Federal Regulatory Update

June 29, 2023

During the first two years of the Biden administration, when Democrats held majorities in both houses of Congresses, much of the activity in Washington focused on traditional lawmaking. But with the new Republican majority in the House of Representatives in January 2023, a flurry of new rulemaking activity signals a focus on regulatory action by administrative agencies. Many of these new regulations and proposed regulations may have a significant impact on farmers. This article will summarize a few of the key rules that have been enacted or proposed already in 2023.

Waters of the United States (WOTUS) Rule

Under the federal Clean Water Act, the scope of the Environmental Protection Agency’s regulatory authority is generally limited to “navigable waters.” The Act, however, broadly defines the term “navigable waters” to mean “the waters of the United States, including the territorial seas.” The inherent ambiguity of this definition has resulted in several court cases and rulemaking efforts that have continued for several years.

After years of legal wrangling and confusion, the Obama administration enacted the “Clean Water Rule” on June 29, 2015, that adopted an extremely broad definition of “waters of the United States” and would have dramatically expanded the scope of federal authority beyond traditional navigable waters. This rule was challenged in federal court by a number of farm and business groups, as well as several states, and was subsequently repealed by the Trump administration on October 22, 2019.

A few months later, on January 23, 2020, the Trump administration enacted the “Navigable Waters Protection Rule” that more narrowly defined “waters of the United States.” Specifically, this rule limited the definition of “waters of the United States” to “relatively permanent flowing and standing waterbodies that are traditional navigable waters in their own right or that have a specific surface water connection to traditional navigable waters, as well as wetlands that abut or are otherwise inseparably bound up with such relatively permanent waters.” The Trump administration’s rule was also challenged in federal court (this time primarily by environmental activists).

On January 18, 2023, the Biden administration published a final rule that repeals the Trump administration rule and (yet again) redefines the term “waters of the United States.” Under this rule, “waters of the United States” include (1) traditional navigable waters, the territorial seas; and interstate waters; (2) impoundments and tributaries of these waters; (3) wetlands that are adjacent to (and have a continuous surface connection with) any of these waters; (4) other waters that have “relatively permanent, standing or continuously flowing waters” and that have a continuous surface connection with such waters; and (5) other waters that have a “significant nexus” with (i.e., that significantly affect the chemical, physical, or biological integrity of) such waters. Although slightly narrower than the Obama administration’s rule, this rule would again significantly expand the scope of the federal government’s authority beyond traditional navigable waters.

While this issue may seem to be highly technical, and something that only lawyers or government bureaucrats would be interested in following, the impact of this issue on farmers and other landowners is significant. The Clean Water Act requires an NPDES permit for discharge of a pollutant from a “point source” to “navigable waters” (i.e., “waters of the United States”). And a Concentrated Animal Feeding Operation (CAFO)—which includes a feedlot that confines 700 or more mature dairy cattle, 1,000 or more beef cattle or cow/calf pairs, 2,500 swine weighing more than 55 pounds (or 10,000 or more swine weighing less than 55 pounds), or 55,000 or more turkeys (among others)—is a “point source” under the law. Thus, the definition of “waters of the United States” has a significant impact on whether or not livestock facilities need a permit and, if so, the type of permit that you need.

Although the Biden administration’s rule has an effective date of March 20, 2023, several farm and business groups, as well as several states, have already announced legal challenges to the rule. Thus, the uncertainty surrounding this issue will continue until these court cases are resolved (and may continue with future administrations).

CAFO Rulemaking Study

As noted above, a CAFO is a “point source” that is subject to regulation under the Clean Water Act. The United States Environmental Protection Agency enacted a regulation that defines a CAFO, establishes a process for the EPA to designate a feedlot as a CAFO if the feedlot does not otherwise meet the regulatory definition, establishes procedures for a CAFO to obtain coverage under an NPDES permit, and regulates discharges of manure and other pollutants from a CAFO.

In January 2023, the EPA announced that it intends to “undertake a detailed study of” CAFOs in anticipation of the agency adopting new rules to regulate CAFOs. This represents an initial stage of the likely rulemaking process for a new rule that the agency is likely to propose down the road.

Packers & Stockyards Act Rulemaking

The Packers & Stockyards Act is an antitrust law that Congress first enacted more than 100 years ago in response to widespread abusive practices by many meatpackers at that time. As amended over the years, the Act generally prohibits “unfair, unjustly discriminatory, or deceptive practice[s] or device[s]” and “undue or unreasonable preference[s] or advantage[s]” by packers, swine contractors, and live poultry dealers. While these terms appear, at first blush, to be broad, federal courts have consistently recognized that the Act is not intended to “upset the traditional principles of freedom of contract” and have interpreted the law (consistent with other antitrust laws) to prohibit only practices that impact general competition in the marketplace (such as practices that apportion supply, manipulate prices, or create monopolies).

The United States Department of Agriculture recently proposed a new rule that would dramatically redefine and expand the scope of these statutory restrictions. If enacted, the proposed rule would effectively allow unelected bureaucrats to retroactively prohibit any practices by swine contractors or live poultry dealers that they deem to be unfair or unreasonable, regardless of whether the practice actually has any impact on competition in the marketplace. The proposed rule would also impose new and significant recordkeeping requirements on swine contractors and live poultry dealers.

The public comment period on these proposed rules has ended, but the proposed rules have not yet been finalized. If adopted, however, the proposed rules would inject significant uncertainty into contract grower relationships that are common among swine and poultry producers and may cause many swine contractors and live poultry dealers to reconsider whether to continue utilizing contract growers to care for their pigs and birds or whether to instead build or purchase their own facilities and hire employees to care for the animals. This development would have significant negative consequences on many family farmers who rely on these common contractual relationships as a steady source of income and a natural supplement to their crop farming operations.

Noncompete Agreement Rulemaking

Another article in this issue of Dirt describes noncompete agreements. On January 19, 2023, the Federal Trade Commission published a proposed rule that would prohibit employers from entering into (or attempting to enter into) noncompete agreements with their workers, maintaining existing noncompete agreements with workers, or representing to workers that they are subject to a noncompete clause. The proposed rule would also require employers to notify existing workers who are currently subject to a noncompete agreement that the agreement is no longer valid and may not be enforced.

This rule, if adopted, would represent a substantial departure from the existing law in most states and would prohibit an agreement that many businesses use to protect their proprietary information and trade secrets when employees leave. Although the proposed rule is not specifically directed at agricultural businesses, many agricultural businesses (like many other types of businesses) commonly use these agreements and would be impacted if the proposed rule were enacted.

Associated Attorneys