In 2010, a bevy of court decisions and actions by Congress impacted agricultural law.
In mid-February, Farm Press spoke with Roger McEowen, director of Iowa State University’s Center for Agricultural Law and Taxation (CALT), about what he sees as the most significant agriculture-related developments over the past year.
In reverse order of importance, his top five picks are:
(for picks 6 through 10, see Part One)
5. Bona fide purchaser defense under Superfund
“We tend not to think of Superfund in an agricultural context. But it can be very important.
“When you buy agricultural land, someone in the past may have placed hazardous chemicals on that property. There are a lot of ag properties with a remote area that was used in the past as a dump: pesticide and herbicide containers, oil, all of the types of chemicals used on a farm…
Many of the chemicals and substances used in a farming operation are classified as ‘hazardous’ waste under the Superfund law.
“When you buy land, the last thing you want is to be held liable for the conduct of someone who owned, or operated, the property before you. There are ways to avoid that liability. One of those is to conduct ‘all appropriate inquiry’ concerning the status of that property. In other words, you ask the seller a list of questions and get them to certify there’s no problem with the property, they know of no problem. … That way, if a problem is discovered once you own the property, you won’t be held liable.
“Well, we’ve never really had the framework for figuring out what it takes to be a bona fide purchaser and what is the defense. … We now at least have a framework for how to establish a bona fide purchaser defense.”
4. FDA Food Safety Modernization Act
The Food Safety Modernization Act was passed by Congress and signed by President Obama in late 2010.
“It’s the biggest change in U.S. food safety law since the 1938 federal Food, Drug and Cosmetics Act.
“It heightens inspections by, about, a factor of seven over the next five years of ‘food facilities.’ That will be paid through a tax on those facilities which will be passed on to consumers in higher food costs…
“All food facilities have to produce ‘risk-based preventative controls’ and undertake periodic hazard analysis.
“Meat, poultry and dairy products are covered under different legislation.
“Also, the FDA is given mandatory recall authority over covered food products, except alcoholic beverages. Most food companies will have to write and implement food safety protocols designed to minimize potential food hazards. The cost of that additional administrative burden will, again, be passed on to consumers.”
The act “also provides whistle-blower protections for employees of employers engaged in the manufacture, process, packing or importation of food. And the FDA has the power to ‘harmonize’ U.S. food and dietary supplement industries with internationally recognized standards. That means basic food staples will be genetically modified. Indeed, Monsanto was a major supporter of the act because of that provision.
“It will cost about $1.4 billion over the next four years. The additional costs to the private sector haven’t been estimated.
“The thing that’s interesting is that Congress passed this and the president signed it into law in spite of data showing the incidence of food-borne illness has dropped by a third over the past 14 years.”
Wetlands/NCC v. EPA
3. Attempt to extend jurisdiction over “prior converted” wetland (New Hope Power Company, et al. v. United States Army Corps of Engineers)
“This has been important in parts of the country for many years, particularly since ‘Swampbuster’ rules came into play in the 1985 farm bill. But we also have CWA rules that involve prior converted wetlands – and that was the issue in this case.
“If you’d converted wetland to cropland prior to the effective date of the farm bill, then you’re in the clear. You get a ‘prior converted’ status and you do what you want on that land: farm it, develop it.
“Well, the Army Corps of Engineers (ACE) and the EPA have concurrent jurisdiction over many issues with respect to wetlands.
“In this case, out of Florida, a tract of land was used before 1985. It was converted and previously used to grow sugarcane. In 1993, the ACE designated the property as ‘prior converted wetland’ and told the plaintiff it didn’t need to get a CWA permit to build a plant. They were putting up a renewable-energy facility on part of that land. (The plaintiff) then wanted to put in an ash monofill – a land-fill for waste for waste produced at the facility…
“The ACE promulgated some internal rules -- didn’t publish them for notice and comment in the Federal Register – and kind of changed their position regarding prior converted wetland. Then, they told the renewable energy plant they were in violation of the CWA.
“The plant sued saying ‘you can’t change the rules without making them public and complying with the Administrative Procedure Act.’ The court agreed and struck those rules down as invalid.
“It’s a big case for paring back by what’s seen by many as over-reaching by the ACE.”
2. Supreme Court denies review in Clean Water Act case (The Cotton Council of America, et al. v. United States Environmental Protection Agency)
“The issue in this one is: if you’re using pesticides in compliance with the Federal Insecticide Fungicide Rodenticide Act (FIFRA), are you exempt from the CWA permitting requirements? The CWA requires you get a permit before you discharge a pollutant into navigable waters of the United States.
“Well, if you have run-off of pesticides that were applied consistent with FIFRA, and they run-off into navigable water are you subject to the CWA requirements?”
“The trial court said there was. The CWA clearly covers a discharge of a pollutant from a point source. But pesticide residue is something that occurs after a discharge occurs.
“Federal courts are all over the board on this. Some have ruled pesticides applied consistent with FIFRA aren’t chemical waste – in other words, they aren’t pollutants so you don’t have to get a CWA permit. But some courts have reached that conclusion only when the pesticide leaves no residue.
“A lot of people in agriculture hoped a rehearing would be granted in this case. … And, if necessary, the U.S. Supreme Court would agree to hear the case and clarify the different outcomes in the lower courts.
“But the full 6th Circuit declined to rehear the case in early 2010 and, later in the year, the Supreme Court refuse to take it. So, there’s still some uncertainty.”
1 . Estate taxes, etc.
In late 2010, Congress was faced with the potential of the 2001 tax rules – known as the ‘Bush tax cuts’ – expiring.
“They came in very late in the year and passed a bill that basically gives us a two-year reprieve. It basically extends the law through 2012.
“One of the big portions of that law has to do with the relief – some would call it a tax increase – with respect to estate tax, gift tax and generation-skipping tax (transfer tax). Now, instead of no estate tax (the rule in 2009), the estate tax is reinstated at a $5 million exemption. Taxable amounts above that are taxed at 35 percent.
“So, we went from a zero tax last year to a 35 percent tax on amounts above $5 million. That $5 million exclusion is portable between spouses – if both die in 2011/2012, it will be a true $10 million exclusion without the need to do some high-brow and expensive estate-planning techniques.”