Category: Ag Law

For well more than a decade, every year has brought a new wave of WOTUS uncertainty. At all but the stroke of midnight to close out 2022, the EPA announced the final revised WOTUS rule which is set to take effect this spring, 60 days after publication in the Federal Register. If headlines about WOTUS over the past decade have confused you, fear not. You’re not alone. The two steps forward – one step back progression of the hunt for WOTUS clarity follows a switchback trail of previous and current administrations. Despite this brand-new rule, the uncertainly might not be over just yet.

Since the inception of the modern-day Clean Water Act (“CWA”), enforcement agencies and citizens alike have been seeking to define “water of the United States” in an effort to determine where federal jurisdiction of a body of water begins and ends under the CWA. Sparing the dirty details, there have been four WOTUS eras worthy of mention here.

First, commonly referred to as the “Pre-2015 Rule,” the WOTUS rule in place since the 1980s was constructed through regulation and the implementation of key agency memoranda shaped by seminal judicial opinions.^[1] The second era of mention began in 2015, when the EPA and Army Corps of Engineers (the “Corps”) issued a new rule, also known as the “Clean Water Rule” which was broader in application and was simultaneously praised as a long-overdue revision of the WOTUS rule, and also criticized as a gross overreach of authority. Due in part to legal challenges, the EPA and the Corps delayed implementation of the 2015 Clean Water Rule until 2020. Meanwhile, in 2019, the Trump administration repealed the 2015 Clean Water Rule and in 2020, proposed yet another new WOTUS rule, the “Navigable Waters Protection Rule,” or “NWPR,” the third mentionable WOTUS era.

The NWPR reversed course from the 2015 Rule, narrowing the scope of WOTUS and federal jurisdiction under the CWA by setting forth four categories of waters falling under CWA jurisdiction which included territorial seas, traditionally navigable waters and interstate waters; tributaries and lakes, ponds, impoundments directly or indirectly contributing surface water to traditionally navigable waters; and wetlands adjacent to these. Once again, litigation quickly took center stage. The NWPR was short-lived as President Biden’s administration sought to provide a workable, more stable definition of WOTUS and nix the never-ending uncertainty that has plagued the CWA since its inception.

The fourth and current era officially began on December 30, 2022, when the EPA and the Corps finalized the latest WOTUS rule. Under the new final rule, using the Pre-2015 Rule as a foundation, tributaries and impoundments as well as wetlands adjacent to traditionally navigable water that are either “relatively permanent” or have a “significant nexus” to traditionally navigable waters will fall under the CWA’s jurisdiction. The new rule sets forth that its “relatively permanent standard” refers to “relatively permanent, standing or continuously flowing waters” connected to traditionally navigable waters or waters with a “continuous surface connection to such relatively permanent waters.” The rule also defines a “significant nexus” as where waters “either alone or in combination with similarly situated waters in the region, significantly affect the chemical, physical, or biological integrity of traditional navigable waters, the territorial seas, or interstate waters.” Finally, the new rule states that “adjacent wetlands” are those which have a “continuous surface connection to a relatively permanent, standing or continuously flowing water” connected to traditionally navigable waters “or must either alone or in combination with similarly situated waters significantly affect the chemical, physical, or biological integrity” of traditionally navigable waters, territorial seas or interstate waters.^[2]WOTUS clarity, in large part, hinges on these defined terms and the ability of these terms to be readily identified and applied. 

In its release of the new rule, the EPA also published a “Fact Sheet for the Agricultural Community” which sets forth the agricultural exemptions from CWA jurisdiction and specific exclusions in the final rule. Among the exemptions are “normal farming, silviculture, and ranching activities” with examples listed; construction of farm or stock ponds or irrigation ditches and maintenance of drainage ditches; and construction or maintenance of farm roads in accordance with best management practices. Prior converted cropland also remains excluded from the final rule so long as it is available for agricultural commodity production, such as crop production, haying, grazing, agroforestry, or idling land for conservation uses.^[3]

Currently, the nation awaits the Supreme Court’s decision in Sackett v. EPA, wherein the Supreme Court is asked to determine the proper test for determining which wetlands constitute WOTUS. The Supreme Court is expected to announce its decision early this spring. The anticipated ruling has the potential to affect the latest WOTUS final rule and send the EPA and Corps back to the writing room or alternatively, to affirm the appropriateness of the new rule as written. For today, a new WOTUS rule reigns. Time will tell whether the hunt for WOTUS clarity is over or whether litigation, both new and old, will keep WOTUS in the trenches

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^[1] See SWANCC v. U.S. Army Corps of Engineers, 531 US 159 (2001), and Rapanos v. U.S., 547 US 715 (2006).

^[2] EPA, Pre-Publication Final Rule Notice: Revised Definition of ‘Waters of the United States.’” 6560-50-P (December 2022) pp. 9-10. 

^[3] EPA, “Final Rule: Revised Definition of ‘Waters of the United States’ Fact Sheet for the Agricultural Community December 2022.”

Author: Jennifer Shaver Friedel, J.D.

Director, Land Use-Value Assessment Program

Professor of Practice

Virginia Tech

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Friedel, Jennifer. “The Navigability of WOTUS.” Southern Ag Today 3(2.5). January 13, 2023. Permalink

Photo by Max Parada: https://www.pexels.com/photo/stones-on-the-river-13932592/

When one thinks of crops, insurance, and risk, one may think of traditional crop insurance. The case of Three Rivers Hydroponics, LLC v. Florists’ Mutual Insurance Company,^[1] decided by the United States District Court of the Western District of Pennsylvania in 2021, illustrates a “business package” insurance policy application to a fast-growing area of agriculture: hydroponic agriculture.^[2]

            In the Three Rivers Hydroponics case, the insured was engaged in the business of growing organic basil through a hydroponic ozone system.^[3] The ozone system treated and disinfected water utilized for crop production.^[4] On June 30, 2014, the ozone system caught fire, and the crop soon failed thereafter.^[5] Eventually, the insured lost its business.^[6]

            The insured’s business package insurance policy in the case included an Equipment Breakdown Boiler and Machinery Coverage endorsement, in which the insurer agreed to pay for a loss caused by an “Accident” to “covered equipment.”^[7] An “Accident” was defined in the policy as a “mechanical breakdown.”^[8] Thus, the insured could only recover under the policy if the ozone system had a mechanical breakdown.

            The insured contended that the ozone system failed due to an issue with the ORP controller.^[9] Two engineering experts of the Defendant concluded that only the ozone generator sustained damage in the fire and that complete replacement of the system was unnecessary.^[10] The insurer issued a payment for replacement of the ozone generator but denied the claim for mechanical breakdown.^[11]

            The insured filed a breach of contract claim as well as bad faith claim against the insurer.^[12] In examining these claims, the Court noted that whether mechanical breakdown of the ozone system occurred is a “highly technical” matter.^[13] However, the insured did not produce any expert testimony of an engineer who opined on whether a mechanical breakdown of the system occurred.^[14] Thus, the Court found that the insured did not meet its burden to produce admissible evidence to establish a prima facie case that coverage existed and granted summary judgment to the insurer on the insured’s breach of contract claim.^[15] In addition, the Court also granted summary judgment to the insurer on the insured’s bad faith claim as the Court found that the insurer “conducted a substantial, thorough, and timely investigation” as a matter of law.^[16]

            The Three Rivers Hydroponics case exemplifies a sometimes overlooked area in agricultural law – the significance of expert testimony in cases involving more technical matters.

Nothing in this article is intended to create an attorney-client relationship and does not constitute legal advice.

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^[1] See Three Rivers Hydroponics, LLC v. Florists’ Mutual Insurance Company, No. 2:15-cv-00809, 2021 WL 6133304 (W.D. Pa. Dec. 29, 2021).

^[2] See Hydroponics, United States Department of Agriculture National Agriculture Library (2022), available at: https://www.nal.usda.gov/farms-and-agricultural-production-systems/hydroponics

^[3] See Three Rivers Hydroponics, LLC V. Florists’ Mutual Insurance Company, 2021 WL 6133304 at *1.

^[4] Id.

^[5] Id.

^[6] Id.

^[7] Id. at *2.

^[8] Id. at *2.

^[9] Id. at *3.

^[10] Id. at *3-7.

^[11] Id. at *7.

^[12] Id. at *1.

^[13] Id. at *10.

^[14] Id. at *10.

^[15] Id. at *15.

^[16] Id. at *16.

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Marzen, Chad. “Hydroponic Agriculture and Insurance Coverage.” Southern Ag Today 3(1.5). January 6, 2023. Permalink

The Supreme Court of the United States (“SCOTUS”) has recently had a significant docket of cases with an impact on agriculture.  Two cases have been heard this fall, with another hearing set for next spring.

In Sackett v. EPA, the Supreme Court once again considered the scope of wetlands jurisdiction under the Clean Water Act (“CWA”). Specifically, the Court was asked to revisit its landmark Rapanos ruling which resulted in two tests to establish when a wetland should receive CWA protection.  However, the Court rules are sure to impact the scope of CWA jurisdiction, and potentially impact EPA’s ongoing attempt to redefine the key CWA term “waters of the United States.” To learn more about the case, click here.

In National Pork Producers Council v. Ross, SCOTUS considered the constitutionality of “Prop 12,” a California law regulating space requirements for farm animals.  Specifically, the court heard arguments about the circumstances under which a state government can pass laws that primarily affect the actions of people in other states.  To learn more about this and other similar challenges to Prop 12, click here. 

The upcoming case involves water rights in the Colorado River basin, an area where drought conditions are already causing existing water allocations to be substantially reduced. In November, SCOTUS agreed to hear two cases involving the Navajo Nation’s potential rights to Colorado River water.  These cases have been consolidated so that there will be only one hearing, which is expected to be in early 2023. To read more, click here. 

In all three cases, a decision is expected by June 2023.

Author: Elizabeth Rumley

Senior Staff Attorney

erumley@uark.edu

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Rumley, Beth. “The Supreme Court and Agriculture.” Southern Ag Today 2(53.5). December 30, 2022. Permalink

Maryland has the most significant solar, specific carve-out of any state at 14.5% energy generation sales by 2028 (1) – the majority of which will be produced through utility-scale solar operations. Utility-scale solar is a solar energy generating system that sells electricity through power purchase agreements or into the wholesale electricity market (2). Utility-scale solar facilities are usually owned by a generation company and require a Certificate of Public Convenience and Necessity (CPCN) to be developed and connected to the grid (2). 

Although there are mandatory considerations and research-based claims to prioritize solar development on non-farmland, that has not been the case in Maryland and other states. In Maryland, only one of the currently built utility-scale solar projects is not on “Prime Farmland” or “Farmland of Statewide Importance,” as defined by the Natural Resources Conservation Service (NRCS). More specifically, 44% of utility-scale solar acres developed are on “Prime farmland,” 48% on “Farmland of statewide importance,” and 8% on “Not prime farmland.”

Producers who own land are acting as rational economic agents, given the estimated additional gross revenue utility-scale solar can generate for the landowner compared to traditional crop rotation gross annual farm profits. In the lefthand column of the following table is the range of annual gross rental rates, less the land payment or land cost^[1], a commercial corn-soybean field rotation receives per acre in Maryland^[2]. The first row shows the range of utility-scale solar rental payments collected from focus groups and leases. The most likely outcome amongst the ranges of annual gross revenues for a farmer who transitions land from farmland to solar generation in Maryland would be a ~350% increase in gross revenue per acre. 

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The ambitious renewable energy generation goals of Maryland, paired with the financially attractive offers landowners are receiving, have and look to continue to result in the development of utility-scale solar generation facilities on farmland. The continuing increase in renewable energy generation, like large-scale solar generation, will likely result in the loss of farmland nationwide. It would be advantageous for the Southern region to conduct outreach and research to determine the impacts of farmland loss on renewable energy generation.  

This work is supported by the Agriculture and Food Research Initiative (AFRI) program, grant no. 2020-68006-31182/project accession no. 1022637, from the U.S. Department of Agriculture, National Institute of Food and Agriculture.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and should not be construed to represent any official USDA or U.S. Government determination or policy.

1. Renewable Energy Development and Siting, (2020, August 14). Governor’s Task Force on REDS –Final Report. Retrieved November 18, 2022, from https://docs.google.com/presentation/d/1F4wXH9XD9Tbozab6gpuhLg4tmuGJSw52/edit#slide=id.p13
2. Maryland Public Service Commission. (2022, October 7). Solar in Maryland – Maryland Policies. Electricity – Renewable Energy. Retrieved November 18, 2022, from https://www.psc.state.md.us/electricity/renewable-energy/solar-in-maryland/ 

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^[1] The land payment or cost is assumed to be the same per acre between farmland and land developed into solar fields

^[2] Derived from University of Maryland Extension Enterprise Budgets (https://extension.umd.edu/programs/agriculture-food-systems/program-areas/farm-and-agribusiness-management/grain-marketing/crop-budgets)

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Thilmany, Elizabeth. “The Potential Implications of Large-Scale Solar Development: A Case Study on Maryland’s Agricultural Industry.” Southern Ag Today 2(49.5). December 2, 2022. Permalink

Agricultural conservation easements (ACES) – given their perpetual and restrictive nature – are considered the best tool for protecting valuable agricultural soils from non-farm residential and commercial development. While ACES are also considered helpful in farm succession planning due to cash and tax – and often emotional – benefits, their principal feature – a restriction of future subdivision – may have frustrating consequences on an equal division of estate value and desired future development. While the outright restriction on subdivision is the default position in most ACE deeds, pathways exist in federal and state policy to preplan subdivision for the distribution of family lands to heirs to avoid co-tenancy while ensuring the resulting parcels are protected. Once a blanket restriction on subdivision is granted, however, it is tough – if at all – to undo.

Given the need for consolidation of management over tracts used in farming and forestry, it is generally undesirable to have multiple co-tenants on a single parcel, mainly when one “heir” is farming and one or more (usually siblings) are not, which can frustrate long-term decision-making and use of the land as collateral for loans. While parcel partition usually is available to a real property co-tenant under a state law proceeding, the conservation easement likely frustrates any judicial order of partition “in kind” (i.e., physical subdivision), resulting in a sale of the parcel as a whole.

Most agricultural conservation easement deeds receiving federal monies are based on a common template language provided by NRCS, which must include specific language to conform to public policy goals associated with the monies and tax benefits (among these being a blanket prescription against subdivision). However, the NRCS deed guidance provides sample language to contemplate the present or future subdivision of a parcel, and it is critical to ensure this option remains open from the outset of the application process (the NRCS manual provides criteria for consideration and acceptance of future subdivisions, including allocation of impervious surface ratios among subdivided parcels). Additionally, state laws and funding policies may contemplate future subdivisions. For example, North Carolina’s state ACE purchase fund – the NC Agricultural Development and Farmland Preservation Trust Fund – allows future subdivision provided no parcel is less than 20 acres, and North Carolina’s ACE authorization statute restricts such subdivisions to no more than three parcels).

How a request for future subdivisions impacts a particular project application’s ranking is unclear. Still, pre-planning is critical for those wishing to protect a large parcel while allowing a future subdivision among family members. For more detailed information on this topic, a draft paper is in development.

Author: Robert Andrew Branan, JD

Assistant Extension Professor, Agricultural and Resource Economics

rabrana2@ncsu.edufarmlaw.ces.ncsu.edu

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Brannon, Robert Andrew. “Conservation Easements: Subdivision Considerations in Farm Succession Planning.” Southern Ag Today 2(48.5). November 25, 2022. Permalink