Karnal Bunt; Compensation for the 1995-1996 Crop Season

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 301

[Docket No. 96-016-17]

RIN 0579-AA83

Karnal Bunt; Compensation for the 1995-1996 Crop Season

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: We are adopting as a final rule, with changes, an interim rule

that amended the regulations to provide compensation for certain

growers and handlers, owners of grain storage facilities, and flour

millers in order to mitigate losses and expenses incurred because of

Karnal bunt in the 1995-1996 crop season. In this final rule, we are

adding compensation provisions for handlers of wheat that was tested

and found negative for Karnal bunt, handlers and growers with wheat

inventories for past crop seasons, and participants in the National

Karnal Bunt Survey whose wheat or grain storage facility is found

positive for Karnal bunt. The payment of compensation is necessary in

order to reduce the economic impact of the Karnal bunt quarantine on

affected wheat growers and other individuals, and to help obtain

cooperation from affected individuals in Karnal bunt eradication

efforts.

EFFECTIVE DATE: April 30, 1997.

FOR FURTHER INFORMATION CONTACT: Mr. Mike Stefan, Operations Officer,

Domestic and Emergency Operations, PPQ, APHIS, 4700 River Road Unit

134, Riverdale, MD 20737-1236, (301) 734-8247.

SUPPLEMENTARY INFORMATION:

Background

Karnal bunt is a fungal disease of wheat (Triticum aestivum), durum

wheat (Triticum durum), and triticale (Triticum aestivum X Secale

cereale), a hybrid of wheat and rye. In the absence of measures taken

by the U.S. Department of Agriculture (USDA) to prevent its spread, the

establishment of Karnal bunt in the United States would have

significant consequences with regard to the export of wheat to

international markets. Karnal bunt is caused by the smut fungus

Tilletia indica (Mitra) Mundkur and is spread by spores. The

regulations regarding Karnal bunt are set forth in 7 CFR 301.89-1

through 301.89-14.

In an interim rule effective on June 27, 1996, and published in the

Federal Register on July 5, 1996 (61 FR 35102-35107, Docket No. 96-016-

7), we amended the regulations to provide compensation for certain

growers and handlers, owners of grain storage facilities, and flour

millers in order to mitigate losses and expenses incurred because of

actions taken by the Secretary to prevent the spread of Karnal bunt

(Sec. 301.89-12, redesignated as Sec. 301.89-14 in a final rule

published on October 4, 1996 (61 FR 52189-52213, Docket No. 96-016-

14)).

We solicited comments concerning the interim rule for 60 days

ending September 3, 1996. We received 15 comments by that date. They

were from wheat growers, handlers, harvesters, railroad companies, seed

producers, a member of Congress, and a State department of agriculture.

We have carefully considered all of the comments we received. The

comments generally supported the interim rule offering compensation to

certain groups affected by the Karnal bunt quarantine and emergency

actions. However, all the comments recommended additions or revisions

to the compensation provisions. Each of these recommendations is

discussed below by topic.

The Karnal bunt regulations that were initially established were

necessarily broad due to the lack of data available at the time as to

the extent of the infestation. The discovery of Karnal bunt and

subsequent quarantine and emergency actions occurred after production

and marketing decisions had been made. Producers and other affected

individuals had little time or ability to avoid the unexpected costs or

pass those costs on to others in the marketing chain. The impact was

particularly severe on the wheat industry in the regulated area because

much of the crop is grown under contract at specified amounts and

prices.

In order to alleviate some of these hardships and to ensure full

and effective compliance with the Karnal bunt regulatory program,

compensation to mitigate certain losses was offered to producers and

other affected parties in a regulated area. The payment of compensation

is in recognition of the fact that while benefits from regulation

accrue to a large portion of the wheat industry outside the regulated

areas, the regulatory burden falls predominantly on a small segment of

the affected wheat industry within the regulated area.

The Agency has identified three principles for deciding whether to

provide compensation. First, compensation may be appropriate where

quarantine and emergency actions cause losses over and above those that

would result from the normal operation of market forces. Payment of

compensation would reflect the incremental burdens of complying with

regulatory requirements insofar as market forces would not otherwise

impose similar or analogous costs. Second, compensation may be

appropriate where parties undertake actions that confer significant

benefits on others. Under this principle, payment of compensation would

be intended to overcome the usual disincentives to produce such

benefits. Third, compensation may be appropriate where a small number

of parties necessarily bears a disproportionate share of the burden of

providing such benefits. This principle rests on the widely shared

belief that burden-sharing is a fundamental principle of equity.

Individual decisions regarding what specific losses to compensate

and how much compensation to offer in each case were made in line with

the above basic principles which describe the goals of compensation. A

top equity priority was compensation for costs of plowing down fields,

and for wheat and other articles the Agency ordered destroyed or

prohibited movement. Compensation amounts took into account the need to

mitigate real losses caused by the regulations, so that regulated

parties would not have a strong economic incentive to avoid compliance.

At the same time, amounts were not set at a high enough rate to

establish a ``bounty'' that would encourage fraudulent claims or

behavior that would result in increases in contaminated wheat or other

articles eligible for compensation.

The interim rule establishing compensation for the Karnal bunt

program provided compensation in the 1995-1996 crop season for the

plow-down of infected fields in New Mexico and Texas; the loss in value

of nonpropagative wheat grown in the regulated area (this was provided

for producers and handlers); decontamination of grain storage

facilities; and the cost of heat-treating millfeed made from wheat

produced in the quarantined area. Several commenters requested

compensation for costs that were not provided for in the interim rule.

These comments are discussed below.

The interim rule provided compensation for handlers who sell

nonpropagative wheat only if the wheat is positive for Karnal bunt, and

under the following circumstances: (1) Handlers who honor contracts by

paying

[[Page 24747]]

the grower full contract price on nonpropagative wheat grown in the

quarantined area that was tested by the Animal and Plant Health

Inspection Service (APHIS) and found positive for Karnal bunt; or (2)

handlers who purchase contracted or noncontracted nonpropagative wheat

grown in the quarantined area that was tested by APHIS and found

negative for Karnal bunt prior to purchase but that was tested by APHIS

and found positive for Karnal bunt after purchase. As explained in the

interim rule, we expected that handlers who purchase negative wheat

that continues to test negative after purchase would not experience a

loss in value for the wheat compared to the price they paid for it.

Some commenters, however, said that handlers who purchased

negative-testing wheat after the Karnal bunt quarantine was imposed,

but purchased it for the price that was contracted before Karnal bunt

was discovered (in Arizona in March 1996), did experience a loss in

value of the wheat compared to the price they paid for it. Even though

the wheat was negative for Karnal bunt, handlers had to sell it for a

lower price than anticipated because the wheat was from the quarantined

area. Some handlers adjusted their purchase price to account for the

loss in value; others honored the prices agreed on in their contracts

prior to March 1996. Commenters said that handlers who honored their

contracts on negative wheat by paying the price that was agreed on

before the discovery of Karnal bunt in March 1996, should be

compensated.

We believe that compensating these handlers would be consistent

with our compensation to other individuals who experience a loss in

value of their wheat because of the regulations for Karnal bunt.

Therefore, we are amending the regulations at Sec. 301.89-14(b) to

provide compensation to handlers under the following additional

circumstance: Except as explained below, handlers who honored contracts

by paying the grower or another handler full contract price on

nonpropagative wheat grown in the regulated area that was tested by

APHIS and found negative for Karnal bunt if a price was determined in

the contract before March 1, 1996. The exception to this compensation

eligibility is handlers who had contracted to sell the wheat (for

example, to another handler, a mill, or a foreign country) at a price

determined in the contract before March 1, 1996, and who received the

full contract price. Such handlers would not have experienced any loss

in value of their wheat due to Karnal bunt. To claim compensation under

this new circumstance, we are requiring that, in addition to the

documents already required for handlers (see Sec. 301.89-14(b)(4)),

handlers who had contracted to sell the wheat at a price determined in

the contract before March 1, 1996, must submit to FSA a copy of the

contract the handler has for the sale of the wheat.

Handlers who honored contracts on negative wheat will be eligible

for compensation using the same calculation provided in the interim

rule for growers of negative wheat not grown under contract--the

estimated market price for the relevant class of wheat (meaning type of

wheat, such as durum or hard red winter) minus the higher of either the

salvage value or the actual price received by the handler (see

Sec. 301.89-14(b)(1)(iii)). We explained in the interim rule that the

estimated market price is intended to represent what the market price

would have been if there were no quarantine for Karnal bunt, and will

be calculated by APHIS for each class of wheat, taking into account the

prices offered by relevant terminal markets (animal feed, milling, or

export) for the period between May 1 and June 30, 1996, with

adjustments for transportation and other handling costs.

For the 1995-1996 crop season, estimated market prices were

calculated for durum wheat and hard red winter wheat. The estimated

market prices for durum wheat were calculated based on the following:

the daily closing cash prices for choice milling durum wheat traded on

the Minneapolis Grain Exchange during the period of May 1 to June 30,

1996, adjusted to account for the handling and transportation charges

incurred in getting the wheat from the regulated area in California and

Arizona to the central market in Minneapolis. These adjustments were

based on the average difference between the Minneapolis cash price and

the cash prices within the regulated area for 1995. Estimated market

prices for hard red winter wheat were calculated in a similar manner,

based on the daily closing futures prices for the July hard red winter

wheat contract traded on the Kansas City Board of Trade during the

period of May 1 to June 30, 1996, adjusted to account for the handling

and transportation charges incurred in getting the wheat from a central

point in the regulated area to the market in Kansas City. These

adjustments were based on the average difference between the Kansas

City futures price and the cash prices within the regulated area for

1995.

The estimated market prices used to calculate compensation for

handlers who honored their contracts on negative wheat will be

determined in the same manner. However, if the salvage value is used in

the calculation, the rate of compensation will be different than the

rate that has been paid to other handlers under the interim rule,

because the salvage value appropriate for negative wheat will be used

in the calculation. Compensation payments will be issued by the Farm

Service Agency (FSA).

One commenter requested that we provide compensation for lost

income due to the quarantine on wheat straw. Many growers sell wheat

straw to supplement their wheat grain income. Straw is sold for use at

places such as racetracks, highway shoulders, feed yards, and parks for

erosion control and to minimize muddy conditions. Wheat straw is listed

in the Karnal bunt regulations as a regulated article and is prohibited

from being moved outside of the regulated area. This has prevented many

wheat straw producers from shipping their 1995-1996 crop season straw

to the intended markets. Some wheat straw was sold to alternative

markets within the regulated area for a lower price; other wheat straw

was not able to be sold.

We are considering what, if any, compensation should be provided

for lost income due to the restrictions that have been placed on the

movement of 1995-1996 crop season wheat straw. We will publish any

proposed compensation for wheat straw producers in a future edition of

the Federal Register.

The interim rule did not provide compensation for any losses

concerning wheat grown outside the area regulated for Karnal bunt.

APHIS is conducting a National Karnal Bunt Survey to demonstrate to our

trading partners that areas producing wheat for export are free of the

disease. APHIS is receiving voluntary cooperation from many grain

storage facilities in wheat producing areas both within and outside the

States in which the Secretary of Agriculture has declared an

extraordinary emergency.

Some commenters asked that we clarify what compensation we plan to

offer to participants in the National Karnal Bunt Survey who are found

to have positive grain or whose grain storage facility outside of the

regulated area is found to have Karnal bunt. We have every intention of

making sure that all participants in the survey whose wheat or grain

storage facilities are found to be positive for Karnal bunt will be

compensated for the loss in value of their wheat and for the costs for

part of

[[Page 24748]]

decontaminating their grain storage facilities.

The declarations of extraordinary emergency authorize the Secretary

of Agriculture to take emergency action in those States with regard to

Karnal bunt, and authorize the Secretary to compensate growers and

other persons in those States for economic losses incurred by them as a

result of those emergency actions. USDA is not authorized to pay

compensation to individuals who are not in States for which an

extraordinary emergency has been declared. If a grain storage facility

participating in the National Survey in one of the States for which an

extraordinary emergency has been declared tests positive for Karnal

bunt, USDA will regulate the facility under an Emergency Action

Notification (PPQ Form 523), and will compensate the owner of the grain

storage facility for the loss in value of the wheat and for up to 50

percent of the direct cost of decontaminating the facility (not to

exceed $20,000) on a one time only basis for wheat harvested in 1996,

if the facility is required to be decontaminated. In the event that a

grain storage facility participating in the National Survey that is in

a State not covered by a declaration of extraordinary emergency should

test positive for Karnal bunt, the State may offer to compensate the

owner of the facility for the loss in value of the positive wheat and

for the cost of decontamination. If the State is unwilling or unable to

offer compensation at a level equal to that offered by USDA, USDA will

consider, after consultation with the State Department of Agriculture,

declaring an extraordinary emergency in that State. USDA could then

compensate the owner of the facility.

We completed the National Survey for the 1995-1996 crop season in

the fall of 1996. In this final rule, we are adding a new paragraph

Sec. 301.89-14(f) to the 1995-1996 crop season compensation regulations

stating that if a grain storage facility participating in the National

Karnal Bunt Survey tests positive for Karnal bunt, the facility will be

regulated under an Emergency Action Notification (PPQ Form 523), and

the owner may be required to decontaminate the facility to remove the

quarantine. If a Declaration of Extraordinary Emergency has been

declared in the State in which the grain storage facility is located,

the owner of the facility will be compensated for the loss in value of

the wheat. Compensation will equal the estimated market price for the

relevant class of wheat minus the salvage value (as described in

Sec. 301.89-14(b)(3)). The estimated market price will be calculated by

APHIS for each class of wheat, taking into account the prices offered

by relevant terminal markets (animal feed, milling, or export) for the

period between October 1 and November 30, 1996, with adjustments for

transportation and other handling costs. However, compensation will not

exceed $2.50 per bushel under any circumstances. Compensation payments

for loss in value of wheat will be issued by FSA. To claim

compensation, the owner of the facility must submit to the local FSA

office a copy of the Emergency Action Notification under which the

facility is or was quarantined. The owner must also submit to the FSA

office verification as to the actual (not estimated) weight of the

wheat (such as a copy of the limited permit under which the wheat was

moved to a mill or a copy of the bill of lading for the wheat, if the

actual weight appears on those documents, or other verification).

The owner of the facility will also be compensated for the direct

cost of decontamination at the same rate provided by the interim rule

for decontamination of grain storage facilities (a maximum of $20,000

per facility, paid on a one time only basis for wheat harvested in

1996). Compensation payments for decontamination of grain storage

facilities will be issued by APHIS.

A few commenters requested compensation for damage to harvesting

equipment caused by disinfection in accordance with the Karnal bunt

regulations. We are still considering what compensation would be

appropriate for grain harvesters and are continuing to gather

information to help us make that determination. If we determine to take

regulatory action to compensate grain harvesters, we will publish

proposed compensation regulations in a future edition of the Federal

Register.

Commenters also requested compensation for loss in value of 1995-

1996 crop season seed. We stated in the interim rule that we do intend

to compensate seed producers for the loss in value of their seed. That

intention has not changed, and we plan to publish proposed compensation

regulations for seed producers in a future edition of the Federal

Register.

Several commenters requested that we add compensation provisions to

cover numerous circumstances other than those provided for in the

interim rule and those discussed previously in this document. These

include requested compensation for demurrage charges on railcars; the

cost of cleaning and sanitizing railcars prior to loading; declines in

transporter operations due to delays caused by the Karnal bunt

regulations; extra labor to clean and disinfect combines; loss in

customers for harvesters due to delays in waiting for field test

results; loss in wheat income and soil nutrients due to a 5-year

quarantine on wheat production; and loan interest on funds borrowed to

see producers through delays in selling 1996 wheat. Commenters also

requested several other changes to the compensation provisions in the

interim rule. Two commenters requested that we lower the $3.60 minimum

salvage value because they do not believe it adequately reflects the

costs to handlers of freight charges and railcar cleaning. One

commenter said that the maximum $20,000 per premises compensation for

decontamination of grain storage facilities is inadequate. Another

commenter said that the same compensation offered to flour millers for

heat-treating millfeed should be available to all producers, grain

handlers, and millers regardless of whether or not the wheat originated

in the quarantined area.

We have considered all of these comments very carefully, but we are

not making any changes to the compensation regulations in response to

these comments. We recognize that the compensations we have offered do

not fully account for every loss or expense due to the Karnal bunt

quarantine and emergency actions. However, we believe the compensation

provisions in this final rule do significantly mitigate losses and

expenses due to the actions taken to control Karnal bunt. We are

continuing to consider the effects of the Karnal bunt quarantine and

emergency actions on all affected individuals. If we make any further

determinations as to additional compensations, we will publish another

document in the Federal Register.

Miscellaneous Changes

We are making a number of miscellaneous changes to the interim

rule. Many of these changes are necessary to clarify the intent of the

regulations and to deal with circumstances identified during

implementation of the interim rule.

The compensation regulations established by the interim rule were

intended to apply to the 1995-1996 crop season. Therefore, we are

revising the heading and introductory text for the compensation

regulations in this rule to make it clear that they apply only to the

1995-1996 crop season. For the same reason, we are revising

Sec. 301.89-14(d) to clarify that compensation for

[[Page 24749]]

decontamination of grain storage facilities under this rule will be

made on a one time only basis for each covered crop year wheat.

This final rule will add a requirement to Sec. 301.89-14 that all

claims for compensation for the 1995-1996 crop season must be made by

May 31, 1997. In addition, we are adding a provision that the

Administrator may extend this deadline upon request in specific cases

when unusual and unforeseen circumstances occur which prevent or hinder

a claimant from requesting compensation on or before May 31, 1997.

The term ``contract price'' is used several times in Sec. 301.89-

14. In some cases, the contract price is a determining factor in the

amount of compensation received by a claimant. Some contracts provide

for adjustments in the contract price contingent on grain quality or

other factors. To ensure that growers or handlers are not paid

compensation for quality issues not related to Karnal bunt, and to

clarify what we intended to mean by the term ``contract price,'' we are

adding a definition to Sec. 301.89-1 of the regulations, to read as

follows:

Contract price. The net price after adjustment for any premiums or

discounts stated in the contract.

Paragraph (b)(1) of Sec. 301.89-14 contains compensation

calculations for growers who sell nonpropagative wheat; one for wheat

grown under contract, and one for wheat not grown under contract. In

implementing the interim rule, it became apparent that different

calculations were needed to account for other contracting

circumstances. For example, not all contracted wheat had a price in the

contract prior to the discovery of Karnal bunt in March 1996.

Therefore, even though the wheat was contracted prior to the discovery

of Karnal bunt, the price eventually agreed on may have reflected the

loss-in-value of wheat due to Karnal bunt.

Contracts without prices set before March 1996 normally stipulated

that the price was to be determined at harvest. The 1996 harvest began

in April 1996 and was not complete in all regulated areas until August

1996. Compensation regulations were not in effect until June 27, 1996

(see Docket No. 96-016-7, published in the Federal Register on July 5,

1996), mid-way through the 1996 harvest, and claims for compensation

could not be processed for several more weeks. Because growers and

handlers did not know what compensation APHIS would offer, some

contract prices set at harvest reflected the loss-in-value of wheat due

to the Karnal bunt regulations, while some contract prices set at

harvest were based on what market prices would have been without the

presence of Karnal bunt. This situation warranted calculating

compensation using the higher of either the contract price or the

estimated market price. This procedure for calculating compensation

would not unfairly disadvantage growers whose contract prices set at

harvest reflected the loss-in-value of wheat due to the Karnal bunt

regulations. Contract prices settled after August 1996 may have

reflected the compensation offered by APHIS, and would not have been

consistent with the original intent of the contract that the price be

determined at harvest. For these reasons, we are changing the

compensation calculations for growers who sell nonpropagative wheat to

accommodate three circumstances, as follows:

If the wheat was grown under contract and a price was determined in

the contract before March 1, 1996, compensation will equal the

contracted price minus the higher of either the salvage value or the

actual price received by the grower. If the wheat was grown under

contract and a price was determined in the contract on or after March

1, 1996, and on or before August 1, 1996, compensation will equal the

higher of either the contract price or the estimated market price minus

the higher of either the salvage value or the actual price received by

the grower. If the wheat was not grown under contract or the price was

determined in the contract after August 1, 1996, compensation will

equal the estimated market price for the relevant class of wheat minus

the higher of either the salvage value or the actual price received by

the grower.

We are also revising the requirements for growers and handlers for

claiming compensation to ensure that growers and handlers supply all

the information necessary to determine the amount of compensation for

which they are eligible. In addition to the documentation already

required by Sec. 301.89-14(b), growers will have to submit a copy of

the receipt for the final sale of the wheat, showing the intended use

for which the wheat was sold, total bushels sold, and the total amount

paid to the grower by the handler. Handlers will have to submit a copy

of the receipt for the purchase of the wheat from the grower, showing

the total bushels purchased and the amount the handler paid to the

grower, and a copy of the receipt for the final sale of the wheat,

showing the intended use for which the wheat was sold. Both growers and

handlers must submit a copy of the Karnal bunt certificate issued by

APHIS that shows Karnal bunt test results.

At the time that Karnal bunt was discovered in Arizona in March

1996, some handlers and growers in the regulated area had wheat

inventories on hand from past crop seasons. These inventories became

subject to the same restrictions as 1995-1996 crop season wheat from

the regulated area, and handlers and growers with such inventories

experienced a loss in value of that wheat. For this reason, we are

revising Sec. 301.89-14(b)(2) to clarify that handlers and growers in

the regulated area are eligible to be compensated for 1995-1996 crop

season wheat and for wheat inventories in their possession that were

unsold as of March 1, 1996.

We are revising the provision in Sec. 301.89-14(c) of the

regulations for growers and handlers who do not sell their wheat. The

interim rule stated that compensation will only be paid to growers and

handlers on wheat that is not sold if the wheat has been buried in a

sanitary landfill. In implementing the regulations, APHIS has approved

sites for burying wheat other than a sanitary landfill. These sites

were determined to be acceptable because they were in areas where

burying the wheat would not pose a risk of spreading Karnal bunt (for

example, the desert). To accommodate these situations, we are amending

paragraph (c) to state that unsold wheat must be buried in a landfill

or other site that has been approved by APHIS. To claim compensation,

the interim rule required that a grower or handler must submit

verification of how much wheat was buried, in the form of a receipt

from the landfill. We are adding that the verification may also be in

the form of a document signed by an APHIS inspector.

The interim rule stated at Sec. 301.89-14(d) that compensation for

decontamination of grain storage facilities will not exceed $20,000 per

premises. The term premises has proven to be confusing to both affected

entities and inspectors in determining the amount of compensation for

which an owner is eligible. We believe the term ``facility'' would be

more clear. To clarify our intent, we are revising paragraph (d) to

state that compensation will not exceed $20,000 per grain storage

facility. We are also removing the definition of premises from

Sec. 301.89-1 of the regulations and adding a definition for grain

storage facility, to mean ``That part of a grain handling operation or

unit of a grain handling operation, consisting of structures,

conveyances, and equipment that receive, unload, and store grain, and

that is able to operate as an independent unit from other units of the

grain handling operation. A grain handling

[[Page 24750]]

operation may be one grain storage facility or may be comprised of many

grain storage facilities on a single premises.''

We are revising the provisions at Sec. 301.89-14(e) by which flour

millers must claim compensation. The interim rule provided that, to

claim compensation, flour millers must submit verification that the

millfeed was heat-treated, in the form of a copy of the limited permit

under which the wheat was moved to a treatment facility. However, some

flour millers have purchased their own heat treating equipment and do

not need to move the wheat under a limited permit to a treatment

facility. To accommodate this, we are stating that verification of

treatment may also be provided in the form of a copy of PPQ Form 700,

which includes a certification of processing, signed by the inspector

who monitors the mill.

We are adding sentences to Sec. 301.89-14(a), (b)(4), and (c),

concerning growers and handlers, to clarify that these compensation

payments will be issued by FSA. We are also adding sentences to

Sec. 301.89-14(d) and (e), concerning grain storage facilities and

flour millers, to clarify that these compensation payments will be

issued by APHIS.

The interim rule requires certain claimants to file three forms:

ASCS Form 574, ASCS Form 578, and FCI Form 73. The correct names for

ASCS Form 574 and ASCS Form 578 are FSA Form 574 and FSA Form 578,

respectively. We are making this change in this final rule.

A final rule published in the Federal Register on October 4, 1996,

and effective on November 4, 1996 (61 FR 52189-52213, Docket No. 96-

016-14), established ``regulated areas'' to replace the areas

previously called ``quarantined areas.'' To reflect this change, we are

removing the term ``quarantined area'' each time it appears in

Sec. 301.89-14 and replacing it with the term ``regulated area.''

Further, the interim rule provided that growers and handlers will

be compensated for wheat ``grown in the quarantined area.'' In addition

to changing the term to ``regulated area,'' we would add a provision

that growers and handlers in States where the Secretary has declared an

extraordinary emergency would also be compensated for wheat grown in an

area for which an Emergency Action Notification (PPQ Form 523) has been

issued by an inspector, in accordance with Sec. 301.89-3(d) of the

regulations. Section 301.89-3(d) of the regulations allows the

Administrator or an inspector to temporarily designate any nonregulated

area as a regulated area. When this occurs, an inspector provides

written notice of this action to the owner or person responsible for

the management of the area, in the form of an Emergency Action

Notification. Areas temporarily regulated under an Emergency Action

Notification will not necessarily be listed in the regulations as

``regulated areas,'' but are subject to the same restrictions (and

potential losses or expenses) as areas that are listed in the

regulations.

Therefore, based on the rationale set forth in the interim rule and

in this document, we are adopting the provisions of the interim rule as

a final rule, with the changes discussed in this document.

This final rule also affirms the information contained in the

interim rule concerning Executive Orders 12372 and 12988.

Effective Date

Pursuant to the administrative procedure provisions in 5 U.S.C.

553, we find good cause for making this rule effective less than 30

days after publication in the Federal Register. This rule provides

compensation to individuals who were and are required to take emergency

actions to eliminate the spread of Karnal bunt or who experience

economic losses because of the quarantine for Karnal bunt. Immediate

action is necessary to compensate these losses and expenses. Therefore,

the Administrator of the Animal and Plant Health Inspection Service has

determined that this rule should be effective upon signature.

Executive Order 12866 and Regulatory Flexibility Act

This rule has been reviewed under Executive Order 12866. This rule

has been determined to be economically significant for purposes of

Executive Order 12866 and, therefore, has been reviewed by the Office

of Management and Budget.

This action makes final with certain changes an interim rule that

amended the regulations to provide compensation for certain growers and

handlers, owners of grain storage facilities, and flour millers in

order to mitigate losses and expenses incurred in the 1995-1996 crop

season because of the Karnal bunt quarantine and emergency actions. The

quarantine and regulations for Karnal bunt were established by a series

of interim rules and a final rule published in the Federal Register on

October 4, 1996. The interim rules and the final rule were published on

an emergency basis. We stated in those rules that the emergency

situation made timely compliance with section 6, subsections (3)(B)(ii)

and (3)(C), of Executive Order 12866 impracticable. We also stated that

we would complete the required cost-benefit analysis for those rules as

soon as possible and make the information available to the public.

Elsewhere in the ``Rules'' section of this issue of the Federal

Register, we are publishing a companion docket (Docket No. 96-016-20)

to this final rule that includes a Regulatory Impact Analysis that

analyzes the costs and benefits of the interim rules and the final rule

we have already published, as well as those of the provisions of this

final rule.

On April 3, 1997, we published in the Federal Register a Regulatory

Flexibility Analysis for the interim rules and the final rule we have

already published regarding the Karnal bunt quarantine and regulations

(62 FR 15809-15819, Docket No. 96-016-18).

In accordance with 5 USC 604, we have performed a Final Regulatory

Flexibility Analysis regarding the impact of this final rule on small

entities, and are publishing that analysis in a companion docket

(Docket No. 96-016-20) to this final rule elsewhere in the ``Rules''

section of this issue of the Federal Register.

Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L.

104-121, USC 801-808)

This rule has been designated by the Administrator, Office of

Information and Regulatory Affairs, Office of Management and Budget, as

a major rule under the Small Business Regulatory Enforcement Fairness

Act of 1996 (Act). The Administrator of the Animal and Plant Health

Inspection Service has determined, however, that there is good cause

for making this rule effective less than 60 days after submission of

the rule to each House of Congress and to the Comptroller General

because a delay in the implementation of this rule would be contrary to

the public interest. This final rule adds handlers of negative grain,

handlers with past crop season wheat inventories, and participants in

the National Karnal Bunt Survey to the list of individuals eligible for

compensation. It is necessary to make this rule effective upon

publication in the Federal Register in order that these individuals can

be compensated for economic losses and expenses in the 1995-1996 crop

season resulting from the quarantine and emergency actions taken by the

Department because of Karnal bunt. Section 808 of the Act provides that

rules which would be exempted from the notice and comment provisions of

the Administrative Procedure Act may be excepted from

[[Page 24751]]

section 801(a)(1)(A), and the delay in the effective date for major

rules under section 801(a)(3). Such rules may be made effective as the

agency promulgating the rule determines. A 60-day or longer delay of

the effective date for this final rule would clearly be contrary to the

public interest, since it would delay compensation for affected

handlers and National Survey participants.

Paperwork Reduction Act

In accordance with section 3507(d) of the Paperwork Reduction Act

of 1995 (44 U.S.C. 3501 et seq.), the information collection or

recordkeeping requirements included in this final rule have been

submitted for approval to the Office of Management and Budget (OMB).

When OMB notifies us of its decision, we will publish a document in the

Federal Register providing notice of the assigned OMB control numbers

or, if approval is denied, providing notice of what action we plan to

take.

The information collection or recordkeeping requirements included

in the interim rule that preceded this final rule were approved by OMB.

However, this final rule contains an information collection requirement

that was not included in the interim rule. Specifically, this final

rule requires a claimant to make a request in order to be granted an

extension of the deadline for filing compensation claims.

Estimate of burden: Public reporting burden for this collection of

information is estimated to average .166 hours per response.

Respondents: 10.

Estimated number of responses per respondent: 1.

Estimated total annual burden on respondents: 2 hours.

List of Subjects in 7 CFR Part 301

Agricultural commodities, Plant diseases and pests, Quarantine,

Reporting and recordkeeping requirements, Transportation.

Accordingly, the interim rule amending 7 CFR part 301 which was

published at 61 FR 35102-35107 on July 5, 1996, is adopted as a final

rule with the following changes:

PART 301--DOMESTIC QUARANTINE NOTICES

1. The authority citation for part 301 continues to read as

follows:

Authority: 7 USC 150bb, 150dd, 150ee, 150ff, 161, 162, and 164-

167; 7 CFR 2.22, 2.80, and 371.2(c).

2. In Sec. 301.89-1, the definition for Premises is removed and

definitions for Contract price and Grain storage facility are added in

alphabetical order to read as follows:

Sec. 301.89-1 Definitions.

* * * * *

Contract price. The net price after adjustment for any premiums or

discounts stated in the contract.

* * * * *

Grain storage facility. That part of a grain handling operation or

unit of a grain handling operation, consisting of structures,

conveyances, and equipment that receive, unload, and store grain, and

that is able to operate as an independent unit from other units of the

grain handling operation. A grain handling operation may be one grain

storage facility or may be comprised of many grain storage facilities

on a single premises.

* * * * *

3. Section 301.89-14 is revised to read as set forth below.

Sec. 301.89-14 Compensation for the 1995-1996 crop season.

The following individuals are eligible to receive compensation from

the United States Department of Agriculture (USDA) for the 1995-1996

crop season to mitigate losses or expenses incurred because of the

Karnal bunt regulations and emergency actions, as follows:

(a) Growers who have destroyed crops. Growers in New Mexico and

Texas who have destroyed crops of wheat pursuant to an Emergency Action

Notification (PPQ Form 523) issued by an inspector are eligible to be

compensated at the rate of $300 per acre of destroyed crop.

Compensation payments will be issued by the Farm Service Agency (FSA).

To claim compensation, the grower must complete and submit to a local

FSA county office whichever of the following three forms are

applicable, as determined by FSA: FSA Form 574, FSA Form 578, and FCI

Form 73. The forms will be furnished by FSA. Claims for compensation

must be received by FSA on or before May 31, 1997. The Administrator

may extend this deadline, upon request in specific cases, when unusual

and unforeseen circumstances occur which prevent or hinder a claimant

from requesting compensation on or before May 31, 1997.

(b) Growers and handlers who sell nonpropagative wheat. Growers and

handlers in a State where the Secretary has declared an extraordinary

emergency, and who sell nonpropagative wheat grown in the regulated

area or in an area for which an Emergency Action Notification (PPQ Form

523) has been issued in accordance with Sec. 301.89-3(d), are eligible

to be compensated for the loss in value of their wheat due to the

Karnal bunt regulations, as follows:

(1) Growers who sell nonpropagative wheat. Growers are eligible to

be compensated for nonpropagative 1995-1996 crop season wheat and for

nonpropagative wheat inventories in their possession that were unsold

as of March 1, 1996, as described in paragraphs (b)(1)(i), (b)(1)(ii),

and (b)(1)(iii) of this section. However, compensation will not exceed

$2.50 per bushel under any circumstances.

(i) If the wheat was grown under contract and a price was

determined in the contract before March 1, 1996, compensation will

equal the contracted price minus the higher of either the salvage

value, as described in paragraph (b)(3) of this section, or the actual

price received by the grower.

(ii) If the wheat was grown under contract and a price was

determined in the contract on or after March 1, 1996, and on or before

August 1, 1996, compensation will equal the higher of either the

contract price or the estimated market price for the relevant class of

wheat (meaning type of wheat, such as durum or hard red winter) minus

the higher of either the salvage value, as described in paragraph

(b)(3) of this section, or the actual price received by the grower. The

estimated market price will be calculated by APHIS for each class of

wheat, taking into account the prices offered by relevant terminal

markets (animal feed, milling, or export) for the period between May 1

and June 30, 1996, with adjustments for transportation and other

handling costs.

(iii) If the wheat was not grown under contract or a price was

determined in the contract after August 1, 1996, compensation will

equal the estimated market price for the relevant class of wheat

(meaning type of wheat, such as durum or hard red winter) minus the

higher of either the salvage value, as described in paragraph (b)(3) of

this section, or the actual price received by the grower. The estimated

market price will be calculated by APHIS for each class of wheat,

taking into account the prices offered by relevant terminal markets

(animal feed, milling, or export) for the period between May 1 and June

30, 1996, with adjustments for transportation and other handling costs.

(2) Handlers who sell nonpropagative wheat. Handlers are eligible

to be compensated for nonpropagative 1995-1996 crop season wheat and

for nonpropagative wheat inventories in their possession that were

unsold as of March 1, 1996, only under the circumstances described in

paragraphs (b)(2)(i), (b)(2)(ii), and (b)(2)(iii) of this section.

Compensation for the

[[Page 24752]]

circumstances in paragraphs (b)(2)(i) and (b)(2)(ii) will equal the

estimated market price for the relevant class of wheat (meaning type of

wheat, such as durum or hard red winter) minus the salvage value, as

described in paragraph (b)(3) of this section. Compensation for the

circumstance in paragraph (b)(2)(iii) will equal the estimated market

price for the relevant class of wheat (meaning type of wheat, such as

durum or hard red winter) minus the higher of either the salvage value,

as described in paragraph (b)(3) of this section, or the actual price

received by the handler. The estimated market price will be calculated

by APHIS for each class of wheat, taking into account the prices

offered by relevant terminal markets (animal feed, milling, or export)

for the period between May 1 and June 30, 1996, with adjustments for

transportation and other handling costs. However, compensation will not

exceed $2.50 per bushel under any circumstances.

(i) Handlers who honor contracts by paying the grower full contract

price on wheat grown for nonpropagative purposes in the regulated area

that was tested by APHIS and found positive for Karnal bunt;

(ii) Handlers who purchase contracted or noncontracted wheat grown

for nonpropagative purposes in the regulated area that was tested by

APHIS and found negative for Karnal bunt prior to purchase but that was

tested by APHIS and found positive for Karnal bunt after purchase; or

(iii) Except as explained in this paragraph, handlers who honor

contracts by paying the grower or another handler full contract price

on nonpropagative wheat grown in the regulated area that was tested by

APHIS and found negative for Karnal bunt if a price was determined in

the contract before March 1, 1996. Handlers who had contracted to sell

the wheat at a price determined in the contract before March 1, 1996,

and who received the full contract price, are not eligible for

compensation.

(3) Salvage value. Salvage values will be as follows:

(i) If the wheat is positive for Karnal bunt and is sold for use as

animal feed, salvage value equals $6.00 per hundredweight or $3.60 per

bushel for all classes of wheat.

(ii) If the wheat is positive for Karnal bunt and is sold for a use

other than animal feed, salvage value equals whichever is higher of the

following: the average price paid in the region of the regulated area

where the wheat is sold for the relevant class of wheat (meaning type

of wheat, such as durum or hard red winter) for the period between May

1 and June 30, 1996; or, $3.60 per bushel.

(iii) If the wheat is negative for Karnal bunt and is sold for any

use, salvage value equals whichever is higher of the following: the

average price paid in the region of the regulated area where the wheat

is sold for the relevant class of wheat (meaning type of wheat, such as

durum or hard red winter) for the period between May 1 and June 30,

1996; or, $3.60 per bushel.

(4) To claim compensation. Compensation payments will be issued by

the Farm Service Agency (FSA). Claims for compensation must be received

by FSA on or before May 31, 1997. The Administrator may extend this

deadline, upon request in specific cases, when unusual and unforeseen

circumstances occur which prevent or hinder a claimant from requesting

compensation on or before May 31, 1997. To claim compensation, a grower

or handler must complete and submit to the local FSA county office the

following documents:

(i) Both growers and handlers. A grower or handler must submit

whichever of the following three forms are applicable, as determined by

FSA: FSA Form 574, FSA Form 578, and FCI Form 73. A grower or a handler

must also submit a copy of the receipt for the final sale of the wheat,

showing the intended use for which the wheat was sold, and a copy of

the Karnal bunt certificate issued by APHIS that shows the Karnal bunt

test results.

(ii) Growers. In addition to the documents required in paragraph

(b)(4)(i), growers must submit a copy of the contract the grower has

for the wheat, if the wheat was under contract; and a copy of the

receipt for the final sale of the wheat, showing the intended use for

which the wheat was sold, total bushels sold, and the total amount paid

to the grower by the handler.

(iii) Handlers. In addition to the documents required in paragraph

(b)(4)(i), handlers must submit a copy of the contract the handler had

with the grower for the wheat, if the wheat was under contract; a copy

of the receipt for the purchase of the wheat from the grower or

handler, showing the total bushels purchased and the amount the handler

paid for the wheat; and a copy of the receipt for the final sale of the

wheat, showing the intended use for which the wheat was sold. Handlers

who had contracted to sell the wheat at a price determined in the

contract before March 1, 1996, must submit a copy of the contract for

the sale of the wheat.

(c) Nonpropagative wheat that is not sold. If a grower or handler

of nonpropagative wheat grown in the regulated area in a State where

the Secretary has declared an extraordinary emergency is not able to or

elects not to sell their wheat, they will be eligible to receive

compensation at the rate of $2.50 per bushel. Compensation will only be

paid if the grower or handler has destroyed the wheat by burying it in

a sanitary landfill or other site that has been approved by APHIS.

Compensation claims will be issued by the Farm Service Agency (FSA). To

claim compensation, the grower or handler must complete and submit to

the local FSA county office whichever of the following three forms are

applicable, as determined by FSA: FSA Form 574, FSA Form 578, and FCI

Form 73. In addition, the grower or handler must submit verification of

how much wheat was buried, in the form of a receipt from the sanitary

landfill or verification signed by an APHIS inspector. Claims for

compensation must be received by FSA on or before May 31, 1997. The

Administrator may extend this deadline, upon request in specific cases,

when unusual and unforeseen circumstances occur which prevent or hinder

a claimant from requesting compensation on or before May 31, 1997.

(d) Decontamination of grain storage facilities. Owners of grain

storage facilities that are in States where the Secretary has declared

an extraordinary emergency, and who have decontaminated their grain

storage facilities pursuant to an Emergency Action Notification (PPQ

Form 523) issued by an inspector, are eligible to be compensated, on a

one time only basis for each facility and each covered crop year wheat,

for up to 50 percent of the cost of decontamination. However,

compensation will not exceed $20,000 per grain storage facility (as

defined in Sec. 301.89-1). General clean-up, repair, and refurbishment

costs are excluded from compensation. Compensation payments will be

issued by APHIS. To claim compensation, the owner of the grain storage

facility must submit to an inspector records demonstrating that

decontamination was performed on all structures, conveyances, or

materials ordered to be decontaminated by the Emergency Action

Notification on the facility. The records must include a copy of the

Emergency Action Notification, contracts with individuals or companies

hired to perform the decontamination, receipts for equipment and

materials purchased to perform the decontamination, time

[[Page 24753]]

sheets for employees of the grain storage facility who performed

activities connected to the decontamination, and any other

documentation that helps show the cost to the owner and that

decontamination has been completed. Claims for compensation must be

received by APHIS on or before May 31, 1997. The Administrator may

extend this deadline, upon request in specific cases, when unusual and

unforeseen circumstances occur which prevent or hinder a claimant from

requesting compensation on or before May 31, 1997.

(e) Flour millers. Flour millers who, in accordance with a

compliance agreement with APHIS, heat-treat millfeed made from wheat

produced in regulated areas that require such treatment are eligible to

be compensated at the rate of $35.00 per short ton of millfeed. The

amount of millfeed compensated will be calculated by multiplying the

weight of wheat from the regulated area received by the miller by 25

percent (the average percent of millfeed derived from a short ton of

grain). Compensation payments will be issued by APHIS. To claim

compensation, the miller must submit to an inspector verification as to

the actual (not estimated) weight of the wheat (such as a copy of the

limited permit under which the wheat was moved to the mill or a copy of

the bill of lading for the wheat, if the actual weight appears on those

documents, or other verification). Flour millers must also submit

verification that the millfeed was heat treated (such as a copy of the

limited permit under which the wheat was moved to a treatment facility

and a copy of the bill of lading accompanying that movement; or a copy

of PPQ Form 700 (which includes certification of processing) signed by

the inspector who monitors the mill). Claims for compensation must be

received by APHIS on or before May 31, 1997. The Administrator may

extend this deadline, upon request in specific cases, when unusual and

unforeseen circumstances occur which prevent or hinder a claimant from

requesting compensation on or before May 31, 1997.

(f) National Karnal Bunt Survey participants. If a grain storage

facility participating in the National Karnal Bunt Survey tests

positive for Karnal bunt spores, the facility will be regulated and may

be ordered decontaminated pursuant to an Emergency Action Notification

(PPQ Form 523) issued by an inspector. If a Declaration of

Extraordinary Emergency has been declared for the State in which the

grain storage facility is located, the owner of the grain storage

facility will be eligible for compensation as follows:

(1) Loss in value of positive wheat. The owner of the grain storage

facility will be compensated for the loss in value of positive wheat.

Compensation will equal the estimated market price for the relevant

class of wheat minus the salvage value, as described in paragraph

(b)(3) of this section. The estimated market price will be calculated

by APHIS for each class of wheat, taking into account the prices

offered by relevant terminal markets (animal feed, milling, or export)

for the period between October 1 and November 30, 1996, with

adjustments for transportation and other handling costs. However,

compensation will not exceed $2.50 per bushel under any circumstances.

Compensation payments for loss in value of wheat will be issued by the

Farm Service Agency (FSA). To claim compensation, the owner of the

facility must submit to the local FSA office a copy of the Emergency

Action Notification under which the facility is or was quarantined and

verification as to the actual (not estimated) weight of the wheat (such

as a copy of the limited permit under which the wheat was moved to a

mill or a copy of the bill of lading for the wheat, if the actual

weight appears on those documents, or other verification). Claims for

compensation must be received by FSA on or before May 31, 1997. The

Administrator may extend this deadline, upon request in specific cases,

when unusual and unforeseen circumstances occur which prevent or hinder

a claimant from requesting compensation on or before May 31, 1997.

(2) Decontamination of grain storage facilities. The owner of the

facility will be compensated on a one time only basis for each grain

storage facility and each covered crop year wheat for the direct costs

of decontamination of the facility at the same rate described under

paragraph (d) of this section (up to 50 per cent of the direct costs of

decontamination, not to exceed $20,000 per grain storage facility).

Compensation payments for decontamination of grain storage facilities

will be issued by APHIS, and claims for compensation must be submitted

in accordance with the provisions in paragraph (d) of this section.

Claims for compensation must be received by APHIS on or before May 31,

1997. The Administrator may extend this deadline, upon request in

specific cases, when unusual and unforeseen circumstances occur which

prevent or hinder a claimant from requesting compensation on or before

May 31, 1997.

Done in Washington, DC, this 30th day of April 1997.

Donald W. Luchsinger,

Acting Administrator, Animal and Plant Health Inspection Service.

[FR Doc. 97-11719 Filed 5-1-97; 11:27 am]

BILLING CODE 3410-34-P