Spearmint Oil Produced in the Far West; Revision of Administrative Rules and Regulations Governing Issuance of Additional Allotment Base to New and Existing Producers

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV97-985-1 PR]

Spearmint Oil Produced in the Far West; Revision of

Administrative Rules and Regulations Governing Issuance of Additional

Allotment Base to New and Existing Producers

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would reduce the number of regions

established for issuing additional allotment bases to new producers

from four to three; revise the procedure used for issuing additional

allotment bases when no requests are received from a region for a class

of spearmint oil; and eliminate obsolete language pertaining to the

issuance of additional allotment bases to existing producers during the

1992-93 and 1993-94 marketing years. The Spearmint Oil Administrative

Committee (Committee), the agency responsible for local administration

of the marketing order for spearmint oil produced in the Far West,

recommended this rule to ensure that a maximum number of new producers

would receive additional allotment base each year at a level determined

by the Committee to be a minimum economic enterprise.

DATES: Comments must be received by July 22, 1997.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposed rule. Comments must be sent in triplicate to

the Docket Clerk, Fruit and Vegetable Division, AMS, USDA, room 2525-S,

South Building, PO Box 96456, Washington, DC. 20090-6456. Comments

should reference the docket number and the date and page number of this

issue of the Federal Register and will be made available for public

inspection in the Office of the Docket Clerk during regular business

hours.

FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 1220 SW Third Avenue, room 369,

Portland, Oregon 97204; telephone: (503) 326-2043; Fax: (503) 326-7440;

or George Kelhart, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, room 2525-S, South Building, PO Box

96456, Washington, DC 20090-6456; telephone: (202) 690-3919; Fax: (202)

720-5698. Small businesses may request information on compliance with

this regulation by contacting: Jay Guerber, Marketing Order

Administration Branch, Fruit and Vegetable Division, AMS, USDA, PO Box

96456, room 2523-S, Washington, DC 20090-6456; telephone (202) 720-

2491; Fax (202) 720-5698.

SUPPLEMENTARY INFORMATION: This proposed rule is issued under Marketing

Order No. 985 (7 CFR part 985), regulating the handling of spearmint

oil produced in the Far West (Washington, Idaho, Oregon, and designated

parts of Nevada and Utah), hereinafter referred to as the ``order.''

This order is effective under the Agricultural Marketing Agreement Act

of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the

``Act.''

The Department of Agriculture (Department) is issuing this rule in

conformance with Executive Order 12866.

This proposal has been reviewed under Executive Order 12988, Civil

Justice Reform. This rule is not intended to have retroactive effect.

This proposal will not preempt any State or local laws, regulations, or

policies, unless they present an irreconcilable conflict with this

rule.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court. Under section 608c(15)(A) of the

Act, any handler subject to an order may file with the Secretary a

petition stating that the order, any provision of the order, or any

obligation imposed in connection with the order is not in accordance

with law and request a modification of the order or to be exempted

therefrom. A handler is afforded the opportunity for a hearing on the

petition. After the hearing the Secretary would rule on the petition.

The Act provides that the district court of the United States in any

district in which the handler is an inhabitant, or has his or her

principal place of business, has jurisdiction to review the Secretary's

ruling on the petition, provided an action is filed not later than 20

days after date of the entry of the ruling.

The spearmint oil order is a volume control program that authorizes

the regulation of spearmint oil produced in the Far West through annual

allotment percentages and salable quantities for Class 1 (Scotch) and

Class 3 (Native) spearmint oils. The salable quantity limits the

quantity of each class of spearmint oil that may be marketed from each

season's crop. Each producer is allotted a share of the salable

quantity by applying the allotment percentage to that producer's

allotment base for the applicable class of spearmint oil. Handlers may

not purchase spearmint oil in excess of a producer's annual allotment,

or from producers who have not been issued an allotment base under the

order.

Section 985.53(d)(3) of the order provides for rules to be

established by the Committee, with the approval of the Secretary, for

distribution of additional allotment bases. Pursuant to the authority

in that section, the Committee unanimously recommended revising

Sec. 985.153 of the order's rules and regulations at its meeting on

March 18, 1997. Section 985.153 provides regulations for the issuance

of additional allotment bases to new and existing producers. The

Committee's recommendation proposes modification of portions of

Sec. 985.153 to reflect current conditions within the Far West

spearmint oil industry relative to the annual issuance of additional

allotment bases to both new and existing producers. This proposed rule

would reduce the number of regions established for issuing additional

allotment bases to new producers from four to three; revise the

procedure used for issuing additional allotment bases when no requests

are received from a region for a class of spearmint oil; and r

eliminate obsolete language pertaining to the issuance of additional

allotment bases to existing producers during the 1992-93 and 1993-94

marketing years.

Section 985.53(d)(1) provides that, beginning with the 1982-83

marketing year, the Committee annually make additional allotment bases

available in an amount not greater than 1 percent of the total

allotment base for each class of spearmint oil. The order specifies

that, each year, 50 percent of the additional allotment bases be made

available for new producers and 50 percent be made available for

existing producers. A new producer is any person who has never been

issued allotment base for a class of oil, and an existing producer is

any person who has been issued allotment base for a class of oil.

Provision is made in the order for new producers to apply to the

Committee for the additional allotment base, which in turn is issued to

applicants in each oil class by lottery. The additional allotment bases

being made available to existing producers are distributed equally

among all existing producers who apply.

The order was amended on June 26, 1996 (61 FR 32924), by redefining

the production area to exclude those portions of the area with no

historic record of commercial production of

[[Page 36237]]

spearmint oil. The amendment thus removed the regulated portions of

California and Montana, leaving the defined production area to mean the

States of Washington, Oregon, and Idaho, and portions of the States of

Nevada and Utah.

Based on the order prior to the amendment, Sec. 985.153(c)

currently establishes the regions for issuing additional allotment base

as follows:

(A) Region 1--Those portions of Montana and Utah included in the

production area.

(B) Region 2--The State of Oregon and those portions of Nevada and

California included in the production area.

(C) Region 3--The State of Idaho.

(D) Region 4--The State of Washington.

During past additional allotment base lotteries, the name of one

new producer per class of oil in each of the above four regions was

drawn by Committee staff. The lottery usually resulted in four new

Scotch spearmint oil producers receiving approximately 2,300 pounds of

allotment base each, and four new Native spearmint oil producers

receiving approximately 2,500 pounds of allotment base each.

This proposed rule would replace the above four regions with the

following three regions:

(A) Region 1--The State of Oregon and those portions of Utah and

Nevada included in the production area.

(B) Region 2--The State of Idaho.

(C) Region 3--The State of Washington.

The Committee made this recommendation primarily because of the

removal of Montana and California from the production area, as well as

its analysis of statistics relating to current spearmint oil production

and the number of requests received each year for additional allotment

base from the various states included in the production area. For

example, Committee records show that the average number of applications

by state for additional allotment base from 1986 to 1996 for Class 1

and Class 3 spearmint oil, respectively, is 63.2 and 73.2 percent for

Washington, 26.7 and 21.5 percent for Idaho, 9.6 and 11.2 percent for

Oregon, 1.4 and 2.6 percent for Utah, and 0.2 and 0.2 percent for

Nevada. Records also show that the number of producers, as well as the

allotment bases held by those producers, is greatest in Washington

followed in decreasing order by Idaho, Oregon, Utah, and Nevada. This

recommendation would result in each region potentially having a

significant number of applicants each year, thus bringing about equity

in issuing the additional allotment base. It would also increase the

amount of allotment base that is issued to each new producer.

In reaching its recommendation to establish three regions the

Committee also considered the importance of issuing as many blocks of

additional allotment base as are possible at a level considered

economically viable to each recipient. The Committee also resolved that

each region should receive an equal number of these blocks. To

establish a reasonable minimum economic enterprise required to produce

each class of spearmint oil, the Committee relied on available

statistical information and on the spearmint oil production experience

of each member. Using this information and experience, the Committee

concluded that producers require approximately 14 acres for Scotch

spearmint oil production and approximately 13 acres for Native

spearmint oil production to be economically viable. Using a 5-year

average yield and a nominal allotment percentage of 55 as a basis, the

Committee calculated that each new block of additional allotment base

should be approximately 3,000 pounds for Scotch spearmint oil, and

approximately 3,400 pounds for Native spearmint oil.

The Committee used the following formula to establish a range of

possible allotments for additional base: (Number of Acres x Average

Yield per Acre = Production) Allotment Percentage = Allotment

Base Required for Viability. For example, applying this formula to a

theoretical 14-acre Scotch spearmint oil operation with a 5-year

average yield of 126 pounds per acre and a nominal 55 percent

allotment, each new producer would receive an allotment base of 3,207

pounds. To obtain the total additional allotment base available for new

Scotch spearmint oil producers during the 1997-98 marketing year, the

total allotment base of 1,811,556 was multiplied by 0.5 percent (50

percent of the additional allotment base). The result, 9,058 pounds, if

divided equally among the three proposed regions, would provide three

new Class 1 producers with 3,019 pounds of allotment base each.

Similarly, an example with a theoretical 13-acre Native spearmint

oil operation, using a 5-year average yield of 151 pounds per acre and

a nominal allotment percentage of 55, results in an allotment base of

3,569 pounds for each new producer. The total additional allotment base

available for new Native spearmint oil producers during the 1997-98

marketing year, 10,048 pounds, was obtained by multiplying the total

allotment base of 2,009,556 pounds by 0.5 percent. Thus, with equal

distribution among the three proposed regions, three new Class 3

producers would each receive 3,349 pounds of allotment base.

From such calculations the Committee determined that there should

be three regions, that a reasonable minimum economic unit would

currently be approximately 3,000 pounds for Scotch spearmint oil and

approximately 3,400 pounds for Native spearmint oil, and that currently

there should be one new producer per class per region drawn during the

annual allotment base lottery. Based on the current total industry

allotment bases, the Committee concluded that any more than one

recipient per class of oil in a region would result in an inadequate

level of allotment base being issued to each new producer.

The amount of allotment base to be issued to new Scotch spearmint

oil producers would be slightly higher than the approximate amount the

Committee believes necessary for an economically viable production

unit. The amount to be issued to new Native spearmint oil producers

would be only slightly lower than the Committee's guideline of 3,400

pounds. In both cases, the amount to be allocated to new producers

would be higher than under the current four district system.

The Committee also recommended changing the procedure used to

distribute unused additional allotment base for each class of oil in

the event requests for such are not received from eligible new

producers in one or more of the three proposed regions. Currently, if

the Committee does not receive requests for additional allotment base

for a class of oil from one or more regions, the unused allotment base

is divided equally among the eligible new producers within the other

regions receiving allotment base for that class of oil. This procedure

has resulted in a reduction in the number of additional allotment base

recipients. To insure that a maximum number of new producers receive

allotment base for each class of oil each year, the Committee

recommended that, in the event no requests for additional allotment

base for a class of oil are received from a region, the unused

allotment base would be issued to an eligible new producer whose name

is drawn by lot from all remaining eligible new producers from all

regions for that class of oil.

Finally, the Committee recommended that obsolete language in

Sec. 985.153(c)(2) pertaining to existing producers, but specific to

the 1992-93 and 1993-94

[[Page 36238]]

marketing years, be removed. This language is specific to action taken

on June 26, 1992 (57 FR 28569), to issue additional allotment base to

existing producers with less than 3,000 pounds of allotment base to

bring them up to a level not to exceed 3,000 pounds.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the Agricultural Marketing Service (AMS) has considered the

economic impact of this action on small entities. Accordingly, this

initial regulatory flexibility analysis has been prepared.

The purpose of the RFA is to fit regulatory actions to the scale of

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. Marketing orders issued

pursuant to the Act, and rules issued thereunder, are unique in that

they are brought about through group action of essentially small

entities acting on their own behalf. Thus, both statutes have small

entity orientation and compatibility.

There are 8 spearmint oil handlers subject to regulation under the

order and approximately 250 producers of spearmint oil in the regulated

production area. Of the 250 producers, approximately 135 producers hold

Class 1 spearmint oil allotment base, and approximately 115 producers

hold Class 3 spearmint oil allotment base. Small agricultural service

firms are defined by the Small Business Administration (13 CFR 121.601)

as those having annual receipts of less than $5,000,000, and small

agricultural producers have been defined as those whose annual receipts

are less than $500,000.

The Far West spearmint oil industry is characterized by producers

whose farming operations generally involve more than one commodity, and

whose incomes from farming operations are not exclusively dependent on

the production of spearmint oil. In the production of the spearmint

plant, crop rotation is an essential cultural practice for weed,

insect, and disease control. An average spearmint oil producing

operation would have acreage sufficient enough to ensure that the total

acreage available for the production of the crop is approximately one-

third spearmint and two-thirds rotational crops. Consequently, most

spearmint oil producers would have considerably more acreage available

than would be planted to spearmint during any given season. To remain

economically viable with the added costs associated with spearmint oil

production, most such farms would fall into the category of large

businesses.

Small spearmint oil producers generally are not extensively

diversified and as such are more at risk to market fluctuations. Such

small producers generally need to market their entire annual crop and

do not have the luxury of having other crops to cushion seasons with

poor spearmint oil returns. Conversely, large diversified producers

have the potential to endure one or more seasons of poor spearmint oil

markets because incomes from alternate crops could support the

operation for a period of time. Being reasonably assured of a stable

price and market provides small producing entities with the ability to

maintain proper cash flow and to meet annual expenses. Thus, the market

and price stability provided by the order potentially benefit the small

producer more than such provisions benefit large producers. Even though

a majority of handlers and producers of spearmint oil may not be

classified as small entities, the volume control feature of this order

has small entity orientation. Records show that the order has

contributed extensively to the stabilization of producer prices.

Based on the Small Business Administration's definition of small

entities, the Committee estimates that none of the eight handlers

regulated by the order would be considered small entities as all are

national or multinational corporations involved in the buying and

selling of essential oils and the products of such essential oils. The

Committee also estimates that 17 of the 135 Scotch spearmint oil

producers and 10 of the 115 Native spearmint oil producers would be

classified as small entities. Thus, a majority of handlers and

producers of Far West spearmint oil would not be classified as small

entities.

Section 985.53 of the order provides that each year the Committee

make available additional allotment bases for each class of oil in the

amount of no more than 1 percent of the total allotment base for that

class of oil. This affords an orderly method for new spearmint oil

producers to enter into business and existing producers the ability to

expand their operations as the spearmint oil market and individual

conditions warrant. One-half of the 1 percent increase is issued

annually by lot to eligible new producers for each class of oil. To be

eligible, a producer must never have been issued allotment base for the

class of spearmint oil such producer is making application for, and

have the ability to produce such spearmint oil. The ability to produce

spearmint oil is generally demonstrated when a producer has experience

at farming, and owns or rents the equipment and land necessary to

successfully produce spearmint oil.

This proposed rule would reduce the number of regions established

for the purpose of issuing annual additional allotment base to new

producers from four to three. It would also change the procedure used

to issue additional allotment base should no requests be received from

eligible new producers in one or more of the three proposed regions.

This proposal would also delete obsolete provisions in

Sec. 985.153(c)(2) that pertain to the issuance of additional allotment

base to existing producers during the 1992-93 and 1993-94 marketing

years. The Committee recommended this rule for the purpose of ensuring

equity in the distribution of additional allotment base following the

order amendment that removed the regulated portions of California and

Montana from the production area. The recommendation would also help to

ensure that a maximum number of eligible new producers would receive

additional allotment base each year at a level determined by the

Committee to be the minimum economic enterprise needed to produce each

class of spearmint oil.

To establish a reasonable minimum economic enterprise required for

the production of each class of spearmint oil, the Committee relied on

available statistical information and on the spearmint oil production

experience of each member. Using this information and experience, the

Committee concluded that producers require approximately 14 acres for

Scotch spearmint oil production and approximately 13 acres for Native

spearmint oil production to be economically viable. Using a 5-year

average yield and a nominal allotment percentage of 55 as a basis, the

Committee calculated that each new block of additional allotment base

should be approximately 3,000 pounds for Scotch spearmint oil, and

approximately 3,400 pounds for Native spearmint oil.

The Committee used the following formula to establish a range of

possible allotments for additional base: (Number of Acres x Average

Yield per Acre = Production) Allotment Percentage = Allotment

Base Required for Viability. For example, applying this formula to a

theoretical 14-acre Scotch spearmint oil operation with a 5-year

average yield of 126 pounds per acre and a nominal allotment percentage

of 55, each new producer would receive an allotment base of 3,207

pounds. To obtain the total additional allotment base available for new

Scotch spearmint oil producers during the 1997-98 marketing year, the

Committee multiplied the total industry allotment base of 1,811,556 by

0.5

[[Page 36239]]

percent (50 percent of the additional allotment base). The result,

9,058 pounds, if divided equally among the three proposed regions,

would allot 3,019 pounds each for three new Class 1 producers.

Similarly, an example with a theoretical 13-acre Native spearmint

oil operation, using a 5-year average yield of 151 pounds per acre and

a nominal allotment of 55 percent, results in an allotment base of

3,569 pounds for each new producer. The total additional allotment base

available for new Native spearmint oil producers during the 1997-98

marketing year, 10,048 pounds, was obtained by multiplying the total

industry allotment base of 2,009,556 pounds by 0.5 percent. With equal

distribution among the three proposed regions, three new Class 3

producers would each receive 3,349 pounds of allotment base.

From such calculations the Committee determined that there should

be three regions, that a reasonable minimum economic unit would

currently be approximately 3,000 pounds for Scotch spearmint oil and

approximately 3,400 pounds for Native spearmint oil, and that currently

there should be one new producer per class per region drawn during the

annual allotment base lottery. Based on the current total industry

allotment bases, the Committee concluded that any more than one

recipient per class of oil in a region would result in an inadequate

level of allotment base being issued to each new producer.

The amount of allotment base to be issued to new Scotch spearmint

oil producers would be slightly higher than the approximate amount the

Committee believes necessary for an economically viable production

unit. The amount to be issued to new Native spearmint oil producers

would be only slightly lower than the Committee's guideline of 3,400

pounds. In both cases, the amount to be allocated to new producers

would be higher than under the current four district system.

During its deliberations, the Committee considered alternatives to

this proposal. The first option discussed would have left

Sec. 985.153(c) unchanged. This was rejected because of the need to

develop a more equitable method of issuing additional base in light of

the order amendment that removed California and Montana from the

production area. The Committee also discussed the possibility of

eliminating the use of different regions in its additional allotment

base issuance procedures. In such a scenario, available additional

allotment base would be distributed equally to those new producers

drawing the allotment regardless of their spearmint acreage location.

However, this option was also rejected because the Committee determined

that such a procedure has the statistical potential of adding more new

producers to those states with a greater number of current producers

than to the states with few producers.

The Committee made its recommendation after careful consideration

of available information, including the aforementioned alternative

recommendations, the order amendment that removed Montana and

California from the production area, the minimum economic enterprise

required for spearmint oil production, historical statistics relating

to the locations of the producers applying for the annual additional

allotment base, and other factors such as number of producers by state

and the amount of allotment base held by such producers. Based on its

review, the Committee believes that the action recommended is the best

option available to ensure that the objectives sought will be achieved.

The information collection requirements contained in the section of

the order's rules and regulations proposed to be amended by this rule

have been previously approved by the Office of Management and Budget

(OMB) under the provisions of 44 U.S.C. chapter 35 and have been

assigned OMB No. 0581-0065. This action would not impose any additional

reporting or record keeping requirements on either small or large

spearmint oil producers and handlers. All reports and forms associated

with this program are reviewed periodically in order to avoid

unnecessary and duplicative information collection by industry and

public sector agencies. The Department has not identified any relevant

Federal rules that duplicate, overlap, or conflict with this proposed

rule.

The Committee's meeting was widely publicized throughout the

spearmint oil industry and all interested persons were invited to

attend and participate in the discussion on these issues. Interested

persons are also invited to submit information on the regulatory and

informational impacts of this action on small businesses.

A 15-day comment period is provided to allow interested persons to

respond to this proposal. Fifteen days is deemed appropriate because

this rule would need to be in place as soon as possible because the

Committee plans to distribute base to new producers for the 1998-99

marketing year in August 1997. All written comments received within the

comment period will be considered before a final determination is made

on this matter.

List of Subjects in 7 CFR Part 985

Marketing agreements, Oils and fats, Reporting and recordkeeping

requirements, Spearmint oil.

For the reasons set forth in the preamble, 7 CFR part 985 is

proposed to be amended as follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL

PRODUCED IN THE FAR WEST

1. The authority citation for 7 CFR part 985 continues to read as

follows:

Authority: 7 U.S.C. 601-674.

2. In Sec. 985.153, paragraph (c) is revised to read as follows:

Sec. 985.153 Issuance of additional allotment base to new and existing

producers.

* * * * *

(c) Issuance--(1) New producers. (i) Regions: For the purpose of

issuing additional allotment base to new producers, the production area

is divided into the following regions:

(A) Region 1. The State of Oregon and those portions of Utah and

Nevada included in the production area.

(B) Region 2. The State of Idaho.

(C) Region 3. The State of Washington.

(ii) Each year, the Committee shall determine the size of the

minimum economic enterprise required to produce each class of oil. The

Committee shall thereafter calculate the number of new producers who

will receive allotment base under this section for each class of oil.

An equal number of grants of the additional allotment base for each

class of oil that is available to new producers each marketing year

shall be issued to producers within each region. The Committee shall

include that information in its announcements to new producers in each

region informing them when to submit requests for allotment base. The

Committee shall determine whether the new producers requesting

additional base have ability to produce spearmint oil. The names of all

eligible new producers in each region shall be placed in a lot for

drawing. A separate drawing shall be held for each region. If, in any

marketing year, there are no requests in a class of oil from eligible

new producers in a region, such unused allotment base shall be issued

to an eligible new producer whose name is selected by drawing from a

lot containing the names of all remaining eligible new producers from

all regions

[[Page 36240]]

for that class of oil. The Committee shall immediately notify each new

producer whose name was drawn and issue that producer an allotment base

in the appropriate amount.

(2) Existing producers. (i) The Committee shall review all requests

from existing producers for additional allotment base.

(ii) Each existing producer of a class of spearmint oil who

requests additional allotment base and who has the ability to produce

additional quantities of that class of spearmint oil, shall be eligible

to receive a share of the additional allotment base for that class of

oil. Additional allotment base to be issued by the Committee for a

class of oil shall be distributed equally among the eligible producers

for that class of oil. The Committee shall immediately notify each

producer who is to receive additional allotment base by issuing that

producer an allotment base in the appropriate amount.

* * * * *

Dated: June 30, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-17607 Filed 7-3-97; 8:45 am]

BILLING CODE 3410-02-P