Note: This is the second in a series examining the Farm Credit Administration’s (FCA) responses to questions submitted for the record by members of the House Committee on Agriculture following its oversight hearing of the Farm Credit System (FCS) in December 2015.
Oil derricks. Vertical wells. Hydraulic fracturing.
Doesn’t sound like agriculture, does it?
It does to the Farm Credit System (FCS) – and even though there’s no mention in statute that it should be exploiting mineral assets, Farm Credit brazenly pushed on in 2015, garnering $70 million in mineral revenue from properties its predecessors foreclosed on during the Great Depression.
Most people don’t consider oil and natural gas extraction a form of agriculture, and members of Congress agree – Rep. Marlin Stutzman (R-IN) called for the Government Accountability Office (GAO) to conduct an audit on the mineral rights holdings of Agribank, a constituent bank of the FCS.
And at the hearing held in December by the House Committee on Agriculture, the question was brought up point blank again – what’s the whole story on Agribank’s mineral rights holdings? A series of questions directed to the FCA by Rep. Frank Lucas (R-OK) forced it to finally address the issue.
The first question was whether the FCS should be in the business of holding long-term assets like oil, gas and other minerals, and the FCA dodged the question – instead of answering whether it should hold onto these assets, it responded only by saying that it is allowed.
Following up on his first question, Rep. Lucas asked whether the FCA knows the value of AgriBank’s mineral assets, and the response is thorough in its hedging until the very end, when the FCA revealed that AgriBank’s mineral income for 2015 was $56.5 million.
Rep. Lucas’ final question was whether the FCA will require AgriBank to dispose of its long-held mineral assets, to which the FCA responded that AgriBank’s possession of the mineral rights does not violate the law, and that it has no basis to require AgriBank to dispose of those assets.
Throughout this line of questioning, the FCA kept falling back to its boilerplate answer, that AgriBank’s possession of mineral rights doesn’t break the letter of the law. That’s true – the Farm Credit Amendments Act of 1985 is not retroactive, and it doesn’t require AgriBank to divest of its mineral assets acquired before 1985. But there’s more to law than just the words on a page – there’s the spirit of the law too. And in 1985 Congress made it clear that FCS institutions should not be in the business of profiting off of oil and natural gas extraction.
To its credit, the Farm Credit Bank of Texas sold its mineral rights for $30 million in 2003 – 18 years after Congress made its intent known. Agribank, however, shows no signs of changing course 30 years after – in the last 10 years, AgriBank has reaped $475 million in income from its mineral assets. As to where this income goes, AgriBank does not disclose, but CoBank opaquely reveals that it passes directly to “certain associations.”
Just because it’s legal doesn’t make it right. FCS institutions are supposed to be helping farmers, not reaping the rewards of oil and natural gas production. The FCS’ retention of mineral rights isn’t just depriving entrepreneurs of a fair shot in the market, it’s also showing a flagrant disregard for congressional intent. So instead of trotting out the same tired answer to defend this questionable practice, the FCA should do its job and make sure that FCS institutions follow the spirit of the law. If the FCA isn’t up to the task, then both the House and the Senate Committees on Agriculture should clarify for AgriBank that agriculture has little to do with oil, natural gas or mineral rights.
Oil derricks. Vertical wells. Hydraulic fracturing. Doesn’t sound like agriculture, does it? It does to the Farm Credit System (FCS).