From phosphate reduction to phosphate rights

The 2017 Phosphate Reduction Plan Regulation will end in a few days. With the implementation and results of the Regulation, the way has been cleared for the introduction of the system of phosphate rights.

Everything is aimed at ensuring that as of 1 January 2018 (via an amendment to the Fertilizer Act) to introduce phosphate rights for dairy and dairy rearing farms. How does all this work?

Phosphate reduction
The 2017 Phosphate Reduction Plan Regulation was a temporary emergency measure to phosphate production by bringing dairy cattle below the applicable phosphate production ceiling. The exceeding of this (on the derogation attached) condition stood in the way of the introduction of the phosphate rights system. The issuance of tradable property rights is seen as impermissible state aid, in a situation where there is a violation of regulations.

Carola Schouten, Minister of Agriculture, Nature and Food Quality (LNV), indicates that the intended reduction target has been achieved. State aid problems no longer stand in the way of the introduction of phosphate rights. The European Commission (EC) is therefore no longer obstructive.

The Scheme has led to an enormous influx of legal proceedings. This is due to the drastic nature of the scheme. These procedures however, will not end on January 1, 2018. After all, appeals are still pending against judgments of the Interim Relief Judge of the District Court in The Hague. 

And for the companies that via the light key, have been placed outside the scope of the Regulation, the procedures will be followed up in objection and appeal procedures against levy decisions. Ultimately, the Trade and Industry Appeals Tribunal will have to pass judgment on the legal sustainability of the 2017 Phosphate Reduction Plan Regulations.

The scheme will therefore have long-lasting effects: not only at company level, but certainly also in legal proceedings.

System of phosphate rights
The phosphate rights system is according to Schouten necessary to ensure that the production of phosphate by dairy cattle remains below the permitted phosphate ceiling. Only then is there a chance of obtaining a new derogation from the Nitrates Directive. It looks like it will take until April 2018 before clarity on this will follow.

The aim is to ensure that the interpretation of the new derogation is at least equal to the current one: 250 or 230 kilograms of nitrogen from grazing livestock manure per hectare per year on farms with at least 80% grassland. It remains to be seen what result can be achieved in Brussels.

The letter to Parliament of 20 December 2017 contains more news worth reading. The most striking thing is that the minister states that phosphate rights (and, incidentally, also pig and poultry rights) are tax deductible. That is then clear.

Introduction of phosphate rights
When it is introduced, the Dairy Phosphate Rights Act will immediately be incorporated into the Fertilizers Act. From January 1 2018 This law prohibits the production of more animal fertilizers with dairy cattle in 1 calendar year (expressed in kilograms of phosphate) than the phosphate rights resting on the company.

The minister determines the size of the phosphate rights. This is done in decisions that are sent by the Netherlands Enterprise Agency (RVO.nl) in the period 2 to 14 January 2018. As it now appears, decisions are also sent to companies that are not granted rights. This is because they had no animal stock on July 2, 2015.

Legal protection is available against all these decisions. Objections can be lodged during a period of 6 weeks (after dispatch). I expect that these legal protection options will again be used frequently. After all, there is a lot at stake for dairy and rearing farms.

Trade in rights
The trade in phosphate rights will be opened from mid-January. So that won't happen right away. The shortage regulation will (insofar as is known) be open until April 1, 2018. This also applies to the in and out shear regulation. The opening date has not yet been announced.

This also applies to the precise content of the bottleneck arrangement† It is striking that the implementing regulations are currently still lacking. No doubt it has been prepared, but in a legislative process that has taken so long, it should have been expected that the sector would have been informed in good time.

On to 2018
Before 1 January 2018, a number of things still need to be done to implement the system. From 2 January 2018, dairy farms will receive clarity about the size of the number of phosphate rights. This means that the growth regulation of dairy farming in the Netherlands is entering an important and far-reaching new phase.

Peter Goumans

Peter Goumans is a lawyer at Hekkelman. He focuses on the agricultural sector and closely follows developments in this sector. In his blogs he discusses legal issues in the agricultural sector.

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