This will make you cringe: Wheat farmer faces millions in fines

Posted on July 12, 2017 by matt ohern
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In June, 2016, I described a Clean Water Act (CWA) case involving a California wheat farmer. A U.S. District Court found John Duarte chisel plowed pasture lands which were considered to be vernal pools even though the pools seldom have water in them.
The Court determined his vernal pools were wetlands or waters of the United States. See where this is going?
After a year-long delay, the penalty phase of the case against Duarte starts on August 14th. For chisel plowing alleged wetlands, the U.S. Department of Justice (DOJ) and the U.S. Army Corps of Engineers (Corps) are seeking $2.8 million in fines and approximately $30 million to buy wetlands which would mitigate the alleged damage created by Mr. Duarte. He claims “It (450 acres of pasture land) was farmed for wheat many times before, and the permit they wanted me to get had never been issued to a farmer before” (The Modesto Bee, May 24, 2017).
Facing a trial
The Court has now issued an order which declares Mr. Duarte must now face a trial to determine “…the issue of injunctive relief and civil penalties.” Mr. Duarte and his California legal team filed a motion to stay the August 14, 2017 proceedings because there is another case pending before the U.S. Court of Appeals in San Francisco which may have a significant impact on Mr. Duarte.
The judge, after reviewing the prospective case filed in the 9th Circuit U.S. v Joseph Robertson, indicated she believed Duarte’s case should go forward even though the 9thCircuit case could substantially impact Mr. Duarte.
The Court found that “being required to defend [a] suit, without more does not constitute a clear case of hardship or inequity within the meaning of Landis.” The Court also concluded and agreed with the attorneys from DOJ that delay of the Duarte case would “…thwart efforts to mitigate onsite damage to the property.”
This of course means Duarte not only faces a possible fine but might also be saddled with $30+ million in damages… for chisel plowing a wheat field.
His legal team is seeking a stay of the August 2017 trial because the Robertson case could help determine what is a “water of the United States” under the CWA. This is an important question for everyone in tillage agriculture. You may recall the Robertson case because it involves a rancher in Montana who excavated and constructed 9 stock ponds after he was told by the government he could not do so. Mr. Robertson was sentenced to 18 months in prison and ordered to pay approximately $130,000 in restitution for ponds he dug on national forest land and on private property. Mr. Robertson raises a critical point. He believes the CWA only prohibits a discharge of a pollutant into navigable waters or waters of the United States.
Intense controversy
The term “waters of the United States” (WOTUS) has been an issue of intense controversy. Many believe the EPA and the Corps have exceeded CWA’s jurisdiction. Mr. Robertson and Mr. Duarte subscribe to the opinion of the late Justice Scalia which held that WOTUS requires wetlands to maintain a continuous surface connection to navigable water.
It appears the new proposed regulatory decision from EPA Administrator Scott Pruitt regarding WOTUS will also subscribe to this conclusion, which is helpful to everyone in agriculture and ranching. Duarte’s judge and Mr. Robertson’s judge subscribe to a definition written by Justice Kennedy in a case called Rapanos. In fact, in the Robertson case, the jury was instructed to use Justice Kennedy’s “significant nexus” test. The jury apparently was not allowed to utilize Justice Scalia’s four vote plurality test.
Even though this controversy over how to determine jurisdiction is going to be heard in the 9th Circuit, the Duarte court used the Justice Kennedy test and found Duarte’s property indeed had a “significant nexus” to a creek and it to the Sacramento River.
Notwithstanding this dispute, Mr. Duarte’s judge concludes no stay of his case is warranted because it may be 4-5 months before an opinion is issued by the 9th Circuit. The DOJ lawyers also argued that a decision in the Robertson case may not issue for at least 14 months and therefore there is no reason not to proceed with the trial and attempt to fine Duarte millions of dollars and require many millions in mitigation.
Last week Duarte’s legal team filed a PETITION FOR WRIT OF MANDAMUS in the U.S. Court of Appeals 9th Circuit in an attempt to stop the August 14, 2017 trial from proceeding.
The outcome of these legal activities in San Francisco will impact all in tillage agriculture.
(This article first ran in Farm Futures on July 11, 2017)
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Interstate Tolling: New Support—and Old Misconceptions

Posted on July 12, 2017 by matt ohern
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After hinting at it for several months, the White House made it clear last month: the Administration wants states to have the option of using toll financing to modernize their aging Interstate highways. Having a toll revenue stream would also make it feasible for states to enter into long-term P3 concessions to carry out these mega-projects, which should include redesigning and replacing upwards of 100 interchange bottlenecks that snarl traffic in major metro areas.
There was predictable opposition from some in Congress. The ranking member of the House Transportation & Infrastructure Committee, Rep. Peter DeFazio (D, OR) was fairly typical, saying “The American people have already paid for the Interstate system through their gas taxes, and they’re continuing to pay for its upkeep through gas and diesel taxes.” Sam Graves, (R, MO) echoed DeFazio’s point, saying “I’m not a big fan of tolling. I don’t like paying for a road twice.” Their point is true but irrelevant. What we need today is to replace the aging and often obsolete first-generation Interstate system with a second-generation version, at a cost upwards of $1 trillion over the next several decades. No conceivable increase in our declining fuel tax revenue is capable of doing that.
The good news is that there is growing support for Interstate tolling flexibility in a number of states, among them Indiana, Wisconsin, Missouri, Connecticut, and even Oregon, Rep. DeFazio notwithstanding. Fairly detailed tolling studies have been carried out in recent years in Connecticut, Missouri, and Wisconsin, and the Indiana legislature this spring passed transportation legislation that includes authorizing their governor to apply for federal permission to do Interstate tolling, with a similar measure pending in Oregon. Both are also planning new studies of Interstate tolling’s potential.
But along with that growing interest is an array of misconceptions about what is either legal or politically viable. Much of the political discussion in Connecticut has been of the “cash cow” variety: how much revenue could be produced if tolls were slapped on existing Interstates (and quickly), with of course the idea that some of the revenues would be used for reconstruction and widening of those Interstates. That is neither legal nor politically wise.
Another bad idea that keeps popping up (most recently in Wisconsin) is “border tolling”—putting toll collection at the state line (only) so that those who pay would not be the state’s voters but only those from elsewhere (especially Illinois, with its plethora of toll roads). A 2013 assessment by the Congressional Research Service found that border tolling could well violate the commerce clause of the U.S. Constitution.
A third misconception is that Interstate tolls should be charged in addition to the existing state gasoline and diesel taxes. That’s what highway users face on existing toll roads, and it does mean “paying twice” for the same road. Both the toll and the gas tax are supposed to pay for the capital and operating cost of the highways in question, and since tolls must cover the full costs of the toll road, also charging gas tax on them changes that tax from a user fee to a pure tax on mobility.
In the 20th century, when toll roads meant cash collection, giving toll-payers rebates on their gas taxes would have been a cumbersome, paperwork nightmare. Today, with all-electronic tolling (AET), it’s a simple modification to the tolling software. The customer’s vehicle is identified by its license-plate image. Hence, the make and model is known, and so is its EPA mpg rating for highway driving. Also known, if the tolls are charged from on-ramp to off-ramp, is the number of tolled miles driven. Simple math provides the fuel-tax rebate for each trip, and that file can be given to the state Motor Vehicles department monthly or quarterly, listing the amount of rebate owed to each customer.
When state DOT people look askance at this idea, I ask them to remember the growing number of mileage-based user fee pilot projects under way around the country. A basic premise of every one of them is that the MBUF is a substitute for, not in addition to, the state fuel tax. So it should be with 21st-century tolling introduced as a true user fee for delivering and maintaining the needed Interstate 2.0.
There are even signs of hope from the trucking industry, which has long opposed any further expansion of tolling, largely on grounds of “double taxation” and the “cash-cowification” of many toll roads in the Northeast. At an April Senate committee hearing on highways and freight, the president of FedEx Freight, Michael Ducker, “emphasized the importance of funding an improved highway system, with sources to include an increased fuel tax, a vehicle miles traveled fee, and congestion pricing.” Per-mile tolls are vehicle miles traveled fees, and variable tolls are congestion pricing.
The latest annual tally of the cost to truckers of interchange bottlenecks on urban Interstates found that big-rigs that travel 100,000 miles per year incur an average increased operating cost of $22,676 each. At an average big-rig toll of 14 cents per mile, the toll cost of that 100,000 miles would be $14,000/year. If paying such tolls led to an Interstate 2.0 with modernized urban interchanges, isn’t that a value proposition the trucking industry should consider?
(This article first ran in the June 2017 issue of Surface Transportation Innovations)
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Immigrants Add to our State's Economy

Posted on June 19, 2017 by matt ohern
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Virginia is honoring our immigrants with a well-deserved “Immigrant Heritage Month” as declared by Governor Terry McAuliffe.
With that in mind, I want to review some important facts and figures about the impact our immigrants have here in Virginia and then highlight a few immigrant stories.
Virginia has about 900,000 people who were foreign born – just over 11% of our population.  The number immigrants moving into Virginia grew by almost 58% between 2000 and 2010, and continues to grow today.And the immigrant population is a large part of any economic growth we will see in the future.  You see, 17.5% of the business owners in Virginia are immigrants. Over $3 billion in business income is generated by these businesses.  And between 2006 and 2010 almost 54,000 new businesses were formed by our immigrant neighbors.
So as we debate what to do with our immigration policies in this country, let’s remember that legal immigration is a huge positive in our country and we need to keep that in mind.  What to do with the illegal residents in our society is going to be debated over the coming months and we need to figure this out in a rational and reasonable and firm manner.
In the meantime, I want to highlight three Virginians who were either born in foreign countries or their parents were born overseas.
Mohammad Siddique Sheikh came to the United States from Pakistan 50 years ago with $10 in his pocket.  Through hard work, focus and determination he has built a conglomerate of wide-ranging business the anchor of which are more than a dozen gas stations.  He is one who believes in giving back to his community.  He was appointed by Governor Bob McDonnell to the Board of Visitors of George Mason University, Virginia’s largest institution of higher learning.  He has served on a number of state and Fairfax County community boards and commissions and was recently appointed as a board member of BB&T Bank, nationwide.  Believing the influence that many can have when banding together, he established the Pakistan American Business Association which has thousands of members who are successful business leaders.
Raul “Danny” Vargas is a noted business and community leader, media commentator, and marketing/public relations professional.  His mother came to the States from Puerto Rico and Danny grew up on the streets of New York City.  His mother worked long and hard and now, thanks to her dedication and love, Vargas is now a well-respected and noted business and community leader.  He has been an executive at AOL, France Telecom, Global One and Raytheon.  And he was appointed by Virginia’s Governor as Chair of the Virginia Board of Workforce Development.  He was Chairman of the Dulles Chamber of Commerce, the first Hispanic to chair a mainstream Chamber in Virginia.  Vargas ran for the House of Delegates as the Republican standard bearer.  This second generation American citizen is an example of why immigration is so important to our nation.
Puneet Ahluwalia came to the U.S. from India in 1990.  He worked long and hard and learned about real estate investments.  He built a successful mortgage loan business catering to the broad citizenship of Northern Virginia but with a real focus on the immigrant population – helping folks who, like him, came to this country looking for freedom and financial security.  That business was a casualty of the housing crisis in 2008.  Using his networking capabilities and his love for public policy issues and the political rivalry here in America, he is now working full time as a political consultant in Washington DC working our partnerships with overseas companies and organizations that want to do good works by combining American financial support with those who are trying to help people in South Asia better their lives.  He was recently elected to the State Central Committee of the Virginia Republican Party. Puneet Ahluwalia is truly a proud American citizen.
Let’s remember that although we face a necessary and difficult discussion about those “illegal residents” who came to this country unlawfully, most came here for the same reasons as those legal immigrants.  They came to provide a better life for themselves and their families.
Soon we are going to have a robust debate on immigration reform when Congress finally decides to take up this important issue. Let’s have that debate in a reasonable manner looking at the entire immigration policies of this country. We should calmly discuss who we want to come to this country and what these folks can do to build our economy over the long haul.
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Expand Pre-K Access by Expanding Private Scholarships

Posted on June 19, 2017 by matt ohern
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The latest annual report from the National Institute for Early Education Research ranks Virginia #29 in early education access for four-year-olds – a statistic comparing unfavorably to the Commonwealth’s surrounding states.
Some argue that increasing early childhood education access can come only by spending a lot more money; others dismiss early education – even for educationally at-risk children — as “baby sitting.”  The truth is in between.
It’s true that too many studies claiming near-miraculous accomplishments from early childhood education looked only at relatively small “boutique” programs that would be far too expensive to replicate.  But the reality is that low-income children too often get to education’s starting line of kindergarten far behind their wealthier peers.  Among other indicators, by the age of three, children from low-income families will have heard 30 million fewer words than their peers in “professional” families, missing out on the formative stages of language and reading.
However, large scale studies of the Virginia Preschool Initiative (VPI), serving educationally at-risk children, have shown that children attending VPI are more likely to meet early literacy benchmarks, score higher on the third grade Standard of Learning tests, and are more likely to be promoted on-time to eighth grade.
It’s not just “babysitting.”  But it’s also not just “more money.”  The state of North Carolina spends 41 percent more per child than Virginia on early education, without a major difference in access:  North Carolina ranks #25; Virginia, #29.
The Virginia Preschool Initiative has more than 7,000 unfilled slots that could be used to serve eligible at-risk four-year-olds.  More than 6,000 of these are in just 13 school divisions, and another 400 are in 11 divisions that do not participate in VPI at all.  There are three primary reasons for this:  An inability or refusal to meet the required local funding match, insufficient space, or too few eligible students spread too thinly to create critical mass in rural locations.
The question is:  “How do we reduce the number of unserved at-risk students in Virginia, lower barriers to pre-k services, and provide additional data that might be useful in measuring Early Childhood outcomes in order to inform future programs?”
Few non-public providers are involved in the delivery of VPI because of a barriers identified by the Virginia Child Care Association, and this limits expansion.  Among those barriers are decisions by local school systems to simply not include center-based providers; a high, expensive and arguably unnecessary requirement for licensed teachers; limited and confusing communications; and a complex funding mechanism.
The state recently issued a second round of “Mixed-Delivery Preschool Grants,” in order to expand preschool access in five jurisdictions.  But the grants remain top-heavy with regulations, limited in their scope, and have an automatic sunset in two years – at which point funding will go away and localities will likely revert to the current status quo.
A far more effective method would be expansion of the Virginia Education Improvement Scholarship Tax Credit (EISTC) to include pre-k students.  Currently, private donors to scholarship foundations receive a 65 percent state tax credit if it’s used to offer scholarships for K-12 students to attend a school that is a better placement for the student.
This year, the program will raise $10 million to provide 4,000 low-income K-12 students with new private educational opportunities – at no cost to the state taxpayer, since the state is now relieved of the expense of educating the students.
Opening up the EISTC program to offer scholarships equal to the state share of VPI funding would provide additional opportunities for hundreds, if not thousands of additional at-risk students.  The inability or refusal of local jurisdictions to match state funding or have space available would no longer be a barrier.  Parents would simply choose the qualified local provider best fitting their child’s needs.
The proposal would also provide additional data on which to base future decisions.  A deficiency of current studies is the inability to differentiate between students who attend different programs or no program at all.  We know what works in a public pre-k setting; we do not necessarily have the data to compare with a non-public pre-k setting.  Following students who attend non-public pre-k settings through their public school career would add considerably to our knowledge about what works, and incorporating the data would inform us further about what is effective and what might be more efficient.
To be sure, the private schools should have to meet certain minimal requirements:  A minimum half-day program; a curriculum aligned with Virginia’s Foundation Blocks for Early Learning; a teacher-child ratio of no more than 2:20; a teacher development program ensuring early learning teachers are proficient in establishing social-emotional warmth, creating high-quality teacher-child interactions, and delivering high-quality instruction based on the standards and curricula.
Legislation introduced this year by Senator Bill Stanley (R-Moneta) would do just that.  His bill, SB 1427, passed the Senate by 39-0, with one abstention, although it died in the House Finance Committee.
But his bill to expand the EISTC program would increase access for at-risk students and allow us to better measure what works and what doesn’t, and Virginians should hope he re-introduces it and continues the fight next year.
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Community Banks: Help is on the Way

Posted on June 19, 2017 by matt ohern
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In the wake of the financial meltdown in 2008, Congress passed and President Obama signed the Dodd-Frank law which was intended to regulate big banks and address the causes of the financial crisis. As so often happens with legislation, despite good intentions, bad consequences have flown from the Dodd-Frank law, hereinafter Dodd-Frank. Our community banks, defined as those with less than ten billion dollars in assets, have been taking it on the regulatory chin. They have seen their compliance costs soar and there has been a huge wave of consolidations leaving customers with fewer options, fewer choices in banking services, and loans more difficult to find for small businesses and start-ups. But, help is on the way.
Congress and the Trump Administration are aware of the problem and are taking steps to correct the problems caused by Dodd-Frank. The U.S. House Financial Services Committee Chairman Jeb Hensarling (R-TX) said, “Community financial institutions are being crushed by Washington’s ‘one-size-fits-all’ regulatory approach. We are losing, on average, one community financial institution each day – and they are not dying from natural causes but from the sheer weight, volume, complexity and expense of Washington’s rules. So our plan requires financial regulators to tailor regulations so they fit a bank or credit union’s business model and risk profile. This allows America’s small, hometown banks and credit unions to focus their time and resources on serving their customers rather than the dictates of Washington bureaucrats.”
The Virginia Association of Community Banks, representing roughly ninety-five financial institutions in Virginia, has pushed the Trump Administration to make the Financial Choice Act a priority. Earlier this year a larger umbrella group of community bankers, including a representative from Virginia, met with president Trump and other members of his administration to stress the need for relief from the burdensome regulations imposed on them by Dodd-Frank.
According to a study by the Mercatus Center at George Mason University, community banks have seen compliance cost sky-rocket and the number of compliance officers double to handle the increase in regulations. The study also found that the regulations were forcing community banks to discontinue a number of services including elimination of residential mortgage lending. Nearly twenty-five percent of the banks were considering mergers.
A study by the Kennedy School for Government at Harvard, says adding just two members to the compliance department would make one-third of the smallest banks unprofitable. The country cannot afford to lose it small banks because, as the study indicates, small banks account for three-quarters of all agricultural loans and half of all small business loans. These small, generally well-run, banks were not the source of the financial crisis but now bear the brunt of the regulations designed to address failures by the big banks that were deemed “Too Big to Fail.”
The House Financial Services Committee reports that in 2010, the year Dodd-Frank was enacted into law there were 7,658 banks but by the end of 2016 that number had declined to 5,980. The loss of banks was not off-set by new start-ups. The Committee, citing the Richmond Federal Reserve, indicates that while there were 170 banks chartered each year in the country between 2000 and 2008, that number dropped to less than one bank chartered each year since the enactment of Dodd-Frank.
The House Financial Services Committee reported the Financial Choice Act, H.R. 10, to the full House of Representatives on May 4, by a vote of 34-26. In an effort to provide relief to financial institutions with a special focus on small, community banks and their role in growing the economy, the House of Representatives debated the Financial Choice Act the week of June 5, 2017. The bill passed the House on June 8, by a vote of 233-186 and now moves to the Senate for further action before going to the president’s desk and an expected presidential signature into law.
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