Editor's note: The following column, published in the October 2012 issue of PORK magazine, was written by Delmar Ehrich, partner, Faegre Baker Daniels LLP; Andrew Ehrlich, principal, and Luke Tomanelli, assistant vice president, FaegreBD Consulting.
Livestock producers have been under substantial economic pressure in recent years. Market conditions have led to increased consolidation. Those who remain open for business, especially small and medium-sized operations, face additional uncertainty from public policy threats coming from Washington, D.C. In order to stay in business and make a profit, the best defense for our nation’s pork producers remains a good offense, and that includes having the ability to successfully engage and effectively navigate state and federal regulatory authorities, legislators and the courts on a range of policy and legal issues.
Lawmakers in Washington, D.C., are impacting farmers and ranchers like never before. The most significant current example is the Renewable Fuel Standard. Created in 2005 and amended in 2007, the RFS requires that importers, blenders and refiners blend an increasing amount of corn-based ethanol into transportation fuel on an annual basis.
Congress took this step to reduce our dependence on foreign oil and to reduce pollution from tailpipe emissions. Critics say that the RFS has had the unintended consequence of increasing corn price. That in turn drives up the price of food and animal feed which costs every household in this country. The debate has reached a fever pitch this summer as drought conditions across the country have downgraded this year’s corn crop, further exacerbating the impacts of the RFS’s statutory diversion of corn toward ethanol production.
Statutory mandates causing unforeseen circumstances and unexpected costs that hit the bottomline because of the drought amplify each other and have forced some farmers to hire a lawyer because they cannot meet the supply quotas in their contracts, as well as to seek legislative or regulatory relief. So far, numerous governors have petitioned the U.S. Environmental Protection Agency to waive some or all of the renewable fuel mandates.
At the same time, more than one-third of the U.S. House of Representatives and several national trade associations have weighed in with the EPA in support of these waiver requests. (The EPA public comment period ends Oct. 11.) For so many congressmen to sign a piece of paper, someone must have visited their offices to explain the local impact and successfully made the argument that relief was justified.
While outright hostility to the RFS has been commonplace in some sectors since the law’s inception, these policy and legal considerations are gaining a broader, more bipartisan and diverse audience. Republican lawmakers from oil- and gas-producing states suddenly find agreement with Democratic governors who represent hard-hit farming and ranching communities. The combination of state-based, congressional and industry pressure is raising the stakes in the debate over the RFS’ merits. Media interest-- in newspapers, on television and over the Internet-- only serves to heighten chances that the law or regulations will be changed.
Unfortunately, the RFS is not the only public policy that is contributing to the heightened concerns from producers when it comes to the EPA’s role in overseeing production agriculture. Many producers have concerns about the future of their operations and livelihoods because of the agency’s interpretation of the Clean Air Act and the Clean Water Act. For instance, EPA regulation of concentrated animal-feeding operations has been a high-priority threat for years. Recently, EPA unilaterally set aside its so-called CAFO reporting rule, which would have required CAFOs to submit operational information to the federal government.
In addition and in response to an unfavorable court opinion, EPA was recently forced to set aside a separate rule under the Clean Water Act that would have required National Pollutant Discharge Elimination System permits for CAFOs that may discharge pollutants into waters of the United States (as opposed to CAFOs that actually engage in such discharges). These developments have been met with great relief from livestock producers, but bad regulations never seem to die. EPA continues to review its National Air Emissions Monitoring Study, which covers the impacts of CAFO air emissions on nearby and downwind air quality. Many are anticipating that EPA will develop a new set of rules to address its findings from the study.
Furthermore, lawsuits continue to be filed against producers as a way to push EPA and the states toward more regulation of producers. For example, there are ongoing enforcement actions related to atmospheric disposition, which refers to the impacts of CAFO air emissions that ultimately may contribute to diminished water quality.
Further, environmental groups have sued EPA recently, alleging that the agency has failed to regulate emissions of ammonia and that hydrogen sulfide emitted from CAFOs causes asthma and other adverse health conditions for neighbors. The plaintiffs seek an order requiring EPA to regulate ammonia and hydrogen sulfide as “criteria pollutants” under the federal Clean Air Act. Other groups have filed notices of intent to sue 51 pork producers for allegedly violating the emission reporting requirements of the federal Emergency Planning and Community Right to Know Act by failing to report ammonia emissions from their facilities.
There also is the threat of new and more stringent regulation for the raising and handling of livestock. In 2010, and after the passage of several state ballot initiatives, the United Egg Producers — which represents about 95 percent of the nation’s egg-laying hens — came to an agreement with the Humane Society of the United States and others on proposed federal housing standards for 280 million egg-producing hens.
Two members of Congress have introduced federal legislation based on that stakeholder agreement, and now the legislation is subject to a battle in the halls of Congress. Turning to the pork industry, the fact pattern is strikingly similar. State ballot initiatives which seek to regulate the pork industry exist and HSUS continues to ratchet up the pressure on the industry, its customers and its investors. So, pork producers should expect pig housing to remain a controversial public policy issue across the country.
In sum, pork producers should be concerned with old laws (the RFS), possible new regulations (CAFOs) and proposed new laws (humane handling and housing). What that means is that an ability to engage and navigate the judicial, congressional and federal rulemaking processes in a time-effective and cost-efficient manner has never been more important.
These are increasingly valuable services in an atmosphere fraught with economic uncertainty, enhanced regulation and downright unpredictability. Oftentimes, the well-being of an individual producer or industry can come down to having the right legal talent to send the right letter or file the right lawsuit, or having the right government relations professional to engage the right elected official or a staffer at a regulatory agency, or a combination of both.
While the drought and high corn prices surely will end, the legal and legislative issues in Washington, D.C., and across the country surely will not. Like it or not, livestock producers are facing consolidation, strengthened competition, ongoing litigation and a dizzying array of complex regulations at the state and federal levels. In the fight for survival, livestock producers must utilize all of the available assets that are at their disposal in a given situation. The farm depends on it.