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Overcharging for Excellence

Michigan’s new wastewater fee threatens small poultry farms

January 14, 2005 | By Patty Cantrell
Great Lakes Bulletin News Service


Michigan's smaller poultry farms are frozen in their tracks by a new fee that puts them in the same wastewater category as large slaughterhouses. Adjusting the oversized fee would keep the profitable and environmentally friendly farms in business.

When the Delphi West plant in Flint packed up in 1999 and moved its jobs out of Michigan, Frank Jones was one of the lucky ones. With 32 years on the job, he could take early retirement and keep his rural home in nearby Durand.

Because Frank and his wife, Laura Kay, wanted to maintain their comfortable standard of living, they thought about new ways to make additional money. Rather than look for work in a tight job market, the Joneses decided to turn their 10-acre hobby farm, where they were raising a few chickens and selling their certified organic eggs, into a real economic opportunity. But a new state fee that finances the enforcement of Michigan’s water quality laws is threatening their self-employment venture.

Even when Frank was still working at Delphi, the small farm was attracting calls from natural food stores in metro Detroit that wondered if perhaps they also had organic fryers for sale. People really like their eggs: A chef in Fenton, for example, insists on using them for his quiche because, he says, when he uses other eggs, his regular customers complain about the taste. That taste difference stems from the fact that Frank and Laura Kay raise their chickens in large, movable pens set in pastures, allowing the birds to do what birds do: Scratch for worms, soak up sunlight, and fertilize the ground.

Now the couple wants to expand their burgeoning business by selling about 150 fryers per week six months a year. So they built a small, stainless steel-outfitted building designed for sanitary, on-farm poultry processing. Initially, when they informed state environmental regulators that the small facility would use just 150 gallons of wastewater per week, compared to the approximately 2,000 gallons per day that most slaughterhouses use, the regulators assured them that their operation posed no concern.

But a series of letters from the Michigan Department of Environmental Quality has stopped the Joneses and many other micro-scale, pastured-poultry producers like them in their tracks. That is because a new state law the DEQ is enforcing lumps them in with big slaughterhouses and charges them the same annual $1,500 permit fees for their wastewater discharge that the much larger concerns are paying. The fee is part of a package of laws passed in 2003 that, for the first time, requires businesses that hold surface or groundwater discharge permits to pay for the state’s monitoring and enforcement costs.

Good Idea, Bad Fine Print
For small-scale, pastured poultry operations like the Joneses’, the fee adds a production cost that can only be described as prohibitive — anywhere from $1.50 to $15 per bird. The fee threatens to sweep away profit margins and drown one of Michigan’s newest small business sectors. The sector is particularly vital because it is often very profitable, offers a brand new source of jobs, and protects valuable farmland. With its 7 percent unemployment rate (fourth highest in the nation), marked inability to either retain young people or attract outside business investment, and sky-high rate of sprawling development, Michigan should closely analyze how it applies this new fee.

Michigan needs new fees from the businesses that require monitoring of their wastewater discharges. It is an excellent and fair way to finance the enforcement that is necessary to the state’s economy-enhancing job of water quality protection. But owners of small farms say that the fees are not just oversized, they are actually deadly to micro-entrepreneurs who offer one of the most promising and low-cost ways to enrich Michigan communities with good jobs, green spaces — and good food.

Policymakers must solve this problem by recognizing the lack of a threat from farms that release several hundred, not tens of thousands, of gallons of wastewater per week.

The regulatory snag could affect dozens of small-scale, pastured poultry producers in Michigan. They now find themselves facing a story that is familiar to small businesses that struggle to navigate rules that are often designed for bigger fish and are frequently blind to special circumstances. Familiar also is the governmental struggle to build the economy and protect the environment without overtaxing people and businesses.

Unintended Consequences?
In this case, Michigan Governor Jennifer M. Granholm and the Legislature moved to keep Michigan waters clean — and the state’s attractiveness to residents, tourists, and businesses strong — by requiring that those who discharge wastewater cover the state’s costs of making sure they do it properly. The state’s general fund paid these costs for years, but Michigan’s severe budget crunch forced a change in financing tactics.

“We had to come up with more money because the general fund could no longer support the whole structure,” said state Senator Patricia Birkholz, a Republican from Saugatuck, who chairs the Natural Resources and Environmental Affairs Committee, which developed the legislation. “These programs are very important to the economic well being of the state. The last thing we need is to have any pollution, actual or questionable, in our groundwater or surface water.”

Senator Birkholz believes the predicament of pastured poultry producers could be an “unintended consequence” of the compromises made to establish groundwater discharge fees in Senate Bill 560. Cyndi Roper of Clean Water Action in Michigan takes the argument one step further. She says the bill’s harmful effect on small butchering operations are the direct result of negotiations that favored lump sums for broad classes of businesses rather than real efforts to reward those that reduce toxicity or pose little risk, while holding bigger polluters accountable with bigger fees.

“Fees should be proportional to the impact that the facility would have on the environment and public health,” Ms. Roper said.

But the situation is far from theoretical for the Joneses and others with similar operations. Entrepreneurial agriculture policy experts say such farmers need help now.

“These new and beginning entrepreneurial farmers are out there attempting to address demand in the food system being created by in-the-know consumers,” said Tom Guthrie, director of Michigan Integrated Food and Farming Systems, a statewide group working to develop new food and farm markets. “It’s going to be devastating to those folks to pay that kind of permit fee just to get rid of a minimal amount of wastewater.”

A Skewed Policy, Rich in Irony
A dramatic example of how badly skewed the new law is can be found near East Jordan, a small town in north central Lower Michigan. There Jennifer Lewis and her business partner Ryan Romeyn, who sell pastured poultry in addition to fresh produce, partnered with a number of similar, neighboring farms to share the use of a mobile, state-approved poultry-processing trailer that they developed to improve quality and cut costs. But now each one of the four to six farms that uses the cooperative trailer each year faces a DEQ bill for the 2005 fee, plus last year’s $1,500 fee, plus interest. They are getting hit because they are among the very small percentage of micro-processors who actually bothered to seek the state’s blessing and obtain permits. The vast majority of such farms have avoided the DEQ; in retrospect, such wariness seems prescient.

The current situation is rich in irony. One of the strongest selling points for smaller farms focused on specialty and local markets is that they work with, not against, the forces of nature to produce food with exceptional taste and nutrition. Consumers are beginning to look for and choose these more naturally made products over foods from industrial-scale operations, which often endanger land, water, and public health with over-reliance on hazardous chemicals and improper disposal of huge amounts of toxically concentrated manure waste.

State policies play a large role in encouraging or discouraging these different types of agriculture. For example, livestock factories in Michigan, known as concentrated animal feeding operations, or CAFOs, are specifically exempt from the kind of groundwater discharge fees that the smaller and generally much safer pastured poultry producers now face. The rationale: CAFOs don’t dump wastewater; they discharge liquid manure. Yet water contamination from the application of truckloads of liquid manure waste from CAFOs onto land is a growing problem as the number and size of such operations expands.

In a sign of new resolve to prevent such industrial-scale pollution, the state DEQ recently required one such huge operation, Vreba-Hoff Dairy, to install an on-site wastewater treatment facility. The move came after the DEQ documented 25 discharges to waterways of contaminated waste from the dairy’s two locations in south-central Michigan, which generate 40 million pounds of manure waste annually.

The contrast is not lost on Frank Jones. After previously receiving a pollution prevention grant from DEQ for their low-threat poultry processing, the Joneses are flabbergasted by the new $1,500 wastewater permit fee and the penalties for not paying it. “On one hand we’re receiving a grant to reduce and recycle, and on the other hand they’re penalizing us for doing that,” he said.

Patty Cantrell founded and directs the Michigan Land Use Institute’s Entrepreneurial Agriculture project. Reach her at patty@mlui.org.

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