CATCH THE BUZZ – Feds hit brakes on loans to big farms. Do the environmental evaluation BEFORE you ask for a loan.

By Catherine Boudreau, Drovers Journal

The Obama administration is slow-walking the credit it gives to large dairy and livestock farms out of fear that it could get slapped with another big environmental lawsuit, POLITICO has learned.

Big farms in the South, Midwest and Northeast are struggling to get the financing they need because of the slowdown, with applications for loan guarantees languishing for more than a year and a half in some cases, lenders and state farm groups say.

The foot-dragging stems from a 2013 lawsuit that the environmental law nonprofit Earthjustice filed against the administration over loans it guaranteed for farmers to build a concentrated animal feeding operation in northern Arkansas. The litigation has forced the Small Business Administration to reevaluate the way it vets the loan applications to include an assessment of the environmental impact of construction, causing major delays in approvals.

The Department of Agriculture’s Farm Service Agency, too, is taking longer to approve guaranteed farm loans for new construction due to stricter environmental scrutiny, lenders say, although an agency spokesman said its environmental assessment process hasn’t changed as a result of the lawsuit, with the exception of that one Arkansas case.

The backlog of loan applications in Arkansas, New York, Wisconsin and other dairy and meat-producing states is hurting the already sluggish rural economy, lawmakers say, and comes as the agriculture industry faces increasing pressure from the federal government, environmental groups and the public to reduce the impact of farming on land, water and climate.

“This lack of clarity from the SBA is effectively rendering a potentially valuable economic development tool unavailable to dairy operations,” costing about $100 million in potential agribusiness investment in Wisconsin, the state’s congressional delegation said in a letter this summer asking the agency to fix the situation. The lawmakers added that while they understand the need to protect natural resources, the SBA must outline its expectations on how loan applicants can comply with federal regulations.

The agency asserts that it continues to make loans to farmers and ranchers, but the process “may take a bit longer now as we continue to thoroughly review and ensure environmental compliance,” spokesman Terry Sutherland said.

Because major farm construction projects are capital intensive and often cost more than the $1.39 million cap FSA places on guaranteed loans, farmers can use SBA programs to make up the difference. Commercial and Farm Credit System bankers often seek these government-backed loans to reduce their risk and offer farmers long-term loans at lower fixed rates.

Earthjustice, representing four Arkansas conservation groups, sued the SBA and FSA for guaranteeing $3.6 million in loans to a Cargill contract farm. The suit argued the SBA violated both the National Environmental Policy and Endangered Species acts by not assessing the environmental impact of C&H Hog Farms building housing for 6500-swine in Mount Judea.

The complaint also said the FSA’s evaluation was flawed because, for example, it didn’t mention the Buffalo National River and its tributary, Big Creek, even though nine fields where manure is spread border the tributary.

A federal judge agreed, ordering the agencies to conduct a joint environmental assessment. Although the administration again found that the hog farm would have “no significant impact” on the environment, the lawsuit forced the SBA to update its more than 30-year-old environmental policy, which the agency hadn’t been applying to loans, to determine what environmental evaluations should entail.

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