Scope Statements
Agriculture, Trade and Consumer Protection
In accordance with
2011 Wisconsin Act 21, (Sec 227.135(2)) this scope statement was approved by the Governor on July 14, 2011 before DATCP took any action in proceeding with this proposed rule including submission of this scope statement for publication.
The Department of Agriculture, Trade and Consumer Protection (DATCP) gives notice, pursuant to s.
227.135, Stats., that it proposes to modify Chapter
99 of the administrative code as follows:
Subject
Grain dealer and grain warehouse keeper agricultural producer security assessments.
Objective of the Rule
Create a cap on the amount of annual agricultural producer security assessments that must be paid by grain dealers and grain warehouse keepers.
Policy Analysis
Chapter
126 of the Wisconsin Statutes governs the Agricultural Producer Security Program. This program is designed to limit losses to producers in the event of a default by a grain dealer, grain warehouse keeper, vegetable contractor, or a milk contractor. It contains a number of provisions that are designed to reduce the risk that a default may occur. If a default does occur, however, producers who suffer losses may be able to make a claim against the Agricultural Producer Security Fund (“Fund") to cover a portion of those losses.
The program is funded by license fees and assessments paid by licensees. Generally, license fees are calculated based on volume (i.e. the more bushels of grain that a grain dealer purchases or that a grain warehouse keeper stores, the higher the fees). However, assessments are calculated using a formula that, in part, is based on default risk. The formula takes each licensee's financial ratios into account to calculate its assessment. In a sense, the concept is similar to purchasing an insurance policy: the higher the risk of the insured, the higher the premium. All else being equal, a grain dealer or grain warehouse keeper that controls its use of debt or maintains equity in the company will pay a lower assessment than one that is highly leveraged or lacks liquidity.
The new license year for grain dealers and grain warehouse keepers begins on September 1, 2011. Based on the most recently filed financial statements, there is at least one grain elevator that is both a licensed grain dealer and a licensed grain warehouse keeper which will have abnormally high assessments. In various times throughout the program's existence, very large contractors in all regulated industries have occasionally incurred six-digit annual assessments. However, it appears that this year there one licensee's annual assessment will exceed one million dollars. This assessment would more than four times higher than any annual assessment in the history of the grain security program.
Demanding an assessment of this amount jeopardizes the future existence of the grain elevator, creates a significant risk of harm to the welfare of the many hundreds of grain farmers who do business with this grain elevator, and may result in major disruptions in the grain industry.
Statutory Authority
Comparison with Federal Regulations
The USDA, through the Farm Service Agency (FSA), administers the United States Warehouse Act. This is a voluntary regulatory program. Generally, a warehouse keeper must maintain enough grain in inventory to cover 100% of depositor obligations at all times. Further, FSA licensed warehouse keepers must submit financial statements, submit to inspections by USDA auditors, and post surety bonds. In the event the warehouse defaults, FSA can convert the bonds to cash and disperse the proceeds to depositors.
While the federal grain warehouse license is officially a voluntary program, in practice, it is not completely voluntary. Every state that has significant grain production (including Wisconsin) has some type of state grain warehousing law. These laws require grain warehouse keepers to obtain a license, but the grain warehouse keeper is allowed to choose whether they would prefer a state license or a federal license.
There are no federal regulations that relate to grain dealing (buying and selling grain). The U.S. Warehouse Act described above only regulates storing grain that belongs to others.
Policy Alternatives
•
No Change. If DATCP takes no action, current rules will remain in effect.
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Presently, DATCP is contemplating a temporary emergency rule that would institute an upper cap on annual assessment amounts. However, should it become apparent that it would be good policy to pursue assessment limits in a permanent rule, there are additional alternatives.
Entities Affected by the Rule
The State of Wisconsin licenses about 280 grain dealers and about 105 grain warehouse keepers. Almost all of the grain warehouse keepers also maintain a dealer license. However, this proposed rule will likely only directly affect the assessments of one large business that maintains both a state grain warehouse license and a grain dealer license.
Statutory Alternatives
None at this time.
Estimate of Time Needed to Develop the Rule
DATCP estimates that it will use approximately 0.3 FTE staff to develop this rule. This includes investigation, drafting, preparing related documents, coordinating advisory committee meetings, holding public hearings and communicating with affected persons and groups. DATCP will use existing staff to develop this rule.
DATCP Board Authorization
The Board of Agriculture, Trade and Consumer Protection (Board) shall approve this scope statement before DATCP may begin drafting the emergency rule. The Board may not approve this scope statement until 10 days after it is published in the Wisconsin Administrative Register, and DATCP may not publish the scope statement until it has the written approval of the governor.
If the Board takes no action on the scope statement within 30 days after the scope statement is presented to the Board, the scope statement is considered approved.
Agriculture, Trade and Consumer Protection
In accordance with
2011 Wisconsin Act 21, (Sec 227.135(2)) this scope statement was approved by the Governor on July 14, 2011 before DATCP took any action in proceeding with this proposed rule including submission of this scope statement for publication.
The Department of Agriculture, Trade and Consumer Protection (DATCP) gives notice, pursuant to s.
227.135, Stats., that it proposes to revise Chapter
50 of the administrative code.
Subject
Soil and Water Resource Management.
Statutory Authority
Background
By statute, sec. 281.16 Stats., DATCP must develop rules to implement Department of Natural Resources (DNR) farm runoff standards, also known as the agricultural performance standards adopted in NR 151, Wis. Adm. Code (NR 151). Through ch.
ATCP 50, Wis. Adm. Code (ATCP 50), DATCP carries out these responsibilities. ATCP 50 ensures that implementation of the farm runoff standards is contingent on cost-share requirements (see s.
ATCP 50.08). It also addresses the following components needed for implementation:
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Farm conservation standards and practices, with a focus on nutrient management (Subchapter II).
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The framework for statewide soil and water resource management, and the mechanism for distribution of department grant funds to counties including cost-sharing. (Subchapters III and IV).
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Cost-share procedures and rates that apply to department funds used for landowner cost-sharing (Subchapter V).
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Standards for conservation professionals to ensure proper installation of farm and other practices (Subchapter VI).
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Requirements for local regulation including manure storage ordinances (Subchapter VII).
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Technical and other standards for practices cost-shared with state funds (Subchapter VIII).
DNR revised NR 151 in January 2011 to add and modify the performance standards that address runoff from farms. The new standards include:
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A setback area between cropland and waterbodies within which tillage is prohibited for the purpose of maintaining stream bank integrity and avoiding soil deposits into state waters.
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A new annual and rotational limit on the amount of phosphorus that may run off cropland and pasture, as measured by a phosphorus index.
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A prohibition against significant discharge of process wastewater from milk houses, feedlots, and other similar sources.
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A requirement that crop and livestock producers reduce discharges if necessary to meet a load allocation specified in an approved Total Maximum Daily Load (TMDL) by implementing targeted performance standards specified for the TMDL area using best management practices and farm conservation practices in ATCP 50.
The modified farm performance standards are as follows:
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Extension of the sheet, rill and wind erosion standard to pastures starting July 1, 2012.
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Clarification that the nutrient management standard does not cover applications of industrial waste, municipal sludge or septage regulated under other DNR programs provided the material is not commingled with manure prior to application, (with an explanation in a note about the relationship of these applications to farm nutrient management planning).
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Manure storage standards for existing and new facilities are modified to include a margin of safety requirement, and redefine responsibilities for closure.
