Information Requirements for Certain Farm Operations In Excess of 960 Acres and the Eligibility of Certain Formerly Excess Land

SUMMARY: This proposed rule would add a new part to the Bureau of

Reclamation's (Reclamation) regulations to supplement the Acreage

Limitation Rules and Regulations in 43 CFR part 426 that implement the

Reclamation Reform Act of 1982 (RRA). The proposed rule would require

certain farm operators to submit RRA forms that describe the services

they perform and the land they service. The rule would also address the

eligibility of certain formerly excess land held in trusts or by legal

entities to receive nonfull-cost Reclamation irrigation water.

DATES: Reclamation must receive written comments on this proposed rule

by January 19, 1999. We will not necessarily consider comments received

after the above date during our review of the proposed rule.

ADDRESSES: If you wish to comment, you may submit your comments by any

one of several methods. You may mail comments to: Administrative

Record, Commissioner's Office, Bureau of Reclamation, 1849 C Street

N.W., Washington, D.C. 20240. You may also comment via the Internet to

[email protected] (see Public Comment Procedures under SUPPLEMENTARY

INFORMATION). In addition, you may hand-deliver comments to

Commissioner's Office, Bureau of Reclamation, 1849 C Street N.W.,

Washington, D.C. 20240.

FOR FURTHER INFORMATION CONTACT: Erica Petacchi, (202) 208-3368, or

Richard Rizzi, (303) 445-2900.

SUPPLEMENTARY INFORMATION: This section provides the following

information:

I. Public Comment Procedures

II. Introduction

III. Summary of Proposed Changes

IV. Background

V. Public Involvement

VI. Public Comments and Responses on Advance Notice of Proposed

Rulemaking

VII. Detailed Analysis of Proposed 43 CFR Part 428

VIII. Procedural Matters

IX. List of Subjects in 43 CFR Part 428

I. Public Comment Procedures

Written comments on the proposed rule should be specific, should be

confined to issues pertinent to the proposed rule, and should explain

the reason for any recommended change. Where possible, comments should

reference the specific section or paragraph of the proposal which the

commenter is addressing. We may not necessarily consider or include in

the Administrative Record for the final rule comments which we receive

after the close of the comment period (see DATES) or comments delivered

to an address other than those listed above (see ADDRESSES). We will

not consider anonymous comments.

If you submit your comments via the Internet, please submit as an

ASCII file avoiding the use of special characters and any form of

encryption. Please include in the subject line ``AA38'' and include

your name and return address in the body of your Internet message. If

you do not receive a confirmation that we have received your Internet

message, contact us directly at (202) 208-3368.

The administrative record and all comments, including names and

home addresses of respondents, will be available for public review at

the address listed above (see ADDRESSES), during the hours of 9:00 a.m.

to 4:00 p.m., Monday through Friday, except holidays. Individual

respondents may request that we withhold their home address from the

rulemaking record, which we will honor to the extent allowable by law.

There also may be circumstances in which we would withhold from the

rulemaking record a respondent's identity, as allowable by law. If you

wish us to withhold your name and/or address, you must state this

prominently at the beginning of your comment. We will make all

submissions from organizations or businesses, and from individuals

identifying themselves as representatives or officials of organizations

or businesses, available for public inspection in their entirety.

II. Introduction

This proposed rule would supplement the Acreage Limitation Rules

and Regulations, 43 CFR part 426, that govern implementation and

administration of the RRA. The proposed rule would create a separate

CFR part, 43 CFR part 428, addressing information requirements for

certain farm operators, and the eligibility of certain formerly excess

land that is operated by a farm operator who was the landowner of that

land when it was ineligible excess land or land placed under recordable

contract.

We are proposing this rule to address comments raised in both the

rulemaking concluded on December 18, 1996 (the Acreage Limitation Rules

and Regulations) and in the Advance Notice of Proposed Rulemaking

(ANPR) published in the Federal Register (61 FR 66827, Dec. 18, 1996).

Among other things, the comments stated that although we collect

information from landholders to verify compliance with the RRA, we do

not collect this information from farm operators. Commenters pointed

out that we, consequently, may not have adequate information to

determine if the provisions of a farm operating arrangement constitute

a ``lease'' under the acreage limitation provisions and thus require

application of the nonfull-cost entitlements of the RRA. Other comments

stated that we should analyze all farm operations in excess of 960

acres to determine compliance with the acreage limitation provisions of

Federal reclamation law. Public comments from the ANPR are addressed

below.

We believe that this rule balances the interests in enforcing the

law with the interests of limiting paperwork burdens on the public. By

limiting the applicability of the proposed rule as described below, we

hope to target our resources to achieve compliance with the acreage

limitation provisions of Federal reclamation law in an efficient

manner. We seek comments on whether this rule will meet that goal.

III. Summary of Proposed Changes

The proposed rule would extend RRA certification and reporting

forms requirements to farm operators who:

(1) Provide services to more than 960 acres held (directly or

indirectly owned or leased) by one trust or legal entity, or

(2) Provide services to the holdings of any combination of trusts

and legal entities that exceed 960 acres.

In addition, this part applies to the eligibility of formerly

excess land held in trusts or by legal entities, that is operated by a

farm operator who was the landowner of that land when it was ineligible

excess land or land placed under recordable contract. The provisions of

43 CFR part 426 not specifically addressed in this rule are unchanged.

This section summarizes the differences between the existing

regulations and the proposed rule. A detailed analysis can be found

later in this preamble.

[[Page 64155]]

Certification and Reporting Requirements

Under 43 CFR part 426, landholders (direct or indirect landowners

or lessees) whose total westwide landholdings exceed the RRA forms

submittal thresholds must submit RRA forms. Farm operators do not now

have to submit RRA forms. The new 43 CFR part 428 would extend

certification and reporting requirements to farm operators who (1)

provide services to more than 960 acres held by one trust or legal

entity, or (2) provide services to the holdings of any combination of

trusts and legal entities that exceed 960 acres. By extending the

certification and reporting requirements to these farm operators, we

can get information that we need to determine the following :

(1) Who has use or possession of the land being farmed under a farm

operating arrangement; and

(2) Who is responsible for payment of operating expenses, and who

is entitled to receive the profits from the farming operation as

indicators of economic risk.

We need this information because the acreage limitation provisions

apply to all owned or leased land. Use or possession of the land and

who has all or a portion of the economic risk associated with the

farming enterprises are the factors we use to determine if a farm

operating arrangement is in fact a lease. If we determine that a farm

operating arrangement is a lease, then the farm operator leasing the

land will be subject to the acreage limitation provisions.

Excess Land Provisions

Part 426 provides that a seller of excess land may not receive

Reclamation irrigation water if he or she again becomes the landholder

of that land either voluntarily or involuntarily, with certain

exceptions. This proposed rule would apply similar restrictions to farm

operators who sold their excess land at an approved price, and provide

services to that land if it is held in trust or by a legal entity. The

only exceptions would be if the formerly excess land became exempt from

application of the acreage limitation provisions or the full-cost rate

was paid for deliveries of Reclamation irrigation water to the formerly

excess land. This provision will not be effective until January 1,

2000, at which time all farm operating arrangements between farm

operators and trusts or legal entities that meet the criteria will be

affected. This includes farm operating arrangements that were in

existence prior to January 1, 2000, as well as any farm operating

arrangement initiated on or after that date. We believe this provision

is consistent with the intent of the RRA excess land provisions, and

that it parallels excess land provisions that apply to landholders.

The following example illustrates the situation this provision

would address: Landowner A, a qualified recipient, owns 5,000 acres

subject to the acreage limitation provisions, which is 4,040 acres more

than his 960-acre ownership entitlement. Landowner A sells his excess

land at a price that Reclamation approved to a trust benefitting 10

individuals who are each subject to the discretionary provisions; none

of the beneficiaries' landholdings exceed their acreage limitation

entitlements. The trustee of the trust then hires Landowner A to

operate the land owned by the trust. Consequently, Landowner A

continues to farm the entire 5,000 acres as a farm operator, and the

land continues to receive Reclamation irrigation water at the nonfull-

cost rate.

We do not believe the intent of the excess land provisions of

Federal reclamation law has been met in the preceding example. As part

of the rulemaking that was completed on December 18, 1996, we included

as Sec. 426.12(g) a provision that addresses this issue with regard to

landholders. It provides that a district may not make Reclamation

irrigation water available at the nonfull-cost rate to excess land

disposed of by a landholder at a price Reclamation approved, whether or

not under recordable contract, if the landholder later becomes a direct

or indirect landholder of that land through either a voluntary or

involuntary action. Section 426.12(g) provides specific exceptions to

this provision.

We believe that, starting on January 1, 2000, this same concept

should apply to farm operators who provide services to land held in

trusts or by legal entities or any combination thereof that the farm

operator formerly owned as excess and sold at an approved price. We are

seeking comments on the following issues related to formerly excess

land and farm operators:

Should we apply this excess land provision more broadly or

should we include other exceptions to the proposed provision?

Should we not include either of the two exceptions

provided in the proposed rule (the land is no longer subject to the

acreage limitation provisions and payment of the full-cost rate for

deliveries of Reclamation irrigation water to the land in question) or

should we otherwise alter them in some manner?

Is the effective date of January 1, 2000, reasonable for

this excess land provision or should we apply some other date?

IV. Background

The RRA modernized Federal reclamation law, while retaining the

principle of limiting the benefits of receiving Federally subsidized

water to farmers with relatively small landholdings. The RRA adjusted

the acreage limitations for farms eligible to receive nonfull-cost

water. This change was intended to facilitate modern farming practices

and to limit nonfull-cost water deliveries generally to landholdings of

960 acres or less, rather than the 160 acres established by the

Reclamation Act of 1902. However, not only does the RRA provide a

number of exceptions to the 960-acre limitation, such as those

associated with certain involuntary acquisitions, it also provides for

much lower entitlement levels for legal entities that benefit more than

25 natural persons. In addition, the RRA and the part 426 regulations

include provisions that exempt trustees acting in a fiduciary capacity

from application of the acreage limitation provisions if certain

criteria are met.

The RRA does not force districts or landholders to conform to the

new acreage limitation provisions; thus, the prior law provisions still

apply to some districts and landholders. Any owned land subject to

acreage limitations that exceeds a landholder's ownership entitlement

is considered excess land, and must be sold to an eligible buyer at a

price that Reclamation approves in order for that excess land to be

eligible to receive Reclamation irrigation water at any price. Any

owned or leased land subject to acreage limitations that exceeds a

landholder's nonfull-cost entitlement is considered full-cost land and

the landholder must pay the full-cost rate for any Reclamation

irrigation water delivered to that land.

The part 426 regulations implement certain provisions of the RRA.

They address the ownership and leasing of land on Federal Reclamation

irrigation projects, the pricing of Reclamation irrigation water, and

certain terms and conditions for delivery of Reclamation irrigation

water. Under part 426, we require all landholders (individuals or legal

entities that directly or indirectly own or lease land that is subject

to acreage limitation provisions of Federal reclamation law) whose

landholdings exceed established RRA forms submittal thresholds to file

RRA forms. Landholders must provide information on RRA forms about the

land they hold, and certify that they are in compliance with the

acreage limitation provisions of Federal reclamation law. The

[[Page 64156]]

regulations also provide that a district may not make available

Reclamation irrigation water to excess land disposed of by a landholder

at a price Reclamation approved, whether or not under recordable

contract, if the landholder subsequently becomes a direct or indirect

landholder of that land through either a voluntary or involuntary

action.

On December 11, 1996, the Natural Resources Defense Council (NRDC)

and the Departments of Interior and Justice entered into an amended

settlement contract in the case of NRDC v. Underwood, No. Civ. S-88-

375-LKK (a full description of this litigation may be found in the

preamble to the final rule for the Acreage Limitation Rules and

Regulations (61 FR 66757, Dec. 18, 1996)). As a result, the Department

of the Interior (Interior) published the ANPR and invited comments and

suggestions on the following:

Whether to limit nonfull-cost water deliveries to large

trusts with landholdings in excess of 960 acres (or other applicable

acreage thresholds under the RRA);

The criteria used to determine whether landholdings in

excess of 960 acres, operated under a trust agreement, should be

eligible to receive nonfull-cost water deliveries;

Whether nonfull-cost water deliveries to such landholdings

are consistent with the principles of Federal reclamation law and sound

public policy and, if not, how to implement a limit on such deliveries;

What procedures might ensure fairness in transition to new

regulations that would limit large trusts to 960 acres for nonfull-cost

water, and what safeguards are necessary to avoid such trusts from

adopting some other, as yet unregulated form, to escape acreage

limitations; and

The extent of Interior's statutory authority to address

these issues, including the extent of Interior's legal authority to

regulate: future trusts, trusts established from 1982 to the present,

and trusts established before 1982.

Need for Applying Excess Land Provisions to Certain Farm Operators

In considering potential abuses of existing rules concerning

trusts, we have focused on trusts that hold more than 960 acres

westwide. In several instances, these large trusts were created by

owners of excess lands who were required by Section 209 of the RRA to

dispose of their interests in excess lands or face the permanent

ineligibility of the lands for receipt of Reclamation irrigation water.

By requiring the disposal of excess lands, the Congress was attempting

to assure that the benefits of Federal irrigation water would be more

widely distributed.

In some instances owners of excess lands sold or transferred their

excess lands to large trusts. Then, some of these trusts, which are

subject to more liberal acreage limitation provisions, entered into

farm operating agreements with the former owners of such land, creating

a situation where substantially the same enterprise continued to farm

the same large acreage.

The foregoing practice has in fact occurred on a limited basis in

the Central Valley Project in California, and we are further concerned

that the practice may occur elsewhere in the future as recordable

contracts under which excess lands have been temporarily made eligible

to receive Reclamation irrigation water expire or other excess lands

are sold.

While the foregoing arrangements are in literal conformance with

existing regulations, we believe that they do not meet the intent of

the law. To address this issue, we are proposing a change in how

Section 209 is administered to attribute to former owners of excess

lands any formerly excess land held in trusts and operated by the

former owner of the excess lands. Essentially, we propose to treat the

contractual relationship between the trust and the former owner of

excess lands as a continuing financial interest in such lands by the

former landowner, an interest that we can regulate in our rulemaking

power granted by the Congress in Section 224 of the RRA. This change

would eliminate any incentive for former owners of excess lands to use

the large trust vehicle to maintain a continuing farming enterprise and

would curb any abuse of congressional intent inherent in such

arrangements.

We propose to apply this concept also to legal entities that hold

formerly excess land and hire the former owner of such land under a

farm operating arrangement. We do not believe there are many instances

where legal entities have bought formerly excess land and then arranged

for the former owner to farm the land as a farm operator. However, we

are concerned that application of this concept only to trusts does not

cover the full scope of possible arrangements and may result in a

transfer of land ownership to various legal entities that will continue

to arrange to have the land farmed in the same manner as the trust. We

want to preclude such actions.

To ensure a transition and public education period, we will not

implement this provision until January 1, 2000. This provides an

opportunity for all trusts and legal entities that would be affected by

the excess land provision (because their landholdings include formerly

excess land and they have hired the former landholder to provide

services to such land as a farm operator) to make other farming

arrangements. In doing so, affected trusts and legal entities can avoid

having to pay the full-cost rate for the delivery of Reclamation

irrigation water to the formerly excess land, or even the ineligibility

of such land, if they take action before January 1, 2000. Of course,

affected trusts and legal entities could limit the consequences of the

excess land provision at any time after January 1, 2000, by making

alternative arrangements in how the formerly excess land is farmed. In

addition, this proposed change will not affect the underlying trust

itself. Trusts are still subject to the requirements of Section 214 of

the RRA, and as such, the acreage limitation entitlements of the

landholder(s) to whom the land held in trust is attributed will

determine if the land is eligible to receive Reclamation irrigation

water in the holdings of the trust.

Need for Certification and Reporting From Certain Farm Operators

In December 1987, the Congress amended the RRA by passing the audit

provisions of the Omnibus Budget Reconciliation Act of 1987 (section

224[g] of the RRA as amended). Section 224[g] directed the Secretary of

the Interior (Secretary), or his designee, to undertake audits of

``those legal entities and individuals whose landholdings or operations

exceed 960 acres. * * *'' To comply with this mandate, we considered

requiring all farm operators to submit RRA forms. However, by the time

a proposed rule was published in the Federal Register (53 FR 21857,

Jun. 10, 1988) we did not include that concept. Instead, we altered the

general information requirements of the Acreage Limitation Rules and

Regulations to make it clear that natural persons or legal entities

operating land were required to provide records and information upon

our request. This decision was confirmed in the final rules, which were

effective on January 17, 1989 (53 FR 50530, Dec. 16, 1988). We then

revised the RRA forms to require landholders to provide additional

information concerning their farm operators.

Since 1989, we have learned that other approaches could be more

effective and that this procedure places a greater burden on both the

districts and us than if certain farm operators

[[Page 64157]]

were required to submit RRA forms. The current approach also greatly

increases the likelihood that all farm operators providing services to

more than 960 acres westwide will not be identified.

In order for the current system to work, information concerning

farm operators must be gathered from all RRA forms landholders submit

annually. That information then must be collated on a westwide basis to

determine if any farm operator is providing services to more than 960

acres. The collation is required because any landholder, other than a

trust, whose landholding exceeds 960 acres is either (a) not receiving

Reclamation irrigation water on such land or (b) paying the full-cost

rate for Reclamation irrigation water received on such land. In the

case of the former, we have little interest in activities farm

operators may have on land that is not receiving Reclamation irrigation

water. In the case of the latter, determining that a farm operator is a

lessee will have little effect on the eligibility of the land in

question or the rate associated with the water deliveries to that land,

since the full-cost rate is already being applied. What we need to

identify are those farm operators providing services to multiple

landholdings, the total of which exceed 960 acres. Then we must

determine if the arrangements under which the services are being

provided are leases for acreage limitation purposes.

We knew in 1988 that if only the name and address of farm operators

were provided by landholders, it would be difficult to collate the

data. This is due to the fact that operators may be providing services

under different entity names and, if the operator is an individual,

landholders may know the operator by different names (e.g., J. Smith,

John Smith, Johnny Smith, Jack Smith, Smith Enterprises, etc.). In

addition, there may be multiple farm operators that have the same name.

If we relied only on addresses, we may be faced with multiple addresses

for one farm operator which we would not be able to easily determine

was the same person or entity (e.g., post office boxes, business

address, residential address, etc.). Thus, we tried to use telephone

numbers as the unique identifier, but this effort depends on the

landholder providing such on their RRA forms. Regardless, we have

determined that the current process does not ensure consistent

application of the regulations and is inefficient. In addition, it is

extremely difficult for us to verify that a landholder has or has not

provided the required farm operator information, since there are few,

if any, independent sources of information concerning farm operators to

cross-check information.

We have considered requiring landholders to provide more

information, such as taxpayer identification numbers, for their farm

operators who are legal entities. But this would require the

landholders to have such knowledge, resulting in a new burden on

landholders. In addition, this approach would still result in the

requirement for districts to gather the data and us to collate it,

thereby increasing the associated burdens to all parties involved.

Conversely, if certain farm operators were required to submit RRA

forms, then many of the difficulties in administration we experience on

this issue would be resolved. For example, an operator would be

required to include all land on which the operator was providing

services westwide; thus, no data gathering by the districts or

collation by us would be required. In fact, the districts would only be

required to complete a new tabulation sheet concerning farm operators

and include that sheet with their annual summary forms submittal. In

addition, with RRA forms being submitted by farm operators, we would

have a source of verification; specifically, the RRA forms submitted by

landholders to whom the farm operator is providing services.

Impacts of the Proposed Rule

We believe that the proposed rule would help to ensure that the

recipients of Reclamation irrigation water comply with the laws and

regulations governing Federal Reclamation irrigation projects. It is

difficult to determine exactly how many entities may be affected by the

proposed changes, but, for the following reasons, we do not believe

that the rules will be burdensome.

If the changes proposed today were adopted as final, it is possible

that certain farm operators would need to submit RRA forms starting on

January 1, 2000, and, after we reviewed the associated farm operating

arrangement, the pricing and availability of Reclamation irrigation

water could be affected for some farms. For landholders that on January

1, 2000, have a farm operator providing services to land the farm

operator formerly owned as ineligible excess land or land placed under

recordable contract, we would require those landholders or farm

operators to pay full cost for any Reclamation irrigation water

received on now eligible land.

We published a report in 1991 (The Reclamation Reform Act of 1982

Annual Report to the Congress, February 1991) that indicated there were

approximately 80 farm operators who were providing services to more

than 960 acres westwide. Also in that 1991 report, we disclosed that

there were 35 trusts as of the end of 1990 that held more than 960

acres. Another large trust was found shortly thereafter for a total of

36. Recently we reviewed RRA forms submitted by districts for the 1997

water year and found 75 trusts that exceed 960 acres; this represents

an 108 percent increase. We have no reason to believe there has been a

larger increase in the number of farm operators providing services to

more than 960 acres. Therefore, starting with the 1991 figure of 80

large operators, there may be approximately 165 such operators today.

When the focus is narrowed to those farm operators who provide services

to more than 960 acres held in trusts or by legal entities, the number

of farm operators who may be affected by the proposed rule should

decline towards 100. Those farm operators providing services to land

they formerly owned as excess and sold at an approved price should be

an even smaller number. But even these farm operators would not be

immediately affected by the proposed excess land provisions and would

only be impacted if they continued, on or after January 1, 2000, to

have an arrangement to provide services to land they formerly owned as

ineligible excess land or land placed under recordable contract.

Without the expanded information requirements in this rule, we

simply do not have data readily available as to exactly how many farm

operators would be affected by these provisions. The only way we will

be sure in the near term about how many farm operators are providing

services to more than 960 acres held in trusts or by legal entities is

through the expansion of the RRA forms submittal requirements to farm

operators.

Once implemented on January 1, 2000, the only impact for all of

these farm operators would be that they would have to submit RRA forms.

If a farm was affected by the excess land provision in the future,

there is no reason the farm has to employ as a farm operator the

individual or legal entity who formerly owned the land in question as

excess. Therefore, an affected farm could hire a different farm

operator and continue to receive Reclamation irrigation water at the

nonfull-cost rate.

Authority for the Proposed Rule

Section 224(c) of the RRA gives the Secretary the authority to

publish regulations to carry out the provisions of

[[Page 64158]]

the RRA and other provisions of Federal reclamation law. Our authority

for the proposed application of the RRA forms requirements to certain

farm operators is also section 224(c), which directs the Secretary to

collect all data necessary to carry out the provisions of the RRA and

other provisions of Federal reclamation law.

Section 224(g) provides that the Secretary must thoroughly audit

compliance with the reclamation law of the United States, including

with the RRA, by legal entities and individuals subject to the law.

This section specifically directs the Secretary to audit legal entities

and individuals whose landholdings or operations exceed 960 acres.

One of the primary purposes of the acreage limitation provisions of

Federal reclamation law is to encourage the creation and preservation

of small family farms, and this is accomplished by limiting the number

of acres that any one landholder may own and receive Reclamation

irrigation water on at any price. Allowing the former owner of

ineligible excess land (ineligible excess land is not eligible to

receive Reclamation irrigation water at any price) or land placed under

recordable contract to receive Reclamation irrigation water as a farm

operator circumvents one of the basic principles of Federal reclamation

law.

V. Public Involvement

As part of the ANPR effort, on March 14, 1997, we held a public

meeting in Sacramento, California concerning the ANPR. We also received

53 letters during the public comment period on the ANPR that was open

from December 18, 1996, through April 17, 1997.

VI. Public Comments and Responses on Advance Notice of Proposed

Rulemaking

The following section presents general public comments on the ANPR.

These include comments on authority, process, relationship with other

documents, relationship with other laws and mandates, water rights and

contracts, westwide action, and other general comments that were not

specifically directed toward the new 43 CFR part 428.

Comment 1. The manager of an irrigation district indicated that

Reclamation should be prioritizing irrevocable trust reviews to speed

up the process of compliance determinations which will assist the

district in its monitoring responsibilities.

Response. We initially had a large backlog of trusts to review as

well as other acreage limitation implementation actions to take. We

have addressed most of this backlog. Regardless, trusts are considered

to be conditionally approved when submitted to us to assist trustees

and districts while a trust is being reviewed.

Comment 2. The same commenter raised concerns about reviewing only

one part of the RRA regulations, without revisiting other parts.

Response. We throughly reviewed all aspects of the RRA during the

rulemaking process that was completed on December 18, 1996. It was

determined at that time the only issues that needed further review were

those relating to trusts holding more than 960 acres westwide and how

such land is farmed. In addition, we recognized that if action was to

be taken with regard to large landholdings held in trust, we needed to

ensure the land in question was not just transferred to some other type

of landholding arrangement and continued to be farmed in the same

manner.

Comment 3. Another commenter indicated that Reclamation must

recognize its obligations to mitigate, conserve, and protect the

interest of the people as well as the purpose and intent of the RRA.

Reclamation must clarify policy with reference to protection of trust

resources, uses, and values to be co-equal with water development and

delivery.

Response. While we recognize our various responsibilities, the

purpose of this rulemaking is specific to collecting information from

farm operators providing services to more than 960 acres westwide held

in trusts or by legal entities to determine if such farming

arrangements are in fact leases for acreage limitation purposes. In

addition, this proposed rule helps ensure the intent of the excess land

provisions of Federal reclamation law will be met.

Comment 4. The same commenter suggests further that the proposed

rule must include 6 concerns: 1. Must continue to focus on family

farms. 2. The 960-acre limit must apply to operations, as well as

farms. 3. Allowing subsidies to more than 960 acres is a violation of

the intent of law. 4. There must be penalties for violation of the

acreage limitation. 5. Limit the water subsidy to forcefully encourage

water conservation measures. 6. The taxpayer should not subsidize any

farming operation or corporation.

Response. We concur that one of the primary purposes of acreage

limitation is to encourage and foster small family farms. The proposed

rule is intended to facilitate the gathering of information to ensure

operators providing services to more than 960 acres held in trusts or

by legal entities are meeting the requirements of the RRA. In addition,

we are proposing that steps be taken to ensure certain farm operators

do not circumvent the intent of the excess land provisions of Federal

reclamation law.

We have been advised in the past by the Office of the Solicitor

that legislative action would be required to assess penalties for

violation of the acreage limitation provisions. In addition, the RRA is

specific as to the number of acres on which legal entities may receive

nonfull-cost Reclamation irrigation water.

Comment 5. A beneficiary of a trust, writing on behalf of the

beneficiaries of the trust, stated that proposed new regulations are

not in accordance with law and are contrary to the legislative history

of RRA.

Response. Since no new regulations were included as part of the

ANPR issued on December 18, 1996, we urge everyone to examine the

proposed regulations published with this Preamble. We believe section

224(c) of the RRA provides the authority necessary to promulgate these

proposed regulations as follows:

The Secretary may prescribe regulations and shall collect all

data necessary to carry out the provisions of this title and other

provisions of Federal reclamation law.

Comment 6. The same commenter stated that the Federal program

benefits were intended to be limited by the concept of beneficial

ownership, not by the concept of farm size. In 1979 the Congress

included a farm size limitation in an earlier version of RRA, but

deleted such limitation in all subsequent reviews of Reclamation

regulations.

Response. We agree that the Congress has not limited farm size.

However, the Congress did address and limit how much land could be

owned or leased by an individual or entity and be eligible to receive

Reclamation irrigation water at the nonfull-cost rate. The collection

of RRA forms from certain farm operators will help ensure this

provision is being enforced by providing us with sufficient information

to determine if a farm operating arrangement is in fact a lease for

acreage limitation purposes. The Congress also has made it clear that

the excess land provisions are to preclude the accrual of speculative

gain in the disposition of excess land, assist in fostering the wide

distribution of benefits associated with the Reclamation program, and

encourage the creation of family farms.

Comment 7. The same commenter stated that the proposed new

regulations are a dangerous misuse of administrative power.

[[Page 64159]]

Response. We disagree. In fact, in 1987 (Public Law 100-203,

section 5302[a]) the Congress directed Interior to use its

administrative tools to ensure compliance with the acreage limitation

provisions of the RRA. Section 224(c) of the RRA requires the Secretary

to collect all data necessary to carry out the acreage limitation

program and to prescribe regulations needed to carry out those

provisions.

Comment 8. Eighteen members of the Congressional Western Water

Caucus expressed concerns about the ANPR stating their belief that a

rulemaking for trusts is unnecessary, because Interior already has the

tools through audits and other investigation techniques to ensure

compliance with the acreage limitation provisions enacted by the

Congress and the existing regulations.

Response. We do not have sufficient information with regard to farm

operators providing services to more than 960 acres held in trusts or

by legal entities to determine if the operating arrangements are in

fact leases for acreage limitation purposes. In addition, we believe

that these proposed regulations will help ensure the intent of the

excess land provisions is not being circumvented by farm operators

farming the land they previously owned as ineligible excess land or

under recordable contract.

Comment 9. The general manager of a California municipal utility

district stated that he and his district were concerned about again

reopening the rules and regulations. They feel that it is not

appropriate or necessary to proceed with rulemaking at this time. If

there is a perceived problem with larger trusts, Reclamation should

step up the enforcement and audit procedures of such trusts to ensure

they are complying with the law, rather than reopening the process once

again.

Response. We agree that it is unnecessary to reopen 43 CFR part 426

to ensure compliance with the RRA by certain farm operators providing

services to more than 960 acres westwide held in trusts or by legal

entities. By creating 43 CFR part 428, we hope to provide certainty to

the vast majority of landholders that receive Reclamation irrigation

water, while taking the necessary steps to ensure compliance with the

RRA by those farm operators.

Comment 10. A representative of a national conservation group urged

Reclamation to adopt policies that would ensure compliance with the

intent of the RRA. Reclamation should limit irrigation subsidies to 960

acres, which will strengthen family farms, reduce the Federal deficit,

and help protect the environment. Commenter urged that the current

loopholes be closed and bring fairness to Federal irrigation programs.

Response. We are proposing these additional regulatory provisions

to ensure compliance with the RRA by farm operators providing services

to more than 960 acres westwide held in trusts or by legal entities.

The proposed rule is intended to better ensure compliance by requiring

certain farm operators to submit RRA forms. In addition, a perceived

loophole associated with the excess land provisions would be closed.

Comment 11. The representative of a national taxpayers group stated

support for strong reforms in the Federal water subsidy program. The

concern is that each farming operation is only entitled to receive

subsidized water on 960 acres, regardless of how many individuals

benefit from the operation. In addition, they are urging encouragement

of efficient use of water.

Response. We cannot change the law, but must enforce the acreage

limitation provisions of the RRA. Part of this effort is to ensure farm

operators providing services to more than 960 acres held in trusts or

by legal entities are not lessees for acreage limitation purposes.

Comment 12. The representative of a brewery in San Francisco,

California stated that he does not see why the taxpayers should

subsidize large corporate farmers. He also has a concern about the

impacts upon the environment in the Delta and the San Francisco Bay.

Reclamation should adopt the concept of transparency to see through

some of the fancy legal stuff that lets folks get around the spirit of

the law.

Response. We cannot change the statute, but can take the proposed

additional actions to obtain information needed to ensure compliance

with the RRA by farm operators providing services to more than 960

acres westwide held in trusts or by legal entities.

Comment 13. A commenter from San Carlos, California stated that

Federal water subsidies should be limited to only farming operations

which meet the 960-acre limit. Rulemaking must correct the trust

arrangements. Reclamation should enforce the acreage limits by

determining when land owned by different parties is actually being

farmed as one operation.

Response. We are taking additional steps to obtain information

needed to ensure compliance with the acreage limitation provisions of

Federal reclamation law by farm operators providing services to more

than 960 acres westwide held in trusts or by legal entities.

Comment 14. The same commenter stated that Reclamation should

penalize those who do not abide by the acreage limits. Improper water

subsidies only aggravate our water shortages and encourage the

inefficient use of resources.

Response. We vigorously enforce the acreage limitation provisions

as defined by the Congress. However, we have been advised in the past

by the Office of the Solicitor that legislative action would be

required to assess penalties for violations of the acreage limitation

provisions.

Comment 15. A commenter representing a water conservation group

urged a strong stand in implementing the acreage limitation provisions

of the RRA. Reclamation should write regulations that minimize the

exceptions to the 960-acre limit on subsidized project water.

Response. We agree and the current Acreage Limitation Rules and

Regulations (43 CFR part 426) only allow those exceptions to the 960-

acre limit provided by statute.

Comment 16. The same commenter stated that Reclamation must take

action to limit corporate welfare and reduce environmental impacts.

Response. Our proposed rule will not change the law, but it should

help to ensure compliance with the RRA by those farm operators who

provide services to more than 960 acres westwide held in trusts or by

legal entities.

Comment 17. A commenter representing two irrigation districts in

central Arizona stated that farmers of both districts thought that all

RRA matters were laid to rest with the issuance of the revised

regulations.

Response. Because of the concern over trusts holding more than 960

acres westwide, we chose to create a new 43 CFR part 428 to gather

information from farm operators providing services to such trusts or

legal entities or combination thereof. We are also concerned about

whether the intent of the excess land provisions is being met in

association with the practices of certain farm operators to provide

services to the land the farm operator formerly owned as ineligible

excess land or under recordable contract. Therefore, we have proposed

in 43 CFR part 428 that action is taken to ensure such farm operators

are in compliance with the intent of the excess land provisions.

Comment 18. The same commenter stated that the key question is

whether Interior has the authority to regulate

[[Page 64160]]

trusts. It would take an act of the Congress to change section 214 of

the RRA. Changing the application to trusts would undermine what

farmers in Arizona have relied upon for more than 10 years. To now

change the law through regulation is not consistent with sound public

policy.

Response. We are seeking to enforce the RRA, including section 214,

by adding a new 43 CFR part 428 to extend the information requirements

to farm operators providing services to more than 960 acres westwide

held in trusts or by legal entities. We also want to ensure the intent

of the excess land provisions is being met. No new provisions directly

regulating trusts are being proposed.

Comment 19. The president of a water district in California stated

that the law should be left alone, as the regulations work well and no

change is necessary. This is important so that those working under the

law can operate with some degree of certainty.

Response. We agree that certainty is important and so we have

chosen to create a new 43 CFR part 428 to extend the information

requirements to certain farm operators and to address an excess land

issue, which will provide greater certainty for all water users.

Comment 20. A member of the Congress from California expressed

concern that Reclamation use all its power to revise regulations so as

to apply the 960-acre limit to all farms, including farms managed or

operated through trusts, leases, creative management agreements,

limited partnerships, or other devices used to evade the subsidy limit.

Response. We agree that the regulations must be equitably applied

and, accordingly, have proposed provisions to obtain information

concerning farm operators providing services to more than 960 acres

westwide held in trusts or by legal entities. In addition, we want to

ensure that the intent of the excess land provisions is met by those

farm operators.

Comment 21. The manager of an irrigation district indicated that he

was concerned about reopening the rules and regulations. Trusts are not

a problem in his district, but he sees Reclamation being able to step

up enforcement and audit procedures regarding trusts to solve any

problems and does not need to issue new regulations.

Response. We agree that enforcement is a key element in ensuring

compliance with the RRA by certain farm operators. We intend the

proposed rule to provide us with additional information needed for our

enforcement activities and to address certain excess land concerns

without disturbing the provisions of 43 CFR part 426.

Comment 22. A commenter representing a community alliance of small

farmers expressed concerns that no farm operation should receive

subsidized water for more than 960 acres.

Response. A key to any application of the acreage limitation

provisions is in how certain terms are defined. The RRA defines

landholding to include directly or indirectly owned or leased land. Any

farm operator that is determined to be a landholder is subject to

application of the acreage limitation provisions.

Comment 23. The same commenter stated that providing Federal water

at less than full cost to large farm operations results in degradation

of the communities and the well-being of farm workers.

Response. The Congress recognized the need to preserve small family

farms when they limited the availability of nonfull-cost water.

Comment 24. Legal counsel for a trust in California commented that

any attempt by Interior to: classify a trust as a ``legal entity''

under RRA; treat trustees as the owner of real property held in trust;

or exempt only trustees from ownership/pricing limitations, would be

inconsistent with common law of trusts and RRA.

Response. The proposed rule does not attempt to: classify a trust

as a ``legal entity'' under RRA; treat trustees as the owner of real

property held in trust; or exempt only trustees from ownership and

pricing limitations.

Comment 25. The same commenter stated that Reclamation should stick

to the following interpretation of RRA: that no one person can receive

nonfull-cost water on more than 960 acres, no matter whether the land

is owned, leased, involved in a trust or other entity.

Response. We have not altered that interpretation of the RRA; with

the understanding that the acreage limitation provisions apply to legal

entities as well as to individuals. Sections 214 of the RRA and 426.7

of the Acreage Limitation Rules and Regulations include provisions that

exempt trustees acting in a fiduciary capacity from application of the

acreage limitation provisions if certain criteria are met. These

proposed rules have no impact on those provisions.

Comment 26. The same commenter stated that Reclamation has adequate

tools to ensure compliance, and should ``follow the money'' to

determine recipient of benefit of the nonfull-cost water.

Response. We generally do have adequate tools to ensure compliance.

However, we believe we need additional information regarding farm

operators involved in farming more than 960 acres westwide held in

trusts or by legal entities. We also need additional information to

determine if farm operators for trusts or legal entities formerly owned

the land they are providing service to as ineligible excess land or

under recordable contract. The new RRA forms requirements for farm

operators are intended to address these issues.

Comment 27. The same commenter stated that nonfull-cost water to

trusts should not be limited in any manner, and that Reclamation has no

statutory authority to restrict the exemption on trusts in RRA section

214.

Response. We are required by statute to limit nonfull-cost water

deliveries to land held in trust if the individuals or entities to whom

the land held in trust is attributed exceed their acreage limitation

entitlements. This requirement is addressed in 43 CFR part 426. The

proposed rule would also limit such deliveries starting on January 1,

2000, if the land held in trust is being farmed by a farm operator and

that farm operator formerly owned the land as ineligible excess or

under recordable contract.

Comment 28. A national conservation group stated that no matter how

many individuals benefit from a farming operation, the operation is

only entitled to receive subsidized water on 960 acres. The limit

applies both to the farm, and to each individual.

Response. The acreage limitation provisions are fully applied to

any farm operation that is determined to be a landholder. The proposed

rule does seek to ensure congressional intent associated with excess

land is met by farm operators providing services to trusts or legal

entities.

Comment 29. The same commenter stated that the proposed rule must

address all large farming operations, not just trusts, because if

Reclamation only regulates trusts, the trusts will find some other way

to escape acreage limits.

Response. We recognize this possibility and included farm operators

providing services to legal entities in both the proposed information

requirements and the excess land provisions.

Comment 30. The same commenter stated that trusts are a ``glaring

loophole'' in RRA's acreage limitations, and Reclamation must ``close

the loophole'' in order to preserve the purpose of RRA. Reclamation

should treat trusts like any other legal entity,

[[Page 64161]]

limiting them to subsidized water on no more than 960 acres for

qualified recipients. The trusts provision of the RRA was intended to

protect banks or other institutions acting in a purely fiduciary

capacity.

Response. We are limiting this proposed rule to extending the

information requirements to farm operators providing services to more

than 960 acres westwide held in trusts or by legal entities. In

addition, an excess land provision involving farm operators is

included.

Comment 31. The same commenter stated that established precedent

requires Reclamation to interpret the RRA trust exception narrowly to

preserve the central purpose of the RRA. The regulations should read:

An individual or corporate trustee holding land in a fiduciary

capacity is not subject to the ownership or pricing limitation

imposed by title II nor any other provisions of Reclamation law.

However, the interest of each beneficiary (qualified or limited

recipients) in trust land in combination with other land he/she may

own shall not exceed the ownership limitation of title II. Moreover,

the quantity of land in a trust receiving irrigation water cannot

exceed the ownership entitlement of title II.

Response. 43 CFR part 426 already addresses attribution of land

held in trust to, generally, beneficiaries, and under certain

circumstances to grantors or trustees. Acreage limitations clearly are

applicable under those attribution requirements. There is no evidence

that there have been any problems associated with those provisions and

further clarification is not needed as part of this rulemaking.

Comment 32. The same commenter urged that the regulations must

specifically address situations where the trustee serves as the farm

operator of the trust property, clearly applying acreage limitations to

the trustee as well as the trust.

Response. By requiring farm operators providing services to more

than 960 acres westwide held in trusts or by legal entities to submit

RRA forms annually, we will be better able to determine if a trustee

who is also acting as a farm operator for the land held in trust is in

fact a lessee of the land.

Comment 33. The same commenter stated that Reclamation should

revise the rules governing ``leases'' to use criteria or indicators to

determine whether a landholding is actually part of a larger farming

operation. The commenter suggests that Reclamation use indicators

similar to those suggested by the General Accounting Office (GAO).

Response. We already use the indicators suggested by the GAO in

their 1989 report as indicators of economic risk, use, or possession,

which are then used to determine if an operating arrangement is in fact

a lease.

Comment 34. The same commenter stated that there are many reasons

why limiting subsidies to large corporate farms is sound public policy,

consistent with Federal reclamation law, including: (1) The purpose of

the subsidy is to assist small family farms, not individual

shareholders in large corporate farms or investors in a large business

trust; (2) Limiting subsidies can benefit the environment, something

Reclamation is required to do under a variety of statutes and treaties;

and (3) Irrigation subsidies create economic inefficiencies and poor

allocation of natural resources.

Response. The Congress was very clear as to how acreage limitations

are to be applied to ``large corporate farms.'' Specifically, under the

discretionary provisions corporations that benefit more than 25 natural

persons are to be limited recipients with a 640-acre ownership

entitlement and a 320-acre nonfull-cost entitlement, if the corporation

received Reclamation irrigation water on or before October 1, 1981. If

the corporation first received such water after that date, they are to

pay the full-cost rate for any Reclamation irrigation water received.

For those ``large corporate farms'' that remain under prior law, they

continue to have 160-acre ownership and nonfull-cost entitlements. We

have no authority to further limit subsidies to such entities.

VII. Detailed Analysis of Proposed 43 CFR Part 428

Section 428.1

This section provides a statement of the purpose of these

regulations.

Section 428.2

This section includes a statement of applicability. Rather than

repeating provisions found in 43 CFR part 426, paragraph (b) of this

section specifies that 43 CFR part 428 supplements part 426.

Section 428.3

This section defines the terms ``Custom operator,'' ``Farm

operator,'' ``we or us,'' and ``you'' for purposes of part 428.

Section 428.4

This section expands the RRA forms requirements to farm operators

who provide services to more than 960 nonexempt acres westwide held by

a single trust or legal entity, or any combination of trusts and legal

entities. These requirements also apply to any indirect owner of a

legal entity that is a farm operator that must submit RRA forms.

Exemptions to this requirement are provided in Sec. 426.18(g)(2) and

(3) of this chapter.

Section 428.5

This section establishes how the information collection will occur.

Paragraph (a) of this section specifies that we will determine what

forms will be used.

Paragraph (b) of this section establishes that information must be

provided by the farm operator for all nonexempt land to which the farm

operator provides services westwide.

This section provides in paragraph (c) the types of information we

would require to be submitted by each farm operator.

Section 428.6

This section specifies that farm operators required to submit forms

must submit them to each district westwide that is subject to the

acreage limitation provisions, and in which the farm operator provides

services.

Section 428.7

This section describes what will happen if a farm operator fails to

meet the RRA forms requirements. Paragraph (a) of this section provides

that the district is not to deliver water to the land in question until

the farm operator submits the required forms for that water year. In

addition, the farm operator, landholder, or trustee of the land in

question must not accept delivery of such water.

Paragraph (b) provides that after the farm operator submits the

forms, we would restore eligibility for the land.

Paragraph (c) specifies that we will assess administrative costs as

described in Sec. 426.20(e) of this chapter if Reclamation irrigation

water is delivered to land that is ineligible because the farm operator

failed to submit required forms.

Section 428.8

This section provides that we could prosecute a farm operator for

submitting false information on the required forms, and suspend the

farm operator's eligibility to receive Reclamation irrigation water.

Section 428.9

This section addresses the eligibility of formerly excess land

being farmed by certain farm operators. Paragraph (a) of this section

provides (1) if a landholder

[[Page 64162]]

disposed of excess land at a price Reclamation approved, (2) the land

is held in trust or by a legal entity, and (3) that former landholder

is the direct or indirect farm operator of that land, then the farm

operator and landholder may not receive water on such land.

Paragraph (b) of this section includes the following exceptions to

the provisions included in paragraph (a) of this section: (1) The land

becomes exempt from the acreage limitation provisions of Federal

reclamation law or (2) the landholder or farm operator pays the full-

cost rate for any Reclamation irrigation water delivered to the land in

question, assuming the formerly excess land is otherwise eligible to

receive Reclamation irrigation water. If a part owner of a legal entity

that is the farm operator is the party that held the land as ineligible

excess or under recordable contract and the full-cost rate is to be

paid, then application of that rate will be based on the proportional

share the part owner has in the legal entity.

Section 428.10

This section specifies that districts must not make water available

to formerly excess land to which the former owner who sold it at an

approved price is now providing services as a farm operator. Reference

is made to the exceptions provided in Sec. 428.9(b).

Section 428.11

This section establishes an effective date of January 1, 2000, for

43 CFR part 428. This section also specifies that on January 1, 2000,

the excess land provisions found in Sec. 428.9 will apply to any farm

operating arrangements between farm operators and trusts or legal

entities then in place and any future farm operating arrangements.

VIII. Procedural Matters

National Environmental Policy Act

We have analyzed this rule in accordance with the criteria of the

National Environmental Policy Act of 1969 (NEPA) and Departmental

Manual 516 DM. This rule does not constitute a major Federal action

significantly affecting the quality of the human environment. A

detailed statement under NEPA is not required. The rule is

categorically excluded from NEPA review under 40 CFR 1508.4,

Departmental Manual 516 DM 2, Appendix 1, paragraph 1.6, and 516 DM 6,

Appendix 9, paragraph 9.4A.1. In addition, the proposed rule does not

meet any of the 10 criteria for exceptions to categorical exclusions

listed in 516 DM 2, Appendix 2.

As provided in 516 DM 2, Appendix 1, paragraph 1.6, an action is

excluded from review if it is a ``Non-destructive data collection,

inventory (including field, aerial and satellite surveying and

mapping), study, research and monitoring activities.'' This rule

requires an information collection, and would not have a significant

effect on the human environment. As provided in 516 DM 6, Appendix 9,

paragraph 9.4A.1, the following is excluded from review: ``Changes in

regulations or policy directives and legislative proposals where the

impacts are limited to economic and/or social effects.'' The only

impacts associated with the excess land provisions would be that

certain farm operators that meet the criteria in the proposed

regulations or the associated landholders would have to pay full cost

for Reclamation irrigation water delivered to land to which the farm

operator is providing services, the landholder would have to hire a

different farm operator to provide the services, or the landholder and

farm operator could not receive Reclamation irrigation water on that

land. This provision will not be effective until January 1, 2000.

Executive Order 12866, Regulatory Planning and Review

Under Executive Order (E.O.) 12866, (58 FR 51735, Oct. 4, 1993), an

agency must determine whether a regulatory action is significant and

therefore subject to Office of Management and Budget (OMB) review and

the requirements of the Executive Order. E.O. 12866 defines a

``significant regulatory action'' as a regulatory action meeting any

one of four criteria specified in the Executive Order. This rulemaking

is considered a significant regulatory action under criterion number 4,

because it raises novel legal or policy issues arising out of legal

mandates, the President's priorities, or the principles set forth in

the Executive Order. We have therefore submitted the proposed rule to

the OMB for review.

Regulatory Flexibility Act

The Department of the Interior certifies that this document will

not have a significant economic effect on a substantial number of small

entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

We provide some 140,000 Western farmers with irrigation water. We

estimate that out of this number, fewer than 200 entities, not

necessarily small entities, could be affected by the rule. The effect

on most of these entities starting on January 1, 2000, would be limited

to the annual completion of RRA forms. For some of these entities, the

farm operator was also the owner of the land in question when the land

was ineligible excess or under recordable contract. In cases where such

a farm operating arrangement is still in place on January 1, 2000, or

is implemented on or after that date, the full-cost rate would be

applicable to all deliveries of Reclamation irrigation water to such

land. However, the landholder in question could avoid paying the full-

cost rate by hiring a different farm operator who did not formerly own

the land in question as excess. Therefore, we have determined that the

proposed rule will not have a significant economic effect on a

substantial number of small entities.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

This rule is not a major rule under 5 U.S.C. 804(2), the Small

Business Regulatory Enforcement Fairness Act. This rule:

(1) Will not have an annual effect on the economy of $100 million

or more. The rule could affect up to an estimated 200 farms, but the

effects would not approach $100 million or more.

(2) Will not cause a major increase in costs or prices for

consumers, individual industries, Federal, State, or local government

agencies, or geographic regions. There could be an economic effect on

fewer than an estimated 200 farms, but we do not anticipate that this

will cause any noticeable increase in costs or prices.

(3) Will not have significant adverse effects on competition,

employment, investment, productivity, innovation, or the ability of

U.S.-based enterprises to compete with foreign-based enterprises. The

rule would only affect at most a small sector of the farming industry,

and would not have significant adverse effects on competition,

employment, investment, productivity, innovation, or the ability of

U.S.-based enterprises to compete with foreign-based enterprises.

Paperwork Reduction Act

This regulation requires an information collection from 10 or more

parties and a submission under the Paperwork Reduction Act is required.

This information collection is described below.

Existing Information Collection Under the Acreage Limitation Rules and

Regulations

Sections 206, 224(c), and 228 of the RRA (43 U.S.C. 390ff,

390ww(c), and 390zz) require, among other things, that (1) as a

condition to the receipt of Reclamation irrigation water, each

[[Page 64163]]

landholder must annually certify, in a form suitable to the Secretary,

that they are in compliance with the provisions of the RRA, and (2)

districts must annually submit to us, in a form suitable to the

Secretary, records and information necessary to implement the RRA.

These mandatory requirements are addressed in 43 CFR 426.18. To comply

with these requirements, we provide forms for the landholders' and

districts' use. The landholder forms have been approved by OMB under

control number 1006-0005. The district summary forms have been approved

under control number 1006-0006. Both clearances expire on December 31,

1999.

Information Collection Under the Proposed Rule

The proposed rule contains a change that would increase the

reporting burden by requiring certain farm operators to submit RRA

forms starting on January 1, 2000. We estimate that the reporting

burden would be increased by less than 200 hours as a result of this

change. The primary purpose of requiring those farm operators who

provide services to more than 960 acres westwide held in trusts or by

legal entities to complete and submit RRA forms would be to provide us

with sufficient information to determine if the farm operating

arrangement is a lease as defined in section 426.2 of this chapter.

As with all acreage limitation information collections, we would

require farm operators to provide identifier information; such as name,

address, telephone number, etc., and if the farm operator is an entity,

information concerning the entity's organizational structure and part

owners. In addition, farm operators would be required to provide

information concerning the land to which they are providing services;

such as legal descriptions, number of acres, etc. We would also require

farm operators to provide information concerning the specific services

they are providing, who decides when such services are needed, how the

farm operator is compensated for the services, the control the farm

operator has over the daily operation of the land in question, etc. If

different services are provided to different land parcels, such

distinctions would need to be specified.

In order to effectively administer and enforce the proposed excess

land provisions, we would require farm operators to provide information

as to whether the land to which services are being provided was

formerly owned by the farm operator as ineligible excess land or under

recordable contract.

At this time, we would like comments on the planned RRA forms

requirements for farm operators. Comments are invited on: (a) whether

the proposed collection of information is necessary for the proper

performance of our functions, including whether the information will

have practical utility; (b) the accuracy of our burden estimate for the

proposed collection of information; (c) ways to enhance the quality,

utility, and clarity of the information to be collected; and (d) ways

to minimize the burden of the collection of information on those who

are to respond, including through the use of automated collection

techniques or other forms of information technology. In addition, we

would like comments on specific issues related to the proposed

information collection including:

Should the RRA forms submittal threshold for farm

operators be 960 acres westwide held in trusts or by legal entities as

provided in the proposed rules or some other figure (e.g., 40 acres,

240 acres, etc.)?

Is the proposed definition of ``farm operator'' sufficient

or should it be altered? For example, is there a way to define ``farm

operator'' that reduces how many additional RRA forms would need to be

submitted, other than through application of the forms submittal

threshold.

Is the definition of and exemption for ``custom operator''

included in the proposed rule sufficient?

Should certain specific questions be asked of farm

operators on the RRA forms? Examples of such include: Whether the farm

operator is authorized to use his agreements with a landholder as

collateral in any loan; whether the farm operator can sue or be sued in

the name of the landholding; and whether the farm operator is

authorized to apply for any Federal assistance from the United States

Department of Agriculture in the name of the landholding.

In considering the issues associated with certain farm operators

being required to submit RRA forms, we would also like comments as to

whether current RRA forms should be modified to accommodate the

additional information requirements applicable to farm operators, or if

an entirely new form only to be completed by farm operators providing

services to more than 960 acres westwide held in trusts or by legal

entities should be developed.

Submit comments on the RRA information collection changes to us

along with written comments on the proposed rule, or separately (see

DATES, ADDRESSES, and Public Comment Procedures under SUPPLEMENTARY

INFORMATION, above).

Executive Order 12612, Federalism

In accordance with Executive Order 12612, the rule does not have

sufficient federalism implications to warrant the preparation of a

Federalism Assessment. A Federalism Assessment is not required. This

proposed rule would supplement existing provisions for administering

the RRA. The regulation would not significantly change the relationship

or relative roles of the Federal and State Government. It would not

lead to Federal control over traditional State responsibilities, or

decrease the ability of the States to make policy decisions with

respect to their own functions. This regulation would not affect the

distribution of power and responsibilities among the various levels of

government and does not preempt State law. In summary, this regulation

would not have a significant impact on Federalism as described by E.O.

12612.

Executive Order 12630, Takings

In accordance with Executive Order 12630, the rule does not have

significant takings implications. A takings implication assessment is

not required. This proposed rule would not result in imposition of

undue additional fiscal burdens on the public. The rule would not

result in physical invasion or occupancy of private property or

substantially affect its value or use. Specifically, the rule would not

result in the taking of contractual rights to storage water in

Reclamation reservoirs or water rights established under State law.

Unfunded Mandates Reform Act of 1995

This rule does not impose an unfunded mandate on State, local, or

tribal governments or the private sector of more than $100 million per

year. The rule does not have a significant or unique effect on State,

local, or tribal governments or the private sector. A statement

containing the information required by the Unfunded Mandates Reform Act

(2 U.S.C. 1531 et seq.) is not required. The rule would require certain

farm operators, which are not small governments, to submit RRA forms.

The excess land provision of the rule will not affect small

governments. These potential effects would not amount to costs of more

than $100 million per year.

Executive Order 12988, Civil Justice Reform

In accordance with Executive Order 12988, the Office of the

Solicitor has

[[Page 64164]]

determined that this rule does not unduly burden the judicial system

and meets the requirements of sections 3(a) and 3(b)(2) of the Order.

Clarity of This Regulation

Executive Order 12866 requires each agency to write regulations

that are easy to understand. We invite your comments on how to make

this rule easier to understand, including answers to questions such as

the following:

(1) Are the requirements in the rule clearly stated?

(2) Does the rule contain technical language or jargon that

interferes with its clarity?

(3) Does the format of the rule (grouping and order of sections,

use of headings, paragraphing, etc.) aid or reduce its clarity?

(4) Would the rule be easier to understand if it were divided into

more (but shorter) sections? (A ``section'' appears in bold type and is

preceded by the symbol ``Sec. '' and a numbered heading; for example,

Sec. 428.4 Who must submit forms under this part.)

(5) Is the description of the rule in the ``Supplementary

Information'' section of the preamble helpful in understanding the

proposed rule? What else could we do to make the rule easier to

understand?

Send a copy of any comments that concern how we could make this

rule easier to understand to: Office of Regulatory Affairs, Department

of the Interior, Room 7229, 1849 C Street NW, Washington, DC 20240. You

may also e-mail the comments to this address: E[email protected]

IX. List of Subjects in 43 CFR Part 428

Agriculture, Irrigation, Reclamation, Reporting and recordkeeping

requirements, Water resources.

Dated: November 10, 1998.

Patricia J. Beneke,

Assistant Secretary--Water and Science.

For the reasons stated in the preamble, the Bureau of Reclamation

proposes to add a new part 428 to title 43 of the Code of Federal

Regulations as follows:

PART 428--INFORMATION REQUIREMENTS FOR CERTAIN FARM OPERATIONS IN

EXCESS OF 960 ACRES AND THE ELIGIBILITY OF CERTAIN FORMERLY EXCESS

LAND

Sec.

428.1 Purpose of this part.

428.2 Applicability of this part.

428.3 Definitions used in this part.

428.4 Who must submit forms under this part.

428.5 Required information.

428.6 Where to submit required forms and information.

428.7 What happens if a farm operator does not submit required

forms.

428.8 What can happen if a farm operator makes false statements on

the required forms.

428.9 Farm operators who are former owners of excess land.

428.10 Districts' responsibilities concerning certain formerly

excess land.

428.11 Effective date.

Authority: 5 U.S.C. 301; 5 U.S.C. 553; 16 U.S.C. 590z-11; 31

U.S.C. 9701; and 32 Stat. 388 and all acts amendatory thereof or

supplementary thereto including, but not limited to, 43 U.S.C. 390aa

to 390zz-1, 43 U.S.C. 418, 43 U.S.C. 423 to 425b, 43 U.S.C. 431,

434, 440, 43 U.S.C. 451 to 451k, 43 U.S.C. 462, 43 U.S.C. 485 to

485k, 43 U.S.C. 491 to 505, 43 U.S.C. 511 to 513, and 43 U.S.C. 544.

Sec. 428.1 Purpose of this part.

This part addresses Reclamation Reform Act of 1982 (RRA) forms

requirements for certain farm operators and the eligibility of formerly

excess land that is operated by a farm operator who was the landowner

of that land when it was excess.

Sec. 428.2 Applicability of this part.

(a) This part applies to farm operators who provide services to:

(1) More than 960 acres held (directly or indirectly owned or

leased) by one trust or legal entity; or

(2) The holdings of any combination of trusts and legal entities

that exceed 960 acres.

(b) This part also applies to farm operators who provide services

to formerly excess land held in trusts or by legal entities if the farm

operator previously owned that land when the land was ineligible excess

or under recordable contract.

(c) This part supplements the regulations in part 426 of this

chapter.

Sec. 428.3 Definitions used in this part.

Custom operator means an individual or legal entity that provides a

specialized, farm-related service that a farm owner, lessee, sublessee,

or farm operator employs for agreed-upon payments. This includes, for

example, crop dusters, custom harvesters, grain haulers, and any other

such services.

Farm operator means an individual or legal entity other than the

owner, lessee, or sublessee that performs any portion of the farming

operation. This includes farm managers, but does not include spouses,

minor children, employees for whom the employer pays social security

taxes, or custom operators.

We or us means the Bureau of Reclamation.

You means a farm operator.

Sec. 428.4 Who must submit forms under this part.

(a) You must submit RRA forms to us annually if:

(1) You provide services to more than 960 nonexempt acres westwide,

held by a single trust or legal entity or any combination of trusts and

legal entities; and

(2) You are not covered by the exceptions found in

Sec. 426.18(g)(2) and (3).

(b) Anyone who is the indirect owner of a legal entity that is a

farm operator meeting the criteria of paragraph (a) of this section

must submit forms to us annually.

Sec. 428.5 Required information.

(a) We will determine which forms you must use to submit the

information required by this section.

(b) You must declare all nonexempt land to which you provide

services westwide.

(c) You must give us other information about your compliance with

Federal reclamation law, including but not limited to:

(1) Identifier information, such as your name, address, telephone

number;

(2) If you are a legal entity, information concerning your

organizational structure and part owners;

(3) Information about the land to which you provide services, such

as a legal description, and the number of acres;

(4) Information about whether you formerly owned, as ineligible

excess land or under recordable contract, the land to which you are

providing services;

(5) Information about the services you provide, such as what they

are, who decides when they are needed, and how much control you have

over the daily operation of the land;

(6) If you provide different services to different land parcels, a

list of services that you provide to each parcel;

(7) Whether you can use your agreement with a landholder as

collateral in any loan;

(8) Whether you can sue or be sued in the name of the landholding;

and

(9) Whether you are authorized to apply for any Federal assistance

from the United States Department of Agriculture in the name of the

landholding.

Sec. 428.6 Where to submit required forms and information.

You must submit the appropriate completed RRA form(s) to each

district westwide that is subject to the acreage limitation provisions

and in which you provide services.

[[Page 64165]]

Sec. 428.7 What happens if a farm operator does not submit required

forms.

(a) If you do not submit required RRA form(s) in any water year,

then:

(1) The district must not deliver irrigation water before you

submit the required RRA form(s); and

(2) You, the trustee, or the landholder(s) who holds the land

(including to whom the land held in trust is attributed) must not

accept delivery of irrigation water before you submit the required RRA

form(s).

(b) After you submit all required RRA forms to the district, we

will restore eligibility.

(c) If a district delivers irrigation water to land that is

ineligible because you did not submit RRA forms as required by this

part, we will assess administrative costs against the district as

specified in Sec. 426.20(e). We will determine these costs under

Sec. 426.20(a)(1) through (3).

Sec. 428.8 What can happen if a farm operator makes false statements

on the required forms.

If you make a false statement on the required RRA form(s),

Reclamation can prosecute you under the following statement:

Under the provisions of 18 U.S.C. 1001, it is a crime punishable

by 5 years imprisonment or a fine of up to $10,000, or both, for any

person knowingly and willfully to submit or cause to be submitted to

any agency of the United States any false or fraudulent statement(s)

as to any matter within the agency's jurisdiction. False statements

by the farm operator will also result in loss of eligibility.

Eligibility can only be regained upon the approval of the

Commissioner.

Sec. 428.9 Farm operators who are former owners of excess land.

(a) You or a landholder may not receive irrigation water on land

held in trust or by a legal entity if:

(1) You owned the land when the land was excess, whether or not

under recordable contract;

(2) You sold the land at a price approved by Reclamation; and

(3) You are the direct or indirect farm operator of that land.

(b) This section does not apply if:

(1) The formerly excess land becomes exempt from the acreage

limitations of Federal reclamation law; or

(2) You or the landholder pays the full-cost rate for any

irrigation water delivered to your formerly excess land that is

otherwise eligible to receive irrigation water. If you are a part owner

of a legal entity that is the direct or indirect farm operator of the

land in question, then the full-cost rate will apply to the

proportional share of the land that reflects your interest in that

legal entity.

Sec. 428.10 Districts' responsibilities concerning certain formerly

excess land.

Districts must not make irrigation water available to formerly

excess land that meets the criteria under Sec. 428.9(a), unless an

exception provided in Sec. 428.9(b) applies.

Sec. 428.11 Effective date.

This part will be effective beginning on January 1, 2000. On that

date the provisions of Sec. 428.9 will apply to all farm operating

arrangements between farm operators and trusts or legal entities that:

(a) Are then in effect; or

(b) Are initiated on, or after, January 1, 2000.

[FR Doc. 98-30756 Filed 11-17-98; 8:45 am]

BILLING CODE 4310-94-P