Conservation Farm Option

Federal RegisterSep 29, 1998

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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1468

RIN 0578-AA20

Conservation Farm Option

AGENCY: Commodity Credit Corporation, Department of Agriculture.

ACTION: Final rule.

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SUMMARY: Section 335 of the Federal Agriculture Improvement and Reform

Act of 1996 (the 1996 Act) amended the Food Security Act of 1985 (the

1985 Act) establishing the Conservation Farm Option (CFO) Program. The

Commodity Credit Corporation (CCC) administers the CFO under the

supervision of the Vice President of the CCC who is the Chief of the

Natural Resources Conservation Service (NRCS), with concurrence by the

Executive Vice President of the CCC who is the Administrator of the

Farm Service Agency (FSA). This final rule describes how CCC will

implement CFO as authorized by the 1985 Act, responds to comments

received from the public during the comment period, and makes

clarifications to improve implementation of the program.

EFFECTIVE DATE: September 29, 1998.

ADDRESSES: This rule may also be accessed via Internet. Users can

access the Natural Resources Conservation Service (NRCS) homepage at

http://www.nrcs.usda.gov; select the 1996 Farm Bill Conservation

Programs from the menu.

FOR FURTHER INFORMATION CONTACT: Daniel Smith, Water Issues Team

Leader, Conservation Operations Division, Natural Resources

Conservation Service; phone: 202-720-3524; fax: 202-720-4265; e-mail:

[email protected], Attention: CFO; or Edward Rall, Economic and Policy

Analysis Staff, Farm Service Agency; phone: 202-720-7795; fax: 202-720-

8261; e-mail: [email protected], Attention: CFO.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

The Office of Management and Budget (OMB) determined that this

final rule is significant and was reviewed by OMB under Executive Order

12866. Pursuant to section 6(a)(3) of Executive Order 12866, CCC

conducted a benefit-cost analysis. The analysis estimates CFO will have

a beneficial impact on the adoption of conservation practices and, when

installed or applied according to technical standards, will increase

net farm income through a reduction in soil erosion, improved water

quality, and wildlife habitat. In addition, benefits would accrue to

society through maintenance of long-term productivity, enhancement of

the resource base, non-point source pollution damage reductions, and

wildlife enhancements. As a voluntary program, CFO will not impose any

obligation upon agricultural producers or owners that choose not to

participate.

A copy of this analysis is available upon request from Daniel

Smith, Conservation Operations Division, Natural Resources Conservation

Service, P.O. Box 2890, Washington, D.C. 20013-2890.

Regulatory Flexibility Act

The Regulatory Flexibility Act is not applicable to this rule

because CCC is not required by 5 U.S.C. 553 or any other provision of

law to publish a notice of proposed rulemaking with respect to the

subject matter of this rule.

Environmental Analysis

CCC determined through an Environmental Assessment for the

Conservation Farm Option Program, dated January 15, 1998, that the

issuance of this final rule will not have a significant effect on the

human environment. Copies of the Environmental Assessment and the

Finding of No Significant Impact may be obtained from Daniel Smith,

Conservation Operations Division, Natural Resources Conservation

Service, P.O. Box 2890, Washington, DC 20013-2890.

Paperwork Reduction Act

No substantive changes have been made in this final rule which

affect the recordkeeping requirements and estimated burdens previously

reviewed and approved under OMB control number 0560-0174.

Executive Order 12988

This final rule has been reviewed in accordance with Executive

Order 12988. The provisions of this final rule are not retroactive.

Furthermore, the provisions of this final rule preempt State and local

laws to the extent such laws are inconsistent with this final rule.

Before an action may be brought in a Federal court of competent

jurisdiction, the administrative appeal rights afforded persons at 7

CFR parts 11 and 614 must be exhausted.

Federal Crop Insurance Reform and Department of Agriculture

Reorganization Act of 1994

USDA classified this final rule as not major, therefore, pursuant

to Section 304 of the Department of Agriculture Reorganization Act of

1994, a risk assessment is not required.

Unfunded Mandates Reform Act of 1995

Pursuant to Title II of the Unfunded Mandates Reform Act of 1995,

CCC assessed the effects of this rulemaking action on State, local, and

tribal governments, and the public. This action does not compel the

expenditure of $100 million or more by any State, local, or tribal

governments, or anyone in the private sector; therefore a statement

under Section 202 of the Unfunded Mandates Reform Act of 1995 is not

required.

Small Business Regulatory Enforcement Fairness Act of 1996

Pursuant to 5 U.S.C. Sec. 808 of the Small Business Regulatory

Enforcement Fairness Act of 1996, it has been determined by CCC that it

is impractical, unnecessary, and contrary to the public interest to

delay the effective date of this rule. Making this final rule effective

immediately will permit CCC to obligate fiscal year 1998 funds which

would otherwise be forfeited. Furthermore, if this final publication is

further delayed, program implementation will not begin until 2000.

Accordingly, this rule is effective upon publication in the Federal

[[Page 51778]]

Discussion of Program

Background

The Federal Agriculture Improvement and Reform Act of 1996 (the

1996 Act) (Pub. L. 104-127, April 4, 1996) amended the Food Security

Act of 1985 (the 1985 Act) (16 U.S.C. 3801 et seq.) and established the

Conservation Farm Option (CFO) pilot program. Under the 1985 Act, CCC

is authorized under CFO to provide direct payment to producers of

wheat, feed grains, upland cotton, and rice. Accordingly, other

entities, such as groups which coordinate, organize, administer,

monitor, and evaluate pilot projects are not eligible for direct CCC

payment, although an organization such as that described may be

reimbursed by the landowner. Upon a landowner or producer's request,

CCC will provide technical support to assist in implementing the

provisions of this part. Traditional agricultural conservation programs

have provided farmers and ranchers with cost share, land retirement,

and wetland restoration payments as incentives to protect and conserve

soil, water, and other natural resources. However, participation in

several individual programs for which a farmer could be eligible may

require more than one conservation plan and contract for the farm or

ranch, and it may also require numerous payments throughout the year

without an assurance that, in the aggregate, all of the farm's

environmental needs are met. Through CFO, CCC provides a single

contract, conservation farm plan, and payment for implementation of

innovative and environmentally-sound methods for addressing natural

resource concerns and results in the consolidation of payments that

would have been available under the Conservation Reserve Program (CRP),

the Wetlands Reserve Program (WRP), and the Environmental Quality

Incentives Program (EQIP).

NRCS will provide overall program management and implementation

leadership for CFO, including technical leadership for conservation

planning and implementation; while FSA will be responsible for the

administrative processes and procedures for applications, contracting,

program allocations and accounting.

Participation in CFO pilot projects is open to all production

flexibility contract holders within an approved pilot project area who

are eligible for CRP, EQIP, or WRP, without regard to race, color,

national origin, gender, religion, age, disability, political beliefs,

sexual orientation, and marital or family status. Persons with

disabilities who require alternative means for communication of program

information should contact USDA's TARGET Center at: (202) 720-2600

(voice and TDD). To file a complaint of discrimination, write USDA,

Director, Office of Civil Rights, Room 326W, Whitten Building, 14th and

Independence Avenue, S.W., Washington, D.C. 20250-9410 or call (202)

720-5964 (voice or TDD). USDA is an equal opportunity provider and

employer.

Overview of the Conservation Farm Option Pilot Program

As specified in the 1985 Act, the CFO program is available to

producers of wheat, feed grains, upland cotton, and rice. Additionally,

owners and producers must have a farm with contract acres enrolled in

CCC's production flexibility contracts established under Title I of the

1996 Act and meet the eligibility requirements in either CRP, EQIP, or

WRP in order to participate in the CFO program. Owners and producers

accepted into the CFO must enter into 10-year contracts, which may be

extended an additional 5 years.

CFO participation is determined in a two step process: First, CCC

selects CFO pilot project areas based on proposals submitted by the

public; then, CCC accepts applications from eligible producers within

the selected pilot project area.

Pilot Projects

CFO pilot projects are intended to address resource problems and

needs that are well documented and on a scale that will facilitate the

evaluation of the effectiveness of the systems and practices installed,

as well as that of the entire program. CCC will select CFO pilot

project areas based on the extent that the proposal:

1. Demonstrates innovative approaches to conservation program

delivery and administration;

2. Proposes innovative conservation technologies and systems;

3. Provides assurances that the greatest amount of environmental

benefits will be delivered in a cost effective manner;

4. Ensures effective monitoring and evaluation of the pilot effort;

5. Considers multiple stakeholder participation within the pilot

area;

6. Provides additional non-Federal funding; and

7. Addresses conservation of soil, water, and related resources,

water quality protection or improvement; wetland restoration and

protection; and wildlife habitat development and protection; or other

similar conservation purposes.

An interdepartmental committee made up of representatives of

several Federal agencies will review the proposals and make

recommendations to the NRCS Chief, who is a Vice President of the CCC,

based on criteria available to the public in the CFO proposal package.

The Chief, NRCS, with FSA concurrence, will select proposals for

funding.

CFO proposals may be developed for an individual or group of

eligible producers. Individual and groups that desire to coordinate

individual producer plan development and implementation activities may

submit pilot project proposals. If the proposal is funded, the

individual or group will be responsible for providing leadership in the

overall local planning effort, including activities such as information

delivery, monitoring, evaluation, and coordination with local agencies,

States or subdivisions thereof, Tribal, and Federal agencies. However,

because authorizing legislation specifies that CFO funds are available

only to producers of wheat, feed grains, upland cotton, and rice,

entities not meeting this criteria are not eligible for CCC payment.

Despite the restriction on CCC funding third parties, producers are not

precluded from making a payment to a third party.

Determining Eligibility Within Approved Pilot Project Areas

After selection of pilot project areas, all producers or owners

with production flexibility contracts within the project area and who

are eligible for either CRP, EQIP, or WRP will be eligible to enroll in

the program. The 1985 Act requires eligible producers and owners to

prepare a conservation farm plan, which becomes part of the CFO

contract. This conservation farm plan can be developed for a portion of

the farm or the entire farm. The plan describes all conservation

practices, acreage retired, and wetland restoration, or protection

practices to be implemented and maintained on acreage subject to

contract. The 1985 Act also requires the plan to contain a schedule for

the implementation and maintenance of the practices and to comply with

highly erodible land and wetland conservation requirements of Title XII

of the 1985 Act.

The 1985 Act further requires participants to agree to forgo

payments under CRP, EQIP, and WRP. In lieu of these payments, the 1985

Act requires the Secretary to offer annual payments under the contract

that are equivalent to the payments the participant would have received

had they participated in the CRP, EQIP, or WRP. Because of this

[[Page 51779]]

statutory requirement, payments, payment limitations, participant and

land eligibility requirements, and practices for CFO are determined

utilizing the applicable regulatory provisions under the CRP, EQIP, and

WRP. Therefore, this final regulation references the regulations for

CRP (Part 1410), EQIP (Part 1466), and WRP (Part 1467) when setting

forth the provisions for:

1. Eligible conservation practices,

2. Eligibility to earn land retirement rental payments,

3. Eligible land upon which such practices can be installed and on

which such land retirement rental payments can be made,

4. The eligibility requirements for the participant,

5. The payment calculations, and

6. The payments issued to a ``person'' for payment limitation

purposes.

For example, the CFO conservation farm plan and contract specify a

conservation practice on field 1 similar to those eligible under EQIP,

and a land retirement rental payment and conservation practice on field

2 similar to those eligible under CRP. The regulations in Part 1466 for

EQIP will be referenced to determine eligible practices, eligible land,

participant eligibility, payment, and payment limitation for field 1.

Likewise, the regulations in Part 1410 for CRP will be referenced to

determine eligible practices, eligible land, participant eligibility,

land retirement rental payment and conservation cost-share payment, and

payment limitation for field 2. The total payments calculated and

limited by the applicable provisions in Parts 1466 and 1410 will be

totaled to determine the amount which will be issued for the CFO annual

rental payment.

Because the regulations at Parts 1410, 1466, and 1467 could be

revised which would require a corresponding revision of this part, the

provisions on eligible practices, eligible land, participant

eligibility, land retirement rental payment, and conservation cost-

share payment, and payment limitation are provided for CFO through

references to the regulations for CRP, EQIP, and WRP. CFO is not

authorized to acquire easements. Therefore, acreage that is subject to

a WRP easement will not be included in the CFO contract and WRP

easement payments will not be incorporated into the CFO annual payment.

However, CFO will be used to install any reasonable practice needed to

restore wetlands, and appropriate adjacent uplands.

Although CCC funds for CFO are not authorized for technical

assistance, upon a participant's request, NRCS may provide technical

assistance to a participant. Participants may, at their own cost, use

qualified professionals, other than NRCS personnel, to provide

technical assistance, such as conservation planning; conservation

practice survey, design, layout, and installation; information,

education, and training for producers; and training and quality

assurance for professional conservationists. In all situations, NRCS

retains approval authority over the technical adequacy of work

accomplished by non-NRCS personnel for the purpose of maintaining

compliance within CFO.

Ranking and Selecting Applications Within Approved Pilot Project Areas

After a pilot project area has been approved, the NRCS Chief will

notify the appropriate group or individual. Once notified, the

individual will contact the appropriate NRCS field office to complete

the CFO contract. For group proposals, the NRCS Chief will notify the

appropriate group sponsor and corresponding NRCS and FSA field offices.

Once notified CCC will accept applications throughout the fiscal year.

Periodically, as determined by the State Conservationist based on the

needs of the pilot project area, applications will be ranked and

selected according to selected ranking criteria. Once the applicant is

determined to be eligible to participate in CFO, the NRCS designated

conservationist will meet with the applicant to calculate the offer

index. The offer index will include: an inventory of resources;

identification of natural resource problems and concerns; treatment

needs; incentive payment levels; and cost-share and land retirement

rates that the producer may accept. The applicant may improve his/her

offer index by one or more of the following: providing additional

environmental benefits without increasing the program costs, or

accepting a rate or payment level less than the established rate or

payment level. The designated conservationist, in consultation with the

local work group, will utilize selected ranking criteria to prioritize

applications from the same pilot project area. The designated

conservationist, in consultation with the local work group, will rank

all applications using criteria that will consider:

1. The degree to which the application is consistent with the pilot

project proposal;

2. The environmental benefits that will be derived by applying the

conservation practices in the conservation farm plan which will meet

the purposes of the program;

3. An estimate of the cost of the planned conservation practices,

the program payments that will be paid to the applicant, and other

factors for determining which applications may present the least cost

to the program; and

4. The environmental benefits per dollar expended.

In creating this criteria, the designated conservationist, in

consultation with the local work group will consider the following

factors:

(1) Soil erosion;

(2) Water quality;

(3) Wildlife benefits;

(4) Soil productivity;

(5) Conservation compliance considerations;

(6) Likelihood to remain in conserving uses beyond the contract

period, including tree planting and permanent wildlife habitat;

(7) State water quality priority areas; and

(8) The environmental benefits per dollar expended.

The FSA county committee will approve funding in the pilot project

area in accordance with the NRCS ranking.

Payments

When enrolling in CFO, the participant enrolls the entire farm, as

constituted by FSA. Once enrolled, the individual will forego accepting

any future payment, under CRP, EQIP, or WRP on the farm, except for

payments earned but not paid before enrollment in CFO.

CCC will determine annual payments, subject to the availability of

funds, based on the value of the expected payments that would have been

paid to the participant under CRP, EQIP, or WRP. For example, a

practice that is determined eligible under WRP will receive the cost-

share rate for that practice in accordance with WRP. The same holds

true for land retirement rates under CRP and cost-share rates under

both CRP and EQIP. If a participant chooses to acquire a land

retirement rental payment and also wishes to install a practice on that

particular parcel in which he/she is receiving the land retirement

payment, CRP cost-share rates will be utilized. For new technologies

and innovations, the cost-share rate received will be equivalent to

that received under EQIP. Cost-share rates shall not exceed the total

amounts calculated among these three programs. For a practice that is

eligible under all three programs, the participant will chose between

CRP, EQIP, or WRP to determine what type of cost-share the

[[Page 51780]]

participant will receive. Where cost-share payments to a participant

exceed 100 percent of the actual cost of the practice, the CCC payments

to a participant shall be reduced so that the total financial

contributions for a structural or vegetative practice from all public

and private entity sources do not exceed the cost of the practice.

Cost-share or incentive payments will not be made to a participant

who has applied or initiated the application of a conservation practice

prior to approval of the contract.

Transferring from CRP, EQIP, or WRP to CFO

Producers or owners who wish to participate in CFO do not need to

be enrolled in CRP, EQIP, or WRP to be eligible for CFO. Producers or

owners who are currently enrolled in CRP, EQIP, or WRP must terminate

the existing contract(s). Remaining rights and obligations under CRP,

EQIP, or WRP will be incorporated into the new CFO contract. Practices

included in CRP or EQIP contracts or WRP cost-share agreements must be

included in a CFO contract if an owner or producer wishes to

participate. Participants in CFO with CRP, EQIP, or WRP practices

incorporated into CFO contracts are responsible for operating and

maintaining these practices for the balance of the period specified in

the original program contract, unless otherwise stated in the

conservation farm plan and CFO contract.

In cases where a participant transfers from CRP to CFO, the

participant must ensure that net environmental benefits under a CRP

contract are maintained or exceeded under the CFO contract. For

example, a landowner who was enrolled under CRP may opt to crop retired

land acreage, once the acreage is enrolled under CFO. This may be done

without liquidated damages, as long as the environmental benefits under

the former CRP contract are maintained or exceeded for the whole farm,

according to the approved conservation farm plan and CFO contract.

Under this scenario, the landowner may forego his CRP rental payment

and receive payments for a particular structural or vegetative

practice, if applicable.

Analysis of Public Comment

On April 2, 1998, the CCC issued a proposed rule with requests for

comments (63 FR 16142). The proposed rule described program

administration and program requirements that CCC would use to implement

the program. Thirty-three responses, containing nearly 200 specific

comments were received during the 60-day comment period. Entities

responding included individuals, national conservation organizations,

national farm and commodity organizations, national wildlife

organizations, State natural resource agencies, State associations, and

community development organizations. Changes in this final rule are

based on consideration of the comments received. Other minor changes

have been made in the text for clarity and to facilitate the

application of the regulation.

General Comments

Nine comments were received about the comment period on the

proposed regulation and the pilot project proposal application period

for 1998. All nine respondents felt the time constraints were limiting.

Several of these respondents commented that the application process

occurred at an inappropriate time of year, planting season, for

prospective participants to provide serious thought into the

application process. Respondents also had difficulty obtaining

information on the types of practices that would qualify. One

respondent commented that the time constraint provided an advantage to

existing projects and there was insufficient time to develop new or

innovative ideas.

Response: CCC believes that a sufficient length of time was

provided; however, in the future, consideration will be given

concerning the time of year that the request for proposals is

announced.

Both positive and negative comments were received about the general

nature of the program. Four respondents had reservations about the

program; one respondent was disappointed that the CFO program appeared

to be a duplication of existing programs; another questioned the

advantage of enrolling acreage in CFO versus the individual

conservation programs; and the other two thought the program should

offer more flexibility. One commented on the program goals and

requested that the program should encourage innovative activities. One

supported implementing CFO in a manner consistent with the

``Discussion'' section of the preamble. One indicated the program has

the potential to be a true locally led process with opportunities for

partners to implement a program without sideboards or constraints

imposed by a State Committee.

Response: CCC intends for the CFO program to be a flexible program

that offers participants an opportunity to treat all of their natural

resource concerns on the farm without limiting planning efforts to

certain types of acreage. It enables the participant to achieve the

environmental benefits of all the other programs under a single

contract and a single conservation farm plan. Although the CFO has

these advantages, the CFO program is still subject to the sideboards

established in the authorizing language. CCC is required to consider

certain provisions in the other programs such as eligible practices,

payments the participant would have received under these programs when

determining CFO payments, and county land retirement acreage

limitations. CCC appreciates these comments, however, these comments do

not address language in the regulation. Therefore, changes have not

been made in the final regulation as a result of these comments.

Two comments were received regarding agency workload concerns and

the lack of NRCS personnel available to handle the additional work

created by CFO.

Response: USDA considered these comments; however, it believes that

the additional work caused by CFO will be manageable. These comments

did not justify a modification to the final rule.

Forms

Twelve comments were received on the application form. Five of

these respondents felt the application was difficult to understand,

intimidating or frustrating. One of these respondents indicated that

although the form was a detriment to the program, they were provided

support from USDA staff which enabled the form to be completed. One

respondent requested that the application include more details,

especially where innovative practices are discussed. One respondent

indicated farmers were most frustrated with presenting budget

information. These farmers questioned how lump sum payments would be

used in determining costs and benefits of the project; how will it

impact ranking without providing more information; whether there are

project or individual contract limitations; and whether contributions

from other sources have to be secured at the time the proposal is

written. One respondent commented on the length of time it took to

complete the form. It took this respondent twice as long to complete

the work as was projected by CCC. Clarification is needed in

instructional materials. However, this respondent indicated that the

process was beneficial because it forced the producer to articulate the

long-range goals for the farm. Two respondents submitted positive

comments about the process, citing the

[[Page 51781]]

instructional addendum and the availability of the scoring sheet to

prospective participants. One respondent recommended CCC determine

through a public forum whether a CFO-specific form would be more

appropriate.

Response: Although these comments do not directly relate to the

provisions in the proposed rule, CCC plans to reexamine the application

form, and where necessary revise it, prior to the start of fiscal year

2000, the next time when CCC will solicit the public for CFO pilot

project area proposals. CCC believes that monitoring and evaluation of

the fiscal year 1998 pilot project areas will assist in making this

application form more concise and user-friendly. In addition to

revising the application form, CCC will analyze the instructional

materials and the application process to determine where it can be

improved for the next proposal submission period. The public burden

estimate related to completing the form will also be evaluated to

determine whether adjustments need to be made.

CFO Interface With Other Conservation Programs

Twenty-two comments were received regarding the relationship

between CFO and the CRP, WRP, and EQIP. Ten of these comments simply

requested clarification of how the interface between the three programs

will be handled. Eight respondents were concerned about the ability to

switch from CRP, EQIP, or WRP to CFO and expressed that penalties

should not apply. One comment was concerned about whether payment

limitations applied, and five sought innovative practices and project

designs that may not be permitted under the other conservation

programs.

Three respondents commented that CFO could be a positive

alternative to CRP; however, one of these warned against creating a

program like CRP because of its adverse impacts on certain farmers. For

one respondent this comment was due to CRP's impact on persons wanting

to lease acreage for agricultural activities; the second respondent

wanted CFO to be available to those whose acreage was not accepted into

CRP. One respondent recommended that CFO have no impact on WRP 30-year

or permanent easements. Two comments were received regarding program

payments. One respondent requested that the WRP component of a CFO

contract only consider potential cost-share payments and the other

requested that CRP payments remain separate from CFO contracts due to

the high cost and concern about contract payment limitations.

Response: CCC agrees that the proposed rule provided little

information regarding the relationship between CFO and the other

conservation programs. Language has been clarified and sections revised

throughout the rule to provide clarification regarding the impact of

persons offering acreage for CFO when they are already participating in

CRP, WRP, or EQIP or when they have land that is eligible for these

programs. To clarify, producers or owners who wish to participate in

CFO do not need to be enrolled in CRP, EQIP, or WRP to be eligible for

CFO.

However, eligible producers or owners, in an approved pilot project

area who are currently enrolled in CRP, EQIP, or WRP must terminate

such contracts and transfer the remaining practices and land retirement

rental payments to a CFO contract. In cases where a participant

transfers from CRP to CFO, the participant must ensure that net

environmental benefits under a CRP contract are maintained or exceeded

under the CFO contract. The landowner is also required to maintain

practices that were enrolled under the terminated CRP or EQIP contract,

or WRP cost-share agreement. These remaining rights and obligations

under CRP, EQIP, or WRP will be incorporated into the new CFO contract.

Practices included in CRP or EQIP contracts or WRP cost-share

agreements must be included in a CFO contract if an owner or producer

wishes to participate, unless otherwise stated in the approved

conservation farm plan and CFO contract. Participants in CFO with CRP,

EQIP, or WRP practices incorporated into CFO contracts are responsible

for operating and maintaining these practices for the balance of the

period specified in the original program contract, unless the lifespan

of the practice has been extended under the CFO contract.

The CFO authorizing language provides that in exchange for CFO

payments, the participant shall not participate in and shall forgo

payments under CRP, WRP and EQIP. Therefore, a CFO participant cannot

offer to enroll CFO contract acreage in CRP, EQIP, or WRP. Likewise,

when the CFO contract is approved any existing CRP or EQIP contract, or

WRP cost-share agreement will be simultaneously terminated without

penalty. CFO will not impact any acreage subject to a WRP easement nor

will this acreage be included in a CFO contract. Payments that have

been earned before the CFO contract is approved may be provided to the

producer or owner under the terms of that program. Future payments that

would have been earned under such contract or agreement will be

incorporated into the CFO contract and included in the CFO payment. The

CFO authorizing language has no payment limitation. Payment limitation

will apply to the extent that the total payments calculated, in

accordance with Parts 1466, 1467 and 1410, are limited in the

applicable provisions in Parts 1466 and 1410. The payments will be

totaled to determine the amount which will be issued for the CFO annual

payment.

Third Party Organization Administrative Issues

Sixteen comments were received regarding other organizations

performing certain activities under CFO. Eleven respondents requested

that CFO provide funding to non-government, non-profit organizations.

One of these respondents requested that the final rule add specific

authorization for direct funding for group proposals for project

planning, education, outreach, conservation farm research design,

monitoring, evaluation, and administration. Another recommended 20

percent of a pilot project funds be available to pay for the services

of the proposing organization, including non-profits. According to the

respondent, CFO will never reach its full potential if only individual

farmers apply. Another respondent commented that it is an

``administrative nightmare'' to have after-the-fact subcontracting with

each individual participant which results in higher administrative

costs. Several comments were related to the role of non-profit

organizations and state and local agencies within the context of CFO.

While one respondent requested clarification of the role of local non-

profit organizations, another comment suggested that USDA should

develop incentives for state and field offices to be more proactive in

program implementation. One respondent requested that funding be

available for information outreach efforts to change behavior and

achieve practice adoption.

Response: Under the 1985 Act, CCC is authorized under CFO, to

provide direct payment to producers of wheat, feed grains, upland

cotton, and rice. Accordingly, other entities, such as groups which

coordinate, organize, administer, monitor, and evaluate pilot projects

are not eligible for direct CCC payment, although an organization such

as that described, may be reimbursed by the landowner.

[[Page 51782]]

Program Administration

Fourteen comments were received regarding program administration.

One respondent requested general clarification. Three respondents

requested that states and local entities be permitted to participate in

the process of implementing the program by either contracting through

private businesses or by allocating program funds to these

organizations through a grant or loan program.

Response: Under the 1985 Act, CCC is authorized under CFO to

provide direct payment to producers of wheat, feed grains, upland

cotton, and rice. Other entities, such as groups which coordinate,

organize, administer, monitor, and evaluate pilot projects are not

eligible for CCC payment, although an organization such as that

described, may be reimbursed by the landowner.

One comment requested that the role of the Federal-state-local

relationship be clarified.

Response: CCC will coordinate with Federal, state, and local

agencies where necessary and has attempted to clarify this intent

throughout Part 1468. For example, the final rule has clarified that

the local work group assists in ranking CFO applications.

One respondent encouraged USDA to integrate and coordinate CFO

pilot project areas with state-level recommendations already identified

in conservation programs. However, existing rankings of affected

watersheds for other farm bill or state programs should not completely

supersede local efforts to delineate new watersheds or areas for

consideration.

Response: CCC concurs with this philosophy and believes that the

participation of the local work group will assist in integrating pilot

project areas with state-level recommendations; however, direct

proposal submission to the national level will also assist lower state-

ranked watersheds to acquire some assistance if that pilot project area

meets CFO objectives and requirements.

One comment requested clarification on whether Soil and Water

Conservation District (SWCD) cost-sharing programs can be identified as

partnership contributions, or if a specific allocation for a specific

proposal must be secured.

Response: Soil and Water Conservation District contributions,

including technical and cost-share assistance, may be considered

partnership contributions. Currently, CCC does not have specific

requirements as to the extent that matching funds must be secured from

other agencies or organizations.

One comment urges CCC to actively seek to develop cooperative

agreements or Memorandums of Understanding (MOUs) at the local, state

and Federal levels to ensure compliance with state and Federal

regulations for farmers and ranchers to participate. Two responses were

received regarding the impact of the Endangered Species Act and other

environmental requirements on CFO participants. One respondent

indicated that landowners need assurance that the actions they

undertake under the CFO which benefit endangered and/or threatened

species will not result in penalties during or after the contract

period. Without a cooperative agreement between CCC and the U.S. Fish

and Wildlife Service (FWS) integrating ``safe harbor'' type assurances

into the CFO, or a formal recognition by FWS of CFO plans as habitat

conservation plans, landowners will not have adequate legal protection.

The other respondent provided that any MOU or agreements should provide

reduced liability associated with off-farm environmental degradation or

nuisance law suits. This so-called ``safe harbor'' or environmental

assurance that incorporates relief from additional regulations and

enforcement is necessary to ensure active voluntary participation.

Response: Where local and State people request NRCS to arrange such

cooperative agreements to ensure compliance with state regulations,

NRCS is authorized to enter into these agreements. However, in

situations such as the Endangered Species Act, while CCC is sensitive

to its requirements, CCC does not have the authority to provide safe

harbor for those wishing to ensure compliance with other Federal

regulations, including the Endangered Species Act.

Three comments were received regarding the joint program

administration between NRCS and FSA. One respondent indicated the

administration provisions are confusing as written; the second

respondent did not want joint agency concurrence on environmental

issues. The third respondent wanted to know which agency ensures proper

administration of the program and what is the role of the Cooperative

State Research, Education, and Extension Service (CSREES).

Response: Administration of CFO is shared by the Natural Resources

Conservation Service and the Farm Service Agency. NRCS will provide

overall program management and implementation leadership for CFO,

including technical leadership for conservation planning and

implementation, while FSA will be responsible for the administrative

processes and procedures for applications, contracting, program

allocations and accounting. CCC believes that CSREES will play an

instrumental role in assisting with outreach and education both within

and outside selected pilot project areas. As a result of these

comments, Section 1468.2 has been revised to provide clarification

regarding the responsibilities of the agencies involved with

implementing the program.

One respondent recommended a new section (f) be added to indicate

that NRCS and FSA shall cooperate and make the best use of agency

programs that support CFO management and implementation, including, but

not limited to programs that support assessment and planning

activities.

Response: This recommendation has not been adopted as the

regulation is sufficiently flexible to permit this activity.

Definitions

Three respondents requested that the definition of ``conservation

farm plan'' be changed. All respondents felt the definition in the

proposed regulation does not reflect the most recent information on

farm planning. One respondent requested the definition be expanded to

indicate that conservation plans should be based on an adequate

assessment of conservation needs. The other two respondents requested

more extensive changes to reflect participant's resource problems and

ecologically based management of the whole farm or ranch.

Response: The definition of conservation farm plan has been altered

to match the definition found in NRCS' National Planning Procedures

Handbook (NPPH). This has been done in order to create consistency

across USDA program boundaries.

One respondent recommended revising the definition of technical

assistance to include reference to site-specific assessments.

Response: CCC believes that site-specific assessments are an

integral part of the conservation planning process and have been

adopted throughout the National Planning Procedures Handbook (NPPH),

NRCS' policy manual for conservation planning. According to the NPPH,

site-specific assessments are necessary in planning; therefore, any

reference to conservation farm plans or conservation planning assumes

that a site-specific assessment has been conducted.

One respondent requested that the definition of conservation

practices be amended to allow for practices approved by NRCS for

experimentation and testing.

[[Page 51783]]

Response: NRCS existing standards and specifications for interim

practices already permit experimentation and testing; therefore, this

recommendation has not been adopted.

One respondent recommended the definition of land management

practice be revised to include ``resource conserving crop rotations,

cover crop management, and soil organic matter and carbon sink

management.''

Response: The sample of land management practices included in the

definition was not intended to identify all potential practices.

However, CCC adopted this recommendation to ensure users of this

regulation understand that the term ``land management practices''

includes resource conserving crop rotations, cover crop management, and

organic matter and carbon sink management.

Ten respondents requested clarification of the term, A innovative

technologies.''

Response: A definition of innovative technologies has been included

in Section 1468. 3.

Several other comments were received regarding the definitions in

the proposed regulation. CCC determined that the definitions of these

other terms are sufficiently flexible to meet the needs of the

respondent and the program.

Program Requirements

Five respondents requested the requirement that a producer be

participating in production flexibility contracts be removed. One of

these respondents indicated this requirement would make implementation

of CFO on Tribal, allotted or Indian trust land impossible. While

another indicated it may adversely impact limited resource and minority

farmer's participation.

Response: CCC cannot adopt this recommendation because the CFO

authorizing language requires that a producer be participating in the

Agriculture Market Transition Program and have a production flexibility

contract in order to participate in CFO.

Two respondents recommended subsection (a) be revised to include

sustainable agriculture production practices and crop rotation systems.

Response: CCC believes that the term ``conservation practices''

embodies the concept of sustainable agricultural practices. This

includes resource-conserving practices, such as crop rotation systems,

conservation tillage, and other sustainable agricultural practices.

One respondent requested provisions regarding persons who inherited

property or obtained the property as a result of death but did not have

a producer interest in the property when eligibility of the program was

determined.

Response: The final rule has been revised in section 1468.5 to

clarify the eligibility of persons who obtain interest in acreage as a

result of death. Under CFO, eligibility requirements mimic the

eligibility requirements of CRP, EQIP, and WRP, depending on which

program is the source of CFO practices to be implemented.

One respondent recommended the language in subpart (c)(4) be

revised to indicate that CCC will consider whether the participant has

conducted adequate assessment activities to identify resource needs

when considering the acceptability of the plan.

Response: CCC believes that the conservation planning process

adequately takes into account assessment activities in identifying

resource needs.

One respondent questioned whether CFO participation would preclude

participation in any future USDA or other Federal conservation or

environmental protection incentive programs and whether producers or

owners are foregoing other program by their participation in CFO.

Response: The CFO authorizing language only requires that

participants forego participation in the Conservation Reserve Program

(CRP), the Wetlands Reserve Program (WRP) and the Environmental Quality

Incentives Program (EQIP) for the term of the CFO contract.

Participation in CFO does not necessarily inhibit a person from

participating in other USDA programs, such as the Wildlife Habitat

Incentives Program, Forestry Incentives Program, etc.

One respondent questioned whether CFO proposals are limited to only

pilot areas.

Response: Currently, CFO is authorized as a pilot program in the

1985 Act. As a result, it is limited to pilot project areas. These

pilot project areas will test not only practices, but also the program,

itself.

This section has been revised throughout the rule for clarity, and

therefore no specific references to section numbers have been made.

Innovative Technology

Several comments were received regarding innovative technology.

Eight of these respondents indicated the final regulation needs to

provide more information about the use of innovative technology. One

respondent wanted the innovative technology to have scientific merit

and a high chance of success before tax dollars are expended on testing

such technology. One respondent indicated that innovative projects

cannot be planned in fiscal year 1998. This respondent provided

administrative alternatives to solve this issue. Another respondent

identified technologies such as remote sensing, satellite and aerial

imaging that will offer the ability to identify what plant nutrients

are available in crops, identify stress points in a field as well as

identify drainage problems in fields. Two respondents recommended that

the regulation be revised to indicate that practices need not be

eligible under EQIP, CRP, or WRP, as long as they are approved by the

NRCS.

One respondent wanted clarification regarding the process for

approving innovative technologies. This respondent wanted language

added to encourage innovation and to stimulate experimentation and

adaptive research and demonstration.

Response: To be considered as an eligible conservation practice,

the innovative technology must provide beneficial, cost-effective

approaches for participants to change or adopt operations to conserve

or improve soil, water, or related natural resources. Innovative

technologies and practices are authorized under CFO. Payment for

innovative technologies is limited to what would be received under EQIP

since EQIP is the only program of the three programs which authorizes

innovative technologies. NRCS will authorize, at the state and national

level, interim practice standards and cost-share payments for

innovative technologies that it deems has an environmental benefit. The

policy outlining innovative practices and technology is further

clarified in 1468.7.

CFO Pilot Project Areas

Eleven comments were received regarding CFO pilot program area

proposals. One respondent provided that as a result of the leadership

requirements in the overall planning process, it is doubtful that

individual farmers will participate.

Response: CCC disagrees with this comment. One hundred twenty-one

applications, covering over 14 million acres were received from farmers

or farm groups. Forty-two of these proposals were from individual

farmers. CCC believes that had farmers been provided more time to

develop proposals, the number of submitted proposals would have grown

substantially. This comment is not reflected in the text of the final

regulation.

[[Page 51784]]

One respondent supported wetland restoration and protection through

CFO but expressed concern regarding converting valuable wildlife

habitats to wetlands. The respondent requested that the pilot projects

include evaluations for the quality of existing habitats that may be

destroyed for wetland creation projects.

Response: As outlined in 1468.20, the NRCS designated

conservationist will work with the applicant to ensure that wildlife

benefits will be accounted for when determining the ranking of the

application. CCC believes that the site assessment conducted during the

conservation planning process with the participant will give a good

indication of what habitats to protect, conserve, or create.

One respondent indicated the small acreage requirement provides a

disincentive for group projects.

Response: CFO does not have a maximum acreage requirement in the

final rule; however, the CCC process scoring sheet does award points to

project areas under 32,000 acres. For areas less than 64,000 acres,

which have less than 25 inches per year in annual precipitation or are

predominantly forest or rangeland, the acreage points are also awarded.

CCC supports this rationale due to limited funds in the initial years;

however, as funding increases, CCC anticipates that targeting to larger

acreage may become more prevalent. If CCC changes the targeting to

larger acreage, CCC will adjust the scoring accordingly.

One respondent recommended a criterion be added to reflect the

Scoring Sheet's preference for smaller rather than larger pilot

projects or areas.

Response: This comment was considered; however, it was not

reflected in the text of the final rule, since the amount of points

awarded for each criterion is not specified in the final rule. In any

case, the points awarded for size on the CCC-1211 are sufficient and

further criteria for size limitations are not necessary.

One respondent indicated that innovative practices need more points

in order to be funded.

Response: This comment was considered; however, it was not

reflected in the text of the final rule. CCC believes that the points

allocated to innovative technologies are sufficient.

One respondent indicated that the 1998 pilot project area response

was not reflective of program interest. Program interest was severely

comprised by a short timeframe at the worst time of year; lack of

access to information and forms at the local level; and disallowing

non-NRCS entities to apply for funds despite explicit encouragement to

apply.

Response: In the future, CCC will take into consideration the

timing of when the request for proposals is announced and ensure that

adequate information and forms are provided at the local level. This

comment was considered; however, it was not germane to the development

of the final rule.

One respondent requested that applications be approved under a

continuous sign-up basis.

Response: Once a pilot project area has been approved, CCC will

accept applications throughout the year. CCC will rank and select

applicants' offers periodically, as determined by the State

Conservationist, based on the needs of the pilot project area. This

process is clarified in Sec. 1468.20.

One respondent requested that the language in (a)(2) reflect the 7-

point criteria found in the ``Discussion of the Program'' section of

the proposed regulation.

Response: This recommendation has been adopted.

One respondent recommended that priority be given to proposals that

could not be funded by other programs such as CRP, EQIP, and WRP.

Response: This recommendation has not been adopted due to the fact

that it may limit USDA's ability to enroll some of the Nation's most

environmentally sensitive areas.

Three respondents requested new language be included that would

require CCC to evaluate whether the participant has conducted adequate

assessment activities to identify resource needs when selecting

proposals. Another respondent wanted the regulation to emphasize the

necessity for assessment and planning. At a minimum, CCC should reward

detailed assessment and planning by those who partake in these

activities by enhancing their eligibility for the program.

Response: CCC agrees with the need for adequate assessment and

believes that for the most part, the content and quality of the

proposals which are received will indicate how much assessment and

planning has been conducted.

Five respondents commented on the selection process. Four of these

respondents commented on the national process and one requested

clarification regarding how applicants in approved pilot areas will be

ranked at the national and local levels. Two respondents requested that

local and state or other entities with an interest in CFO be permitted

to be involved in the review of the proposals. One respondent indicated

that the national team review should also include filtering out

proposals which are not based on ``sound science or research''. One

respondent commented that national reviewers may lack the experience

necessary to competently review ``innovative'' proposals. This

respondent provided recommendations for obtaining the required

experience to make competent recommendations to the selecting official.

Response: Periodically, a request for proposals will be announced

in the Federal Register. In this request, CCC will solicit proposals

from individuals, States, or subdivisions thereof, Tribes,

universities, and other organizations to cooperate in the development

and implementation of CFO pilot programs. The request for proposals

will contain the CFO proposal form, instructions for completion of the

CFO proposal form, and the criteria for evaluating proposals. A

national interdepartmental team, consisting of representatives from

several Federal agencies, will use this published criteria to rank and

select the proposals. Consisting of individuals who have a wide variety

of expertise, the interdepartmental team will select proposals which

meet program guidelines and will provide its recommendations to the

NRCS Chief. The Chief, with FSA concurrence, will approve proposals.

CCC will utilize a national interdepartmental team to make decisions

not only because the size of the interdepartmental team would be too

large and cumbersome to be efficient, but also because CCC believes

adequate state and local input should be obtained at the local level

when group proposals are submitted.

Conservation Plan

Five respondents requested clarification or more specific language

regarding conservation planning requirements.

Response: CCC has attempted to clarify planning requirements in

Part 1468.9 and in the following response:

A conservation farm plan is a record of a participant's decisions,

and supporting information for treatment of a unit of land or water as

a result of the planning process, that meets the local NRCS field

office technical guide (FOTG) criteria for each natural resource and

takes into account economic and social considerations. The plan

describes the schedule of operations and activities needed to solve

identified natural resource problems, and takes advantage of

opportunities, at a conservation management system level. NRCS adopts a

nine-step planning procedure process in order to thoroughly assess the

value of the

[[Page 51785]]

natural resources on the participating acreage. In the nine-step

conservation planning process, problems and opportunities are

identified; the participant's objectives are determined; resources are

inventoried and analyzed; alternatives are formulated and evaluated;

decisions are made; the plan is implemented and finally evaluated. This

process is a cyclical one which changes as the resource conditions and

the participant's objectives change.

Under CFO, a conservation farm plan must meet the objectives of the

pilot project area; address the pilot project area's resource concerns;

and allow the participant to achieve a cost-effective resource

management system, or some portion of that system. While a conservation

farm plan that includes all acres on the farm is not required, it is

encouraged. Moreover, while a participant is encouraged to develop a

resource management system (RMS) that identifies and treats every

concern on the farm, a RMS level of treatment is not required. To

simplify the conservation planning process for the participant, the

conservation farm plan may include Federal, state, Tribal, or local

government program or regulatory requirements. The development or

approval of a conservation farm plan will not be deemed to constitute

compliance with program or regulatory requirements administered or

enforced by another agency, unless so indicated by that agency. It is

the participant's responsibility to comply with all applicable

statutory and regulatory requirements.

Participants are responsible for implementing the conservation farm

plan. CCC may accept an existing plan developed for another USDA or CCC

program if the conservation farm plan meets the requirements of CFO.

When a participant develops a conservation plan for more than one

program, the participant will clearly identify the portions of the plan

that are applicable to the CFO contract. Previously installed CRP,

EQIP, and WRP practices along with their operation and maintenance

requirements will also be incorporated into the CFO plan, unless

otherwise specified in the conservation farm plan and CFO contract. The

conservation farm plan forms the basis of the CFO contract.

One respondent requested that the following language be inserted to

1468.6(a), ``Reflect adequate assessment activities to identify natural

resource needs and conservation practices.''

Response: CCC believes that the conservation planning process

adequately takes into account assessment activities in identifying

resource needs.

One respondent requested that the following words be added to

1468.6(d)(1) ``NRCS should actively pursue assistance in providing

services such as site-specific assessments.''

Response: This recommendation has not been adopted. The language as

written provides CCC the authority to utilize the services of others.

One respondent requested CCC identify the items that would be

included as technical assistance that may be provided by others,

including but not limited to: site specific assessments to identify

planning needs; conservation planning; conservation practice survey,

layout, design and installation; information, education, and training

for producers; and training, and quality assurance for professional

conservationists.

Response: Upon a participant's request, NRCS may provide technical