A flowage easement is an agreement between a landowner and one of the member entities of the Metro Flood Diversion Authority (MFDA). Landowners receive a payment in exchange for giving the MFDA, or its members entities, and/or the MCCJPA, the legal right to periodically and temporarily store floodwater on property when the FM Area Diversion operates.
The MFDA, via its member entities, is required by federal and state regulatory agencies to obtain property rights from property where additional floodwater is periodically or temporarily stored when the FM Area Diversion operates. If your property is in the UMA, it is in an area that will require periodic and temporary floodwater storage.
The flowage easement payment compensates landowners for granting the legal right to periodically and temporarily store floodwater on their property, including the loss of development rights, if applicable.
The member entities of the MFDA, or affiliations thereof, will acquire the flowage easements. In North Dakota, the Cass County Joint Water Resource District (CCJWRD) will acquire the easements. In Minnesota, the City of Moorhead, Clay County or the Moorhead-Clay County Joint Powers Authority (MCCJPA) will acquire the easements.
The entity applicable for your property (CCJWRD or MCCJPA) will provide you with an Agreement to Acquire a Flowage Easement, which contains the terms of the flowage easement transaction, including payment terms. Once the parties sign the agreement, CCJWRD or MCCJPA will move as quickly as possible to close the transaction, and you will be paid at closing (when the parties sign the flowage easement document). Compensation for a flowage easement is a one-time payment made at the time the flowage easement is acquired. Flowage easements must be on the dominant estate. If there is a lien against the property, the lien holder may receive the flowage easement payment, but the landowner will have less debt as a result.
The FM Area Diversion has been modeled by the U.S. Army Corps of Engineers (the Corps) and the MFDA to determine how much FM Area Diversion operations would increase floodwater depth on a person’s property compared to the same flood without the FM Area Diversion. This increase in floodwater depth due to the FM Area Diversion is called the “depth difference” and is unique for each property. For example, properties that are closer to the southern embankment or an existing river corridor typically would see depth differences greater and more often than a property on the edge of the UMA. Specific information regarding the depth and duration of additional floodwater on your property is available.
The Corps, North Dakota Department of Water Resources and Minnesota Department of Natural Resources all have different flowage easement requirements. Consequently, the UMA has been divided into four mitigation zones. The zones were established based on the applicable regulatory agency requirements and by modeling how much FM Area Diversion operations would increase the floodwater depth on a person’s property compared to the same flood without the FM Area Diversion. Each mitigation zone has slightly different requirements.
The MFDA has committed to assisting property owners with cleanup from impacts caused by FM Area Diversion operations. Programs are available for private and governmental entities, see mitigation program details.
Yes, the flowage easement allows farming to continue. You will retain the right to farm and lease the land as well as to install drainage. Development, even development of farm-related structures, however, will be restricted.
The MFDA is committed to providing supplemental protections for crop loss directly related to FM Area Diversion operations that are not covered by federal crop insurance.
Project design engineers identify land parcels that will be impacted by the FM Area Diversion. Appraisals are then scheduled for each parcel based on construction timelines. Independent appraisers conduct a thorough assessment and provide their appraisal reports to the Cass County Joint Water Resource District (CCJWRD) in North Dakota or the Moorhead-Clay County Joint Powers Authority (MCCJPA) in Minnesota, and an offer to purchase is made based upon the appraisal. The offer to purchase serves as the basis for negotiations between the landowners and the land agents hired by MCCJPA and CCJWRD. Once a tentative agreement is reached, it is routed to the CCJWRD or MCCJPA for approval. Following the approval, a closing date is set at which time the property rights necessary are conveyed to the acquiring agency and payment is provided to the landowner.
The Metro Flood Diversion Authority, along with the CCJWRD in North Dakota and MCCJPA in Minnesota, contracted with experienced, independent appraisal companies to evaluate impacted properties. While the appraisers weigh many factors in determining each property’s value, we understand there may be factors that may have been overlooked or not available to the appraiser. Therefore, you are encouraged to provide supplemental information regarding your property’s value when you work with your land agent during the negotiation process.
During the U.S. Army Corps of Engineers’ feasibility study and through the Governors’ Task Force, great efforts were made to minimize the direct impact on homes, and the groups tried to balance all impacts, including the impact to people’s homes. However, the system still needed to function hydrologically and work with the area’s topography. Due to the region’s topography and the volume of water associated with the major floods this project is designed to protect against, it was impossible to avoid removal of certain homes in the path of the project.
Property owners from whom a property right is being acquired will receive payment for their land and structures on it, in accordance with values established by independent appraisers. Occupants who are forced to relocate will be provided the benefits they are eligible to receive through the Uniform Relocation Assistance and Real Property Acquisition Policies Act. For those who have an FSA-recognized farmstead or rural business that will be displaced by the project, a Rural Impact Mitigation Program (RIMP) loan may also be available.
Construction on the FM Area Diversion began several years ago and continues to progress into new areas. For this work to proceed, property must be acquired in time for utilities and structures to be removed before contractors access the land for construction.
The MFDA is committed to easing burdens on landowners and agricultural producers in the UMA. While all existing farmland in the UMA will remain tillable and eligible for federal crop insurance upon completion of the project, the MFDA has committed to providing two supplemental crop damage programs at no cost to complement federal crop insurance protections.
Prevent-Plant Crop Insurance Program
This supplemental policy will apply if, due to project operation, producers are unable to plant crops on tillable farmland within the UMA by the established late-planting dates set by federal crop insurance. Under this program, the MFDA will reimburse at the same coverage level that producers purchased through federal crop insurance and this coverage will be provided at no cost to producers (i.e., no premium).
Growing Season Supplemental Crop Loss Program
In the unlikely event of a summer flood requiring project operations, this program will cover 100% of resulting crop loss during the growing season for producers in the UMA, no matter the year or crop type. For farmland that was certified as organic in February 2021, the program will also compensate for all crop loss if project operation causes contamination that prevents farmland from qualifying for certified organic designations.
The MFDA has dedicated sales taxes for the project construction and operation. Further, it is party to a legally binding Settlement Agreement that expressly requires the MFDA to provide crop damage programs.
The MFDA has a comprehensive financial plan to account for construction costs, as well as ongoing project operation and maintenance, which includes funding the above-described crop insurance programs.
Additionally, the MFDA will purchase an insurance product that will provide risk insurance for several purposes, including crop losses caused by project operation. The MFDA is building a roughly $3 billion asset that will need to have insurance. The MFDA’s crop damage programs are among the MFDA’s portfolio of risks covered by insurance. As such, the MFDA will pay a premium for an insurance product that will provide coverage to pay producers for crop losses covered by the MFDA’s supplemental programs.
Yes. The MFDA will have procedures to provide timely communications to growers regarding flood events that impact crop production and which may result in crop loss.
The MFDA’s obligations begin when the control structure gates close, signaling operation of the project. The project is expected to be completed and ready for operations for any flooding in 2027. Therefore, the earliest date that the MFDA will be responsible for crop loss is in crop year 2027.
The MFDA will rely upon the Risk Management Agency’s (RMA) definition of 100% from the federal crop insurance program, which is the producer’s approved yield multiplied by the crop insurance price.
All producers are eligible for 100% coverage under the MFDA’s growing season supplemental crop loss program regardless of the level purchased by the producer. If the federal crop insurance policy pays for part of a crop loss claim, that payment will be considered before the MFDA’s supplemental crop loss program will provide further compensation.
There are three primary individual crop insurance policies that are available for producers to purchase from insurance agents: yield protection (YP), revenue protection (RP), and revenue protection with harvest price (HP) exclusion. The MFDA presumes most producers are going to buy RP, which means the greater of the projected or harvest price will be utilized for establishing the crop value. If a YP policy is purchased, the MFDA will use the spring price, then value the final crop the same as the producer’s crop insurance company would.
The MFDA’s responsibilities stop at the edge of the UMA, but crop insurance units don’t necessarily match up with that boundary. The MFDA’s planned solution for this is to pro-rate against the unit’s size for both attributing the federal crop insurance payment and attributing the MFDA’s responsibility for the supplemental crop insurance to 100% of the expected crop value.
The MFDA’s crop loss programs will compensate producers for actual crop losses caused by project operation. As such, the areas that are not flooded would not qualify for the MFDA’s supplemental crop loss programs.
A producer’s insurance company’s adjuster will come out and determine what is insurable under federal crop insurance and what is not. If the loss is due to project operation, the MFDA is responsible for paying the difference. If a producer’s insurance company says this is entirely on the MFDA because all the losses are uninsurable, then the MFDA is responsible for paying up to 100% of the value of the crop.
The MFDA will use the loss adjuster from the producer’s federal policy to make the determination. The MFDA’s calculation will be very simple: What was the value of the crop, and what payment was made from the other insurance company, if anything? The MFDA will apply any payments from federal crop insurance against the liability, and the producer will get paid the difference from the MFDA.
Sugar beets have special rules and requirements that are imposed on producers by the co-ops. The MFDA has no agreements or obligations to cover these requirements.
The MFDA’s obligations under the Settlement Agreement do not change.
The Settlement Agreement indicates that growing season crop losses are to be compensated up to 100% of the value of the crop. For prevented plant losses, the MFDA’s responsibility is not 100% of the value, but rather to match the prevented plant coverage level that producers purchase themselves. The MFDA does not want to create an incentive for producers to have a prevented plant situation, so the program will compensate at the same level as federal crop insurance.
A producer’s guaranteed crop insurance level decreases after the late planting dates established by USDA for each crop. The MFDA’s supplemental crop loss programs are designed to encourage planting. If a producer chooses to plant during the late-plant dates, and if the project operates, the MFDA’s obligation under the Settlement Agreement is to pay the producer for 100% of the expected value of the crop. If the project operates and the producer has a loss, including a reduced yield, the MFDA is responsible for paying the producer for 100% of the expected value of the crop without reducing the coverage because of the late planting.
If the project operates and a producer is prevented from planting, a prevented plant claim would be processed. The producer may still proceed to plant a crop after the final plant date (as established by the USDA), but the MFDA’s supplemental crop loss programs would only compensate for the prevented plant claim.
As manmade causes of loss, such as gate closures, are not covered by the federal crop insurance program, these losses will not be factored in to crop insurance ratings. Because no indemnities will be paid through the federal program for these flooding losses, premium rates will not increase; however, the amount of coverage could change.
Re-rating the UMA would be controlled by the RMA. The MFDA had some preliminary conversations with the RMA office about re-rating the UMA and it was considered unlikely due to the frequency of flooding. The hydrology, hydraulic modeling, and historic flooding suggests that the project won’t operate until the 20-year flood level, which is 37-feet at the Fargo gage on the Red River.
The MFDA must treat producers as if the project had not operated. The MFDA can’t make the federal crop insurance policy what it would have been; instead, the MFDA will pay the difference between a producer’s actual value and the expected value without operation of the project.
For example, let’s say a producer has a 10-year APH and then a significant flood event requires the project to operate, resulting in 30% of the expected yield. The MFDA can utilize county crop production data to index down and elevate back up to the yields that might have been expected had the flooding not occurred. Based on that, the MFDA can calculate what the approved yield would have been for those 10 years with all the other exclusions, calculate how much different the rate and guarantee would have been, and provide compensation based on that.
Note that the MFDA is also working on a legislative solution to the complex APH calculation issue.
Currently, the Federal Crop Insurance Act, which is the legislation that allows all crop insurance to operate, includes 88 amendments designed specifically to change a producer’s approved yield. This is why a producer’s 10-year-average history and approved yield are not the same. If a producer is on a 2-year, 50/50 crop rotation, those historical yield days can last for 20 years. The MFDA is obligated to compensate the producer for those adjustments.
The MFDA will rely entirely on the federal crop insurance guidelines for loss adjustment.
The MFDA anticipates being able to pay the indemnification under the supplemental coverage within 30 days of receiving final settlement information relevant for federal crop insurance.
Producers have the ability within current federal crop insurance programs to choose whether to accept payment in the current calendar year or the following calendar year based on their tax situation. The MFDA will adopt the same option for producers for its supplemental crop insurance programs. Note that all the historic flood events that would have resulted in project operation occurred in March or April, so realistically, there will be plenty of calendar to work with in terms of getting the payment into the year of the flood event or putting it into the following calendar year for tax planning purposes.
Producers are required to report acres planted (including the planting date) to their crop insurance agent as part of their crop insurance obligations. The MFDA will rely on the current procedures of the federal crop insurance system so new or duplicative paperwork is not created.
Producers are required to provide a notice of loss to the MFDA as well as to their crop insurance agent. The producer’s crop insurance adjuster will determine which bushels are lost to insurable causes and which ones are not.
The MFDA will ask the same crop insurance adjuster that would have visited for the federal crop insurance to adjust for the supplemental crop-loss programs as well to try to keep the process as consistent as possible. The MFDA is working to develop a way to compensate the crop insurance company for their adjuster’s visit. Generally, if there is any loss and a claim is filed, whether it triggers an indemnity or not, the crop insurance company will send an adjuster. The MFDA has approached a couple of approved insurance providers about the possibility of developing terms under which the MFDA can pay the adjusters for producers’ crop insurance policies to do this in cases where they wouldn’t be obligated to already do so.