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North Dakota ag legislators to tackle grain dealers, drainage, CAFO issues

North Dakota state Sen. Larry Luick, R-Fairmont, N.D., talks about grain regulation, drainage, and lien issues that he sees coming in the North Dakota Legislature, which started Jan. 5, 2021, in Bismarck, N.D.

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The North Dakota State Capitol. Forum News Service file photo

BISMARCK, N.D. — Grain dealer re-regulation and drainage regulations may be two of the primary agricultural issues on tap for lawmakers during the 2021 North Dakota Legislature.

State Sen. Larry Luick, R-Fairmount, chairman of the Senate Agriculture Committee, in an ZOOM interview at his farm before going into session, said the session will be available online.

"Any person seeing my committee room will be able to put in a request to testify,” Luick said. “They can do that from their home, their office, from India. Any place you can get a signal, you’ll be allowed to testify.”

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North Dakota State Sen. Larry Luick, R-N.D., is a farmer and chairs the Senate Agriculture Committee. Photo taken Oct. 9, 2019, at Fairmount, N.D. Mikkel Pates / Agweek

People wanting to testify in a particular hearing can email Luick at lluick@nd.gov. They also can send a message to the committee clerk one hour before the hearing starts. The clerk and intern will verify that it is “legitimate and not abusive,” and put the person in the que.

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He expects grain regulation, drainage and animal feeding operations to be hot ag topics this year.

Grain regulation

“We’re looking at (how) grain handlers are being monitored, being audited, how grain transfers are handled, the protection of individuals that have credit sales contracts,” Luick said. New financial reviews will reflect what grains are on hand and how fast transactions occur, Luick said.

Legislators in the 2019 session were angry about a still-fresh fraud led by Hunter Hanson, a Devils Lake, N.D., area 19-year-old who started a roving grain business and then a warehouse business with no training or financial backing. In two years Hanson traded some $23 million in grain. Hanson accumulated customers with the help of Dan Stommes of East Central Grain Marketing, Inc., a broker with contact points in South Dakota and Minnesota.

Federal prosecutors said Hanson operated the business as a “Ponzi scheme.” Hanson ended up owing $11 million to dozens of farmers and elevators and was sentenced to federal prison in Duluth, Minn.

In the 2019 session, legislators moved grain regulation duties from the Public Service Commission to the North Dakota Agriculture Department. Agriculture Commissioner Doug Goehring is proposing a bill that completes the process.

“The roving grain buyers have never really had oversight in their dealings in North Dakota,” Luick said. There will be more regulative oversight of the bonding and insurances.

The issues in Goehring’s bill include the future of an “indemnity fund,” in which farmers pay a small amount in grain transactions to a sort of “insurance fund” that pays out when an insolvency occurs. The existing indemnity fund applies only to credit sale contracts (price-later, or deferred payment) in which title transfers to the elevator or grain merchant.

Some legislators prefer a system where protections come from bonds — not self-funded indemnity funds. Luick said he likes the indemnity fund, in part because farmers stop paying into it at certain level, while bond costs go on whether they’re used or not.

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Drainage

Bills could clarify or adjust a range of water drainage permit procedures. Some residents in drainage projects are assessed for properties in which they don’t have an interest, or think they have insufficient rights. Historically, approval for projects has been a simple majority. Among other things, legislators will consider whether to raise that, say, from 51% to 60%, he said.

Separately, water-related bills involving the permitting process for subsurface water drainage permits also are anticipated. In 2015, the Legislature changed the rules that allowed tiling projects of less than 80 acres to go forward without permits from local drainage boards. Some landowners have gotten around the requirement by doing 79-acre projects.

“We have people who are doing 79 acres one year, 74 acres the next year, then 60 (acres) and attaching these acreages on the same outlet flow into somebody else’s ditch, field, township road ditch, and pretty soon you have some substantial negative impacts,” Luick said.

Rep. Cindy Schreiber-Beck, R-Wahpeton, has written a bill that would require permitting on everything, regardless of size. Luick said he wants to make sure this won’t be a problem for residents needing drainage on 5- to 10-acre farmsteads, for example.

The legislators also may change the permit fee system, making sure applicants — not drain boards — pay costs of notifications of downstream landowners or attorney bills.

Animal feeding operations

Under some proposals, the Legislature would clarify protocols for confined animal feedlot operations and animal feeding operations

“You do it the same in County 1 as County 50. That protocol of how you enquire through the health department, for comment periods. The idea is to make rules regarding setbacks are same throughout the state, rather than county or township based," Luick said. “Everybody is on the same page for how counties and townships get these either negated or approved.”

Central indexing

The North Dakota Secretary of State maintains a Central Indexing System, where mortgage and other lenders register liens they have with borrowers, backed up by collateral including property. In the past, banks have been first in line to collect when borrowers go insolvent.

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“Should they be 100% paid back? Or should Cenex, (or) that … dealership be paid back as well as the banks,” Luick said.

The lenders have offered input in interim hearings, saying that they lend money based on their position, but legislators will consider changes.

“They are not the only ones anymore that have these financing programs,” Luick said.

Mikkel Pates is an agricultural journalist, creating print, online and television stories for Agweek magazine and Agweek TV.
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