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Published June 27, 2012, 11:34 AM

SDPUC proposes changes in elevator reporting

The South Dakota Public Utilities Commission on June 27 offered a five-point proposal for state legislation that would require more accurate, up-to-date financial information from grain buyers, and would impose criminal penalties if the information is false

By: Mikkel Pates, Agweek

The South Dakota Public Utilities Commission on June 27 offered a five-point proposal for state legislation that would require more accurate, up-to-date financial information from grain buyers, and would impose criminal penalties if the information is false.

Chris Nelson, chairman of the SDPUC, in a telephone news conference from Pierre, S.D., said the commission will take the proposal to the South Dakota Legislature in January. He said he hadn’t considered whether to get the governor to impose the proposals on an emergency basis.

The proposals come in response to the Anderson Seed Co. debacle, in which farmers at the Redfield, S.D., location have claims for more than $2 million in unpaid sunflowers. Legumex Walker of Winnipeg, Manitoba, has purchased many assets of Anderson Seed, based in Mentor, Minn., as well as St. Hilaire Seed, also of Mentor. Farmers in Minnesota and North Dakota also have made claims against the company.

The PUC’s proposed legislation would:

n Require current financial statements at the time of the license application. Currently, statements are based on the last audited reports, which in the Anderson Seed case were nearly nine months old.

n Impose perjury penalties on the application if the information is false, and up to felony penalties if there are losses to farmers.

n Impose new, narrower levels of bond requirements in $50,000 increments for various sizes of grain buying entities. Current amounts are in five categories with ranges of more than $100,000.

n Require the grain buyer to notify the PUC at any point if the buyer is out of compliance with the financial requirements for licensing. The PUC then could more quickly begin the formal license revocation, if warranted.

n Require grain buyers to provide copies of financial records at their license locations or at the PUC office, upon request by the commission, even if the buyer’s corporate headquarters is out of the state.

Nelson bristled at political criticism that he or the PUC has inadequate concern for farmers, emphasizing his own close connections to agriculture and his graduation from South Dakota State University, the state’s land grant agricultural school. There has to be a balance that’s struck in regulatory action — a desire to protect farmers, but without over regulating or adding costs where they don’t belong and making it difficult to buy grain in South Dakota, he said.

Costs of bonds and self-imposed indemnity funds (like a fund in North Dakota covering price-later contracts) “take money out of agriculture and move it into the financial sector,” Nelson said. He added that the South Dakota Legislature has a history of borrowing from state-supervised funds that are allowed to grow and grow.

In response to a reporter’s question, Nelson fell short of accusing the Governor’s Office of Economic Development of not using common sense in alerting the PUC when an Anderson Seed application for one of its programs fell through.

He said the PUC studied the possibility of increasing bonds, but said it is not insurance that makes farmers whole when they incur a loss. He added that bond companies said if the amounts were raised to a level that begins to compensate for a loss, they might not be able to offer bonds to half of the elevators in the state.

He and colleague Kristie Fiegen, vice chairman of the commission, pointed out that “99.96155” percent of the grain bought in South Dakota in 2011 was purchased and paid for, accounting for $6.75 million in transactions. Fiegen noted that the figure was 100 percent in the prior 10 years.

While the Anderson Seed issue has been significant, Nelson said the more important focus should be on preventing it from happening again. He could not say if the proposed rules are enforced in other states, and if so, whether they have any effect.

Nelson said it wasn’t the commission’s role to propose higher bond levels, but said it would not object if legislators propose that, nor would he oppose a proposal after legislative debate. The five-point plan was vetted with a large range of farm organizations, including the grain industry, he said.

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