"Prevented Planting" Insurance Plows up Wetlands, Wastes $Billions
Boondoggle: New Fix Likely Won’t Work
In its PLASH for 2014, the agency made another major change in its approach in order to implement recommendations made by its Inspector General in the 2013 audit. The audit concluded that using "normal" weather as a condition for meeting loss adjustment standards was "unworkable because it is too subjective for loss adjusters to apply in a uniform manner." The agency had not provided a definition or a methodology for determining whether the weather was normal during the planting period. Specifically, the report concluded: "Without a definition for ‘normal' weather and a methodology for determining if the claimed acres were planted when weather conditions were ‘normal,' loss adjusters do not have a clear standard to apply when making available-for-planting determinations."
The Inspector General's office recommended that the Risk Management Agency abandon references to "normal" weather and instead require acres to have been planted at least once every three or four years in order to be considered "physically available for planting." Its report went on to suggest any acres that failed the 1-in-3 or 1-in- 4 test "must be planted for a set number of consecutive years before regaining eligibility."
The agency's new rules exactly implement the Inspector General's recommendation for acreage insured in four Prairie Pothole states: Minnesota, Montana, North Dakota and South Dakota. The critical provisions in the new definition are (italics added):
In order for acreage to be "physically available for planting" in accordance of section 17(f)(8) of the Basic Provisions, the acreage must: (1) Be free of trees, rocky outcroppings, or other factors that prevent proper and timely preparation of the seedbed for planting and harvest of the crop in the crop year; … (5) In at least one of the four most recent crop years immediately preceding the current insured crop year, have been planted to a crop:
- a) Using recognized good farming practices;
- b) Insured under the authority of the Federal Crop Insurance Act (Act); and
- c) That was harvested, or, if not harvested, was adjusted for claim purposes under the authority of the Act due to an insured cause of loss (other than a cause of loss related to flood or excess moisture).
Once any acreage does not satisfy the criteria set-forth within 5 (a)(b) and (c) in one of the four most recent crop years immediately preceding the insured crop year, such acreage will be considered physically unavailable for planting until the acreage has been planted to a crop in accordance with (a)(b) and (c) above for two consecutive crop years.
In short, the agency's 2014 policy established two tests that acreage must meet to be considered physically available for planting and therefore eligible for a prevented planting payout:
- A 1-in-4 Years Test, which specifies that the acreage must have been planted, harvested or compensated for a claim (other than for excessive moisture or flooding) in at least one of the previous four years.
- A 2-in-2 Years Test, which specifies that acreage that fails the first test must be planted, harvested or compensated for a claim (other than for excessive moisture or flooding) two years in a row before it can again become eligible for a prevented planting payout.
To evaluate how well these new tests will work to prevent repeated payouts on acreage that should not be eligible, EWG undertook a study of weather data from the region.
1-in-4 Years Test Is Too Liberal
The 1-in-4 years test is the most important. As long as acreage meets that requirement, it remains eligible for a prevented planting payout. EWG analyzed the federal Palmer Drought Index to estimate how easy it would be for acreage in the Prairie Pothole Region to meet the rule. The Palmer Drought index is compiled by NOAA's National Climatic Data Center and records cumulative dry or wet conditions in 344 climate divisions in the lower 48 states. Twenty-seven of those divisions include land in counties of the Prairie Pothole Region.
To assess how likely it was that seasonal wetlands could have been planted under the 1-in-4 year test, EWG analyzed the Palmer Index to see how often conditions were drier than normal in May and June between 2000 and 2014. We then calculated the probability, expressed as a percent, that acreage in each climate division would have been dry enough to plant in at least one year out of the four (Table 1). EWG also assessed a 1-in-3 years test, which was what the Risk Management Agency initially proposed before settling on the 1-in-4 years test.
TABLE 1: NUMBER OF CLIMATE DIVISIONS BY PROBABILITY (PERCENT) THAT ACREAGE WOULD HAVE MET A 1-IN-4 OR 1-IN-3 YEARS TEST
|Number of Climate Divisions|
|Probability of Meeting Tests||Prairie Pothole Region||65 Counties|
|May||1 in 4 years||1 in 3 years||1 in 4 years||1 in 3 years|
|June||1 in 4 years||1 in 3 years||1 in 4 years||1 in 3 years|
|Average||1 in 4 years||1 in 3 years||1 in 4 years||1 in 3 years|
Source: NOAA National Climatic Data Center, U.S. Palmer Drought Indices
This analysis indicates it may be quite easy for acreage in the region to pass the 1-in-4 years test. There was a more than 50 percent probability that all climate divisions had drier than normal conditions in May or June between 2000 and 2014. In May, 25 out of 27 divisions had a more than 75 percent chance of passing the 1-in-4 years test, and in June, 22 out of 27 did. EWG also averaged the Index values for May and June and found the same result – it is very probable that drier than normal conditions will occur once in four years. Results from the 13 climate divisions that overlap the 65 Prairie Pothole counties mirror the results for the entire region.
Moreover, successfully planting acreage when the weather is abnormally dry now counts toward passing the 1-in-4 years test. This is a striking reversal of long-standing RMA policy and means that the millions of acres that could be planted in 2012 – a year of extreme drought – will now count toward meeting the 1-in-4 year test.
A 1-in-3 years test would lower the probability that acreage would qualify for payouts, but there are still a surprising number of climate divisions with a 75 percent chance of meeting that test's requirements.
2-in-2 Years Test Is Much More Restrictive
The Palmer Index data shows that it would be far harder for acreage in the Prairie Pothole Region to pass a 2-in-2 year test (Table 2). In 25 out of the 27 climate divisions, there is less than a 25 percent probability that weather in May would be drier than normal in two consecutive years. In June, the odds are similarly low in 21 out of 27 divisions. For the two-month average, 25 out of 27 divisions would have a less than 25 percent chance of being drier than normal two years in a row.
"Under the rule, for acreage to be eligible for prevented planting payments, the acreage must have been planted and harvested in one out of the last four years, regardless of whether one of those years was abnormally dry.
"‘The new rule is meant to apply a much more objective standard,' Willis said (Brandon Willis, RMA Administrator). He added that the previous policy required planting and harvesting to be done in a ‘normal year.' Under the new provision, that metric is broadened to make the means for determining eligibility more objective. For instance, if farmers planted and harvested in 2012 under ‘abnormally dry conditions,' they can now use that year in their eligibility for the program."
RMA announces new prevented planting rule, Aug. 26, 2013
The weather data show that it would be even harder for acreage in the 65 counties that generated prevented planting payouts 14 years in a row to pass the test. All of the climate divisions in those 65 counties have less than a 25 percent chance of meeting the a 2-in-2 year test when Index values are averaged between May and June.
TABLE 2: NUMBER OF CLIMATE DIVISIONS BY PROBABILITY (PERCENT) THAT ACREAGE WOULD HAVE MET A 2-IN-2 YEARS TEST
|Number of Climate Divisions|
|Probability of Meeting Test||Prairie Pothole Region||65 Counties|
|May||2-in-2 Years||2-in-2 Years|
|June||2-in-2 Years||2-in-2 Years|
|Average||2-in-2 Years||2-in-2 Years|
Source: NOAA National Climatic Data Center, U.S. Palmer Drought Indices
Top Two Counties
EWG took a closer look at weather data for the two counties – Brown County, South Dakota, and Ward County, North Dakota – that got the most prevented planting payouts for excess moisture between 2000 and 2013.
The National Climatic Data Center estimates "normal" weather data using a 30-year record of temperature, degree-days, precipitation, snowfall, snow depth, wind, etc. from weather stations across the country. The so-called weather "normals" are organized into hourly, daily, monthly, seasonal and annual figures.
The Center reports "normals" for six weather stations in Brown County and four in Ward County. EWG calculated normal annual precipitation for each station by adding the 12 monthly "normals." We then compared the annual normal to actual precipitation that year to determine how often the weather was drier than normal for each year from 2000 to 2013. Below-normal precipitation would suggest that seasonal wetlands were likely available for planting.
TABLE 3: PROBABILITY THAT WEATHER WILL BE DRIER THAN NORMAL IN BROWN AND WARD COUNTIES
|1-in-4 years||1-in-3 years||2-in-2 years|
|Brown County, S.D.||91%||85%||40%|
|Ward County, ND||98%||90%||38%|
Source: NOAA National Climatic Data Center, Global Historical Climatology Network
The results are striking. In Brown County there is a 91 percent probability that one in every four years will be drier than normal and an 85 percent chance that one in three will be. In Ward County there is a 98 percent chance that one in four years will be drier than normal and a 90 percent chance in one in three will be. There is a 40 percent probability that weather will be drier than normal in two consecutive years in Brown County, and a 38 percent probability of that in Ward County.
It is almost certain that growers in these two counties will always meet the 1-in-4-years test. In the rare case that they do not, there is still a good chance of meeting a 2-in-2-years standard and once again becoming eligible for prevented planting payouts in succeeding years.
RMA's Office of Inspector General said that its recommended approach – now fully implemented by the agency – would "prevent regularly wet land from becoming eligible, due to being planted in a single, abnormally dry year."
EWG's findings, however, indicate that the new policy will still allow prevented planting payouts for excess moisture year after year for seasonal wetlands that can only be successfully planted when the weather is drier than normal.