Environmental Requirements for Concentrated Animal Feeding Operation SBA Loans

In response to a recent lawsuit that was filed against SBA with regard to a feedlot loan, SBA is currently requiring additional environmental review for loans involving concentrated animal feedlots, including dairy, cattle, hog, and poultry. Environmental reviews under the National Environmental Policy Act (NEPA) are not specified in SOP 50 10 5(H), however, the results of the recent lawsuit made it clear that SBA is required to consider the potential for future environmental impacts associated with feedlot loans. So what does this mean for due diligence on loans involving concentrated animal feeding operations (CAFOs)?

Well, two things are clear: In addition to the already required SBA Environmental Questionnaire and Records Search Risk Assessment (RSRA), the SBA is asking for two additional completed forms as the first step in the process: 1) Farm Loan Checklist and 2) Environmental Worksheet.

But the following questions remain unclear as the SBA continues to consider how best to assess environmental impact: Will the level of environmental due diligence increase? Will the SBA begin to consider CAFOs as a sensitive industry (currently it is not) which would require the environmental due diligence begin with a Phase I ESA? What level of a NEPA will be required to understand other potential impacts?

The NEPA process requires Federal agencies to consider environmental effects that include, but are not limited to, impacts on social, cultural, economic, and natural resources. There are different levels of NEPA review that can be done. Will the SBA require a NEPA with 1) Categorical Exclusion Determination (CATEX), 2) Environmental Assessment/Finding of No Significant Impact (EA/FONSI), and/or 3) Environmental Impact Statement (EIS)?

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