In-Forum, ND
01-26-07
The law of the land
By Jonathan Knutson
A court ruling overturning Nebraska’s anti-corporate farming law renews
questions about the constitutionality – and wisdom – of North Dakota’s similar
law.
There’s longstanding debate over whether the statute – approved 75 years ago
by North Dakota voters – helps or hurts the state’s 30,300 farms.
Opponents say the law limits farmers’ access to capital and reduces their
efficiency.
Supporters say it blocks unfair competition from big, out-of-state corporations.
They say it also allows North Dakota family farms to incorporate, which helps in
estate planning and provides liability protection.
The state has 786 incorporated and limited liability company family farms, up
from 590 in 1996, according to the state auditor’s office.
The North Dakota Attorney General’s Office, which enforces the law, is confident
the statute is on solid ground.
Some legal experts think otherwise.
“It’s obvious the law wouldn’t stand up” to a serious legal challenge, said Lowell
Bottrell, who practices agricultural law with Fargo’s Anderson Bottrell law firm.
Regardless of what courts say, North Dakota’s family farms are changing
already, with traditional farms giving way to bigger and smaller ones.
Nixed in Nebraska
Last month, the 8th U.S. Circuit Court of Appeals ruled that a 1982 ban on
corporate farming in Nebraska is unconstitutional.
The ruling is particularly noteworthy because North Dakota is among the six
states in the 8th Circuit.
The federal appeals court upheld a lower court ruling, which was appealed by the
Nebraska attorney general.
The appeals court ruled the Nebraska law, commonly known as Initiative 300,
violated the “dormant commerce clause” in the U.S. Constitution.
The clause limits the right of states to legislate in connection with interstate
commerce.
The Nebraska attorney general plans to appeal to the U.S. Supreme Court.
Nebraska can’t enforce its ban on corporate farming while awaiting a review of
the decision, a U.S. district court judge ruled Thursday.
Initiative 300 has helped Nebraska family farms by limiting the role of big out-ofstate farm corporations, said Chuck Hassebrook, executive director of the Center
for Rural Affairs in Lyons, Neb.
The private, nonprofit center works to strengthen small businesses, family farms
and ranches, and rural communities.
Hassebrook said he thinks the North Dakota law is substantially different from
Initiative 300 and would withstand a legal challenge.
Roger McEowen, agricultural law professor with Iowa State University in
Ames, also sees substantial differences between the Nebraska and North Dakota
laws.
For instance, Nebraska’s law is in the state constitution, while North Dakota’s is
not, he said.
Another difference: The Nebraska law has residency requirements for farm
operators, while North Dakota’s doesn’t.
It’s difficult to say whether North Dakota’s law is in danger, said Jessica
Shoemaker.
She’s a staff attorney for the St. Paul-based Farmers Legal Action Group, which
represented 35 farm groups that filed a legal brief in the 8th Circuit Court
supporting Initiative 300.
The farm groups included the North Dakota Farmers Union.
“It may be that other corporate farming laws are vulnerable after this decision,”
she said.
“However, any future challenge to another state’s corporate farming regulations
would have to be analyzed based on its own unique facts,” she said, “including
the language of the legislation, its implementation, the history of its enactment,
and the circumstances and nature of the particular legal challenge.”
North Dakota’s law
North Dakota is one of nine Midwestern states – Minnesota and South Dakota
are also on the list – with anti-corporate farming laws.
Legal experts say it’s unclear how the Nebraska ruling will affect Minnesota’s
anti-corporate farming law.
Like North Dakota’s law, Minnesota has exemptions for family farm corporations.
Also similar to North Dakota’s law, and unlike Nebraska’s law, it’s not written into
the state constitution.
The laws reflect a desire to protect family farms and rural communities,
McEowen said.
Despite what some think, North Dakota doesn’t have a blanket ban on corporate
farms.
For instance, nonprofit groups can own farmland, provided they meet certain
requirements.
A Minneapolis-based nonprofit foundation has run afoul of the North Dakota law.
The state is suing Crosslands Inc. for buying about 1,750 acres in Cavalier,
Griggs and Ward counties to create wildlife refuges.
The land was acquired without state approval, as required by the anti-corporate
farming law, state officials said.
Crosslands is led by James Cook. He owns Investment Rarities Inc. of
Minneapolis, which deals in gold and silver coins, bullion and sterling silver
flatware.
“I just want to do something good for wildlife,” he said.
He was uncertain what effect the Nebraska ruling might have on his case.
In another case, Gov. John Hoeven earlier this month denied a request last week
from Ducks Unlimited to buy a large wetland-rich parcel in Sheridan County.
The hunting and conservation group said it wanted to buy the 2,320-acre tract of
private land to preserve wetlands in the Coteau Hills southeast of McClusky.
Under the state anti-corporate farming law, the number of nonprofits allowed to
buy land in the state is limited. The law also requires government approval for
land purchases, with the governor having the final nod.
The shrinking middle
Supporters of North Dakota’s law stress the importance of protecting family
farms.
So what’s a family farm?
There are many definitions, said Richard Taylor, a research scientist at the
Center for Agricultural Policy and Trade Studies at North Dakota State University.
But he said there’s general agreement on four requirements for a farm to be
classified as a family operation.
They are:
- Most of the management and labor must be done by the operator and family.
- There must be close association between the household and the business.
- The operator must exercise managerial control.
- Family farms must obtain a majority of their income from farming.
Whatever the definition, family farms are under pressure to become more
efficient by getting bigger.
In 1992, 18.3 percent of North Dakota farms had more than 2,000 acres.
That rate rose to 21 percent in 2002, according to the last U.S. Census of
Agriculture, which is conducted every five years.
By all accounts, the 2007 Census will report an even higher rate of farms with
more than 2,000 acres.
The number of farms with fewer than 100 acres grew, too, from 9.6 percent in
1992 to 12.6 percent in 2002.
Typically, these small operations are a hobby farm for their owner, rather than a
traditional family farm, Taylor said.
As the number of small and big farms increase, “The middle gets squeezed out,”
he said.
About half of North Dakota farms had 500 to 2,000 acres in 1992.
That had fallen to 35 percent, or one in three, by 2002.
Mixed opinions
Even people who know and love agriculture don’t agree on whether anticorporate farming laws help or hurt farmers.
Such laws are a “nuisance” that work against farmers, said Barry Flinchbaugh,
an agricultural economist at Kansas State University in Manhattan.
Taylor, the NDSU research scientist, said he doesn’t see why agriculture should
be treated differently than other businesses.
The argument that such laws protect small-town economies is dubious, because
many rural residents already drive to the state’s larger cities and shop there, he
said.
“There’s really been a change because of the better transportation,” he said.
North Dakota Farm Bureau President Eric Aasmundstad, a Devils Lake farmer,
assailed what he called the “Chicken Little” attitude of ant-corporate farming law
supporters.
“The big corporations aren’t going to come into North Dakota to buy farmland.
That’s just not going to happen,” he said.
Farmers in states with anti-corporate farming laws are at a disadvantage
compared to farmers in states without them, he said.
Aasmundstad criticized the North Dakota Farmers Union, the state’s other
leading farm group, for its support of the law.
State Farmers Union President Robert Carlson said the statue serves North
Dakota well.
Family farms and rural communities need to be protected, he said.
State Agriculture Commissioner Roger Johnson and Lt. Gov. Jack Dalrymple, a
Casselton farmer, also support the law.
Neither Dalrymple nor Johnson say they see strong sentiment in the ongoing
North Dakota legislative session to revamp the state statute.
“I think it’s doing what it was designed to do,” Dalrymple said.
Readers can reach Forum reporter Jonathan Knutson at (701) 241-5530