Understanding the Environmental Quality Incentives Program (EQIP) Contract
Updated: Jul 23
By Sarah Everhart
EQIP is one of USDA’s most popular Farm Bill conservation programs. Under EQIP, USDA’s National Resources Conservation Service (NRCS) offers technical and financial assistance to plan and install conservation practices on cropland, pastureland, and non-industrial private forestland. In 2014, NRCS provided more than $10 million in EQIP funding to help Maryland farmers improve water quality, soil quality, and wildlife habitat. Farmers can apply throughout the year, but funding selections are made at specific times. The fiscal year 2015 cutoff dates are January 16 and March 20.
A farmer interested in enrolling in EQIP starts the process by submitting an application to a local NRCS field office. The application includes, as an appendix, a form contract so that the farmer can review the general terms of the contract before applying for the program. Along with the application, a farmer also submits a conservation plan addressing soil erosion and, if needed, nutrient management; the plan should describe the conservation practices the farmer plans to implement and the schedule for implementation. Assuming funding is approved, the local NRCS field office will notify the farmer of the funding and develop an EQIP contract for the farmer.
There are a few important legal provisions of the EQIP contract every farmer should understand before signing on the dotted line. By signing the contract, the conservation plan, submitted along with the application, is made an enforceable part of the contract between the farmer and NRCS. This means that a farmer is legally obligated to perform all of the conservation practices outlined in the plan, in accordance with the schedule or time table set forth. Further, a farmer is legally obligated to provide all of the operation and maintenance to ensure the continued effectiveness of the conservation practices outlined in the plan. Additionally, by signing the EQIP contract a farmer agrees to maintain the conservation practices implemented with EQIP funding for the “practice life span,” the time period in which the conservation practice is to be used and maintained. This period may exceed the time period of the contract.
The date a farmer signs an EQIP contract is also legally significant. Why? Because by signing the contract, a farmer agrees to apply or commence a financially assisted conservation practice within the first 12 months from the date the contract is fully executed by both parties.
What if you end up selling your farmland before the contract expires? According to the EQIP contract, it is the farmer’s responsibility to ensure that the contractual responsibilities are transferred to the subsequent owner, and notify NRCS within 60 days of the transfer to avoid termination of the contract and the penalties described below.
There are stiff penalties for breaching the EQIP contract. Should a farmer violate the terms of the EQIP contract or terminate the contract due to their own actions or inactions, the farmer must refund any EQIP funds received, along with liquidated damages. Liquidated damages function as a penalty for a breach of contract, amounting to 10% of the total EQIP financial assistance obligated to the farmer under the contract at termination. Therefore, if there is a breach or early termination a farmer will not only have to give back all the funds received through the program but will also be financially penalized.
This post is meant to highlight a few of the significant legal provisions of the EQIP contract. A farmer should consult with independent legal counsel before entering into such a contract. For more information on the EQIP program, contact your local NRCS Field Office, located in the USDA Service Centers in all Maryland counties.
Currently, USDA is proposing a rule that outlines how it will improve EQIP. The interim final rule includes program changes authorized by Congress in the 2014 Farm Bill. USDA has established a 60-day comment period for the rule.
Highlights of program changes in this rule include:
Requiring at least 5 percent of available EQIP funds be targeted for conservation practices that promote wildlife habitat;
Establishing EQIP as a contributing program for the Regional Conservation Partnership Program;
Increasing the advanced payment from 30 percent to 50 percent for eligible historically underserved producers, including beginning farmers, to help purchase material or contract services;
Targeting assistance to veteran farmers and ranchers including eligibility for the new 50 percent advance payment and up to 90 percent of the cost to implement EQIP conservation practices;
Increasing the payment limitation for EQIP from $300,000 to a maximum of $450,000 for benefits received during 2014-2018 and removes the option for a waiver to exceed payment limitations;
Eliminating the requirement for a program contract to remain in place for one year after the last practice has been implemented, allowing practices to be scheduled through the tenth year of a contract;
Including an option to waive the irrigation history requirement under certain conditions;
Incorporating the Wildlife Habitat Incentive Program functions into EQIP.
Public comments may be submitted through regulations.gov or by mailing them. Comments are due by Feb. 10, 2015. Full details are in the Federal Register notice.