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U.S. Supreme Court declines to hear S.D. farmer’s wetlands case

Posted on: January 12th, 2017
by David Ganje

On Monday, Jan. 9, The U. S. Supreme Court denied the Petition of a Miner County South Dakota farm couple who were fighting a USDA wetlands designation. USDA enforces rules in which it declares as “wetlands” farmland that has been converted by a farmer from wetlands to arable working land. When such a federal designation is made the farmer loses his right to participate in USDA programs and benefits. Under USDA maps about two thirds of North Dakota, one half of South Dakota and the western part of Minnesota is covered by prairie potholes and wetlands.

The interest group representing the Miner County farmers had called this so-called swampbuster action by the department of agriculture a “phony wetlands designation.” The group’s advocacy on behalf of the Miner County farmers was however weak. The group did not use any experts in its challenge to the designation and appeared uninformed on the methods used by the USDA to designate the Miner County land as wetlands.

In the government’s brief before the Supreme Court the government pointed out that the petitioners neither cross-examined the USDA witness nor offered a competing definition of a local area to use as a comparison site. The landowners separately argued in their Petition that USDA violated the US Constitution by selecting a comparable wetlands site without giving petitioners notice and an opportunity to be heard. However the landowners had not presented this argument in the lower courts.

The Miner County couple’s challenge was timely because of problems with the USDA wetlands process. Nevertheless the landowner’s argument was not based on a strong set of facts. But because of the continuing problems with USDA rules on wetlands designations several congressman introduced a bill amending the swampbuster law.

This wetlands bill, introduced in June 2016, was not acted upon and has had no hearings in Congress. In addition, the new bill was not actively pushed by its sponsors. The proposed amendments have merit and should be actively supported by agriculture interest groups. The proposed reforms do not prejudice proper environmental stewardship of the land. This bill should have bipartisan support. The bill, although now caught in no-man’s-land because of a lack of interest, would require the USDA to make a decision on a piece of property as either wetlands or not wetlands within 60 days of noticing the landowner. The proposed bill also allows for quicker and easier access to federal courts without going through a lot of bureaucratic hearings. The amendments state that the USDA has the burden of proof on any claim that the property in question is a wetlands. The proposed amendments also give the landowner the right to obtain technical assistance early on in any process in order to timely oppose a claim of wetland delineation.

A closer look at North Dakota’s condemnation law

Posted on: December 27th, 2016
by David Ganje

A closer look at North Dakota’s condemnation law

This is the second of two articles discussing eminent domain law in both South Dakota and North Dakota. This article will address several problems with North Dakota condemnation law.

The use of eminent domain (condemnation) is a modern legal problem. Condemnation is the taking of property for a public or, in some cases, private interest. Condemnation is a legally sanctioned sword. My argument is not that eminent domain as a concept is wrong, but that in its present state as a legal vehicle attempting to provide fairness, eminent domain is in need of repair on both sides. This law allows a governmental body — and a private business — to convert privately owned land to another use, often over the objections of the landowner. Traditionally in a legal taking a landowner receives “market value” for the land taken. This often includes money for reduction in agriculture output or for the loss of other productive use of the land.

Justice Sandra Day O’Connor famously said in her dissent to a private taking condemnation case, “The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.” One local North Dakota government official said it aptly regarding action to condemn property: it is better to look at condemnation through our local eyes rather than through the developers’ egos.

In my opinion, there are four notable problems with current North Dakota law:

1. While eminent domain makes sense under a public utility easement paradigm, how does this process apply when a pipeline easement on a landowner’s property is the “transportation vehicle” for a commodity? How does one calculate “fair market value” when millions of dollars’ worth of product are flowing across privately-held land? President elect Donald Trump said, “I want the Keystone pipeline, but the people of the United States should be given a piece, a significant piece of the profits.” North Dakota law does not take this into consideration. In fact, state law prohibits this. The law states that no benefit from the proposed improvement may be allowed in calculating a landowner’s compensation.

2. A land owner is not allowed to recover reasonable attorney’s fees if he appeals and does not prevail or if he applies for a new trial and does not receive greater compensation than awarded in the first trial. Why should the land owner be penalized for exercising his right to an appeal or to a new trial when the whole process of condemnation is involuntary in the first place? This lawsuit and claim is not “elective surgery” to the landowner. He is forced into the circumstances of condemnation.

3. In a federal condemnation, even if a landowner does not formally answer the condemnation lawsuit, the landowner may still present evidence of the value of his land and may participate in the distribution of awarded monies. North Dakota law does not provide for this.

4. Eminent Domain law is old law — too old. About half of the states still maintain that the property owner has the burden of proving value and proving the amount of compensation; this is ridiculous. Condemnation is not private litigation. It is a special legal right given to the condemnor to take land from another party. But North Dakota law requires that the burden of proof rests with the landowner to prove entitlement to compensation. This is also ridiculous. Rather than placing the burden of proof on the landowner who would often not prefer the forced taking, the law and the legal burden of proof should hold responsible the government or private party trying to take the land.

I am reminded of one of my tutors during my legal internship, who said something very memorable about the law while instructing me: “David, the law is a strange thing to citizens. They don’t pay much attention to it until it affects their property or their daughters.” The North Dakota Supreme Court acknowledges the dilemma in our society concerning the taking of someone else’s property. The Court stated that condemnation is, “Clear in theory but often cloudy in application.” A landowner in a condemnation case is not a party choosing elective surgery. Although the state has made progress in addressing fairness for surface owner’s, equity demands that more work be done.

David Ganje practices law in the area of natural resources, environmental and commercial law.

South Dakota’s Approach To Condemnation

Posted on: December 2nd, 2016
by David Ganje

The use of eminent domain (condemnation) is a modern legal problem. Condemnation is the taking of property for a public and in some cases a private interest. Condemnation is a legally sanctioned sword. My argument in this article is not that eminent domain as a concept is wrong. My argument is that in its present state, as a legal vehicle attempting to provide fairness, eminent domain is a lemon in need of repair on both sides. This law allows a governmental body – and a private business – to convert privately owned land to another use, often over the objections of the landowner. Traditionally in a legal taking a landowner receives “market value” for the land taken. This often includes money for reduction in agriculture output or for the loss of other productive use of the land.

While eminent domain makes sense under a public utility easement paradigm, how does this process apply when a pipeline easement on a landowner’s property is the “transportation vehicle” for a commodity? How does one calculate “fair market value” when millions of dollars’ worth of product are flowing across privately-held land? Candidate Trump said, “I want the Keystone pipeline, but the people of the United States should be given a piece, a significant piece of the profits.” South Dakota law does not take this into consideration. Condemnation of one’s land involves forced negotiation required by law, and sometimes involuntary litigation. Is a one-time payment for an easement fair compensation? Is the condemnor (developer or government agency) required to provide its plan of work and operations to the condemnee (property owner) so the owner can evaluate this information? This would create a fairer playing field in negotiations. South Dakota law does not provide for this. Should the landowner be granted his expenses and attorney’s fees in a trial and for an appeal if the final award given is greater than the last ‘offer’ made by the condemnor? Or if a mistrial is called which is not the fault of the landowner? South Dakota law does not provide for this. Is the condemnor required to provide written disclosure of its calculations and basis for a proposed offer for the property? South Dakota law does not provide for this. In a federal condemnation, even if a landowner does not formally answer the condemnation lawsuit the landowner may still present evidence of the value of his land and may participate in the distribution of awarded monies. South Dakota law does not provide for this.

The law of condemnation brings out a curious inconsistency in the character of the state. South Dakota is a strong property-rights and individual-rights state. Aside from the important and unique relationships of Indian reservations to the state and to the federal government, private property in South Dakota is a hallowed right. State laws are vigilant in protecting one’s real estate and other property from intrusion, reduction in value as well as protecting the right to use the property for any lawful purposes. The state Constitution, like the federal, directs that, “Private property shall not be taken for public use, or damaged, without just compensation. . .”

Thus we get to my puzzlement. South Dakota has done very little to modernize eminent domain laws. This is not a case of the emperor having no clothes. This is a case of the emperor having no vision. The takeaway is that state leaders have no appetite for changing the status quo.

In modern vernacular ‘trending’ means that which is currently popular in social media, however in common English it means that which is changing or developing in a certain direction. The word ‘trending’ applies to the painfully slow but observable changes in the law of eminent domain. Unfortunately these changes are not coming from South Dakota political leaders. The state’s recent passage of a voluntary mediation statute for condemnation cases does nothing to address the substantive changes needed.A national trend has started toward balancing the sacrifices a property owner makes when business or government does its eminent domain dance. Courts, and over time other state legislatures, will continue to correct the ills of eminent domain when it is used as a legal sword. South Dakota must cultivate a fairer system for the taking of property.

Brownfields: A Calculated Risk Missed by Tribes and South Dakota

Posted on: December 2nd, 2016
by David Ganje

The EPA defines a brownfield as “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) mandated that the purchasers of property are liable for any contamination on this property regardless of when they acquired a site. However, CERCLA also created a defense known as the “innocent landowner defense” that can only be used if “appropriate due diligence” was conducted prior to the acquisition of the property. Appropriate due diligence has been exercised if an environmental site assessment (ESA), a thorough investigation of a site’s current and previous owners, has been prepared.

ESA’s have an average cost of about $4,000 for a small business acquisition and can vary depending on variety of factors specific to the job. The typical businesses that leave behind brownfields include gas stations, dry cleaners, railroads, oil refineries, liquid / chemical storage facilities, and steel / heavy manufacturing plants. Typical hazardous materials they leave behind include hydrocarbons, solvents, pesticides, heavy metals such as lead, and asbestos.

What is so dangerous about leaving these brownfields alone? Many of these brownfields are abandoned commercial properties and tend to be an eyesore in the community. Not only can this lead to decreased property values in surrounding neighborhoods, but the property can also pose serious health risks for new tenants and their neighbors.

Once a brownfield has been identified, the EPA provides two options for cleanup, revolving loan fund grants and cleanup grants. The purpose of revolving loan fund grants is to enable states, political subdivisions, and Native American tribes to make low interest loans to carryout cleanup activities at brownfields properties. Cleanup grants provide funding for a grant recipient to carry out cleanup activities at brownfields sites.

Since the cost of cleanup is considerable, the grants may provide several hundred thousand dollars towards the cost of cleanup. This money comes with strings attached, of course. Among other things, the costs are shared with the property owner, by at least 20 percent, and the brownfield site must be cleaned up within a three-year period.

Entities eligible for the EPA’s brownfield grants and loans include state, local and tribal governments; general purpose units of local government, land clearance authorities or other quasi-governmental entities; regional council or redevelopment agencies; states or legislatures; or nonprofit organizations. If you are not an eligible entity, you may still be able to receive assistance through your state or city.

In South Dakota, the agency that provides statewide brownfield assistance is the Department of Environment & Natural Resources (DENR). DENR receives funding from the EPA for assessments and cleanup and have discretion in how to allocate those funds. For example, a national hotel chain looking to redevelop a brownfield site in South Dakota would not be eligible to apply for assistance through the EPA directly. However, the hotel chain could contact DENR for assistance and DENR could use their funds to perform an ESA or help with the cleanup.

In 2015, Sioux Falls received an assessment grant for $400,000 from the EPA. In addition to performing site assessments, they plan to use the money to update the city’s brownfields site inventory, prioritize sites, plan for cleanups at priority sites, and perform community outreach activities. They, like DENR, also have discretion in performing assessments and have made assessments available to entities who would not be eligible to apply for grants from the EPA.

With these options available to assist with brownfield redevelopment, why do so many brownfields remain untouched in South Dakota? In the last 5 years the EPA only awarded four grants in South Dakota. They gave an assessment grant to Sioux Falls and cleanup grants to Standing Rock Sioux Tribe, Cheyenne River Sioux Tribe, and Lower Brule Sioux Tribe. This suggests that other entities are not aware of the grants available to them, they are dissuaded from applying, or they do not have the structure to run a brownfields program.

Since South Dakota is not small Rhode Island, which is about the size of Brown County, businesses and other eligible entities find it is more economical to buy available land than it is to redevelop a brownfield site. This misses the mark. A brownfield site is many times in an attractive location. A brownfield site is often close to business activity and transportation or the prior owner would not have developed it.

Although the grants and other forms of assistance are “competitive,” grants are awarded based on guidelines. The deadlines for applying for assessment and cleanup grants from the EPA is December 20, 2016, so it’s not too late.

View the original article at FarmForum.net

South Dakota wetlands case before the US Supreme Court

Posted on: October 28th, 2016
by David Ganje

Congress passed the Food Security Act of 1985. Under the Swampbuster provisions of this Act the USDA may make determinations as to whether certain lands qualify as wetlands and whether wetlands which have been manipulated qualify as converted wetlands. The Act passed during the Reagan Administration was written to oppose the conversion of wetlands into cropland. The Eight Circuit Court of Appeals has previously ruled that a person found to have converted wetlands into cropland may become ineligible to receive farm program payments from the federal government. Some of these wetlands are what I call cattail swamps. I spent part of my youth hunting in them.

Faced several years ago with a wetlands designation for part of their land, South Dakota farmers Arlen and Cindy Foster challenged the USDA’s decision that certain of Foster’s acreage was a wetlands. These bureaucratic proceedings took over five years. The USDA based its decision, in part, on a comparable wetlands site some 30 miles away from the Foster’s property in Miner County. Wetland regions in the U.S. include the Prairie Potholes of both North and South Dakota as well as other states.

When the Foster case was later ruled upon by the U.S. District Court for South Dakota, the Fosters were unable to provide the court with substantial evidence that the USDA wetlands decision-making process was wrong. The District Court said that “Plaintiffs (the Fosters) have not shown, beyond a bare assertion, that the range of rainfall shared by both locations or the differences in the depth of the potholes renders the ( USDA comparison) site insufficiently “local.”” The trial judge also stated that the Fosters did not challenge the USDA expert testimony about rainfall averages on the land. The Fosters then appealed this decision to the Eighth Circuit Court of Appeals. The Court of Appeals in its decision upheld the District Court and ruled that the original USDA agency decision was a reasonable interpretation of USDA regulations and that courts should give deference to the “informed discretion of responsible federal agencies.”

The Fosters have now filed a Petition to have the case heard by the United States Supreme Court. Unfortunately for the Fosters, weak facts make bad law. The Foster case, in my view, will not be accepted by the U.S. Supreme Court. Although the Foster Petition to the Supreme Court presents important arguments about agency authority to make decisions and about a court’s deference to an agency decision, the Court will also look at the underlying facts of the case before it. The facts of the Foster case are not strong. Because the Supreme Court may not hear the case, however, this does not mean that the issues raised by the Fosters are without grounds. Overreaching by the USDA in Swampbuster and wetlands decision and rulemaking is a genuine issue. Proposed legislation filed this year in Congress is intended to address some of these challenges. The sponsors of the filed bill argue that the new law would ensure more timely decisions by the USDA; would make the appeals process more efficient for a landowner/farmer and would improve government transparency in providing information to landowners and farmers affected by the Swampbuster process. The intention behind the current Swampbuster law has merit, but I am reminded of what my father said about raising me. “David, my intentions with you were good. It is the outcome that is questionable.”

David Ganje practices law in the area of natural resources, environmental and commercial law.