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Wheat fields in May overlooking the Snake River towards Lower Granite Dam.
Photo by Kim McCabe

WestBred

POLICY

Aiming for 2021

Legislator hopes DNR legislation finds its footing next year

May 2020
By Trista Crossley


Rep. Chris Corry (R-Yakima) is hoping third time’s the charm for his bill that would require the Washington State Department of Natural Resources (DNR) to compensate growers when some leases are terminated early.

The 2020 Legislative Session was the second time Corry has sponsored legislation seeking to change the way DNR handles early termination of agricultural leases, especially under their “higher and better use” clause. The bill, HB 2498, passed the House unanimously, but failed to get out of the Senate Committee on Agriculture, Water, Natural Resources & Parks before the policy cutoff deadline. The bill was almost universally supported, including by DNR. Corry is planning to reintroduce the bill next year.

“Stuff dies all the time. Some stuff you have to fight three to five years to get through,” Corry said. “I’m thankful that DNR is on the back end implementing policy, and I’m hopeful next year we will have no roadblocks getting this through.”

The bill’s genesis was in 2018, when Corry heard from a rancher in Goldendale whose lease had been terminated five years early by DNR. As a result, the lessee was forced to move livestock and remove improvements even though the department had not leased the land at a higher rate. The rancher was left with no way to protest, much less recoup his or her costs. Under their current lease contracts, DNR is required to give growers 180 days notice if they intend to invoke the higher and better use clause, but they are not required to compensate growers for any improvements that have been made to the land or pay any penalties for terminating a lease early. That struck Corry as very wrong.

“That didn’t seem like the fair thing to do. We have all sort of tenant rights when it comes to renters, why wouldn’t farmers have the same rights?” Corry said. His first bill, introduced in the 2019 Legislative Session, would have banned DNR’s ability to terminate leases early without the written consent of the lessee. The department pushed back, testifying against the bill. DNR’s argument was that they have a fiduciary responsibility to get as much money off of state lands as possible and need to be able to move quickly when a better rental opportunity presents itself. Those monies are used to help fund public school construction across the state. Corry said he understood DNR’s position but still felt like the situation needed to be fixed. That first bill died in committee.

“My comment to DNR and to stakeholders was, ‘I’m not done. This is wrong and we need to figure out a solution,’” he recalled. Surprisingly, DNR agreed.

Throughout the summer of 2019, Corry, representatives from the department and agricultural stakeholders met to figure out a solution that would protect the statutory requirements of DNR while at the same time, providing some security to farmers and ranchers who entered into lease agreements with them. The resulting plan required DNR to:

• Provide written documentation that DNR has included the leased land in a plan for higher and better use, land exchange or sale;
• For grazing leases, pay the lessee the annual rent for the leased land, multiplied by six, for the years remaining on the lease;
• For agricultural leases, pay the lessee the expected return from crops raised on the land, less expenses, for the years remaining on the lease;
• Compensate lessees for any improvements made to the land; and
• Reimburse lessees for any penalties resulting from early withdrawal from a natural resources conservation service program.

Initially, DNR advocated for putting the requirements into the Washington Administrative Code (WAC), which regulates how state agencies work. Corry disagreed, saying that although he trusted the DNR staff he was working with, he didn’t necessarily trust who would come after—WACs were too easy to change. Instead, Corry wanted to put the requirements into the Revised Code of Washington (RCW), meaning they become law.

“If they want to change (those requirements), they’ll have to come to the Legislature to ask for that so stakeholders would be involved,” Corry said. All interested parties agreed to that course of action, and HB 2498 was introduced. “When I say everybody was on board, everybody was on board. I jokingly told people, ‘We will walk into that meeting holding hands and singing Kumbaya,’ and we did. The department liked it. They knew it was the right thing to do.”

The bill was sailing along with no opposition until it stalled in the Senate Ag Committee at the end of the 2020 Legislative Session due to what Corry called a “misunderstanding.” A senator mistakenly thought the money that would be used to compensate lessees was going to come out of the school trust fund. In reality, DNR would use money from their annual budget. The good news, however, is that DNR is moving forward with the plan, implementing it as a policy for all new leases. Existing leases will be considered for the new policy on a case-by-case basis. Corry said the support of DNR has been crucial.

“I think they (DNR) were starting to have a more human approach, and this was an evolution of that. I knew if I couldn’t get the department’s support on this, it wouldn’t go through the Legislature. I did everything I could to respect their needs and balancing our needs. I think we had a good piece of legislation that did both. Now, we need them to come along with me next year,” Corry said.

Duane Emmons, DNR product sales and leasing division manager, has been working with Corry on this legislation from the beginning. Emmons said DNR has been hearing from lessees that the fact that leases can be terminated early with no compensation is influencing how and what kind of investments are being made on the leased land.

“We said we do need to recognize that,” Emmons said. “We reached out to Rep. Corry and said let’s all get together and talk about this. Let’s try to work on this together so it does both things. It protects (the school) trust and our fiduciary responsibility and is also fair to the lessee and helps with that rural economic development as much as it can.”

The Washington Association of Wheat Growers (WAWG), along with other ag industry stakeholders such as the Farm Bureau and the Washington Cattlemen’s Association, provided input on the legislation. WAWG took special interest in this bill, thanks to a situation in 2016 where five dryland wheat farmers in the Horse Heaven Hills in Benton County abruptly lost their DNR leases with only 60 days notice. Although the department eventually agreed to provide some compensation to those farmers and made some changes to their procedures regarding terminating leases early, many growers felt DNR handled the situation poorly. Emmons said DNR has only used the early termination clause 12 times in the last 20 years, with most of those being in that Horse Heaven Hills situation.

“In those discussions, we came to realize that people are making investments (based on the lease terms), and knowing ‘oh hey, DNR could take that lease from you any time,’ people aren’t going to bid as much,” Emmons said, adding that the department hopes that by offering compensation, potential lessees will be willing to bid more for the leases and will be willing to make improvements to the land. “It’s kind of a win-win for us. It’s just a good business decision.”

Both Corry and Emmons were very disappointed when they learned the fate of the bill.

“It’s very rare that all parties agree (on a piece of legislation), and that we all supported it. There was no opposition from anyone,” Emmons said. “Even the trust beneficiaries supported it.”

WAWG lobbyist Diana Carlen and several wheat growers testified in support of the bill during a public hearing of the House Committee on Rural Development, Agriculture and Natural Resources. Michelle Hennings, WAWG’s executive director, said while wheat growers were frustrated that the bill didn’t pass, they were encouraged by DNR’s support of the legislation and the department’s recognition that growers should be fairly compensated when leases are terminated early.

“We’ve worked before with DNR on their lease language, so when Rep. Corry approached us to get involved, we were more than happy to help,” Hennings said. “We feel like the resulting legislation adequately compensates growers but still adheres to DNR’s responsibility to generate funds for the school trust. We want to recognize the department for their willingness to work with the ag industry, and we want to thank Rep. Corry for all his efforts in trying to make this situation right.”

Ryan Poe, WAWG president and a farmer in Hartline, Wash., said that his family currently has two DNR leases, and he understands how devastating it can be for a farmer to suddenly lose a big chunk of leased land and to be left holding the check for any improvements or input investments.

“Many farmers rely on leased land, including DNR land, for a good portion of their income, so it can be unsettling to know that at any time, that land could be pulled out from under you,” Poe said. “We applaud the work done by Rep. Corry and DNR and have every confidence that the bill will be successful next year.”

Recently, there has been increasing interest from solar companies in leasing DNR land, especially in Eastern Washington. Emmons said the department is making an effort to communicate more openly with its lessees. DNR has sent letters to farmers who are leasing land that has been identified as being of interest for future solar development.

“We don’t do these early terminations lightly,” he said “We don’t want to say, ‘hey, here’s a 10-year lease, and now we are taking it away.’ Areas are seeing increased interest in solar development and wind development, and we recognize that there is that competing interest.”