollutants are or may be discharged.” On one hand, Breyer says that the Ninth Circuit’s definition of “from” was too broad, and on the other, he says that Maui’s definition was too narrow. The Ninth Circuit adopted a “fairly traceable” approach, meaning that permits would be required for any pollutant that is “fairly traceable” back to a point source. Breyer and the majority say that the Ninth Circuit took it too far, because then any pollutant that travelled for years and years or many miles could be considered to be “from” a point source. Maui County argued that “if at least one nonpoint source” is “between the point source and the navigable water,” then no permit is necessary under the CWA. The majority felt this was too narrow, because then every time a pollutant was moved along to a navigable water by a little bit of rainwater or a small stretch of groundwater, the polluter would be free to pollute without a permit. In other words, there would be a huge loophole in the statute—because the polluter or “pipe’s owner, seeking to avoid the permit requirement,” could “simply move the pipe back, perhaps only a few yards, so that the pollution must travel through at least some groundwater before reaching the sea.” What is more, Breyer cites congressional actions and history to interpret that Congress did not mean to make the statute as broad as the Ninth Circuit found it to be, nor as narrow as Maui County and the EPA suggest.
If the majority determined that one side read the statute too liberally and one too narrowly, then in what situations are point source permits required? Well, the court takes a kind of “we know it when we see it” approach. The court says that a permit is required “when there is a direct discharge from a point source into navigable waters or when there is a functional equivalent of a direct discharge.” The court further explains this language saying that a “functional equivalent” happens when pollutants reach the “same result through roughly similar means.” The court then provides some examples. For instance, a permit is obviously needed if a pipe ends just a couple of feet from a navigable water, and the pollutants then travel underground or across the land to the navigable water. However, “[i]f the pipe ends 50 miles from navigable waters,” the pollutants would travel through a long stretch of groundwater, mixing with other pollutants, and taking years to reach the navigable waters. In this situation, the court says a permit would likely not be required. Finally, Breyer lists relevant factors to consider when determining whether a permit is required:
- Transit time,
- Distance traveled,
- The nature of the material through which the pollutant travels,
- The extent to which the pollutant is diluted or chemically changed as it travels,
- The amount of pollutant entering the navigable waters relative to the amount of the pollutant that leaves the point source,
- The manner by or area in which the pollutant enters the navigable waters, and
- The degree to which the pollution (at that point) has maintained its specific identity.
Note that other factors could apply. In addition, the court says that time and distance will often be the most important factors, but not always. In the future, the EPA and lower courts will use this guidance to determine whether or not a point source permit is required.
Two major actions took place last week that will guide how the CWA is carried out going forward. Trump’s WOTUS rule could be taken down by lawsuits or replaced by the next administration, and the Supreme Court’s ruling may be further clarified by future decisions. As of today, though, these are the guidelines for implementing the CWA.
Economic relief measures in the CARES Act have proven difficult for farms, first due to confusion over which and how farmers qualify and also by soaring demand and depleted funding. But the recently enacted Paycheck Protection Program and Health Care Enhancement Act (HR 266) should help. The legislation injects more funds into both the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans Program (EIDL) and clarifies that farmers can qualify for EIDL loans. The bill also came with a bonus: additional guidance from the USDA and SBA for farmers seeking to access the programs. Both programs are first-come, first-served, so farm businesses who haven’t applied for the funds should decide whether to do so right away.
Here’s how the new legislation affects agricultural businesses:
- Allocates another $310 billion for the PPP to provide payroll funding for eligible employers, which includes $60 billion in funding for smaller lending institutions working with PPP loan applicants.
- Doubles the EIDL program, adding another $10 billion to the SBA disaster loan program for eligible businesses.
- Clarifies that agricultural enterprises are eligible for EIDL loans.
Using the PPP: a few quick tips
The SBA will resume accepting applications for the PPP today. Information about the program is on SBA’s website, here. Generally, PPP gives loans of up to $10 million at 1% interest to keep employees employed, with a loan maturity of two years and generous forgiveness provisions.
Farm businesses, including cooperatives, with fewer than 500 employees or who fit within the definition of a “small business concern” may apply for a PPP loan through an approved lender. Lenders include local banks as well as agricultural lenders in the Farm Credit System. Farmers should talk first to the lenders with whom they ordinarily do business to see if the lenders are participating in the PPP. If not, SBA provides a lender locating tool here.
The PPP application is here. Employers may use the loan for payroll costs or owner compensation replacement, as well as for mortgage interest, rent, and utility payments and interest payment on other debts, but 75% of the expenditures must be for payroll costs. To determine the maximum loan amount, an employer must document and calculate aggregate payroll costs from the previous 12 months, from calendar year 2019, or from February to June of 2019 if a seasonal employer. The SBA provides assistance on how to calculate payroll costs, and finally addresses the requirements for self-employed farms who report income on Schedule F. Read the guidance here, and see question 3 if you’re reporting income on Schedule F.
Upon receiving a PPP loan, a lender will set up a separate account for the funds. Borrowers should carefully document loan expenditures. This is not only for compliance purposes, but also because the PPP loan program includes a forgiveness component that forgives an amount equal to the sum of eligible costs and payments made during the eight weeks following disbursement of loan funds. At least 75% of the amount forgiven has to be for payroll costs, and the amount may be reduced by reductions in total salary or wages. Borrowers will have to apply for forgiveness, and documentation of all expenditures will prove necessary to the forgiveness process. We’re awaiting additional guidance on the forgiveness provisions, so keep an eye out for more information on this important topic.
The EIDL program
Farm businesses and agricultural cooperatives with no more than 500 employees may also now apply for EIDL, which gives loans up to $2 million for businesses that suffer economic injuries due to COVID-19. Because the program ran out of funds, there is a backlog in EIDL applications and the SBA is not reopening the loan portal until it catches up with the backlog. If SBA does reopen the program, businesses apply directly through the SBA here.
Businesses may use an EIDL loan for fixed debt, payroll, accounts payable, and other operating expenses due to the pandemic, but can’t use the funds for the same purposes as the borrower’s PPP loan. The interest rate for EIDL is higher at 3.75% (2.75% for non-profits), but the term can be up to 30 years.
Important to note: EIDL also includes an “emergency advance” component that provides an employer up to $1,000 per employee or a maximum of $10,000 as a grant. A borrower doesn’t have to repay the advance, even if the borrower doesn’t ultimately qualify for a loan. But if the borrower also has a PPP loan, the PPP forgiveness is reduced by the $10,000 EIDL advance. The emergency advance can go towards paying sick leave, payroll, increased materials costs, rental or mortgage payments, or other obligations due to revenue losses, as long as the borrower hasn’t used PPP funds for those costs.
There's still more for farms to digest from the CARES Act. The Farm Office team is ready to help! Join us for "The Farm Office is Open" tonight at 8 p.m., when we'll discuss the CARES Act programs and other economic developments for agriculture. Register for the live webinar and access past webinar recordings here.
Who knew wedding barns could lead us to the Ohio Supreme Court? Such is the case for a longstanding controversy over a wedding barn in Medina County. Litchfield Township opposed the use of the barn for weddings enough to file a lawsuit and appeal its case to Ohio’s highest court. In a unanimous decision issued today, the court ruled that the weddings could go on.
The case revolves around Forever Blueberry Barn, LLC (“Blueberry Barn”), whose owners built a barn in 2015 in Litchfield Township. The owners’ plans were to host weddings and other social events in the barn. The owners believed their use qualified the barn as agriculture under Ohio’s broad “agricultural exemption” from zoning authority. The township thought differently, and claimed that the use was not agriculture and instead violated the township’s residential district zoning regulations. The township sought an injunction to prevent weddings and events from taking place in the barn.
The Medina County Court of Common Pleas issued the injunction against Blueberry Barn, agreeing that the barn did not qualify for the agricultural exemption. But the court later withdrew the injunction upon receiving evidence that Blueberry Barn had planted grape vines on the property. Doing so constituted “viticulture” and fit the land use within the definition of “agriculture” for purposes of the agricultural exemption, the court determined.
On appeal, however, the Ninth District Court of Appeals concluded that the trial court should have examined whether the barn itself was being “used primarily for the purpose of vinting and selling wine.” Ohio’s agricultural exemption prevents townships from using zoning authority to prohibit the use of land for “agriculture,” which includes viticulture, and also states that townships can’t prohibit the use of buildings or structures “used primarily for vinting and selling wine and that are located on land any part of which is used for viticulture.…” The appellate court said that a determination must be made at the trial level whether the wedding barn structure was “used primarily” for wine vinting and sales.
At its second trial court hearing, Blueberry Barn brought forth evidence that it produced and stored wine in the barn along with storing winemaking equipment. Blueberry Barn also explained to the court that persons could only rent the wedding barn if they purchased wine from Blueberry Barn. Based on this evidence, the trial court concluded that the primary use of the barn was for vinting and selling wine. On a second appeal by the township, the Ninth District Court of Appeals agreed with the trial court’s judgment. The township appealed yet again, this time to Ohio’s Supreme Court.
The issue before the Court focused on one word in the agricultural exemption: primarily. In order for the agricultural exemption to apply, the wedding barn must be used primarily for vinting and selling wine. The agricultural exemption does not define the word primarily, so the Court looked to the ordinary dictionary meaning of the word “primary,” which is “of first rank, importance, or value.” The Court reminded that whether a use is primary is a question of fact to be determined by the trial court.
The township argued that the trial court’s conclusion that vinting and selling wine was the primary use of the barn was incorrect, because only 4% of the barn’s physical space involved vinting and selling wine. The Supreme Court disagreed with such a conclusion, and clarified that “primary” does not mean “majority.” The Court stated that the amount of space or time devoted to vinting and selling wine would not determine whether the use is “primary.” It would not be unreasonable for a new winery producing limited quantities of wine in its early stages of production to use its barn space for other purposes, reasoned the Court.
One never knows when the Buckeyes will pop up in a conversation or even a court case, and it happened in this one. In a teaching moment, the Supreme Court used Ohio Stadium to illustrate its interpretation of the word “primary.” It would be hard to argue that football is not the primary use of Ohio Stadium even if the stadium holds 20 events a year and only 7 of those events are for Buckeye football, the Court explained. Additionally, the Court pointed to the fact that only those who purchased wine from Blueberry Barn could use the facility for weddings or events as further support for the trial court’s factual determination that wedding rentals contributed to the barn’s primary use of vinting and selling wine. The Court affirmed the ruling in favor of Blueberry Barn, bringing an end to the six-year wedding barn controversy.
I’ve taught zoning law and Ohio’s agricultural exemption for many years. One question I’ve received hundreds of times is this: how do we know which use of a structure is “primary”? The Court’s decision today sheds light on this seemingly minor but highly relevant question. The answer is one that helps us interpret not only the “used primarily for vinting and selling wine” language in the agricultural exemption, but also relates to additional provisions that apply to “agritourism” structures. Several references in the agricultural exemption prohibit zoning regulation over buildings “used primarily” for agritourism. When next asked what “primary” means, I can now happily refer to the new “primary-use test” created today by the Supreme Court: primary does not mean majority, but does mean of first rank, importance, or value. That’s a primary contribution to Ohio’s agricultural zoning law.
Read the Ohio Supreme Court's decision in Litchfield Twp. Bd. Of Trustees v. Forever Blueberry Barn, L.L.C. here.
Although many of us are quarantined at home these days, the gears of the legal world are still turning. Here’s our gathering of recent notable news and legal developments:
Our Farm Office is open Monday night! Join us for the Farm Office’s live online office hours this Monday night from 8—9:30 p.m. Our team of experts will provide updates on the Paycheck Protection Program and the dairy economy and discuss COVID-19 macro-economic and export impacts, BWC dividends, property tax concerns, potential legal issues arising from COVID-19, and other issues you want to discuss. Register at https://go.osu.edu/farmofficelive.
What’s the deal with dicamba? Our partner, the National Agricultural Law Center, is hosting a free webinar on dicamba litigation on Wednesday, April 15 at noon EST. "The Deal with Dicamba: An Overview of Dicamba Related Litigation," will feature attorney Brigit Rollins, who will review each of the dicamba lawsuits, the claims made by the plaintiffs, and what the outcome of each suit could mean for dicamba use in the United States. Go here to learn more.
Walmart sued for employee’s COVID-19 death. We’ve been wondering when we’d start seeing COVID-19 lawsuits, and the answer is now. On Monday, the estate of a Walmart employee in Illinois who died from COVID-19 sued the company for negligence and wrongful death. The complaint alleges that Walmart failed to properly clean the store or provide employees with masks, gloves, antibacterial wipes and other protective equipment, knew that employees were exhibiting COVID-19 signs and symptoms, and did not screen new employees for COVID-19. A second employee at the same store has also died of the virus. Read the complaint here.
Shell eggs go to market. The FDA issued guidance that eases up packaging and labeling requirements during the COVID-19 pandemic for shell eggs sold directly to consumers in retail food establishments. The agency explained that it made the change because plenty of shell eggs are available to meet increased consumer demands, but properly labeled retail packaging for the eggs is not. See the guidance here.
EPA’s glyphosate approval is challenged. Glyphosate, used in the weed killer Roundup, is in the news again. This time, the controversy surrounds the EPA’s decision in January 2020 to allow glyphosate to continue being used in the interim while the agency conducts its mandatory 15-year re-approval review. Although EPA has yet to make its re-approval decision, two groups of plaintiffs have petitioned the Ninth Circuit Court of Appeals for an invalidation of the EPA’s decision allowing continued use in the interim. Plaintiffs argue that the decision violates both the Federal Insecticide, Fungicide, and Rodenticide Act and the Endangered Species Act because the EPA has not gathered enough information to prove that glyphosate is safe for humans, the environment, and endangered species. You can read the petitions here and here, and EPA’s interim decision here.
No rehearing for RFS litigation. We reported previously that the Tenth Circuit Court of Appeals held the EPA in violation of the Renewable Fuel Standard (RFS) when it granted RFS blending waivers to three small refineries. While the Trump administration did not appeal the court’s decision, two of the oil refiners requested a rehearing before the full panel of Tenth Circuit judges. This week, those requests were rejected by the Tenth Circuit, starting a 90-day period during which the refiners may petition for a hearing before the U.S. Supreme Court.
ODNR suspends hunting and fishing license sales for non-residents. The Ohio Department of Natural Resources announced this week that it is “temporarily suspending the sale of non-resident hunting and fishing licenses until further notice” to further discourage travel into the state. ODNR has no set date to lift the suspension; it will be in place as long as state COVID-19 orders dictate. Read ODNR’s press release here.
BWC gives dividends and deferrals. The Ohio Bureau of Workers’ Compensation board decided yesterday to pay dividends to employers for BWC premiums to the tune of up to $1.6 billion. Checks will go out to employers later in April, and will equal approximately 100% of the BWC premiums paid in their 2018 policy years. The agency is also allowing employers to delay unpaid premium installments due for March through May until June 1, 2020 and will not lapse coverage or assess penalties for amounts not paid due to the COVID-19 pandemic. See this FAQ for details.
As you may know, Ohio State's campuses and offices are closed. But we are all working away at home, and our virtual offices are still open for business. Starting today, April 6th, the OSU Extension Farm Office Team will open our offices online and offer weekly live office hours from 8:00-9:30 pm EST. We'll provide you with short updates on emerging topics and help answer your questions about the farm economy. Each evening will start off with a quick 10-15-minute summary of select farm management topics from our experts and then we'll open it up for questions and answers from attendees on other topics of interest. For tonight's office hours, we'll focus on the newly enacted CARES Act and how it affects agriculture.
Who's on the Farm Office Team? Our team features OSU experts ready to help you run your farm office:
- Peggy Kirk Hall -- agricultural law
- Dianne Shoemaker -- farm business analysis and dairy production
- Ben Brown -- agricultural economics
- David Marrison -- farm management
- Barry Ward -- agricultural economics and tax
Each office session is limited to 500 people and if you miss our office hours, we'll post recordings on farmoffice.osu.edu the following day. Register at https://go.osu.edu/farmofficelive. We look forward to seeing you there!
We love blogging about agricultural law, but sometimes we don’t feel the need to interpret a law that one of our colleagues has already explained perfectly. Such is the case with an article about the new Paycheck Protection Program recently enacted by Congress in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Our colleague Kristine Tidgren at Iowa State’s Center for Agricultural Law and Taxation has written an excellent explanation of the new loan program here.
A few questions about the Paycheck Protection Program that Kristine answers in detail in her blog post are:
- Who’s eligible for the loans? Any small business concern, business concern, 501(c)(3) nonprofit, veterans’ organization or tribal business concern employing 500 or fewer employees whose principal place of residence is the U.S. and eligible self-employed individuals including independent contractors may apply for a loan. Farm businesses with less than 500 employees may fit within these eligibility parameters.
- How much are the loans? The program has a maximum loan amount of the lesser of either $10 million or 250% of the average monthly payroll costs in the one year prior to the loan plus refinanced Economic Injury Disaster loans received after 1/31/20.
- What can the loans be used for? Certain payroll costs, as well as group health care benefits, salaries, commissions and similar compensation, mortgage interest, rent, utilities, and other previous debt obligations.
- What are the terms? The loans have maturity of 2 years and a maximum maturity of 10 years, and the SBA has set the interest rate at 1% (and can’t exceed 4%). Lenders have to defer both interest and principal payments for at least the first 6 months. Note the forgiveness provisions below, however.
- What about loan forgiveness? A borrower is eligible for loan forgiveness in an amount equal to the sum of certain payroll, mortgage interest, rent, and utility payments made during the 8-week period after the loan’s origination date. The loan forgiveness can’t exceed the principal amount and is subject to a number of reduction factors, which Kristine explains.
- What considerations apply to loan approval? In reviewing loan applications, a lender must consider whether the borrower was in operation on Feb. 15, 2020 and had employees for whom the borrower paid salaries and payroll taxes. Applicants must also certify that the uncertainty of current economic conditions makes the loan request necessary to support ongoing operations; funds will be used to retain workers and pay eligible expenses; the applicant does not have an application pending for another loan for the same purpose; and that the applicant has not received amounts under the program for the same purpose for the period of February 15 to December 31, 2020.
- How to apply? According to the Small Business Administration: “Businesses can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.” Consult with your local lender as to whether it is participating in the program. Visit www.sba.gov for a list of SBA lenders.
- When to apply? Lenders may begin processing loan applications for most businesses as soon as April 3, 2020, and for independent contractors and self-employed individuals by April 10, 2020.
- Where to learn more? The Treasury Department and the Small Business Administration have posted extensive information and the application the loan program on their websites.
Watch for more resources about the CARES Act and other COVID-19 legislation here on our blog and on OSU’s Farm Office website at farmoffice.osu.edu.