Food and Agriculture Committee Report

I. No New Farm Bill, but a Farm Bill Extension

Every five years, Congress considers the Farm Bill, a package of legislation affecting commodity prices, conservation measures, trade and subsidy programs, nutrition and food infrastructure programs (such as the Supplemental Nutrition Assistance Program), loan programs and crop insurance for farmers, rural development and economic growth, agricultural and food research and development, energy programs (biofuel, research programs, etc.), and more. The last Farm Bill was passed in 2018, so negotiations for the next Farm Bill came to a head in 2023. Unfortunately, a Congress caught up in looming shutdowns and leadership challenges was unable to pass a new Farm Bill in 2023, which threatened funding for hundreds of agricultural- and food-based programs. Congress did, however, agree to extend the 2018 Farm Bill through September 2024, providing ten additional months to reach a compromise – albeit by a deadline just weeks before the next Presidential election.

II. Supreme Court Upholds California’s Prop 12 and Out-of-State Regulation of Animal Agricultural Production

Wastewater and air emissions are not the only environmental concerns faced by the animal agriculture industry. In 2018, California voters passed Proposition 12 (Prop 12), a measure establishing minimum requirements for operations involved in raising egg-laying hens, breeding pigs, and calves raised for veal. The measure does not only impact California farmers, though, as it prohibits the sale or distribution in the state of California of any egg, pork, or veal products that do not meet the Prop 12 standards.

After years of legal challenges, on May 11, 2023, the United States Supreme Court upheld the law in National Pork Producers Council v. Ross, with the majority determining that a state’s interest in protecting the public health and welfare can extend to actions that occur beyond the state’s boundaries. Accordingly, persons engaged in the distribution of regulated products in the state of California must register with the state (including a separate registration for each location from which they distribute) and provide a certificate of compliance issued by an accredited certifying agent, California Department of Food and Agriculture, or other qualified governmental entity affirming compliance.

III. Golden State Leads the Way on Mandatory Greenhouse Gas Emissions Disclosures

Securities and Exchange Commission (“SEC”) to issue its final climate disclosure rule after publishing the proposed rule in early 2022, the State of California stepped in, enacting its own mandatory climate disclosure and greenhouse gas (“GHG”) emissions reporting regime in October 2023—the Climate Accountability Package, or “CAP.” California’s new disclosure requirements will require many US companies—including large US agribusinesses—to make a public accounting of their GHG emissions and key climate-related financial risks. Responding to the CAP will require an industry-wide effort to measure (and mitigate) emissions up and down the global supply chains and distribution networks for food, fiber, and fuel.

The CAP consists of two landmark laws: the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). The former requires the annual third-party verification and public disclosure of companies’ GHG emissions, while the latter requires companies to publish, on a biennial basis, reports of their climate-related financial risks and the steps they are taking to reduce or adapt to such risks.

The Golden State’s new greenhouse gas and climate disclosure rules have accelerated companies’ timelines for assessing emissions baselines by imposing an actual deadline—2026—for compliance with the relevant reporting requirements. And the reach of these California laws sweep well beyond the SEC’s proposed rule, covering not only the publicly traded companies contemplated under the SEC proposal, but also capturing partnerships, corporations, limited liability companies, and any other business entities (public or private) doing business in California.

A. Climate Corporate Data Accountability Act (SB 253)

The Climate Corporate Data Accountability Act (SB 253) applies to US companies (public or private) doing business in California “with total [annual] revenues in excess of $1 billion” in the prior fiscal year. (This revenue threshold includes all of a company’s revenues, not only revenues attributable to the company’s business in California.) SB 253 calls for the annual public reporting of a company’s scope 1 and 2 emissions beginning in 2026, with annual reporting of scope 3 emissions starting in 2027. For purposes of SB 253, scope 1 emissions are defined as “all direct…emissions [stemming] from sources …a reporting entity owns or directly controls, …including …fuel combustion activities.” While scope 2 emissions capture “indirect greenhouse gas emissions from consumed electricity, steam, heating or cooling purchased or acquired by [a] reporting entity.” Scope 3 emissions—a broad, catch-all category of emissions—include “indirect upstream and downstream greenhouse gas emissions, other than scope 2 emissions, from sources that the reporting entity does not own or directly control and [that] may include...purchased goods and services, business travel, employee commutes, and processing and use of sold products.”

SB 253 requires a company’s emissions reports to be audited by an independent third-party assurance provider before being submitted to a non-profit emissions reporting organization designated by California Air Resources Board (CARB). scope 1 and 2 emissions= audits are to be performed at a “limited assurance” level until 2030, when a “reasonable assurance” standard takes effect. For scope 3 emissions, CARB may establish an assurance standard by January 1, 2027 that will govern reporting before 2030; then, beginning in 2030, audits of scope 3 emission reports will become subject to a “reasonable assurance” audit standard. A copy of the third-party assurance provider's audit report must be submitted with a reporting entity's disclosure of greenhouse gas emissions. The CARB-designated emissions reporting organization is required to make reporting entities’ disclosures available on a publicly accessible online platform.

SB 253 authorizes CARB to adopt regulations imposing penalties up to $500,000 per reporting year for insufficient reporting or for failure to report. Reporting entities will not be subject to penalties with respect to misstatements of scope 3 emissions that are “made with a reasonable basis and disclosed in good faith,” and from 2027 to 2030, penalties with respect to scope 3 emissions reporting will only be imposed for a failure to file disclosures.

B. Climate-Related Financial Risk Act (SB 261)

The Climate-Related Financial Risk Act (SB 261) applies to any U.S. covered entity that does business in California (excluding certain insurance businesses) with total revenues more than $500 million in the previous fiscal year. (As with SB 253, the revenue threshold for SB 261 includes all revenues, not just those derived from business in California). SB 261 requires these covered entities to publish on their public-facing websites reports of relevant climate-related financial risks on at least a biennial basis, starting January 1, 2026. It also broadly defines a “climate-related financial risk” as a

[M]aterial risk of harm to immediate and long-term financial outcomes due to physical and transition risks, including, but not limited to, risks to corporate operations, provision of goods and services, supply chains, employee health and safety, capital and financial investments, institutional investments, financial standing of loan recipients and borrowers, shareholder value, consumer demand, and financial markets and economic health.

Disclosures under SB 261 must be made in accordance with a recognized standard accepted under the statute, such as the Task Force on Climate-Related Financial Disclosures framework or the International Financial Reporting Standards Sustainability Disclosure Standards issued by the International Sustainability Standards Board.

SB 261 also calls for CARB to contract a nonprofit climate reporting organization to prepare, on a biennial basis, a public report summarizing climate-related financial risks from companies’ public disclosures. The climate reporting organization will also aid in enforcement by identifying inadequate or insufficient reports. Companies may face administrative penalties of up to $50,000 in a reporting year for inadequate reporting or for failure to publish a report.

C. Implementation of California’s Climate Disclosure Laws

Before the reporting obligations in SB 253 and 261 take effect, CARB must issue regulations to clarify the implementation and administration of the laws’ climate-related financial risk and greenhouse gas emissions disclosure obligations. As the regulated community awaits further guidance from CARB on the scope and application of the California laws, it remains to be seen whether the SEC will adapt its own disclosure rule in light of California’s more expansive reporting regime.

IV. PFAS

No discussion of 2023 would be complete without a discussion of the ubiquitous and ill-defined family of chemicals called per- and polyfluoroalkyl substances (PFAS). From a food and agriculture perspective, it has been the state-level “laboratories of democracy” where action has been most prevalent.

The nature of many PFAS chemicals as grease- and water-resistant means there has been widespread use in food production and packaging. At least a dozen states have enacted laws regulating the use or presence of PFAS chemicals in food packaging, with at least a dozen additional states considering their own actions. New York, California, and Maine – the vanguards in this space – all had laws that took effect the beginning of 2023, and more state laws continue to become effective on a rolling basis.

In general, the laws have become more expansive and more proscriptive as time goes on. Early laws, like in California and New York, prohibited the intentional addition of PFAS chemicals in certain types of fiber-based packaging that come into direct contact with foods. Subsequent laws, however, began chipping away at some of the qualifiers, such as removing the direct food contact requirement, expanding beyond intentionally added PFAS to capture any PFAS, applying to all food containers (not just those made out of plant fibers), or defining food packaging to include things like shipping containers and pallets.

EPA and the states have also been taking action with respect to PFAS chemicals in pesticide products and pesticide product packaging. In the last year, the EPA has removed certain PFAS chemicals from its approved inerts ingredients list and issued TSCA orders directing a packaging supplier that supplies to the pesticide industry (among other industries) to cease producing PFAS chemicals as part of its production of fluorinated HDPE containers. Several states have begun passing laws prohibiting or regulating the intentional use of PFAS chemicals in pesticide products and packaging.