Conservation Farm Option

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1468

RIN 0578-AA20

Conservation Farm Option

AGENCY: Commodity Credit Corporation, Department of Agriculture.

ACTION: Proposed 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) to establish 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

throughout the process by a Executive Vice President of the CCC who is

the Administrator of the Farm Service Agency (FSA). The CCC is issuing

a proposed rule for the CFO. This proposed rule describes how CCC will

implement CFO as authorized by the 1985 Act. The CCC seeks comments

from the public which will be used to make revisions, if necessary,

that will be issued in a final rule.

DATES: Comments must be received by June 1, 1998.

ADDRESSES: All comments concerning this proposed rule should be

addressed to Gary R. Nordstrom, Director, Conservation Operations

Division, Natural Resources Conservation Service, PO Box 2890,

Washington, DC 20013-2890. Attention: CFO. FAX: 202-720-1838. This rule

may also be accessed,

[[Page 16143]]

and comments submitted, via Internet. Users can access the Natural

Resources Conservation Service (NRCS) homepage at http://

www.ftw.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

Pursuant to Executive Order 12866, Regulatory Planning and Review

(58 FR 51735, October 4, 1993), the Office of Management and Budget

(OMB) has determined that this proposed rule is a significant

regulatory action. It will not result in an annual effect on the

economy of $100 million or more, and therefore is not an economically

significant regulatory action. The administrative record is available

for public inspection in Room 6037, South Building, USDA, 14th and

Independence Ave, SW, Washington, D.C.

Pursuant to Executive Order 12866, CCC conducted an economic

analysis of the potential impacts associated with this program, and

included the analysis as part of a Cost Benefit Analysis document

prepared for this rule. The analysis estimates CFO will have a

beneficial impact on the adoption of conservation practices and, when

installed or applied to technical standards, will increase net farm

income. 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 or burden upon agricultural producers that choose not to

participate.

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 has determined through an Environmental Assessment for the

Conservation Farm Option Program, dated August 1, 1996, that the

issuance of this proposed 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, PO Box 2890, Washington, DC 20013-2890.

Paperwork Reduction Act

This proposed rule sets forth procedures for implementing CFO. CCC

needs certain information from potential applicants in order to carry

out the requirements of the program. CCC submitted information

collection requirements to the Office of Management and Budget (OMB)

for approval under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

FSA has requested reinstatement of OMB 0560-0174 which covers both CFO

and EQIP. This package contains the forms necessary for program

implementation and include Forms CCC-1200, CCC 1210, and CCC-1245.

Form CCC-1200 is the Conservation Program Contract used in both the

CFO and Environmental Quality Incentive Program (EQIP) and allows a

farmer, rancher, or landowner to apply for conservation benefits under

the terms and conditions of the contract.

Form CCC-1210 is the Conservation Farm Option Pilot Proposal form

used only in the CFO program and allows farmers, groups and other

entities to propose geographic areas for inclusion as pilot areas in

the CFO.

Form CCC-1245 is the Practice Approval and Payment Application used

in both the CFO and EQIP and allows the participant to submit

performance data in order to be paid for the practices installed by the

participant under the program.

A regular information collection submission for CFO and EQIP is in

clearance and a notice will be published in the Federal Register

shortly.

Executive Order 12988

This proposed rule has been reviewed in accordance with Executive

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

Furthermore, the provisions of this proposed rule preempt State and

local laws to the extent such laws are inconsistent with this proposed

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 proposed 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.

Discussion of Program

Background

Traditional agricultural conservation programs provide farmers and

ranchers with cost share and land retirement payments as incentives to

protect and conserve soil, water, and other natural resources, and

provide technical assistance to implement conservation practices. In

certain cases, however, these traditional programs lack sufficient

flexibility to allow farmers and ranchers to operate in a manner they

consider optimal or to address natural resource concerns which warrant

innovative solutions. The CFO is intended to promote innovative and

environmentally-sound methods for addressing these concerns.

Overview of the Conservation Farm Option Pilot Program

In accordance with the 1985 Act, CCC will establish CFO pilot

programs for producers of wheat, feed grains, upland cotton, and rice.

Only those owners and producers that have a farm with contract acres

enrolled in production flexibility contracts established under the 1996

Act are eligible to participate in the CFO. Producers accepted into the

CFO must enter into 10-year contracts which may be extended an

additional 5 years. The purposes of CFO pilot programs include: (1)

Conservation of soil, water, and related resources; (2) water quality

protection or improvement; (3) wetland restoration, protection, and

creation; (4) wildlife habitat development and protection; and (5)

other similar conservation purposes. To enroll in the program, the 1985

Act requires producers to prepare a conservation farm plan which

becomes part of the

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CFO contract. The plan describes all conservation practices to be

implemented and maintained on acreage subject to contract. An important

goal is to promote the adoption of resource conserving crop rotations

while maintaining agricultural production and maximizing environmental

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

the implementation and maintenance of the practices, comply with highly

erodible land and wetland conservation requirements of Title XII of the

1985 Act, and contain such other terms as the Secretary may require.

Producers must also agree to forgo payments under the Conservation

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

Environmental Quality Incentives Program (EQIP). 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 owner or

producer would have received had the owner or producer participated in

the CRP, the WRP and the EQIP. CCC will determine the CFO payment rates

taking into consideration the payments that would have been received

under the CRP, WRP, and EQIP, as applicable. CRP payments will not

exceed the maximum bid price accepted for similar land in the vicinity.

The CFO pilot program will substitute a single annual payment for

the different types of payments available under the CRP, the WRP, and

EQIP, provide an incentive for coordinated, long-term natural resource

planning, and be flexible enough to allow farmers and ranchers to

operate in economically efficient, but innovative ways. The CFO

provides for a locally-led approach by allowing individual farmers and

ranchers, or groups of farmers and ranchers to implement innovative

solutions to natural resource problems and encourages implementation of

sustainable agricultural production practices. The CFO is a program

that permits farmers and ranchers to maximize environmental benefits

with minimal land retirement, while maintaining agricultural

production.

CCC will determine CFO participation in a two step process: First,

CCC will select CFO pilot project areas based on proposals submitted by

the public; then, CCC will accept applications from eligible producers

within the selected pilot project area.

CFO Pilot Projects

CFO pilot projects will 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. CFO pilot projects are intended to be

simple, flexible, and should encourage sustainable agricultural

production practices and support locally led conservation goals.

CCC will select CFO pilot project areas based on the extent of the

proposal:

1. Demonstrates innovative approaches to conservation program

delivery and administration;

2. Demonstrates innovative conservation technologies and systems;

3. Creates environmental benefits in a cost effective manner;

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

water quality protection or improvement; wetland restoration,

protection, and creation; and wildlife habitat development and

protection;

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

6. Considers multiple stakeholder participation (partnerships)

within the pilot area; and

7. Provides additional non-Federal funding.

An interdepartmental committee made up of representatives of

several Federal agencies will review the proposals and make

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

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

The CFO proposal package includes the CFO Pilot Proposal Form CCC-1210,

instructions for completion of the CCC-1210, and the criteria for

evaluating proposals. The CFO proposal package is available from any

FSA or NRCS office. CCC will give preference to proposals that have

high ratings based on the criteria upon which proposals will be

evaluated.

Pilot projects can involve either an individual or a group. In

either case, to be considered for enrollment in CFO, each individual or

entity within an approved pilot project area must submit an application

which is the basis for the contract between the participant and CCC.

Pilot Project Area Proposal Submission

CCC requests recommendations from the public regarding

establishment of pilot project areas for fiscal year (FY) 1998. In FY

1999 through FY 2002, the CCC may establish additional pilot projects,

as funding allows. Pilot projects will be fully funded upon selection.

CFO proposals may be developed for a group of eligible producers by

organizations or entities that desire to coordinate individual producer

plan development and implementation activities. These group proposals

may promote the adoption of sustainable farming or other conservation

practices on several farms, thus, expanding the opportunity for greater

acceptance of innovative and environmentally sound farming practices.

Achievements from these efforts may serve as on-farm models to

encourage others to accept new measures without government assistance.

Moreover, groups participating will promote program success stories to

enhance the CFO based on proven results.

The proposals for pilot project areas must be for the purpose(s) of

conserving soil, water, and related resources; protecting or improving

water quality; restoring, protecting and creating wetlands; developing

and protecting wildlife habitat; or other similar conservation

purposes.

An individual, organization, or entity submitting the proposal will

be responsible for providing leadership in the overall local planning

effort, including activities such as education, information delivery,

monitoring and coordination with local agencies, States or subdivisions

thereof, tribal, and Federal agencies.

Selection Of Participants Within Pilot Project Areas

Upon selection of pilot project areas, all producers with

production flexibility contracts within the project area will be

eligible to participate in the CFO. NRCS will approve CFO conservation

farm plans and the local FSA office will approve the CFO contracts and

make payments on behalf of CCC.

Participation in CFO projects is open to all production flexibility

contract holders without regard to race, color, national origin, sex,

religion, age, disability, political beliefs and marital or familial

status.

List of Subjects in 7 CFR Part 1468

Administrative practices and procedures, Conservation plan,

Contracts, Natural resources, Payment rates, Soil conservation,

Technical assistance, Water resources, and Wetlands.

Accordingly, Title 7 of the Code of Federal Regulations is amended

by adding a new part 1468 to read as follows:

PART 1468--CONSERVATION FARM OPTION

Subpart A--General Provisions

Sec.

1468.1 Applicability.

1468.2 Administration.

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1468.3 Definitions.

1468.4 Program requirements.

1468.5 CFO pilot project areas.

1468.6 Conservation plan.

Subpart B--Contracts

1468.20 Application for CFO program participation.

1468.21 Contract requirements.

1468.22 Conservation practice operation and maintenance.

1468.23 Annual payments.

1468.24 Contract modifications and transfers of land.

1468.25 Contract violations and termination.

Subpart C--General Administration

1468.30 Appeals.

1468.31 Access to operating unit.

1468.32 Performance based upon advice or action of representatives

of CCC.

1468.33 Offsets and assignments.

1468.34 Misrepresentation and scheme or device.

Authority: 16 U.S.C. 3839bb.

Subpart A--General Provisions

Sec. 1468.1 Applicability.

Through the Conservation Farm Option, the Commodity Credit

Corporation (CCC) provides financial assistance to eligible farmers and

ranchers to address soil, water, and related natural resources

concerns, water quality protection or improvement; wetland restoration,

protection, and creation; wildlife habitat development and protection

and other similar conservation purposes on their lands in an

environmentally beneficial and cost-effective manner. An important

purpose is to promote the adoption of resource-conserving crop

rotations while maintaining agricultural production and maximizing

environmental benefits through the implementation of structural,

vegetative, and land management practices on eligible land.

Sec. 1468.2 Administration.

(a) Administration of CFO is shared by the Natural Resources

Conservation Service (NRCS) and the Farm Service Agency (FSA) as set

forth below.

(b) NRCS shall:

(1) Provide overall program management and implementation of the

CFO;

(2) Establish policies, procedures, priorities, and guidance for

program implementation, including determination of pilot project areas;

(3) Establish annual payment rates;

(4) Make funding decisions and determine allocations of program

funds;

(c) FSA shall be responsible for the administrative processes and

procedures for applications, contracting, financial matters, program

accounting and distribution of allocations;

(d) NRCS and FSA shall cooperate in establishing program policies,

priorities, and guidelines related to the implementation of this part.

(e) No delegation herein to lower organizational levels shall

preclude the Chief of NRCS, or the Administrator of FSA, or a designee,

from determining any question arising under this part or from reversing

or modifying any determination made under this part that is the

responsibility of their respective agencies.

Sec. 1468.3 Definitions.

The following definitions shall apply to this part and all

documents issued in accordance with this part, unless specified

otherwise:

Applicant means a producer who has requested in writing to

participate in CFO.

Chief means the Chief of NRCS, or designee.

Conservation district means a political subdivision of a State,

Indian tribe, or territory, organized pursuant to the State or

territorial soil conservation district law, or tribal law. The

subdivision may be a conservation district, soil conservation district,

soil and water conservation district, resource conservation district,

natural resource district, land conservation committee, or similar

legally constituted body.

Conservation plan means a record of a participant's decisions, and

supporting information for treatment of a unit of land or water,

including the schedule of operations, activities, and estimated

expenditures needed to solve identified natural resource problems.

Conservation practice means a specified treatment, such as a

structural or vegetative practice or a land management practice, which

is planned and applied according to NRCS standards and specifications.

Contract means a legal document that specifies the rights and

obligations of any person who has been accepted for participation in

the program.

County executive director means the FSA employee responsible for

directing and managing program and administrative operations in one or

more FSA county offices.

County Farm Service Agency Committee means a committee elected by

the agricultural producers in the county or area, in accordance with

Sec. 8(b) of the Soil Conservation and Domestic Allotment Act, as

amended, or designee.

Field office technical guide means the official NRCS guidelines,

criteria, and standards for planning and applying conservation

treatments and conservation management systems. It contains detailed

information on the conservation of soil, water, air, plant, and animal

resources applicable to the local area for which it is prepared.

Indian tribe means any Indian tribe, band, nation, or other

organized group or community, including any Alaska Native village or

regional or village corporation as defined in or established pursuant

to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.)

which is recognized as eligible for the special programs and services

provided by the United States to Indians because of their status as

Indians.

Land management practice means conservation practices that

primarily require site-specific management techniques and methods to

conserve, protect from degradation, or improve soil, water, or related

natural resources in the most cost-effective manner. Land management

practices include, but are not limited to, nutrient management, manure

management, integrated pest management, integrated crop management,

irrigation water management, tillage or residue management,

stripcropping, contour farming, grazing management, and wildlife

habitat management.

Liquidated damages means a sum of money stipulated in the contract

which the participant agrees to pay, in addition to refunds and other

charges, if the participant breaches the contract, and represents an

estimate of the anticipated or actual harm caused by the breach, and

reflects the difficulties of proof of loss and the inconvenience or

nonfeasibility of otherwise obtaining an adequate remedy.

Operation and maintenance means work performed by the participant

to keep the applied conservation practice functioning for the intended

purpose during its life span. Operation includes the administration,

management, and performance of non-maintenance actions needed to keep

the completed practice safe and functioning as intended. Maintenance

includes work to prevent deterioration of the practice, repairing

damage, or replacement of the practice to its original condition if one

or more components fail.

Participant means an applicant who is a party to a CFO contract.

Secretary means the Secretary of the United States Department of

Agriculture.

State conservationist means the NRCS employee authorized to direct

and supervise NRCS activities in a State, the Caribbean Area, or the

Pacific Basin Area.

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State technical committee means a committee established by the

Secretary in a State pursuant to 16 U.S.C. 3861.

Technical assistance means the personnel and support resources

needed to conduct conservation planning; conservation practice survey,

layout, design, installation, and certification; training,

certification, and quality assurance for professional conservationists;

and evaluation and assessment of the program.

Unit of concern means a parcel of agricultural land that has

natural resource conditions that are of concern to the participant.

Sec. 1468.4 Program requirements

(a) Program participation is voluntary. The participant is

responsible for the development of a conservation plan for the farm or

ranching unit of concern. The participant's conservation plan is a part

of the CFO contract. CCC will provide annual payments to a participant

to apply needed conservation practices and land use adjustments as

specified in a time schedule set forth in the conservation plan.

(b) To be eligible to participate in CFO, an applicant must have a

production flexibility contract in accordance with part 1412 of this

chapter.

(c) Participants in the CFO must:

(1) Agree to forgo payments under the Conservation Reserve Program

authorized by part 1410 of this chapter, the Wetlands Reserve Program

authorized by part 1467 of chapter, and Environmental Quality

Incentives Program authorized by part 1466 of this chapter, on the farm

enrolled in the CFO.

(2) Be in compliance with the highly erodible land and wetland

conservation provisions found at part 12 of this title;

(3) Have control of the land for the term of the proposed contract

period.

(i) An exception may be made by the Chief in the case of land

allotted by the Bureau of Indian Affairs (BIA), tribal land, or other

instances in which the Chief determines that there is sufficient

assurance of control;

(ii) and if the applicant is a tenant of the land involved in

agricultural production the applicant shall provide CCC with the

written authorization by the landowner to apply the structural or

vegetative practice.

(4) Submit a proposed conservation plan to CCC. When considering

the acceptability of the plan, CCC will consider whether the

participant will use the most cost-effective conservation practices to

solve the natural resource concerns and maximize environmental benefits

per dollar expended. The conservation practices must be eligible

practices under CRP, WRP, or EQIP, or some other innovative

conservation measure approved by the State Conservationist.

(5) Comply with the provisions at Sec. 1412.304 of this chapter for

protecting the interests of tenants and sharecroppers, including

provisions for sharing, on a fair and equitable basis, payments made

available under this part, as may be applicable;

(6) Supply information as required by CCC to determine eligibility

for the program.

(7) Comply with all the provisions of the CFO contract which

includes the conservation plan approved by CCC.

(d) States, political subdivisions, and agencies thereof are not

eligible to participate in CFO.

(e) Land may be eligible for enrollment in CFO if such land is

otherwise eligible for the program and used as:

(1) Cropland;

(2) Rangeland;

(3) Pasture;

(4) Forest land;

(5) Other land on which crops or livestock are produced; and

(6) Other agricultural land that NRCS determines poses a serious

threat to soil, water, or related natural resources by reason of the

soil types, terrain, climate, soil, saline characteristics, or other

factors or natural hazards, such as the existing agricultural

management practices of the applicant.

(f) In addition to meeting the land eligibility requirements in

paragraph(e) of this section, land may be only considered for

enrollment in CFO if CCC determines that the land is:

(1) Privately-owned land;

(2) Publicly-owned land where--

(i) The land is under private control for the contract period and

is included in the participant's operating unit;

(ii) Installation of conservation practices will not primarily

benefit the government landowner;

(iii) Conservation practices will contribute to an improvement in

the identified natural resource concern; and

(iv) The participant has provided CCC with written authorization

from the government landowner to apply the conservation practices; or

(3) Tribal, allotted, or Indian trust land.

Sec. 1468.5 CFO Pilot project areas

(a)(1) CCC may solicit proposals from the public to establish pilot

project areas.

(2) CCC shall select pilot project areas based on the extent the

individual proposal:

(i) Demonstrates innovative approaches to conservation program

delivery and administration;

(ii) Proposes innovative conservation technologies and system;

(iii) Proposes cost effective solutions to environmental concerns;

(iv) Ensures effective evaluation of the pilot effort; and

(v) Addresses the following:

(A) Conservation of soil, water, and related resources,

(B) Water quality protection or improvement,

(C) Wetland restoration, protection, and creation, and

(D) Wildlife habitat development and protection.

(b) Pilot projects may involve one or more participants. Each

individual or entity within an approved pilot project area must submit

an application in order to be considered for enrollment in the CFO.

Sec. 1468.6 Conservation plan

(a) The conservation plan for the farm or ranch unit of concern

shall:

(1) Describe any resource conserving crop rotation, and all other

conservation practices, to be implemented and maintained on the acreage

that is subject to contract during the contact period; and

(2) Address the resource concerns identified in the CFO Pilot

Proposal through the methods, systems or practices specified in the CFO

Pilot Proposal.

(3) Contain a schedule for the implementation and maintenance of

the practices described in the conservation farm plan; and

(b) The conservation plan is part of the CFO contract.

(c) The conservation plan must allow the participant to achieve a

cost-effective resource management system, or some appropriate portion

of that system, identified in the applicable NRCS field office

technical guide or as approved by the State Conservationist.

(d) Upon a participant's request, the NRCS may provide technical

assistance to a participant.

(1) NRCS may utilize the services of qualified personnel of

cooperating Federal, State, or local agencies, Indian tribes, or

private agribusiness sector or organizations, in performing its

responsibilities for technical assistance.

(2) Participants may, at their own cost, use qualified

professionals to provide technical assistance. NRCS retains approval

authority over the technical adequacy of work done by non-NRCS

personnel for the purpose of determining CFO contract compliance.

(3) Technical and other assistance provided by qualified personnel

not

[[Page 16147]]

affiliated with NRCS may include, but not limited to: conservation

planning; conservation practice survey, layout, design, and

installation; information, education, and training for producers; and

training, and quality assurance for professional conservationists.

(e) Participants are responsible for implementing the conservation

plan. A participant may seek additional assistance from other public or

private organizations or private agribusiness sector as long as the

activities funded are in compliance with this part.

(f) All conservation practices scheduled in the conservation plan

are to be carried out in accordance with the applicable NRCS field

office technical guide. The State Conservationist may approve use of

innovative conservation measures that are not contained in the NRCS

field office technical guide.

(g)(1) To simplify the conservation planning process for the

participant, the conservation plan may be developed, at the request of

the participant, as a single plan that incorporates, other Federal,

State, tribal, or local government program or regulatory requirements;

and the CCC development or approval of a conservation plan shall not

constitute compliance with program, statutory and regulatory

requirements administered or enforced by another agency, except as

agreed to by the participant and the relevant Federal, State, local or

tribal entities.

(2) CCC may accept an existing conservation plan developed and

required for participation in any other CCC or USDA program if the

conservation plan otherwise meets the requirements of this part. When a

participant develops a single conservation plan for more than one

program, the participant shall clearly identify the portions of the

plan that are applicable to the CFO contract. It is the responsibility

of the participant to ascertain and comply with all applicable

statutory and regulatory requirements.

Subpart B--Contracts

Sec. 1468.20 Application for CFO Program Participation

(a) Any eligible farmer or rancher within an approved pilot project

area, may submit an application for participation in the CFO to a

service center or other USDA county or field office of FSA or NRCS.

(b) CCC will accept applications throughout the year. CCC will rank

and select the offers of applicants periodically, as determined

appropriate by CCC.

(c) CCC will develop ranking criteria to prioritize applications

within a pilot project area; and will accept applications in a pilot

project area based on eligibility factors of the applicant and this

ranking.

(d) An applicant has the option of offering and accepting less than

the maximum program payments allowed.

(e) CCC 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 plan which will meet the

purposes of the program;

(3) An estimate of the cost of annual payments; and

(4) The environmental benefits per dollar expend;

(f) If two or more applications have an equal rank, the application

that will result in the least cost to the program will be given greater

consideration.

Sec. 1468.21 Contract requirements

(a) In order for an applicant to receive annual payments, the

applicant shall enter into a contract agreeing to implement a

conservation plan.

(b) A CFO contract shall:

(1) Incorporate by reference all portions of a conservation plan

applicable to CFO;

(2) Be for a duration of 10 years, and may be renewed, subject to

the availability of funds, for a period not to exceed 5 years upon

mutual agreement of CCC and the participant;

(3) Provide that the participant will:

(i) Not conduct any practices on the farm or ranch unit of concern

consistent with the goals of the contract that would attend to defeat

the purposes of the contract, and reduce net environmental and societal

benefits,

(ii) In accordance with the provisions of Sec. 1468.25 of this

part, refund with interest any program payments received and forfeit

any future payments under the program, on the violation of a term or

condition of the contract.

(iii) Refund all program payments received on the transfer of the

right and interest of the producer in land subject to the contract,

unless the transferee of the right and interest agrees to assume all

obligations of the contract, in accordance with the provisions of

Sec. 1468.24 of this part, and

(iv) Supply information as required by CCC to determine compliance

with the contract and requirements of the program;

(4) Specify the participant's requirements for operation and

maintenance of the applied conservation practices in accordance with

the provisions of Sec. 1468.22 of this part, and

(5) Include any other provision determined necessary or appropriate

by CCC.

(c) There is a limit of one CFO contract at any one time for each

farm, as identified with FSA number, determined at the time of the

application for CFO assistance.

Sec. 1468.23 Annual payments.

(a) Annual payments, subject to the availability of funds, will be

based on the value of the expected payments that would have been paid

to the participant under CRP, WRP, or EQIP, as applicable.

(b) The participant must certify that a conservation practice is

completed in accordance with the conservation plan to establish

compliance with the contract.

Sec. 1468.24 Contract modifications and transfers of land.

(a) The participant and CCC may modify a contract if the

participant and CCC agree to the contract modification and the

conservation plan is revised in accordance with CCC requirements.

(b) The parties may agree to transfer a contract with the agreement

of all parties to the contract. The transferee must be determined by

CCC to be eligible and shall assume full responsibility under the

contract, including operation and maintenance of those conservation

practices already installed and to be installed as a condition of the

contract.

Sec. 1468.25 Contract violations and termination.

(a)(1) If CCC determines that a participant is in violation of the

terms of a contract or the provisions of this part, CCC may give the

participant a reasonable time to correct the violation. If a

participant continues in violation, CCC will terminate the CFO

contract.

(2) Notwithstanding the provisions of (a)(1), a contract

termination shall be effective immediately upon a determination by CCC,

that the participant has submitted false information, filed a false

claim, or engaged in any act for which a finding of ineligibility for

payments is permitted under the provisions of Sec. 1468.35 of this

part, or in a case in which the actions of the party involved are

deemed to be sufficiently purposeful or negligent to warrant a

termination without delay.

(b)(1) If CCC terminates a contract, the participant shall forfeit

all rights for future payments under the contract and

[[Page 16148]]

shall refund all or part of the payments received, plus interest,

determined in accordance with part 1403 of this chapter. The county FSA

committee, in consultation with NRCS, has the option of requiring only

partial refund of the payments received if a previously installed

conservation practice can function independently, is not affected by

the violation or other conservation practices that would have been

installed under the contract, and the participant agrees to operate and

maintain the installed conservation practice for the life span of the

practice.

(2) If CCC terminates a contract due to breach of contract or the

participant voluntarily terminates the contract before any contractual

payments have been made, the participant shall forfeit all rights for

further payments under the contract and shall pay such liquidated

damages as are prescribed in the contract.

(3) When making all contract termination decisions, CCC may reduce

the amount of money owed by the participant by a proportion which

reflects the good-faith effort of the participant to comply with the

contract, or the hardships beyond the participant's control that have

prevented compliance with the contract.

(4) The participant may voluntarily terminate a contract if, based

on CCC's determination that such termination would be in the public

interest, CCC approves the termination.

Subpart C--General Administration

Sec. 1468.30 Appeals.

(a) An applicant or participant may obtain administrative review of

an adverse decision made with respect to this part and the CFO contract

in accordance with parts 2 and 614 of this title, except as provided in

paragraph (b) of this section.

(b) The following decisions are not appealable:

(1) CCC funding allocations;

(2) Eligible conservation practices; and

(3) Other matters of general applicability.

Sec. 1468.31 Access to operating unit.

Any authorized CCC representative shall have the right to enter an

operating unit or tract for the purpose of ascertaining the accuracy of

any representations made in a contract or in anticipation of entering a

contract, or as to the performance of the terms and conditions of the

contract. Access shall include the right to provide technical

assistance and inspect any work undertaken under the contract. The CCC

representative shall make a reasonable effort to contact the

participant prior to the exercise of this right to access.

Sec. 1468.32 Performance based upon advice or action of

representatives of CCC.

If a participant relied upon the advice or action of any authorized

representative of CCC, and did not know or have reason to know that the

action or advice was improper or erroneous, the county FSA committee,

in consultation with NRCS, may accept the advice or action as meeting

the requirements of the program and may grant relief, to the extent it

is deemed desirable by CCC, to provide a fair and equitable treatment

because of the good-faith reliance on the part of the participant.

Sec. 1468.33 Offsets and assignments.

(a) Except as provided in paragraph (b) of this section, any

payment or portion thereof to any participant shall be made without

regard to questions of title under State law and without regard to any

claim or lien against the crop, or proceeds thereof, in favor of the

owner or any other creditor except agencies of the United States. The

regulations governing offsets and withholdings found at part 1403 of

this chapter shall apply to contract payments.

(b) Any participant entitled to any payment may assign any payments

in accordance with regulations governing assignment of payment found at

part 1404 of this chapter.

Sec. 1468.34 Misrepresentation and scheme or device.

(a) A participant who is determined to have erroneously represented

any fact affecting a program determination made in accordance with this

part shall not be entitled to contract payments and must refund to CCC

all payments, plus interest determined in accordance with part 1403 of

this chapter.

(b) An applicant or participant who is determined to have knowingly

adopted any scheme or device that tends to defeat the purpose of the

program, made any fraudulent representation, or misrepresented any fact

affecting a program determination, shall refund to CCC all payments,

plus interest determined in accordance with part 1403 of this chapter,

received by such applicant or participant with respect to CFO

contracts.

Signed in Washington, D.C. on March 26, 1998.

Pearlie S. Reed,

Vice President, Commodity Credit Corporation.

[FR Doc. 98-8505 Filed 4-1-98; 8:45 am]

BILLING CODE 3410-16-P