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New Energy Economics: Who Owns the Biomass – Tenant or Landowner?

Cole Gustafson, NDSU Biofuels Economist Cole Gustafson, NDSU Biofuels Economist

By Cole Gustafson, Biofuels Economist

NDSU Extension Service

Several colleagues and I are evaluating the economic feasibility of supplying wheat straw and other crop residues to a proposed biofuel plant near Spiritwood. To evaluate the feasibility of the project, we rely on both published historical data from sources, such as the North Dakota Agricultural Statistics Service, as well as information obtained directly from farmers in the study region who are asked to participate in focus groups and share their views on key strategic points.

As we begin to formulate our conclusions about the project, an interesting question has emerged.

In our focus group meetings, should we have met with landowners instead of farm operators who rent land? Obviously some focus group members were farm owner-operators who owned the land they farmed. Other focus group members were operators who primarily rented land.

A group we did not specifically seek was landowners who lease land to farm operators. In hindsight, do they have an interest in biomass produced on their property? In other words, who really has ownership of biomass resources produced on croplands?

One certainly can argue that farmers who rent land have a keen interest in biomass produced on acreage, just as they do in the grain that is produced. Since they supply most inputs, labor and machinery services, renters have an economic investment in output that accrues.

However, landowners also could make a claim on the biomass that is produced. Historically, biomass produced on land that is leased to tenants has not been collected. Instead, the biomass was left on the soil to provide valuable protection against wind and water erosion. Through time, decomposing biomass builds soil organic matter and overall soil health. Consequently, residual biomass was a portion of the return expected from the rental arrangement.

One colleague in the study, David Saxowsky, who is an agricultural lawyer, has some insights into the situation.

“North Dakota law states that tenants own production that accrues over the rental period, which broadly includes crop residues,” Saxowsky says. “This line of reasoning is consistent with past practices which allow tenants to remove straw for feed and bedding. A specific law supporting this view is North Dakota Century Code ( NDCC) 47-16-04. It says that in the absence of any agreement to the contrary between the lessor and the lessee, the products received from real property during the term of a lease belong to the lessee. However, there is language in this statute that the landowner and tenant could negotiate an alternative agreement with respect to any of the produce, including the residue.

“However, landowners also are protected,” he says. “The law generally prohibits a tenant from damaging the land. Would this prohibit a tenant from removing so much residue that the land is damaged by increased erosion or decreased sustainability? If yes, the amount of residue a tenant can remove is limited. For example, NDCC 47-16-09 says the lessee of real property must use ordinary care to preserve such property in safety and to keep it in good condition. Also, NDCC 47-16-10 says the lessee of real property must repair all deteriorations or injuries thereto occasioned by the lessee's ordinary negligence."

In summary, it appears that a tenant who meets environmental standards for leaving adequate residue will be considered as operating the land in a husbandlike manner and be allowed to utilize the remaining biomass as he or she sees fit.

However, what are these environmental standards? What is “ordinary care” or “preserve property in safety and to keep it in good condition?” It is never easy when a lawyer gets involved. Thanks, Dave!

NDSU Agriculture Communication

Source:Cole Gustafson, (701) 231-7096,
Editor:Rich Mattern, (701) 231-6136,
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