Study to be Conducted on the Impact of Horses on the Environment

By: Katherine Huddleston, Staff Member

The United States Department of Agriculture ("USDA") has begun a five-year educational project entitled, "Environmental Impact of Equine Operations." Natalie Voss, Environmental Impact Study to Include UK Faculty Member, THEHORSE.COM, Jan. 13, 2010, http://www.thehorse.com/ViewArticle.aspx?ID=15628. While the equine industry has a long and rich history, very little is known about the potential its environmental impact. Id. This project was initiated by Michael Westendorf, PhD, of Rutgers University and proposes to combine the efforts of "Cooperative Extension agents and university faculty" from 12 states. Currently the states being studied include: Connecticut, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Alabama, New Jersey, North Carolina, Pennsylvania, South Dakota, and Vermont. Id. Kentucky joined this list just last week when the Department of Agricultural Economics at the University of Kentucky announced that assistant director, Jill Stowe, PhD, would take part in the project. Id.

Participants will soon begin research; the results of which they hope to circulate widely at the close of the five-year term. Id. Potential research topics include "the effects of manure and fertilizer runoff on soil and groundwater," which has been shown to affect water environments, as well as how horses' diets and medications can affect "life in the soil and water." Id. With the "Go Green" movement taking hold across the country, these researchers are hoping to find the best balance between "the safety of the horse and … the well-being of the environment," says Stowe. Id.

The results of the studies will likely affect the industry both here in Kentucky and nationwide. While the overall impact of the equine industry on the environment is likely very slight in comparison to the cattle and other large livestock industries, the project will hopefully find concrete and manageable ways in which the industry can join in the fight for a more environmentally friendly society. Id.

CRUDE EVALUATIONS: DO COURTS PROPERLY CONSIDER THE COSTS OF FOREIGN ENERGY RELIANCE?

By: LeeAnne Edmonds Applegate, Former Staff Member. This Comment was originally published in JNREL Vol. 20 No. 1.

Abstract by: Ramsey Groves, Staff Member

Montana Wilderness Ass'n. v. Fry, 310 F. Supp. 2d 1127 (D. Mont. 2004) was decided by the United States District Court for the District of Montana. In this crucial case, the court enjoined the continued use of a natural gas pipeline based on violations of the National Environmental Policy Act of 1969 (NEPA). In issuing the injunction, the court weighed the public interest in protecting the environment against the potential economic harm to the energy company. However, the court failed to consider the economic harm to the public. Arguably, the court erred because the policies and goals of NEPA indicate the relevance of economic harm to the public. On multiple occasions, the courts of the Ninth Circuit have exhibited faulty analysis of energy issues by refusing to consider the economic harm to the public despite the requirements of the NEPA.

The NEPA states that its goals include "identify[ing] and developing methods and procedures . . . which will insure that presently unquantified environmental amenities and values may be given appropriate consideration in decision-making along with economic and technical considerations." Thus, the NEPA states in no uncertain terms that economic impact should be considered. However, in Montana Wilderness Ass'n v. Fry, the Ninth Circuit recognized that the remedy for a NEPA violation is ordinarily an injunction, and the court stated that the factors to be considered include harm to the public and harm to the parties. The court further stated, "A third party's financial damages from an injunction generally do not outweigh potential harm to the environment." Based on this statement, the Ninth Circuit clearly places more weight on the environmental impact factor.

When balancing factors that include harm to the public, it is reasonable to expect a court to give appropriate consideration to economic harm to the public. This is certainly true when one considers the rising price of oil. This is of great importance because of the widespread use of petroleum products in our culture and the profound effect of these products on our national economy. Rising oil prices not only increase transportation and heating costs, but they also impact the costs of household items made from petroleum derivatives, such as diapers, deodorant, aspirin, dentures, golf balls, and compact discs.

Fortunately, not all circuits have the same view as the Ninth Circuit. The D.C. Circuit recognizes the value in reducing U.S. dependency on foreign oil. As such, the D.C. Circuit takes a more expansive approach by considering all of the factors articulated by Congress, including the economic harm to the public.

The Ninth Circuit clearly fails to comply with the NEPA policy of weighing economic harms. This circuit is the largest in the country geographically and includes within its jurisdiction the oil-producing states of California and Alaska. The Ninth Circuit's view is particularly troubling because, by failing to consider the impact of increased energy costs on the public, there is certainly a potential for great damage to the economy. Absent a Supreme Court decision mandating that the standards of NEPA are to be considered in their entirety, the Ninth Circuit is likely to maintain its problematic position.

Horse sales tax exemption: Good for the industry, bad for the state?

By: Adrianne Crow, Staff Member

According to a recent article in the Lexington Herald-Leader, some Kentucky citizens have begun to question tax exemptions provided to horse sales and the impact of this exemption on the state's economy. Janet Patton, Horseman say exemption crucial for Ky., Lexington Herald-Leader, Jan. 17, 2010, available athttp://www.kentucky.com/horse_racing/story/1099255.html (last visited Jan. 20, 2010). Kentucky Revised Statute § 139.531 provides exemptions for sales tax and use tax for the sale or use of horses made for breeding purposes only as well as for the sale of horses less than two years of age bought by out-of-state residents who take the horses out of Kentucky. Ky. Rev. Stat. Ann. § 139.531(2) (2009).

Based on estimates supplied by the state, this practice has cost the Kentucky almost $220 million in lost revenue from 2004 to 2010. See Patton. For example, SheikhMohammed bin RashidalMaktoum of Dubai, Kentucky's top buyer of thoroughbreds, has purchased more than $60 million in broodmares at Keeneland's fall sales since 2002. Id. Had these purchases been taxed at Kentucky's rate of six percent, they would have generated more than $3.6 million by themselves. Id. During this time of budget short-falls and overall cut-backs in our state, some suggest that it is time to reevaluate Kentucky's tax code.

However, others worry that that taxing more sales would cost Kentucky a competitive edge in the horse industry, which is already hurting. Those in the horse industry are afraid that if Kentucky imposes a sales tax, buyers will simply go to other states that offer exemptions, including Maryland, New York, California, Florida, Pennsylvania and Texas. Id. Additionally, those who support keeping the tax exemptions point out that the horse industry is taxed in ways that other agriculture sectors are not. Jay Blanton, spokesman for Keeneland, explained "that sales of many horses, including those of racehorses, are taxed, and that horse farms pay sales taxes that other agricultural enterprises don't. Feed and hay for cattle, for instance, are exempt while the same products for horses are taxed." Id.

During these continued tough economic times for people in Kentucky and across the country, these issues regarding tax reform are surely to be debated by our legislators in the near future.

Senator Thayer Pulls in the Reins on his Gambling Amendment

By: Natasha Farmer, Staff Member

Republican Senator Damon Thayer called off a committee vote on his proposed constitutional amendment on January 13. Janet Patton, Senator Calls Off Committee Vote on Gambling Amendment, Lexington Herald-Leaser, Jan. 14, 2010, available at http://www.kentucky.com/news/state/story/1094981.html (last visited Jan. 17, 2010). His proposed amendment, if passed by the full Senate, would allow video lottery terminals in up to seven counties that have racetracks, but the racetracks would have to compete for this license.

Id.

This bill was expected to pass the Senate State and Local Government Committee; however, it was unlikely to pass a floor vote by the full Senate.

Id.

Thayer

believed that delaying the bill would give him more time to gain additional support for his bill. Ron Mitchell,

Thayer

Delays Committee Vote on Gaming Bill

, January 14, 2010,

available at

http://www.bloodhorse.com/horse-racing/articles/54796/thayer-delays-committee-vote-on-gaming-bill (last visited Jan. 17, 2010.)

Thayer

said that he "wanted to see if there is anyone else that is willing to come to the table."

Id.

Many leaders and racetracks of the horse industry have opposed Senate Bill 21 because "it does not guarantee that tracks get expanded gambling." Janet Patton, Senator Calls Off Committee Vote on Gambling Amendment, Lexington Herald-Leaser, Jan. 14, 2010, available at http://www.kentucky.com/news/state/story/1094981.html (last visited Jan. 17, 2010). But, Thayer said he has heard from a few "rank and file" horsemen that are disappointed with the horse industry opposing his bill. Id.Thayer explained that delaying the vote until later this month will hopefully translate into bipartisan support. Id. "Gambling Licenses are something of value to the people of Kentucky. A competitive bidding process is likely to result in higher fees to the state," Thayer explained. Id. Furthermore, he said that increased purses from the slots would bring more racehorses, which would generate revenue for the tracks. Id.

Senator Ed Worley has said no Democrat will vote for Thayer's bill. Id. If Worley's statement is true, Thayer's bill will not pass because a constitutional amendment needs at least 23 votes in the Senate to pass. Id. Only time will tell if Thayer's amendment can gain enough bipartisan support to pass through the Senate.

The Battle Between Coal and Gas Rights Continues: Hazard Coal Corp. v. Kentucky West Virginia Gas Co.

This comment was written by former staff member Elizabeth Clevinger and published in JNREL Vol. 20. No. 1. Staff member Tanner James wrote the following abstract.

Coal and natural gas, despite the ongoing debates about their conservation, are undeniably important to modern society's history and future. Landowners of resource-rich property often grant rights of access to those entities that facilitate the extraction and use of these natural fuels. But, on occasion, conflict arises; and, courts must effectively determine the importance of each resource involved.

In Hazard Coal Corp. v. Kentucky West Virginia Gas Co., 311 F.3d 733 (6th Cir. 2002), a property dispute between a coal company and natural gas company resulted in a victory for natural gas—potentially signifying the end of an era of coal dominance. Hazard Coal Corporation owned the mineral property rights of the tract of land in question. Kentucky West Virginia Gas Company held limited rights to run pipelines through the property that would allow access and transportation of their natural gas. After years of conflict-free operation, the plaintiff sought to extract coal from the property in a location that required the natural gas pipelines to be destroyed or relocated at the expense of Kentucky West. When Kentucky West declined, this case came to trial.

Despite finding that the property agreement was violated by Kentucky West, the Court considered equity and policy, finding for the defendant. The equitable notion of acquiescence (e.g., the plaintiff knew or should have known that the defendant was violating the agreement, yet allowed the violation to continue without complaint) prevented the plaintiff from succeeding on claim of breach. Perhaps more importantly, however, is that the Court considered social policy in determining that Kentucky West should not face liability for decisions made by Hazard Coal.

There once was a time when coal was king, and courts used policy considerations to protect the interests of coal companies. If Hazard Coal Corp. v. Kentucky West Virginia Gas Co. is any indication, the pendulum is now swinging away from coal, in favor of other viable fuel resources.

KJEANRL is now on the ABA blog database

After a winter break hiatus and below freezing temperatures in the Bluegrass, the blog will be up and running next week!

Over the break the blog was added to the ABA's blawg database. The database provides a search engine for legal blogs. To visit the ABA's description of the blog please visit: http://www.abajournal.com/blawg/kentucky_journal_of_equine_agriculture_and_natural_resources/


If the link does not work please go to http://www.abajournal.com/. Click on the Blawgs tab. In the Search area type in "KJEANRL."

This semester we also look forward to posting those comments by staff members not chosen for publication in our spring edition. Due to the limited space allotted for comments in our print edition we can only publish so many pieces but we wish to provide the world with the well-written and insightful comments written by our staff members.

For those readers awaiting the fall print edition of the journal we are hoping to have the journal in publication by late January or early February. For those interested in ordering a copy of the journal please visit the Contact Us tab for more instructions on subscriptions.

Blog to observe University of Kentucky Winter Break

Fellow readers,
The University of Kentucky College of Law is starting finals beginning next Tuesday! Considering that all our staff members are law students no one will be blogging until the beginning of spring semester. We hope to start posting by the second week of school, Monday January 18. Thank you all for your time and we look forward to discussing exciting issues in the fields of equine, agricultural and natural resources law in 2010! In addition, we are proud to announce that the next print issue of KJEANRL should be ready after the first week of January and if you are interested in ordering a copy you should do so now! To check which pieces will be published in our next issue please read our "Current Issue" page.

Thank you all and have a great winter!

Sincerely,
Mark Rouse, Production Editor and the KJEANRL staff

“Federal Income Tax incentives for Energy from Renewable Resources”

Appearing in JNREL Vo1. 20, No.2, the following article was written by John Kaufmann. Staff member Kyle Hermanson wrote the following abstract. Readers should note that this article discusses the tax code as it existed at the time of the article's publication. Any person citing the article or engaged in tax planning should consult the current edition of the Code.

Countless experts have discussed the necessity for the United States to develop clean, renewable sources of energy in order to avoid the parade of horribles attendant upon continued dependence on fossil fuels. Despite this national dialogue, businesses and consumers have not invested heavily in renewable energy projects until recently. Two things are now beginning to make these projects cost effective. First, the tremendous increase in the cost of fossil fuel in the recent past has encouraged academics and business people alike to turn to renewable energy sources as a way to avoid the risks of price fluctuation in the fossil fuel markets. Second, the cost of energy from renewable sources is approaching that from traditional sources. Given these factors, investment in renewable energy sources presents a unique opportunity to do normative good and at the same time, to succeed economically.

When weighing an investment in a renewable energy project, one of the factors a business person needs to consider is the tax effect of the project. The Internal Revenue Code contains several sections which provide tax subsidies for users and producers of renewable energy sources. Many of these tax credits were added or amended by the American Jobs Creation Act of 2004 and Title XIII of the Energy Policy Act of 2005. The tax code implicates everything from events as small as a taxpayer adding a residential solar water heater or photovoltaic cell to events as large as an agricultural operation becoming an open-loop biomass energy facility. This article explores and explains the federal income tax benefits of renewable energy investments, listing subsidies and discussing their real effect on different classes of taxpayers.

Pony Up: Gov. Beshear Predicts Video Slot Machines May Be Legalized at Kentucky Racetracks in 2010

The following post was written by staff member Donald Smith.

Kentucky has, in various forms, debated the legalization of gambling, particularly in the form of video slot machines at racetracks, for more than a decade. Beth Musgrave & Janet Patton, Beshear Wants Slots Bill by Winter, Lexington Herald-Leader, Nov. 5, 2009, available at http://www.kentucky.com/181/story/1006050.html?storylink=omni_popular (last visited Nov. 17, 2009). After Ohio residents passed a referendum on November 3, 2009, allowing casino gambling in four major cities, including Cincinnati, the efforts to legalize gambling gained momentum. Id. Governor Beshear issued the following statement after the referendum passed: "Clearly, the time to act on expanded gaming is now.… Ohio citizens are going to reap the benefits of thousands of new jobs and millions of dollars in tax revenue. Ohio's decision reinforces the urgency to pass the video lottery terminal bill I proposed earlier this year." Id.

In addition to questionable popular support, the proponents of legalizing gambling have faced the criticism that the move can only legally be made through amendment of the state constitution, an argument that Governor Beshear labels as a stall tactic that cannot be tolerated as the Kentucky horseracing industry faces tough times. Id. Although last term a bill passed the democrat-controlled House, but did not get out of committee in the Senate, Governor Beshear now predicts that the bill would pass both houses in 2010, after changes in membership. Ryan Alessi, Beshear: Slots Will Pass the Full Senate if Given a Chance, Bluegrass Politics, http:// bluegrasspolitics.bloginky.com/2009/11/17/beshear-slots-will-pass-the-full-senate-if-given-a-chance/ (last visited Nov. 17, 2009). Speaking of the impact on the horse industry, which would receive a cut of profits under the proposed bill, Governor Beshear stated: "In my opinion we must protect this industry. Why? Not because there are two to three rich guys in it. But because there are 100,000 hard working Kentuckians who work in that industry every day." Id. Only time will tell whether the bill will in fact pass the legislature, and if so, only the courts will tell if the bill passes constitutional muster.