[Federal Register Volume 61, Number 244 (Wednesday, December 18, 1996)]
[Proposed Rules]
[Pages 66827-66828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31905]


      

  Federal Register / Vol. 61, No. 244 / Wednesday, December 18, 1996 / 
Proposed Rules  

[[Page 66827]]



DEPARTMENT OF THE INTERIOR

Bureau of Reclamation

43 CFR Part 426

RIN 1006-AA38


Acreage Limitation

AGENCY: Bureau of Reclamation, Interior.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: This advance notice of proposed rulemaking requests public 
comment on possible revisions to existing rules and regulations 
regarding acreage limitation provisions of the Reclamation Reform Act 
of 1982 (RRA). During the recently completed RRA rulemaking published 
in today's Federal Register, the Department of the Interior 
(Department) received a number of comments regarding the compliance of 
certain large trusts with the acreage limitation provisions of the RRA. 
Comments expressed a variety of viewpoints, including the assertion 
that some trusts with landholdings (owned or leased land) in excess of 
960 acres may circumvent the requirements of Federal reclamation law. 
The Department seeks comment on this issue as specified below. In 
addition, the Department also hopes to obtain the views of interested 
parties on the extent of the Department's statutory authority to 
address matters described below.

DATES: Written comments on this advance notice of proposed rulemaking 
must be received by the Bureau of Reclamation by March 18, 1997.

ADDRESSES: Mail written comments to the Commissioner's Office, Bureau 
of Reclamation, 1849 C Street N.W., Washington, D.C. 20240.

FOR FURTHER INFORMATION CONTACT: Steven Richardson, Bureau of 
Reclamation, Mail Code W-1500, 1849 C Street, N.W., Washington, D.C. 
20240, telephone (202) 208-4291.

SUPPLEMENTARY INFORMATION:

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 subsidized 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. The RRA provides a number of exceptions to the 960-acre 
limitation. One of these, section 214 of the RRA, provides that the 
acreage limitation provisions do not apply to lands held in trust, if 
certain criteria are met.
    In 1983, the Bureau of Reclamation (Reclamation) adopted rules 
implementing the RRA's trust provisions (43 CFR Part 426). The 1987 
rules required that trust agreements must: (a) be in writing, (b) be 
approved by the Secretary of the Interior, (c) identify the 
beneficiaries, and (d) describe the interest of the beneficiaries. In 
December 1988, the rules were again revised to incorporate amendments 
to the RRA contained in the Omnibus Budget Reconciliation Act of 1987 
(Pub. L. 100-203). These amendments addressed treatment of revocable 
trusts, among other issues.
    Under current Reclamation policy, Reclamation generally attributes 
land held by a trust to the beneficiaries of that trust. For example, 
the current regulations permit large landholdings in excess of 960 
acres held in trust to be operated as one farm and to receive nonfull-
cost water as long as no beneficiaries to whom land has been attributed 
exceed their acreage limitations. Current regulations do not 
distinguish between family, financial institution, and estate planning 
trusts on the one hand, and certain other large trusts created after 
1982 that appear to some to be designed specifically to avoid the 
acreage limitation provisions of Federal reclamation law.
    The Department published in the Federal Register on April 3, 1995, 
(63 FR 16922, Apr. 3, 1995) a notice of proposed rulemaking on the 
acreage limitation provisions and received hundreds of comments from 
the public. The final rule on acreage limitations (43 CFR Part 426) is 
published in today's Federal Register. This final rule makes no 
substantive change in the treatment of trusts.
    The proposed rule sought to address outstanding concerns raised by 
some members of the public regarding compliance by large trusts with 
the acreage limitation requirements of the RRA and other as yet 
unregulated forms of land holding. The proposed rule would have amended 
the definition of what constitutes a lease for purposes of the acreage 
limitation requirements of the RRA. Reclamation treats large farm 
operations as leases, subject to the acreage limitation requirements, 
if the operator assumes the economic risk of the farming enterprise and 
has use or possession of the land. By contrast, the proposed rulemaking 
focused on possession of the land. Under that proposed change, if 
someone other than the landowner had possession of the land, then 
Reclamation would determine that a lease subject to the acreage 
limitation provisions existed regardless of whether that person or 
entity also assumed the economic risk. One of the effects of the 
proposed rule may have been to treat certain operators of land held in 
trust as lessees.
    Based upon comments on the proposed rulemaking, Reclamation has 
determined that the proposed provision altering the definition of a 
lease is an inadequate means of addressing the concerns about 
compliance with the acreage limitation provisions of the RRA and could 
have produced unintended consequences. Many comments from the public 
raised concerns about the effects of such a change on custom service 
providers, specialty services, and lenders among others. Still others 
noted that the proposed change could be easily avoided. Given the 
widely divergent views and the complexity of this issue, this advance 
notice of proposed rulemaking seeks further public comment on the 
matter.

Summary of Proposal

    The treatment of trusts under the RRA can significantly affect how 
much acreage in a given farming arrangement is eligible for nonfull-
cost water. Many family farms, trust departments of financial 
institutions, and others use trusts for estate planning and other 
purposes unrelated to acreage limitations. Section 214 of the RRA, 
contemplating these legitimate trust purposes, provides that lands held 
in trust and meeting certain criteria are not subject to acreage 
limitations. Thus such trusts are eligible to receive nonfull-cost 
water from Reclamation projects. Following the enactment of the RRA, 
however, some holders of large farms created trusts, transferred their 
landholdings to those trusts, and continued to receive nonfull-cost 
water without regard to the traditional purposes for trusts that 
Congress may have contemplated in adopting section 214.
    Reclamation's comprehensive February 1991 review of RRA 
implementation contains the most recently published data on 
administration and enforcement of RRA through 1990. According to this 
review, out of a total of 550 trust arrangements, only 35 trusts 
(primarily in California, Arizona, and Washington) held more than 960 
acres. Thus, the vast majority of the 550 trusts were found to be well 
within the RRA's acreage limitations.

[[Page 66828]]

    To address the issue of large trusts in excess of 960 acres that 
may circumvent acreage limitations, the Department invites comments and 
suggestions on:
     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 arrangement, 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 
rules that would limit large trusts to 960 acres for nonfull-cost 
water, and what safeguards would be necessary to avoid such trusts from 
adopting some other,as yet unregulated form, to escape acreage 
limitations; and
     The extent of the Department's statutory authority to 
address these issues, including, the extent of the Department's legal 
authority to regulate: (a) future trusts, (b) trusts established from 
1982 to the present, and (c) trusts established prior to 1982.
    By seeking public comment, Interior hopes to receive input and 
suggestions that will better enable the Department to ensure compliance 
wit the acreage limitation provisions by large trusts and other forms 
of landholdings in excess of 960 acres.

    Dated: December 11, 1996.
Patricia J. Beneke,
Assistant Secretary, Water and Science.
[FR Doc. 96-31905 Filed 12-13-96; 10:31 am]
BILLING CODE 4310-94-P