Can Plows Create Mountain Ranges?

by Levi Russell

According to the EPA, the Clean Water Act does not require a permit for normal agricultural practices including the following:

Normal farming, silviculture, and ranching practices. Those activities include plowing, seeding, cultivating, minor drainage, and harvesting for production of food, fiber, and forest products.

Upland soil and water conservation practices.

Agricultural stormwater discharges.

Return flows from irrigated agriculture.

Construction and maintenance of farm or stock ponds or irrigation ditches on dry land.

Maintenance of drainage ditches.

Construction or maintenance of farm, forest, and temporary mining roads.

That sounds pretty comprehensive to me, but the EPA and US Army Corps of Engineers has apparently decided to circumvent their own rule. A report released by the Majority Staff of the Senate Committee on Environmental and Public Works claims that

Landowners will not be able to rely on current statutory exemptions or the new regulatory exemptions because the agencies have narrowed the exemptions in practice and simply regulate under another name.  For example, if activity takes place on land that is wet: 
- plowing to shallow depths is not exempt when the Corps calls the soil between furrows “mini mountain ranges,” “uplands,” and “dry land;”
- discing is regulated even though it is a type of plowing;
- changing from one agricultural commodity constitutes a new use that eliminates the exemption; and 
- puddles, tire ruts, sheet flow, and standing water all can be renamed “disturbed wetlands” and regulated. 

This expansion of jurisdiction is apparently not what the EPA previously claimed it would be. If farmers are required to get permits to cultivate the soil, I'd bet on a couple of things:
1) the average farm size will grow dramatically as smaller farmers go out of business very quickly;
2) food prices will rise, or will fall more slowly than they otherwise would.

I doubt the average person looking at this situation would call those outcomes "good" but they're highly likely in my opinion. As Public Choice theory indicates, the EPA is not a residual claimant with regard to its policies, so its incentives are not as well-aligned as are the owner of the typical non-monopoly firm. Further, the EPA has plenty of incentive to increase the quantity of work for its employees and lawyers. This question remains: Will the farm lobby be able to keep their exemptions?

Farmers as Environmentalists

by Levi Russell

This morning in my daily ag reading I came across an article entitled "Greens Make Green." The author lays out the case for the farmer-as-environmentalist better than I've ever seen, so I thought I'd share it here. The underlying economic argument here is that there is great incentive compatibility between farmers (who are interested in long-term profits) and environmental sustainability. Do you find it compelling? Let me know in the comments.

In truth, farmers and environmentalists should be allies. The environmental and agricultural communities have more in common than conventional wisdom might suggest. Both desire to preserve our planet and its resources for future generations. I am not shy about saying farmers are the original environmentalists.

To a person, every farmer I have ever met is driven by an ethical obligation to protect the environment. They view themselves as stewards of the land. And for good reason: Nearly all want their children and grandchildren to carry on the tradition. Cousins Scott and Tom Deardorff II reflect the common theme of sustainability that connects the past to the present and future. Founded in 1937 by patriarch and great-grandfather W. H. Deardorff, Southern California-based Deardorff Family Farms has dedicated four generations to refining its environmental craft. For nearly eight decades, the Deardorff family has been driven by the relentless pursuit of improvement, pioneering many farming practices aimed at increasing productivity while reducing their reliance on natural resources.

Today, Scott and Tom have not only embraced but expanded the family legacy of stewardship. For example, they have invested heavily in the latest water-saving technologies, including drip irrigation and state-of-the-art weather stations and soil moisture monitors. The cousins have also curtailed the use of fertilizer and pesticides on their organic vegetable farms through innovative soil fertility programs and integrated pest management systems. And they recently completed construction on a cooling and packing facility that meets the highest green building standards in the country.

Multigenerational farms like theirs are the heart and soul of agriculture in the West and across the country. They are the very embodiment of sustainability. We should be so lucky as to entrust all our natural resources to the collective care of such thoughtful stewards.

If you can't bring yourself to buy the moral argument, at least consider renting the financial one. Farmers are business owners. They are motivated by sustainable profit. Their businesses are dependent on healthy soil and clean water, both of which lead to stronger yields and higher quality products. The math is quite simple: An environmentally healthy farm can deliver sustainable profits, while land that has been abused will one day cease to produce anything. Furthermore, inputs like fertilizer and pesticides are expensive; a business that doesn't minimize operating costs won't stay in business very long. Clean air, soil, and water are all outcomes supported by environmentalists. So why do so many continue to paint farmers as the enemy?

In his farewell address, President Eisenhower famously warned the nation against "unwarranted influence .  .  . by the military-industrial complex." Today we see the maturation of an environmental-industrial complex, defined by multimillion-dollar global enterprises closely integrated with academia and government regulators implementing environmental programs.

Like a storyline out of Mad Men, environmental activists have channeled their inner Don Drapers, fomenting fear of business and industry, and of human activity generally, in order to build a database of committed donors. It is an ingenious business model, used by corporate America since the early 1920s, when Gerard Lambert stigmatized halitosis to sell Listerine. Marketers have long understood that fear is a powerful motivating tool.

Every cause needs a bad guy, a threat that must be put down. For Listerine, it was bad breath. For too many environmental organizations, farmers—cast as the pillagers of Mother Earth—have served as compelling bogeymen (typically referred to as "corporate agriculture," "industrial agriculture," or the like) to alarm the 98 percent of Americans who aren't farmers.

We are all motivated to some degree by self-interest. Farmers are motivated by the love of farming and social good that comes from providing healthy food, and they are also motivated by the desire to succeed financially. Environmental activists working in big organizations aren't all that different. There is no doubt that most choose a career based on a commitment to environmental values and a desire to do good. And there is also no doubt that another motivation, and one that is entirely defensible, is the financial reward and career security that these organizations can provide.

Unfortunately, in the public debate, it is perfectly acceptable to point to farmers' financial motivations and equally unacceptable to acknowledge the financial motivations of environmental advocates. Those in private enterprise who are targeted by the policy and political initiatives of the environmental lobby ought to be more vocal about that.

If one can acknowledge the reality that the environmental lobby is motivated not only by the values of environmentalism, but also by the financial rewards of growing a motivated donor base, one might ask whether it would benefit these organizations to ever declare a problem solved. After all, while committed donors might feel good upon hearing such an announcement, they would also have one less reason to contribute.

Nowhere was this more in evidence than during the opposition waged against Senator Dianne Feinstein's compromise California drought legislation in 2014, which culminated in a joint-letter from multiple organizations slamming her bill.

Not one to seek the ire of environmentalists, the senator candidly responded—as quoted in the San Francisco Chronicle—that they "have never been helpful to me in producing good water policy." She went on to lament, "I have not had a single constructive view from environmentalists of how to provide water when there is no snowpack."

The practice of environmental protection and the business of environmentalism are two sides of a scale. Our nation's natural resources have benefited from much that has come from the former, but today the scale is weighted too much to the latter. It is the business side of environmentalism that produces the political targeting of agriculture.

It should stop. We share a common aim: to safeguard the planet for its people, animals, and plants. Imagine how much good could be accomplished if all farmers, regardless of size, whether conventional or organic, were accepted and embraced as partners for environmental protection. Now that is a narrative I know Don Draper could sell.

Tom Nassif is president and CEO of the Western Growers Association.

Yes, Virginia, Plowing is Pollution

by Levi Russell

Obviously the title is meant to be facetious. I'm just in shock about this ruling and am concerned about the ramifications it will have for producers in the future.

Below I reproduce a short Farm Futures article that summarizes a recent court decision in California regarding the Clean Water Act. As cynical as I am, this decision did surprise me.

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Judge Kimberly Mueller on June 10, 2016 in the U.S. Eastern District Court of California found that John Duarte, a nursery operator and wheat farmer, plowed wetlands, four to six inches deep, and therefore violated the Clean Water Act (CWA).

The Judge found Mr. Duarte, by chiseling a pasture, discharged fill material into a water (vernal pool) of the United States. Get this! The Court wrote “In sum, soil is a pollutant. And here, plaintiffs instructed [a contractor] to till and loosen soil on the property.”

This plowing, according to the Court, caused “…the material in this case soil, to move horizontally, creating furrows and ridges.” You will not believe this. 

The Court wrote, “This movement of the soil resulted in its being redeposited into waters of the United States at least in areas of the wetlands as delineated...” In sum, the Judge found that chiseling no more than a few inches of soil constituted an addition of a pollutant to a wetland.

Stunning!

The Court also evaluated whether the tractor and soil chisel plow were point sources under the CWA. The Court cited cases which found that bulldozers, backhoes, graders, tractors pulling discs and rippers can be point sources under the CWA.

The Court describes Mr. Duarte’s equipment as having 7 shanks with 24-inch spacing and each shank was 36 inches long. The Court wrote, “The equipment loosened and moved the soil horizontally, pulling the dirt out of the wetlands [vernal pools] and redepositing it there as well.” 

Vernal pools are described as meeting all three wetland parameters. They are dry the majority of time. As a result, the Court found that the equipment used to aerate the soil was a point source under the CWA.

Under the CWA there must be a discharge of a pollutant to navigable waters from a point source. Again, it is believed that to have a discharge of a pollutant, there must be an addition of the pollutant to the navigable waters. It is also believed that farming operations allegedly have an exemption under the CWA which exempts certain activities of farming and ranching from CWA permitting requirements. (The Court seems unaware that farming is considered a nonpoint source covered by section 319 of the CWA)

The CWA regulations defines farming and declares “Normal farming…activities such as plowing, seeding, cultivating, minor drainage and harvesting for the production of food, fiber and forest products,…” are not activities which are prohibited or regulated under the CWA. Plowing is also defined by EPA as meaning “…all forms of primary tillage, including moldboard, chisel or wide-blade plowing, discing, harrowing and similar physical means utilized on farm, forest or ranchland for the breaking up, cutting, turning over, or stirring of soil to prepare it for the planting of crops.”

The Court found that Mr. Duarte’s activities did not meet the exemption EPA has provided for farming. The Court believed that the land being aerated by Mr. Duarte had not been land used for farming activities but for the grazing of animals. (Grazing or pasturing of animals apparently is not an agricultural activity!) The Court believed the farming operation which could be exempted had ceased to operate as a farm, and that Mr. Duarte was engaging in new agricultural activities. 

Legal complications

The case is extremely complicated from a legal standpoint where Mr. Duarte sued the Army Corps of Engineers (Corps) claiming the Corps had violated his 5th Amendment right to due process and his 1st Amendment right against retaliatory prosecution. According to the opinion, there were two rounds of motions to dismiss significant evidentiary objections and objections over what constituted hearsay. The U.S. Department of Justice filed a counterclaim against Mr. Duarte using the CWA and won.

Basically the case says plowing can be a polluting activity particularly in areas that can be identified as vernal pools, vernal swales, seasonal wetlands, seasonal swales and areas where there may be intermittent and ephemeral drainages.

Mr. Duarte had purchased the land in order to plant winter wheat. He had been very careful in hiring consultants to identify any wetlands. Apparently what he did was insufficient according to Judge Mueller, an Obama appointee, who served as a City Councilwoman in Sacramento. In addition she has worked as a U.S. Magistrate Judge but appears to have no experience in agriculture. It shows!  It is indeed surprising that an attempt to grow wheat on approximately 450 acres results in the violation of the CWA.

Supply of and Demand for Environmental Regulation

by Levi Russell

I have a project in mind that I thought I'd share here and hopefully get some feedback. On previous posts (here and here) I've discussed some supply factors of environmental regulation. I think there's a lot more that can be done to find measures of factors affecting the supply of and demand for environmental regulation that I think would make a good public choice type paper.

There's already a lot of literature out there on supply and demand of regulation. The foundational theoretical papers by George Stigler, Gary Becker, Sam Peltzman, Fred McChesney, and Richard Posner are obvious starting points for a project like this. Some empirical/historical papers can be found here, here, here, here, here, here, and here. The last one is a lighter read.

I'm interested specifically in environmental regulation. I'm interested in it as an ag economist but also as a student of regulation in general. Environmental regulation makes up a significant portion of all regulation in the US and has for a coupe of decades.

Demand factors I have in mind include the number of species on the endangered species list, dollars spent on lobbying efforts by environmental groups on key environmental legislation, and results of surveys of public opinion on environmental problems.

Supply factors include indices of legislator support for environmental causes, majority parties in congress and the executive branch, legislation published by environmental groups, and measures of legislator ideology.

I’ll probably use data from the Mercatus Center’s RegData on Title 40 of the Code of Federal Regulations which contains most of the EPA's regulatory text. I want to look at environmental regulation in general, but also focus on specific industries such as agriculture, airlines, mining and fossil fuel extraction, manufacturing, construction, and transportation.

Any thoughts you have are greatly appreciated!

Environmental Common Law vs Administrative Regulation

I recently listened to an old EconTalk podcast featuring Clemson economist Bruce Yandle. Yandle is famous for the "Bootleggers and Baptists" theory of regulation. In this episode, he discusses an alternative to the current form of federal environmental regulation. Specifically, he talks about the pre-1970s era when state-level common law settled disputes between parties in regard to environmental quality.

Yandle begins by discussing the tragedy of the commons or the commons problem. For those who don't know, the tragedy of the commons refers to the problem we face with public access to scarce resources. He talks about the stages of evolution of property rights and introduces his juxtaposition of common law approaches to environmental policy to administrative regulation with some historical examples. I'll leave those for the interested listener (the podcast is about 1 hour in length, the extra run time at the end is devoted to a comment by the host).

Here are several of Yandle's points that make his case for the common law approach vis-a-vis the current regulatory approach:

- The state- and city-level common law standard prevalent before the 1970s applied to the parties to the dispute, no one else, though a particular case might be cited in the decision of another. The basic principle was that you didn't have a right to pollute your neighbor's property without their permission.

- Many businesses seeking to discharge waste went to downstream landowners and offered to pay to offset the water quality deterioration rather than purchase the land outright (though this was common as well). This makes a Coasian point: there must be someone who is harmed by the discharge for an externality to exist. Getting rid of all pollution is not likely to be cost-effective. The downstream property holder had a right to water quality based on his or her ownership of the land.

- Common law generally works on a  case-by-case cost-benefit standard whereas regulations don't. The license to discharge or the technological standard required to mitigate pollution applies to all, Yandle says that this implies that the damage done by the pollution isn't legally relevant, only the rules laid out by the regulator.

- Though differential access to legal services is potentially an issue, district attorneys (or tort law, in my amateur, non-lawyer opinion) could be used to solve this problem.

- Did the common law standard work well? Previous research indicates that progress in water and air quality before 1970 was roughly indistinguishable from progress after.

- Yandle is positive about the prospect of using the EPA as an environmental research organization and expert witness in environmental common law cases.

- I can't resist one example. Anglers' associations in England and the English part of Canada have successfully brought suit against polluters and improved water quality under the existing common law standard. This is possible because a landowner also owns the wildlife on his or her property. Yandle says that this is not so in the US; that wildlife are considered public property here. Anglers' associations in the UK have been so successful in common law courts and are now so powerful that all they have to do is make a phone call to a business inadvertently killing fish in a stream or river and the problem is fixed quickly and quietly. Overall, Yandle makes a persuasive case in favor of environmental common law.

Cooperation Between Environmentalists, Oil, and Agriculture

A recent Twitter conversation with the folks at the Property and Environment Research Center (PERC) pointed me to some interesting examples of cooperation between environmentalists and oil interests, farmers, and ranchers. Some of them involve artificial markets for conservation credits while others are simply payments to land owners to help preserve environmental amenities. I don't specialize in environmental economics but I think it's important to bring up theses issues from time to time on the Farmer Hayek blog. On a related note, I want to be clear that I don't take a position on these issues personally since I haven't studied them carefully.

One example concerns the decline of monarch butterfly habitat. A blog post last week at the Environmental Defense Fund gives the details:

My Confusion on WOTUS and Ag Exemptions

In the past I've been puzzled over the conflicting stories told about WOTUS by the EPA and Farm Bureau. The EPA claims that the rule does not impact normal farming operations but will require permits for many non-day-to-day activities farmers might engage in that would affect a "water of the United States." Farm Bureau makes much stronger claims, indicating that many typical practices will be hindered by bureaucratic red tape.

I've not found any source that nails down precisely what is and is not a "water of the United States." That's more than a little bit unnerving, as the definition of that term is the basis of the regulatory authority. [A previous version of this post indicated that my colleague Tiffany Dowell-Lashmet claimed that the EPA's characterization of the WOTUS rule is more accurate than FB. I've been informed that this is not her view and have deleted the offending portion of the post.]

A recent DTN column entitled "Farming Under Regulatory Fear: California Farmer's Battle Spotlights Growing Fear of Government Overreach" sounds at first like clickbait, but brings to light a case that makes me think Farm Bureau's claims are more accurate than I first believed. The article is ungated for now, but might be behind a paywall in the near future.

McCloskey on the Coase Theorem

The Coase Theorem is an important part of economics research, agricultural or otherwise. The standard definition of the theorem is that in a world with zero or very low transactions costs, bargaining over a disputed right between two parties will lead to an efficient allocation of resources regardless of which party is legally awarded the property right. (If you are familiar with the Coase Theorem, you can skip the next paragraph.)

A classic example (which is found in Coase's paper "The Problem of Social Cost" is that of the railroad and the farmer. As trains traveled down the track in the 1900s, they emitted sparks that potentially could set fire to farmers' crops. If this were to happen, who should pay for the lost crop? In a world where transactions costs (that is, costs associated with acquiring information, monitoring the other party, or executing the trade) are zero, it doesn't matter who a court decides is responsible. If it's less costly for the railroad to put on a spark-catching device, the farmer will pay the railroad company to do so. If it's less costly for the farmer to plant his crops farther from the railroad, the railroad company will pay the farmer to do so.

Of course, we don't live in a world of zero transactions costs, so it does matter to whom the court grants the property right. Transactions costs also make it difficult for governments to figure out how to solve the problem. If the government decided it wanted to make farmers reduce their planting to solve the problem, there would be significant costs associated with determining just how far to restrict planting away from the tracks. In the opposite case, the government (that is, the taxpayer) would have to incur a cost to determine precisely which device the railroad should use to contain the sparks. These costs don't disappear in the cases of tradeable permits in fisheries or pollution. The government still has to determine the extent and details of these artificial markets.

It seems strange, but Coase himself maintains that the theorem (as described in the first two paragraphs of this post) is not about his work. He says that it's really George Stigler's theorem, but that Stigler was kind enough to name it after him. This is where McCloskey comes in. Her Summer 1998 column in the Eastern Economic Journal makes some bold claims about the Coase Theorem and, I think, provides some interesting insights, which I reproduce below.

Her interpretation is at odds with the way most interpret the Theorem. Her interpretation, which she says is Coase's (and I have reason to believe it is... Coase spent a lot of time arguing against what he called "blackboard economics"), is a caution to people who take the typical form of the theorem as an argument for "markets are always best" or "government solutions are always best."

PERC Weighs in on EPA's WOTUS Rule

Over the past year, I've explored several aspects of EPA regulation (here, here, here, and here). In a blog post last month at the Property and Environment Research Center (PERC), law professor Jonathan Adler discussed the conservation aspect of the EPA's contentious new definition of "waters of the United States" (WOTUS). In the post, he makes some good points about the ways in which an expansion of federal government conservation efforts could affect private or state government conservation.

Adler says that previous court restrictions on EPA's authority were the impetus behind the new definition of "waters of the United States":

The new definition was prompted by the failure of prior agency definitions to withstand judicial review. In 2001, and again in 2006, the U.S. Supreme Court rejected the agencies’ overly expansive notion of their own jurisdiction. Authority to regulate activities touching upon “waters of the United States” is broad, but not infinite, the Court ruled, and must ultimately connect to the nation’s navigable waters. Already multiple suits are pending in federal court challenging the new WOTUS definition for failing to heed this guidance.

He writes that the underlying theory behind the new definition is that conservation can be maximized if and only if federal regulatory authority is maximized. However, Adler claims that there are potential crowding-out effects associated with the new definition. He gives a couple of examples:

Consider the case of wetlands, which are subject to the Clean Water Act under the new WOTUS rule insofar as they are adjacent or otherwise connected to navigable waters and their tributaries. If federal regulation does not cover all wetlands—and it does not—other steps are necessary to maximize wetland conservation. Yet conservation groups and state and local governments cannot know where their efforts are most needed if they do not know where federal regulatory authority ends and the need for additional efforts begins. 

The expansion of federal regulatory jurisdiction also threatens to penalize and discourage conservation efforts more directly. Among other things, the Clean Water Act prohibits the discharge of pollutants, defined to include clean “fill material” such as dirt, in the nation’s waters without a permit, and the WOTUS rule defines waters to include many wetlands. This means that even the most well-intentioned conservationists may need a federal permit to undertake ecological restoration on private land. Why does this matter? Because obtaining such permits can be costly and time-consuming—and failure to comply can bring criminal penalties. And as has been shown in the context of endangered species, excessively punitive regulations can discourage voluntary conservation on private land.

Adler concludes:

There are more than 100 million acres of wetlands in the United States, and approximately three-fourths of these are on private land. This means that insofar as federal regulatory efforts discourage private conservation, they can have significant, unintended consequences. The unrestrained expansion of regulatory jurisdiction may be good for federal agencies, but it’s not always good for conservation.

What's clear is that this new definition, whatever form it takes, will have substantial effects on agriculture and conservation. We don't yet know whether those effects will be positive or negative on net.