The Ag Law Roundup

It’s time to round up a sampling of legal questions we’ve received the past month or so.  The questions effectively illustrate the breadth of “agricultural law,” and we’re happy to help Ohioans understand its many parts.  Here’s a look at what has come our way:

I’m considering a carbon credit agreement.  What should I look for?   Several types of carbon credit agreements are now available to Ohio farmers, and they differ from one another so it’s good to review them closely and with the assistance of an attorney and an agronomist.  For starters, take time to understand the terminology, make sure you can meet the initial eligibility criteria, review payment and penalty terms, know what types of practices are acceptable, determine “additionality” requirements for creating completing new carbon reductions, know the required length of participation and how long the carbon reductions must remain in place, understand how carbon reductions will be verified and certified, be aware of data ownership rights, and review legal remedy provisions.  That’s a lot!  Read more about each of these recommendations in our blog post on “Considering Carbon Farming?”

I want to replace an old line fence.  Can I remove trees along the fence when I build the new fence?   No, unless they are completely on your side of the boundary line.  Both you and your neighbor co-own the boundary trees, so you’ll need the neighbor’s permission to remove them.  You could be liable to the neighbor for the value of the trees if you remove them without the neighbor’s approval, and Ohio law allows triple that value if you remove them against the neighbor’s wishes or recklessly harm the trees in the process of building the fence.  You can, however, trim back the neighbor’s tree branches to the property line as long as you don’t harm the tree.  Also, Ohio’s line fence law in ORC 971.08 allows you to access up to 10 feet of the neighbor’s property to build the fence, although you can be liable if you damage the property in doing so.

I want to sell grow annuals and sell the cut flowers.  Do I need a nursery license?  No.  Ohio’s nursery dealer license requirement applies to those who sell or distribute “nursery stock,” which the law defines as any “hardy” tree, shrub, plant, bulb, cutting, graft, or bud, excluding turf grass.  A “hardy” plant is one that is capable of surviving winter temperatures. Note that the definition of nursery stock also includes some non-hardy plants sold out of the state.  Because annual flowers and cuttings from those flowers don’t fall into the definition of “nursery stock,” a seller need not obtain the nursery dealer license.

Must I collect sales tax on cut flowers that I sell?  Yes.  In agriculture, we’re accustomed to many items being exempt from Ohio’s sales tax.  That’s not the case when selling flowers and plants directly to customers, which is a retail sale that is subject to the sales tax.  The seller must obtain a vendor’s license from the Ohio Department of Taxation, then collect and submit the taxes regularly.  Read more about vendor’s licenses and sales taxes in our law bulletin at this link.

I’m an absentee landowner who rents my farmland to a tenant operator.  Should I have liability insurance on the land?  Yes.  A general liability policy with a farm insurer should be affordable and worth the liability risk reduction.  But a few other steps can further minimize risk.  Require your tenant operator to have liability insurance that adequately covers the tenant’s operations, and include indemnification provisions in your farm lease that shift liability to the tenant during the lease period.  Also consider requiring your tenant or hiring someone to do routine property inspections, monitor trespass issues, and ensure that the property is in a safe condition. 

My neighbor and I both own up to the shoreline on either side of a small lake–do I have the right to use the whole lake?  It depends on where the property lines lay and whether the lake is connected to other waters. If the lake is completely surrounded by private property and not connected to other “navigable” waters, such as a stream that feeds into it, the lake is most likely a private water body.  Both of you could limit access to your side of the property line as it runs through the lake.  You also have the legal right to make a “reasonable use” of the water in the lake from your land, referred to as “riparian rights.”  You could withdraw it to water your livestock, for example; but you cannot “unreasonably” interfere with your neighbor’s right to reasonably use the water.   The law changes if the lake is part of a “navigable” waterway.  It is then a “water of the state” that is subject to the public right of navigation.  Others could float on and otherwise navigate the water, and you could navigate over to your neighbor’s side.  Public users would not have the riparian rights that would allow them to withdraw and use the water, however, and would be trespassing if they go onto the private land along the shore.

If I start an agritourism activity on my farm, will I lose my CAUV status?  No, not if your activities fit within the legal definition of “agritourism.”  Ohio law states in ORC 5713.30(A)(5) that “agritourism” activities do not disqualify a parcel from Ohio’s Current Agricultural Use Valuation (CAUV) program. “Agritourism,” according to the definition in ORC 901.80, is any agriculturally related educational, entertainment, historical, cultural, or recreational activity on a “farm” that allows or invites members of the general public to observe, participate in, or enjoy that activity.  The definition of a “farm” is the same as the CAUV eligibility—a parcel devoted to commercial agricultural production that is either 10 acres or more or, if under 10 acres, grosses $2500 annually from agricultural production.  This means that land that is enrolled in the CAUV program qualifies as a “farm” and can add agritourism activities without becoming ineligible for CAUV.

Send your questions to aglaw@osu.edu and we’ll do our best to provide an answer.  Also be sure to check out our law bulletins and the Ag Law Library on https://farmoffice.osu.edu, which explain many of Ohio’s vast assortment of agricultural laws.

Carbon as a commodity for agriculture?

There’s a lot of talk about carbon markets and agriculture these days.  While carbon markets aren’t new, recent proposals in Congress and announcements by the Biden administration are raising new interests in them.  Some companies are actively pursuing carbon trading agreements with farmers, further fueling the discussion in the agricultural community. 

As is common for any new opportunity, the talk on carbon markets may be tinged with a bit of skepticism and a lot of questions.  Do carbon sequestration practices have real potential as an agricultural commodity?  That’s a tough question and the answer isn’t yet clear.  There are answers for other questions, though, as well as resources that may be helpful for those considering carbon markets for the first time.  Here’s a sampling.

What is a carbon market?   A carbon market revolves around carbon credits generated by carbon reduction practices.  In the farm setting, a producer who either lowers the farm’s carbon emissions or captures carbon through “sequestration” practices can earn carbon credits.  Like other markets, a carbon market involves a transaction between a seller and a buyer.  The seller sells a carbon credit to a buyer who can use the carbon credit to offset or reduce its carbon emissions.

Do carbon markets already exist?  Yes, although they may be private markets with varying names occurring in different regions.  For example, Bayer Crop Sciences began its Carbon Initiative last year, paying producers for adopting carbon reduction practices that will help Bayer reach its goal of reducing its greenhouse gas emissions by 30% in 2030.  Indigo Ag began entering into long-term carbon agreements with producers in 2019, paying $15 per ton for carbon sequestration practices.  Food companies and agribusinesses including McDonald’s, Cargill, and General Mills formed the Ecosystem Services Market Consortium, which will fully open its private carbon market in 2022.

Are legal agreements involved?  Yes.  Using a written agreement is a common practice in carbon market transactions, but the agreements can vary from market to market.  Provisions might address acceptable practices, calculating and verifying carbon reductions including third-party verification, sharing data and records, pricing, costs of practices, minimum acreage, and contract period.  As with other legal contracts, reviewing a carbon agreement with an attorney is a wise decision.  Watch for more details about carbon agreements as we share our analysis of them in future blog posts.

What is President Biden considering for carbon markets?  The Biden administration has expressed interest in developing a federal carbon bank that would pay producers and foresters for carbon reduction practices.  The USDA would administer the bank with funding from the Commodity Credit Corporation.  Rumors are that the bank would begin with at least $1 billion to purchase carbon credits from producers for $20 per ton.  The proposal is one of several ideas for the USDA outlined in the administration’s Climate 21 Project.

What is Congress proposing for carbon markets?  The bipartisan Growing Climate Solutions Act would require USDA to assess the market for carbon credits, establish a third-party verifier certification program overseen by an advisory council, establish an online website with information for producers, and regularly report to Congress on market performance, challenges for producers, and barriers to market entry.  An initial $4.1 million program allocation would be supplemented with $1 million per year for the next five years.  The Senate Agriculture, Nutrition and Forestry Committee has already passed the bill.  The Rural Forest Markets Act, also a bipartisan bill, would help small-scale private forest landowners by guaranteeing financing for markets for forest carbon reduction practices.

Is there opposition to carbon markets?  Yes, and skepticism also.  For example, a recent letter from dozens of organizations urged Congress to “oppose carbon offset scams like the Growing Climate Solutions Act” and argued that agricultural offsets are ineffective, incompatible with sustainable agriculture, may further consolidate agriculture and will increase hazardous pollution, especially in environmental justice communities.  The Institute for Agriculture & Trade Policy also criticizes carbon markets, claiming that emission credit prices are too low and volatile, leakages and offsets can lead to accountability and fraud issues, measurement tools are inadequate, soil carbon storage is impermanent, and the markets undermine more effective and holistic practices.  Almost half of the farmers in the 2020 Iowa Farm and Rural Life Poll were uncertain about earning money for carbon credits while 17% said carbon markets should not be developed.

To learn more about carbon markets, drop into an upcoming webinar by our partner, the National Agricultural Law Center.  “Considering Carbon:  The Evolution and Operation of Carbon Markets” on May 19, 2021 at Noon will feature Chandler Van Voorhis, a leading expert in conservation and ecological markets.  The Center also has a recording of last month’s webinar on “Opportunities and Challenges Agriculture Faces in the Climate Debate,” featuring Andrew Walmsley, Director of Congressional Relations and Shelby Swain Myers, Economist, both with American Farm Bureau.  A new series by the Center on Considering Carbon will focus on legal issues with the carbon industry and will complement our upcoming project on “The Conservation Movement:  Legal Needs for Farm and Forest Landowners.”  There’s still much more talking to do on the carbon markets topics.