SD farm groups 'nervous' after foreign farmland ownership bill passes House

A South Dakota bill meant to implement modern regulations on the foreign ownership of agricultural land lives to see another committee.

House Bill 1231, a bill headed by Rep. James Wangsness, updates the state's alien ownership of agricultural land and registered agent laws by prohibiting certain countries from owning farmland and granting the state's attorney general the power to investigate violations of the proposed legislation.

The bill passed the House on a 61-6 vote Tuesday, with three lawmakers excused. HB 1231 now heads to the Senate, where it will be assigned to and heard by committee.

Though the legislation made its way through the House with ease, it has yet to garner support from the state's major farm groups, who have also not voiced direct opposition to the bill.

Some groups, however, do find certain parts of what the bill proposes concerning. South Dakota Pork Producers Council Executive Director Glenn Muller used the word "nervousness" to describe the lingering anxiety over the unintended consequences he believes could result if the bill is passed in its current form.

That's because HB 1231 prevents certain "prohibited entities" from owning ag land or ag land easements in South Dakota. This includes any government or people from China, Cuba, Iran, North Korea, Russia and Venezuela, as well as any organization who has any amount of ownership by the six nations.

The blacklisted countries also cannot lease South Dakota farmland, unless the lease is exclusively used for ag research and consists of 320 acres or less. A similar exception exists for ag land used only for feeding livestock. Easements and leases owned by the six nations outside of these exceptions will be dissolved by the state.

Agricultural land owned by the banned countries will also be forfeited to the state if the bill is made into law.

Proponents say HB 1231 closes 'entity loophole' in South Dakota laws

Countries, organizations and people for which and whom the block list does not apply are considered foreign owners and are subject to some of the same restrictions that currently apply in South Dakota law. Foreign owners, for instance, cannot own more than 160 acres in the state.

Rep. Will Mortenson, R-Fort Pierre, told House members Tuesday the bill would close what he termed an "entity loophole," where owners from foreign countries could possess farmland by proxy through corporations and limited liability companies.

Under the new bill, organizations with more than 10% ownership by a foreign person or government would be considered a foreign entity and subject to the bill's restrictions.

"Anyone who's a year out of law school could find a way around the current law we've gotten," Mortenson said.

Foreign ownership of South Dakota farmland is a growing but tiny fraction of the state's ag land make-up. According to U.S. Department of Agriculture's latest foreign holdings report, 411,102 acres or 0.9% of all South Dakota agricultural land is owned by other countries.

The USDA report disclosed some gray areas exist within its reporting system. When an investor lists multiple countries of origin, as is the case in some multi-country organizations and investing groups, and a primary country cannot be identified, the holding is identified as "no predominant country."

This means, per the USDA, the acreage numbers reported by Chinese investors or others — any non-U.S. ag land owner — should be treated "as a minimum."

Of the more than 410,000 acres held by foreign countries in South Dakota, Canada is the single largest foreign shareholder, with 149,664 acres owned, followed by the United Kingdom with 96,607 acres owned.

144,111 fall under the "all others" category. Excluding Canada, Germany, Italy, Netherlands, and the United Kingdom, various other countries, including the six blocked nations, contribute to this cumulative total.

Because of the dozens of potential foreign countries that could comprise this category, some lawmakers feel efforts to restrict out-of-country investors is more so intended to make a "political statement."

"I don't believe the problem is fully vetted, because, just in those percentages alone, we understand that many foreign owners own our land," Rep. Tina Mulally, R-Rapid City, told House members Tuesday. "I believe that, without knowing what the problem is, the solution is just to kicking [sic] the can down the road."

'We are nervous': Foreign farmland bill could hurt ag exports, farm group says

South Dakota's greater ag community has not weighed in on Wangsness' bill this session. None of the state's major agricultural groups voiced their support for or opposition against the bill in the bill's first committee hearing Thursday.

However, Glenn Muller, executive director of South Dakota Pork Producers Council, told the Argus Leader on Tuesday the state's farm groups remain "neutral" on the proposed legislation.

On one hand, Muller said he appreciates the concerns of state legislators over national and food security. However, echoing comments from Senate Bill 185, last year's foreign ag land bill, which was near-unanimously rejected by the state's farm groups, Muller said the issue should be handled by the federal government, not the state.

"We are nervous a little bit but fully support the concerns for national security and food security," Muller said. "So we are we are comfortable with where the bill is at this time."

Past coverage: Noem's foreign ag bill moves forward, despite near-unanimous opposition from South Dakota ag groups

Muller said the bill comes with one "drastic" improvement compared to last year's bill: the oversight structure.

Under this year's HB 1231, the South Dakota Department of Agriculture and Natural Resources would have to refer evidence of noncompliance of the proposed law to the state's attorney general. The legal officer would then be able to bring a lawsuit against potential offending owners, with a host of new subpoena powers to investigate whether the new law has been violated.

If a judge finds that a noncompliance occurred based on a preponderance of the evidence — legal language indicating the attorney general's claim is more than 50% true — the foreign owners would be considered in violation of the law.

"We're arming them with the strongest tools we have in our state law toolbox," Mortenson said.

Last year's Senate Bill 185 proposed to create its own state-level Committee on Foreign Investment in the United States board. The ambitious legislation, brought by Sen. Erin Tobin, R-Winner, would have created a review council led by the state's sitting governor.

But many ag groups pushed back against this bill, with some opposing testimony centered on the concern that comes with granting the state's top political figure the ability to review all foreign farm investments and the shifting priorities of future state leaders.

It's much more appealing, Muller said, to see those oversight responsibilities in the hands of an attorney general.

"He's going to deal with what the Department of Ag and Natural Resources turns into him as being potentially illegal acquisition of land and he will make that interpretation on a legal basis," Muller said. "We don't know how much experience the future governors will have with agriculture and what their position will be towards towards agriculture. It was concerning to us to have all that power and authority in the hands of the governor."

Yet, the bill's potential impact on exports remains a considerable negative in Muller's eyes.

According to the National Pork Board, the U.S. exports about 29% of the pork and variety meats it produces to other countries, and the China and Hong Kong market is the third largest U.S. pork market, accounting for about $1.2 billion in 2023.

"Our producers deliver to multiple harvesting facilities, and I'm sure … some of that product that is going is be exported to China," Muller said. "We're very concerned about national security — we need to protect that — and yet we need to make sure that we do that without having negative implications on the ag producers in the state."

Past coverage: Why Gov. Kristi Noem's foreign ag bill may not make it through the legislature in 2023

The bill would not place any restrictions on any easements or leases held by foreign owners excluded from the banned list of countries.

The bill would also require the South Dakota Secretary of State's office to release a public report listing all foreign owners and owners with foreign investors that held farmland within the latest reporting period.

"We've been involved in conversations and had the had the ability to negotiate with some of the prime sponsors to clean up some of the language in the bill to where … it's palatable today," Muller said. "Neutral is where we are on this bill."

This article originally appeared on Sioux Falls Argus Leader: 'We are nervous': SD farm groups 'neutral' on foreign farmland bill