Another DFO Dairy Quota Transfer Assessment Appeal dismissed

Ferme Benoit Lachaine Inc. (FBL) sold its entire milk production quota in six separate transactions.  Under the 15% quota transfer assessment policy of the DFO, FBL did not receive $367,055.21 from those six quota transactions.  An appeal to the DFO was unsuccessful and so FBL appealed to the Agriculture, Food and Rural Affairs Tribunal.  The Tribunal decided the case on the following basis:

While we are not bound by the several previous Tribunal exemption decisions, we feel it appropriate to list the factual differences between the FBL circumstances and those previous cases:

Benoit Lachaine continues as an active farmer

Benoit Lachaine was not killed in an accidentenoit Lachaine did not suffer a catastrophic injury that ended his farming career

Benoit Lachaine does not have a terminal disease

Benoit Lachaine did not have a plan to exit the industry interrupted by the November 2006 policy

A significant part of FBL's case was based on financial hardship. Without deciding that financial hardship could be the basis for an exemption, we find no evidence of financial hardship.

Based on all the evidence we find that FBL has not satisfied us that there is anything sufficiently "special" about Benoit Lachaine's foot condition to warrant an exemption from the 15 percent quota transfer assessment.

Read the decision at: Ferme Benoit Lachaine vs Dairy Farmers of Ontario (DFO)

Creditors and CAIS payments

Government contributions under the former Canadian Agricultural Income Stabilization Program (CAIS) are not assignable to another party by agreement.  For that reason, a farmer entitled to payments under the program could not grant a security interest in a CAIS payment.  However, in PEI at least, it was standard practice where a farmer was indebted and wished to make use of his or her interest in a CAIS account to provide a Letter of Direction by which the government agency involved would forward to a creditor the funds otherwise payable to the farmer.

The Court of Appeal in PEI recently decided a case between two competing creditors looking to lay claim to CAIS payments owing to a potato farming corporation called Rural Realty.  A PEI Crown Corporation called P.E.I. Lending Agency loaned money to Rural Realty and, as a condition of the loan, required Rural Realty to execute a Letter of Direction requiring the proceeds of CAIS to be sent to it directly.  In 2004, Rural Realty owed its creditors over $2 million.  It was decided, however, that it was in the best interests of the Lending Agency and a crop input supplier called McCain Produce (also a creditor) that a crop be planted that year.  The three parties, the creditors and Rural Realty, entered into an agreement whereby the Lending Agency agreed, among other things, "that McCain shall rank in priority to the Lending Agency with respect to one-half (50%) of all receivables/proceeds generated by the 2004 potato crop". 

The question on appeal was whether the CAIS payment to be made to Rural Realty, which was to be directed to the Lending Agency, constituted a "receivable" or "proceeds" of the 2004 potato crop.  On application to a lower court, McCain had been successful in obtaining a 50% interest in the CAIS payment.  The Lending Agency appealed the decision to the Court of Appeal.  The 2004 CAIS payment to Rural Realty was $690,000.  Therefore, $345,000 was at stake in the appeal.

The judge hearing the original application decided that the CAIS payment did constitute proceeds of the 2004 crop because, but for the planting of the crop, no payment would have been made under CAIS.  However, the Court of Appeal did not agree that this relationship between the crop and the CAIS payment meant that the CAIS funds were proceeds of the crop.  The CAIS funds were not traceable to the proceeds of the sale of the potato crop, and were based on a formula for calculating income over a period of time. 

Also, the Court of Appeal found that the parties involved, the Lending Agency and McCain Produce, were sophisticated business entities and, if they had intended to split the CAIS proceeds, they would have done so explicitly in the agreement with Rural Realty.

For these reasons, the Court of Appeal allowed the appeal, giving the Lending Agency the full $690,000 CAIS payment.

Read the decision at: PEI Lending Agency v. McCain Produce Inc.

NEB Approves NOVA Groundbirch Pipeline Project

The National Energy Board has released its Reasons for Decision in GH-1-2009 approving NOVA Gas Transmission Ltd.'s application for the Groundbirch Pipeline Project that will run between Alberta and British Columbia, just north of Dawson Creek.  Of note to landowners in the decision, the NEB ruled:

• "With regard to depth of cover, the Board notes that the proposed design meets or exceeds CSA Z662-07 requirements, which, in the Board's view is sufficient to accommodate ordinary agricultural practices."  The CSA standard for depth of cover is 2 feet.  The Board provided no explanation of its use of the term "ordinary agricultural practices";
• With respect to pipeline abandonment, the Board says that it "has committed to address issues related to abandonment through its Land Matters Consultation Initiative", and required no commitments on the part of NOVA;
• The Board is allowing NOVA to implement Alternative Integrity Validation (AIV) to check the integrity of the pipeline before it is placed into operation and then to apply for a partial exemption from hydrostatic testing requirements (where water is pumped through the pipe).  It is not yet, therefore, allowing full use of AIV as requested by the company;
• The South Peace Landowners Association (SPLA) raised concerns with the Board over NOVA's use of a confidentiality agreement in its consultation with landowners.  NOVA was requiring landowners to enter into a confidentiality agreement before presenting certain offers to them.  In its decision, the Board makes no ruling about the appropriateness of the confidentiality requirement, other than to say that it finds that "the impact of the Confidentiality Agreement on certain landowners and their representatives has, in part, frustrated" the objectives of NOVA's consultation program;
• In its discussion of land matters, the Board acknowledged SPLA's concerns about the confidentiality requirement and the conduct of land agents for NOVA, but impose any changes in NOVA's practices.  The Board encouraged NOVA to instruct its land agents on appropriate conduct.

Read the decision at: NEB Reasons for Decision GH-1-2009

Source water protection plans and agriculture

Better Farming asked Ontario Cattleman's Association water quality specialist Chris Attema about new source water protection reports being completed.  Seven reports from 36 zones have been completed and released, and Attema suggests that agricultural drainage is being treated much differently than urban drainage.  Read the article at: Better Farming - "Water Protection Plans will hammer agriculture warns expert"

Under the Clean Water Act, 2006, the provincial government and municipal governments have extensive powers to develop and implement programs aimed at protecting the sources of drinking water.  Through the implementation of source water protection plans (based on the reports that are released for each zone), agricultural activity may be restricted and/or made more expensive.  The Act gives the government the ability to restrict land use and to inspect premises without landowner consent or a warrant. 

The Clean Water Act, 2006 also expressly provides that there will be no compensation or damages and no remedy for basically anything done under the Act.  While lands can be expropriated for the purposes of source water protection according to the Expropriations Act (which requires that compensation be paid), nothing else that is done under the Clean Water Act, 2006 can constitute expropriation or injurious affection.  In other words, there is no compensation for the imposition of land use restrictions and additional costs for landowners.  Unless the land is actually taken, the best a landowner can hope for is funding for necessary changes through a related government program.

For more information on the Clean Water Act, 2006, vist the Ontario Ministry of the Environment webpage.

Agriculture, Food and Rural Affairs Tribunal speaks out on exemptions from dairy quota transfer assessment

Lucien and Murielle Martel operated a dairy herd of about 60 cows until April 2008.  At that time they sold their entire milk production quota of 66.17 kgs. at a price of $31,505.00 per kg.  Under the Dairy Farmers of Ontario (DFO) 2006 regulatory policy, the sale was subject to a 19.06 percent transfer assessment.  In this case, the assessment to be paid to DFO was more than $337,000. 

The Martels requested an exemption from the transfer assessment because they asserted that they were forced to sell the quota because of Lucien's back condition.  He alleged that he could no longer do the job of a dairy farmer and was told that his back condition would not improve. 

After the DFO rejected the request for an exemption, the Martels appealed to the Agriculture, Food and Rural Affairs Tribunal.  At the hearing, the DFO confirmed that it has received about 80 exemption requests since the transfer assessment was introduced in November, 2006.  Of those requests, DFO has granted 4 exemptions, and one other exemption was given as a result of negotiations during an appeal.  I have also already posted this year at least 2 decisions of the Tribunal granting full or partial exemptions where the exemptions had been refused by the DFO.

In this case, the Tribunal found it important that Lucien Martel continued to carry out cash cropping activities on his farm.  On that basis alone, the Tribunal decided, the exemption request must be denied.  In dismissing the appeal, the Tribunal provided some guidance to the DFO on what circumstances might engage the "special consideration" exemption from the transfer assessment:

• death of the primary dairy operator;
• catastrophic accident ending the farming career of the primary dairy operator;
• fatal disease of the primary dairy operator;
• ongoing plan to exit the dairy industry interrupted by the November 2006 policy;
• undue hardship;
• other compassionate grounds

Overall, there must be something unique or extraordinary to warrant an exemption from the policy.

Read the Tribunal's decision at: Ferme Martel Inc. v. Dairy Farmers of Ontario

Suit seeks to bar genetically modified sugar beets

Suit seeks to bar genetically modified sugar beets - Winnipeg Free Press

The Winnipeg Free Press is reporting on a lawsuit in the U.S. by organic farmers hoping to halt the planting this spring of genetically modified sugar beets.  After only two years of use, the Roundup Ready beets already comprise 95% of beets being planted.  The organic farmers are concerned about cross-pollination.

The article also refers to a successful 2007 U.S. lawsuit over Roundup Ready alfalfa.  Monsanto is appealing the decision in that case to the U.S. Supreme Court, but a date for hearing has not been set.  Tom Lutey of the Billings Gazette in Montana is reporting that Supreme Court Justice Stephen Breyer has recused himself from (taken himself out of) the case because his brother heard the alfalfa case in a lower court.  Supreme Court Justice Clarence Thomas, who was a former staff attorney in Monsanto's herbicide division, is not recusing himself.

The Alberta Government's take on the no annual compensation decision

Court Decision Regarding Annual Compensation for Pipelines in Alberta

Click on the link above to read the report posted by Alberta's Department of Agriculture and Rural Development about last week's Court of Queen's Bench decision on annual compensation for pipeline landowners. The government's take on the decision:

What does this all mean?  Bottom line is that the arguments for annual compensation, were not supported at the court level.  This means that while landowners may continue to negotiate for annual compensation, there is now a greater requirement for cogent evidence to depart from the pattern.  Landowners continue to have a right to bring other arguments to regulatory proceedings and they may continue to pursue policy or legislative change if they wish.

What do farmers think of this response?

Pipeline clean up tax in South Dakota being opposed by TransCanada

Noel Griese of the Energy Pipeline News is reporting on a move by South Dakota to charge an environmental clean up tax on pipelines carrying oil.  The tax rate would be 2 cents per barrel for pipelines carrying more than 10,000 barrels per day.  The money collected would go into a fund to cover costs of cleaning up oil releases, but the fund would be capped at $30 million. 

TransCanada Pipelines Limited, which plans to build the Keystone XL oil pipeline through South Dakota, opposes the tax.  TransCanada suggests it will lose an estimated $38 million in tax incentives.  Wayne Ortman of The Oklahoman reports that Dennis Duncan, a lobbyist for TransCanada, says that the company would be paying $20 million in property taxes annually on the pipeline and that the new tax bill could damage South Dakota's pro-business and tax friendly image.

Read the articles at the following links:
Noel Griese Article at Energy Pipeline News
Wayne Ortman article at NewsOK