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Statement of the
American Farm Bureau Federation


TO THE HOUSE COMMITTEE ON AGRICULTURE
SUBCOMMITTEE ON CONSERVATION AND FORESTRY
IMPACTS OF ENVIRONMENTAL REGULATIONS AND VOLUNTARY
CONSERVATION SOLUTIONS
MAY 17, 2016

Presented By:
Richard R. Ebert
President, Pennsylvania Farm Bureau
Member of the Board of Directors, American Farm Bureau Federation


Member of the Board of Directors, American Farm Bureau Federation Chairman Thompson, Ranking Member Grisham and Members of the Subcommittee, thank you for the invitation to appear today to testify on “Focus on the Farm Economy: Impacts of Environmental Regulations and Voluntary Conservation Solutions.” I am Rick Ebert. I operate a dairy farm in Blairsville, Westmoreland County. We milk 80 Holstein cows and grow alfalfa, corn and soybeans. I am working to bring my three sons into the family business.


I have the privilege of serving as the elected President of Pennsylvania Farm Bureau and I was recently elected to serve on the American Farm Bureau Federation’s Board of Directors. Farm Bureau represents farms of all sizes, spanning virtually all commodities grown and sold in our great nation. I am pleased to offer this testimony on behalf of the American Farm Bureau, the largest farm organization in the U.S.


In Pennsylvania, farming remains an integral and critical component of our state’s economy. Agricultural production in Pennsylvania generated an estimated $7.5 billion in cash receipts in 2014, providing $75 billion in total annual economic impact to the Commonwealth. However, the same forces that can provide economic benefit to Pennsylvania’s agricultural industry also have the potential to seriously cripple it. While some may consider Pennsylvania agriculture to be “big business” in the aggregate, the typical business structure of individual farm businesses is predominantly those of small business operations – family-owned proprietorships and partnerships. As with others owning and managing small businesses, Pennsylvania’s farm families have practically no means to individually control the sharp changes in commodity prices and other national and international economic forces that can plague profit margins. As I will discuss a bit later in my testimony, current trends in national and international markets are seriously threatening farm businesses in Pennsylvania, including my family’s business.


Many outside of agriculture fail to appreciate the real significance of either of these aspects. Agriculture does play a pivotal role in the economic vitality of many states and the overall vitality of our national economy. And yet, the viability of agriculture and the economies that agriculture supports are especially vulnerable to volatile economic forces because of the small scale in which individual farm businesses operate and their practical inability to control those forces.


Because farmers are likely to regularly experience volatile and unpredictable commodity prices, it is critically important for individual farm businesses to control their operation costs, especially when sharp drops in prices for their products occur. But farmers can’t be effective in managing costs unless they are very certain of what those costs are likely to be for both the short-term and a more long-term span of several years.


Compliance with the legal obligations associated with commercial business operations is becoming a significant aspect of farmers’ management of costs. Often, actions by government to increase regulatory standards have the effect of increasing a business’ costs of operation. Some businesses have the economic ability to pass the additional costs of increased regulatory standards onto their customers merely by increasing the prices of their products. Increasing their prices doesn’t impact the marketability or consumer demand for their products. Individual farm businesses, however, do not the power in the market to increase prices. The farm business will have to employ some other means – usually reduce or control some other area of cost – to offset any increased costs resulting from more stringent regulatory standards.


In order to come close to making sound cost-management decisions, farmers must have a thorough understanding of what their operational costs will likely be. We can’t make good decisions if regulatory officials are unable or unwilling to identify the boundaries of regulatory standards that will be imposed in the near future or the standards that are likely to be imposed for years to come.


Farmers in Pennsylvania and around our nation are seriously frustrated by the two-pronged approach being taken by both federal and state officials, especially in the area of environmental regulation. EPA’s administrative approach under the current Administration seems to be both a pervasive assertion of regulatory authority over virtually every aspect of land use and function and a serious lack of effort to specifically identify the type of conduct that gives a person any confidence of compliance with his or her legal obligations.


The posture and attitude of federal officials seem to be that any land activity performed may be subject to federal regulation and that the agency make no commitment to defining the extent and limitation of regulatory standards unless the individual first seeks a permit or other approval from the agency. Farm Bureau and individual farmers have raised numerous legitimate questions and have tried to gain specific answers from EPA officials about how existing and proposed regulations are to be interpreted and applied in the context of specific situations that commonly occur on farms. EPA’s response has been evasive and rhetorical, with no meaningful answer provided. And what may be determined today as acceptable conduct may not be acceptable tomorrow because of changes in modeling or evaluation of environmental impacts.


Small businesses owners, especially farmers, cannot sensibly function or viably operate their businesses in such a regulatory climate and culture.


Congress has heard from several agricultural sources about the impacts of EPA’s regulatory posture and strategy in the Chesapeake Bay Watershed. I also wish to focus much of the remainder of my testimony on EPA’s posture in the Bay, because it is a clear example of the real challenges that agriculture has faced and will likely face under the federal government’s current exercise of regulatory power.


EPA’s regulatory and administrative oversight in the Bay Watershed has consistently been one of inflexibility and bureaucracy. And the pervasive efforts and nebulous standards being established or evolving through EPA’s oversight are leaving farmers in the Bay Watershed with a high level of uncertainty about whether their farm production practices are legal now or will be legal tomorrow. I’ll highlight these themes as I discuss the real-life farm-and community-level implications for farmers like me.


I have an average-sized dairy herd and I try to grow as much feed as possible for them on the farm. In that way, I look a lot like my fellow dairy farmers in Pennsylvania. And, I suspect my farm structure – me and my three boys – looks a lot like what farmers across Pennsylvania typically have, including those farmers operating farms in the Bay Watershed. So when I discuss the potential impacts of federal regulatory oversight to my farm, you can assume there are a lot of other farmers who would be similarly impacted.


In addition, while I live western Pennsylvania and not in the Chesapeake Bay Watershed, I am very much impacted by the rules and regulations that the Environmental Protection Agency – and our state Department of Environmental Protection – have developed as a result of their targeted efforts in the region.


As we talk about environmental regulations and their impact, we cannot ignore the challenging situation farmers across the nation are facing in terms of commodity prices. As I said earlier in my testimony, in the real world of agriculture, individual farming businesses cannot make up for the increased costs of regulation by increasing their commodity prices. We must adjust other aspects of our businesses and financing activities to balance those increased costs.


Farmers have been experiencing very low prices on the major commodities for more than a year now. USDA’s Economic Research Service (ERS) estimates that total cash income for farm businesses in the United States for 2015 is more than 27 percent below that of 2014 – again, more than 27 percent below what farmers received in 2014. 2015’s income figure is below what farmers received in 2010 – the “recovery year” from the previous serious economic downturn in agriculture’s economy. And ERS projects another significant drop in cash income for the U.S. agricultural sector in 2016 – nearly 2.5 percent below what farmers received in 2015.


Since I’m a dairy farmer, I’ll highlight how my sector has been impacted by price volatility. For example, 2009 and 2010 were financially devastating years for the dairy industry. In fact, in 2009 client dairy farms of PFB’s MSC Business Services1 lost an average of $2.53 per hundredweight. After two rough years, milk prices began to climb again, reaching all-time highs in 2014, helping farms recover from the low prices of previous years. Regardless, for the six-year period of 2008 through 2013, the net profit margin realized on MSC-client dairy farms only averaged six cents per hundredweight, meaning that dairy farmers overall had little to show for six years of operation.


Costs of production – how much it costs to produce one hundred pounds of milk – have also increased for Pennsylvania’s dairy farmers. Annual costs of production have increased significantly from 2009’s average of $19.50 per hundredweight, jumping to over $23.00 per hundredweight in 2011, 2012 and 2013, and in 2014, the average rose to $25.14. While we don’t have the final analysis yet for 2015, based upon my own experiences, cost of production in 2015 is likely to be at least as much as it was in 2014. Unfortunately, while we had record milk prices to offset 2014 production expenses, the picture was very different for 2015 and, for this year as well, so far.


Why is this important? For farmers already facing significant challenges from volatility in their net operating income, anything that adds stress to already tight margins is a bad thing. For farmers like myself, who are already treading carefully on a razor’s edge of profitability, the danger of uncertainty that comes from a growing patchwork of environmental regulations – particularly those of us in and around the Chesapeake Bay Watershed – is unbelievably frightening and potentially debilitating when we need to make decisions about farming, expansion and even bringing on the next generation.


Perhaps the best illustration of uncertainty comes from estimates of consequences to agricultural production in the Bay Watershed if the nutrient and sediment reduction goals under EPA’s Total Maximum Daily Load (TMDL) are fully implemented. Those estimates project that some 20 percent of all cropland – roughly 630,000 acres – in the watershed will need to sit idle in order to meet nutrient reduction goals. Not surprisingly, EPA has neither confirmed nor denied the accuracy or likelihood of these estimates. But EPA has conceded that even if Pennsylvania farmers fully comply with all of the legal requirements that are “normally” imposed under federal and state regulations, Pennsylvania will still fall substantially below the reduction goals that EPA has imposed for the Commonwealth.


When we’re talking about privately-owned cropland, who will determine what land gets fallowed? Certainly, EPA officials don’t intend to make individual, local land use decisions… or do they?


That’s the looming uncertainty that I’m talking about.


And it is in this context that I ask you to place my testimony today.


Bureaucracy
As the EPA’s Chesapeake Bay regulations have evolved over the years, so too has the massive bureaucracy surrounding this effort. There has been a continuous and overbearing stream of Chesapeake Bay meetings held by dozens of teams, task forces, working groups, expert panels and committees since 2010, when the Chesapeake Bay TMDL was first imposed by EPA. And the overwhelming majority of these meetings have been held directly or indirectly under the auspices of EPA and its exercise of regulatory control in the Bay.


I suspect that EPA is attempting through its stream of meetings to create the image that the agency is working “in partnership with” affected “stakeholders” in the Bay region and is making a serious effort with stakeholders to reach “solutions” for reducing pollution that landowners and local communities can readily and practically do. A closer review of these meetings, however, should clearly show you that activities performed and work products resulting from these meetings are merely an exercise in academics, without any serious consideration of how realistic those academic analyses can be attained or feasibly implemented by landowners and communities subject to TMDL regulation.


The driving force behind this host of Bay meetings remains a model that attempts to “project” outcomes from land use activities based on numerous assumptions. Even those who have the technical ability to understand EPA’s Chesapeake Bay model and the factors that affect outcomes in the model will commonly remark there is a significant difference between the “model world” and the “real world.”


I’ll just quickly mention that this same EPA model, which drives the requirements and limitations imposed on farmers, landowners and communities in the Bay watershed, and which measures the environmental achievements of Pennsylvania and other Bay states, has been significantly modified several times since 2010. And it will be significantly changed in the near future, once again moving the target of regulatory requirements that EPA will impose on farmers, businesses and local communities and the measure of environmental achievement that these sectors have attained in the Bay Watershed.


EPA can attempt to claim that its system of Chesapeake Bay meetings is an open and public process and that I – as a farmer – have the opportunity to weigh in. Yes, there are token farmer representatives on these meeting bodies. But despite my four-year degree in animal science from a well-known and respected university and 34 years of farming while implementing modern technologies, I don’t understand EPA’s science. And no farmer can legitimately comprehend and respond to the reams of academic analyses that have been produced through these meetings and continue to perform the tasks needed to run his or her farm business.


There should be little doubt that EPA’s bureaucratic imprint and extensive nature of influence and oversight of outcomes in the Bay has continued even in the creation and function of “public input” bodies currently existing in the Bay Watershed.


The Chesapeake Bay Program is described on its website as “a regional partnership” that leads and directs the restoration and protection of the Chesapeake Bay. Yet all of the members of the Program’s leadership team are EPA officials. And EPA officials comprise a significant presence on numerous input bodies.


I have attached (Appendix 2) to my testimony a list of nearly 60 public bodies that have been created under the auspices of Chesapeake Bay Program. This is the organizational web through which EPA expects individual farmers to engage and provide input.


As a farmer, I consider myself a practical guy. My inputs are measurable. My outputs are measurable. Each year, I have a profit or loss statement. My farm’s – and my family’s – financial future is measured by real, tangible things: bushels of corn, tons of silage, pounds of milk… dollars. Meanwhile, EPA seeks to measure environmental impact through complex computer modeling, even though several state, interstate and federal agencies have accurate and reliable water quality monitoring stations in rivers, streams and the Bay itself.


Inflexibility
While simple for regulators, one size doesn’t usually fit all. It especially doesn’t work in agriculture – where farms are most certainly not alike and where land dynamics change significantly from one part of the state to the other. In fact, more recent studies by Penn State University and others are showing that not only is EPA’s one-size-fits-all regulatory approach in the Bay Watershed unworkable, it is also very inefficient in both managing the costs of environmental improvement projects and utilizing public funds in a manner that provides the greatest environmental improvement for each dollar of public funds spent.


EPA’s Chesapeake Bay model is inflexible. For example, it makes assumptions of no-till that conflict with what we know to be true. The Conservation Effects Assessment Project (CEAP), undertaken by USDA’s Natural Resources Conservation Service (NRCS), determined that no-till and conservation tillage are used on nearly 80 percent of the cultivated cropland in the Bay watershed.


Furthermore, continuous conventional tillage is used on only 6 percent of the cropland. In fact, the report demonstrates there has been substantial adoption of conservation practices between the 2003-2006 and 2011 reports. Despite NRCS’ findings, EPA’s model makes the assumption that 50 percent of all cultivated crops used conventional tillage, with the other half planted using only conservation tillage. What amazes me is that when we have reliable data, produced by another federal agency, EPA still refuses to credit farmers for the good work we’re doing.

 

One of the major challenges we continue to face regarding the Chesapeake Bay regulations and the resulting Bay Model is the failure to capture and credit a multitude of best management practices (BMPs) that farmers voluntarily use, without the use of government funds. While these are practices have been proven to provide measurable impacts in improving water quality, EPA has consistently refused to recognize them, unless those practices are administered through government cost-share or are personally verified by state or federal regulatory officials. It just doesn’t make sense to me.


For years, EPA officials have flatly rejected attempts by the agricultural sector to provide a feasible methodology for recognition and crediting of these reported agricultural non-cost share BMPs that would allow verification by persons other than a “qualified” government official or allow a crediting of pollution reduction for reported BMPs on any acre of farmland in which the “qualified” official has not personally inspected and verified the practice is actually performed.


In Pennsylvania, the departments of Environmental Protection and Agriculture have teamed up with Penn State University and agricultural organizations – including Farm Bureau – to develop a program to capture and verify these BMPs. As part of the effort, farmers in the Bay Watershed were asked participate in a survey where they have the opportunity to report recognized BMPs and do so in a way that protects them from adverse consequences such as enforcement activity. The results will be reported and statistically verified, and hopefully credited in EPA’s Bay Model. Unfortunately, EPA has previously rejected similar plans hoping to utilize statistically reliable data collection and validation in order to credit Pennsylvania’s farmers with nutrient and sediment reduction activities. So far, I understand that approximately 7,000 surveys have been returned. We are optimistic that this survey will help us better capture the practices that farmers are using, but in order for this endeavor to be successful, we will need the full, continued support of state and federal officials to convince EPA to include this statistically valid data into the Chesapeake Bay computer model.


Uncertainty
In the fall of 2015, EPA summarily decided to withhold $3 million in funding because they believed Pennsylvania was not doing enough to reduce nutrient and sediment pollution from nonpoint sources. This is money that the state could ill-afford to lose considering that Penn State University’s Environmental and Natural Resources Institute found that to fully comply with EPA’s pollution reduction mandates by 2025, the state would need to incur $3.6 billion in total costs or approximately $240 million per year just for initial implementation of nonpoint BMPs and infrastructure. In order to both implement and maintain such practices and infrastructure, that number rises to $378.3 million per year. In FY 2014, total state and federal funding available to the state for nitrogen, phosphorus and sediment pollution reduction programs statewide, not just for the Bay Watershed, amounted to just $146.6 million. In short, while comparatively speaking that $3 million withheld by EPA is a small amount, it is absolutely needed.


EPA failed to provide to either Pennsylvania officials or to Pennsylvania citizens specific detail of the supporting reasons or bases behind its determination to withhold federal funding. Similar to Pennsylvania’s regulated community, officials from Pennsylvania’s Department of Environmental Protection (DEP) were left trying to guess the type and degree of change the agency needed in administrating its nonpoint program to restore favor with EPA and finally receive the $3 million that EPA was withholding from Pennsylvania.


DEP’s administrative response to EPA’s decision to withhold federal funds, which DEP has characterized as its “reboot strategy,” did result in the release of the $3 million being withheld. But similar to its initial decision to withhold funds, EPA provided no specific detail on which previously deficient components of Pennsylvania’s nonpoint program were sufficiently remedied under DEP’s reboot strategy.


While I’m glad that Pennsylvania did finally receive needed federal monies for use in Pennsylvania’s Bay Watershed, the lack of due process shown by EPA in both its initial decision to withhold federal funds and its subsequent decision to release funds to the Commonwealth is very disturbing. EPA’s manipulation of federal funding for Pennsylvania was arbitrary, at least in appearance if not in reality. What is to stop EPA in the future from making greater demands of Pennsylvania and imposing more stringent demands of state regulatory programs purely for political or ideological purposes? Is it fair for state regulators to be forced to play a guessing game with EPA? And more importantly, is it fair for farmers to be caught in this tug of war between EPA and state regulators? Finally, is it fair for those 33,600 Pennsylvania farmers in the Bay watershed to wonder if – despite their best practices – one day they will be forced to shutter or significantly reconfigure their farms in order for Pennsylvania to meet EPA’s arbitrary threat of federal withholding?


As a farmer, I do several things to satisfy state regulators, but as I established earlier, I’m also dealing with tanking milk prices while trying to make my farm financially sustainable to bring my sons into the family business. I believe I’ve demonstrated my willingness to undertake practices that are better for the environment, but I want to do things that make sense for my farm and improves water quality in my local community, rather than a water body that is several hundred miles away.


Both state and federal officials have noted and documented the significant progress that Pennsylvania has made in reducing nitrogen and phosphorus pollution in the Bay Watershed, including pollution from nonpoint sources over the past several decades and more recently during the time period that President Obama’s Chesapeake Bay Executive Order has been in effect.


At the same time EPA and its cohorts point fingers and paint agriculture – farmers just like me –as a villain that impairs water quality in the Bay. But their accusations are in direct conflict with U.S. Geological Survey data – which showed pretty positive gains on water quality in tributaries throughout the Bay Watershed. These gains are not because of our revised Bay strategy or EPA’s model. It merely demonstrates what agriculture has been doing for decades through increased knowledge, additional opportunities, technology and time.


Here’s my question for EPA: Do you really think I’m trying to pollute?


I want to do the right thing. On my farm, I’ve been no-tilling for 20 years and, for the last four to five years, I’ve planted cover crops. I maintain a farm conservation plan and a nutrient management plan specifically designed for my farm. All of these practices were done voluntarily and without federal dollars. The only time I’ve used federal dollars for conservation was for help in laying out our contour strips on our farm in the 1980s. I know there are many farmers in
Pennsylvania and in the U.S. who have implemented voluntary practices without any federal funding. Yet, in the eyes of the EPA – and in terms of the Bay Model – we don’t count.


Tell me, does that makes sense?


Conclusion
Bureaucracy. Inflexibility. Uncertainty. These three words certainly capture the theme of EPA’s Chesapeake Bay regulations and how they impact farmers, not just in the watershed, but across Pennsylvania, the region and even the nation.


There’s no question that farmers can reap financial benefits from implementing best management practices. I’ve certainly seen that using no-till practices on my farm. But there are also can be significant costs as well. As much as I – and other farmers – would like to implement more practices, I don’t have the money to do more without – or even sometimes with – state or federal assistance. As farmers, we are dependent on the agricultural economy and right now, that definitely adds a major challenge. As I mentioned earlier, there’s been a great ebb and flow of farm income and margins for nearly 10 years.


Regulators must be aware of the realities of agriculture. I’m a small business owner. I don’t have a compliance officer – or a large staff – available to dance when the EPA says dance. At the end of the day, it’s just me and my three sons trying to make a living on the farm – trying to balance the day-to-day tasks while complying with an ever-growing list of environmental regulations put forth by federal agencies willingly ignoring the beneficial practices we employ.


I consider myself a typical American farmer. I operate a small family farm. Our milk goes to a small family business, where it is processed and used in schools and hospitals in and around Pittsburgh, Pennsylvania. On our farm, we’re trying to do the right thing. We’re good stewards. We take excellent care of our cows and we go the extra mile to take care of our land and our water, not only because it’s the right thing to do, but because it’s my family – my children and grandchildren – who eat here, play here and hopefully one day will work here.


Again, thank you for the opportunity to provide testimony to the Subcommittee today.


1 PFB’s MSC Business Services provides every aspect of farm and agri-business management. A staff of 40 trained accountants conduct tax planning/preparation and business consulting services in farm homes and offices across the state. MSC Business Services publishes nearly 900 individual Dairy Profitability Comparisons annually for clients, giving in depth analysis allowing for comparison to similar sized farms and the most financially successful farms in the program. See Appendix 1 for corresponding data.