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North Dakota's anti-corporate-farming law still standing, still being challenged

by Carolyn Orr ~ November 2018 ~ Stateline Midwest »
In the 1930s, farmers throughout the Midwest were going out of business in record numbers, and corporations were buying the farmland at rock-bottom prices. In response, several Midwestern states passed bans on corporate farming and foreign land ownership. One of the first was North Dakota — via an initiated measure approved by voters in 1932.
That Depression-era law has faced a mix of legislative and legal challenges over the past three years, but it’s still standing.
Most recently, in September, U.S. District Court Judge Daniel Hovland issued a decision in a closely watched case that pitted the state against the North Dakota Farm Bureau.
Hovland’s ruling allowed both sides in the case to claim victory. But for Attorney General Wayne Stenehjem, the bottom line was this: North Dakota’s law has been upheld, with no fundamental changes in how his office has been enforcing it.
“[We] will continue to permit qualifying family corporations to take advantage of the family farm exception,” Stenehjem said after the decision.
That exception to the general ban on corporate farm ownership dates back to 1981. To qualify, family members in the corporation must be within a “certain degree of kinship,” and at least one of the shareholders must be “residing on or operating the farm or ranch.”
Hovland said the phrase “or operating” distinguishes North Dakota’s statute from laws in Nebraska and South Dakota that have been ruled unconstitutional violations of the Commerce Clause. Those two states had explicit language requiring a physical presence on the farm; North Dakota’s law does not. Because agricultural operations can be conducted remotely, Hovland noted, a nonresident of North Dakota can qualify for the state’s family-farm exception. The judge, however, did sever the law’s language on “domestic corporation” and “domestic limited liability company,” saying the term “domestic” gave preference to in-state entities.
Three years ago, the North Dakota legislature sought to loosen the state’s anti-corporate-farming law with passage of SB 2351. It allowed corporations to own pork and dairy operations of up to 640 acres.
“We were hoping to give smaller farmers the tools to survive in modern markets and allow extended family to invest,” notes Sen. Terry Wanzek, an author of that bill. One year after SB 2351 became law, however, North Dakotans, by a wide margin, “vetoed” the measure through a ballot referendum.
The 1932 anti-corporate-farming law remains popular in North Dakota, but legal challenges continue. The oil-pipeline company Dakota Access, LLC, is currently fighting efforts by the state to force a sale of Cannonball Ranch. Located on the route of a new pipeline, this ranchland was the site of anti-pipeline protesters. In response, Dakota Access says, it bought the land to protect the safety of pipeline workers.
The attorney general’s office says the company’s ongoing ownership of the land is illegal; Dakota Access counters by saying the state’s anti-corporate-farming law is unconstitutional and that the company qualifies for an industrial and business purpose exemption.


Articles written by Carolyn Orr, CSG Midwest staff liaison for the Midwestern Legislative Conference Agriculture & Natural Resources Committee.