[Federal Register Volume 62, Number 87 (Tuesday, May 6, 1997)]
[Rules and Regulations]
[Pages 24746-24753]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11719]



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Part III





Department of Agriculture





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Animal and Plant Health Inspection Service



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7 CFR Part 301



Karnal Bunt; Compensation for the 1995-1996 Crop Season; Final Rule



Karnal Bunt Regulatory Flexibility Analysis and Regulatory Impact 
Analysis; Final Rule

  Federal Register / Vol. 62, No. 87 / Tuesday, May 6, 1997 / Rules and 
Regulations  

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DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 301

[Docket No. 96-016-17]
RIN 0579-AA83


Karnal Bunt; Compensation for the 1995-1996 Crop Season

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: We are adopting as a final rule, with changes, an interim rule 
that amended the regulations to provide compensation for certain 
growers and handlers, owners of grain storage facilities, and flour 
millers in order to mitigate losses and expenses incurred because of 
Karnal bunt in the 1995-1996 crop season. In this final rule, we are 
adding compensation provisions for handlers of wheat that was tested 
and found negative for Karnal bunt, handlers and growers with wheat 
inventories for past crop seasons, and participants in the National 
Karnal Bunt Survey whose wheat or grain storage facility is found 
positive for Karnal bunt. The payment of compensation is necessary in 
order to reduce the economic impact of the Karnal bunt quarantine on 
affected wheat growers and other individuals, and to help obtain 
cooperation from affected individuals in Karnal bunt eradication 
efforts.

EFFECTIVE DATE: April 30, 1997.

FOR FURTHER INFORMATION CONTACT: Mr. Mike Stefan, Operations Officer, 
Domestic and Emergency Operations, PPQ, APHIS, 4700 River Road Unit 
134, Riverdale, MD 20737-1236, (301) 734-8247.

SUPPLEMENTARY INFORMATION:

Background

    Karnal bunt is a fungal disease of wheat (Triticum aestivum), durum 
wheat (Triticum durum), and triticale (Triticum aestivum X Secale 
cereale), a hybrid of wheat and rye. In the absence of measures taken 
by the U.S. Department of Agriculture (USDA) to prevent its spread, the 
establishment of Karnal bunt in the United States would have 
significant consequences with regard to the export of wheat to 
international markets. Karnal bunt is caused by the smut fungus 
Tilletia indica (Mitra) Mundkur and is spread by spores. The 
regulations regarding Karnal bunt are set forth in 7 CFR 301.89-1 
through 301.89-14.
    In an interim rule effective on June 27, 1996, and published in the 
Federal Register on July 5, 1996 (61 FR 35102-35107, Docket No. 96-016-
7), we amended the regulations to provide compensation for certain 
growers and handlers, owners of grain storage facilities, and flour 
millers in order to mitigate losses and expenses incurred because of 
actions taken by the Secretary to prevent the spread of Karnal bunt 
(Sec. 301.89-12, redesignated as Sec. 301.89-14 in a final rule 
published on October 4, 1996 (61 FR 52189-52213, Docket No. 96-016-
14)).
    We solicited comments concerning the interim rule for 60 days 
ending September 3, 1996. We received 15 comments by that date. They 
were from wheat growers, handlers, harvesters, railroad companies, seed 
producers, a member of Congress, and a State department of agriculture. 
We have carefully considered all of the comments we received. The 
comments generally supported the interim rule offering compensation to 
certain groups affected by the Karnal bunt quarantine and emergency 
actions. However, all the comments recommended additions or revisions 
to the compensation provisions. Each of these recommendations is 
discussed below by topic.
    The Karnal bunt regulations that were initially established were 
necessarily broad due to the lack of data available at the time as to 
the extent of the infestation. The discovery of Karnal bunt and 
subsequent quarantine and emergency actions occurred after production 
and marketing decisions had been made. Producers and other affected 
individuals had little time or ability to avoid the unexpected costs or 
pass those costs on to others in the marketing chain. The impact was 
particularly severe on the wheat industry in the regulated area because 
much of the crop is grown under contract at specified amounts and 
prices.
    In order to alleviate some of these hardships and to ensure full 
and effective compliance with the Karnal bunt regulatory program, 
compensation to mitigate certain losses was offered to producers and 
other affected parties in a regulated area. The payment of compensation 
is in recognition of the fact that while benefits from regulation 
accrue to a large portion of the wheat industry outside the regulated 
areas, the regulatory burden falls predominantly on a small segment of 
the affected wheat industry within the regulated area.
    The Agency has identified three principles for deciding whether to 
provide compensation. First, compensation may be appropriate where 
quarantine and emergency actions cause losses over and above those that 
would result from the normal operation of market forces. Payment of 
compensation would reflect the incremental burdens of complying with 
regulatory requirements insofar as market forces would not otherwise 
impose similar or analogous costs. Second, compensation may be 
appropriate where parties undertake actions that confer significant 
benefits on others. Under this principle, payment of compensation would 
be intended to overcome the usual disincentives to produce such 
benefits. Third, compensation may be appropriate where a small number 
of parties necessarily bears a disproportionate share of the burden of 
providing such benefits. This principle rests on the widely shared 
belief that burden-sharing is a fundamental principle of equity.
    Individual decisions regarding what specific losses to compensate 
and how much compensation to offer in each case were made in line with 
the above basic principles which describe the goals of compensation. A 
top equity priority was compensation for costs of plowing down fields, 
and for wheat and other articles the Agency ordered destroyed or 
prohibited movement. Compensation amounts took into account the need to 
mitigate real losses caused by the regulations, so that regulated 
parties would not have a strong economic incentive to avoid compliance. 
At the same time, amounts were not set at a high enough rate to 
establish a ``bounty'' that would encourage fraudulent claims or 
behavior that would result in increases in contaminated wheat or other 
articles eligible for compensation.
    The interim rule establishing compensation for the Karnal bunt 
program provided compensation in the 1995-1996 crop season for the 
plow-down of infected fields in New Mexico and Texas; the loss in value 
of nonpropagative wheat grown in the regulated area (this was provided 
for producers and handlers); decontamination of grain storage 
facilities; and the cost of heat-treating millfeed made from wheat 
produced in the quarantined area. Several commenters requested 
compensation for costs that were not provided for in the interim rule. 
These comments are discussed below.
    The interim rule provided compensation for handlers who sell 
nonpropagative wheat only if the wheat is positive for Karnal bunt, and 
under the following circumstances: (1) Handlers who honor contracts by 
paying

[[Page 24747]]

the grower full contract price on nonpropagative wheat grown in the 
quarantined area that was tested by the Animal and Plant Health 
Inspection Service (APHIS) and found positive for Karnal bunt; or (2) 
handlers who purchase contracted or noncontracted nonpropagative wheat 
grown in the quarantined area that was tested by APHIS and found 
negative for Karnal bunt prior to purchase but that was tested by APHIS 
and found positive for Karnal bunt after purchase. As explained in the 
interim rule, we expected that handlers who purchase negative wheat 
that continues to test negative after purchase would not experience a 
loss in value for the wheat compared to the price they paid for it.
    Some commenters, however, said that handlers who purchased 
negative-testing wheat after the Karnal bunt quarantine was imposed, 
but purchased it for the price that was contracted before Karnal bunt 
was discovered (in Arizona in March 1996), did experience a loss in 
value of the wheat compared to the price they paid for it. Even though 
the wheat was negative for Karnal bunt, handlers had to sell it for a 
lower price than anticipated because the wheat was from the quarantined 
area. Some handlers adjusted their purchase price to account for the 
loss in value; others honored the prices agreed on in their contracts 
prior to March 1996. Commenters said that handlers who honored their 
contracts on negative wheat by paying the price that was agreed on 
before the discovery of Karnal bunt in March 1996, should be 
compensated.
    We believe that compensating these handlers would be consistent 
with our compensation to other individuals who experience a loss in 
value of their wheat because of the regulations for Karnal bunt. 
Therefore, we are amending the regulations at Sec. 301.89-14(b) to 
provide compensation to handlers under the following additional 
circumstance: Except as explained below, handlers who honored contracts 
by paying the grower or another handler full contract price on 
nonpropagative wheat grown in the regulated area that was tested by 
APHIS and found negative for Karnal bunt if a price was determined in 
the contract before March 1, 1996. The exception to this compensation 
eligibility is handlers who had contracted to sell the wheat (for 
example, to another handler, a mill, or a foreign country) at a price 
determined in the contract before March 1, 1996, and who received the 
full contract price. Such handlers would not have experienced any loss 
in value of their wheat due to Karnal bunt. To claim compensation under 
this new circumstance, we are requiring that, in addition to the 
documents already required for handlers (see Sec. 301.89-14(b)(4)), 
handlers who had contracted to sell the wheat at a price determined in 
the contract before March 1, 1996, must submit to FSA a copy of the 
contract the handler has for the sale of the wheat.
    Handlers who honored contracts on negative wheat will be eligible 
for compensation using the same calculation provided in the interim 
rule for growers of negative wheat not grown under contract--the 
estimated market price for the relevant class of wheat (meaning type of 
wheat, such as durum or hard red winter) minus the higher of either the 
salvage value or the actual price received by the handler (see 
Sec. 301.89-14(b)(1)(iii)). We explained in the interim rule that the 
estimated market price is intended to represent what the market price 
would have been if there were no quarantine for Karnal bunt, and will 
be calculated by APHIS for each class of wheat, taking into account the 
prices offered by relevant terminal markets (animal feed, milling, or 
export) for the period between May 1 and June 30, 1996, with 
adjustments for transportation and other handling costs.
    For the 1995-1996 crop season, estimated market prices were 
calculated for durum wheat and hard red winter wheat. The estimated 
market prices for durum wheat were calculated based on the following: 
the daily closing cash prices for choice milling durum wheat traded on 
the Minneapolis Grain Exchange during the period of May 1 to June 30, 
1996, adjusted to account for the handling and transportation charges 
incurred in getting the wheat from the regulated area in California and 
Arizona to the central market in Minneapolis. These adjustments were 
based on the average difference between the Minneapolis cash price and 
the cash prices within the regulated area for 1995. Estimated market 
prices for hard red winter wheat were calculated in a similar manner, 
based on the daily closing futures prices for the July hard red winter 
wheat contract traded on the Kansas City Board of Trade during the 
period of May 1 to June 30, 1996, adjusted to account for the handling 
and transportation charges incurred in getting the wheat from a central 
point in the regulated area to the market in Kansas City. These 
adjustments were based on the average difference between the Kansas 
City futures price and the cash prices within the regulated area for 
1995.
    The estimated market prices used to calculate compensation for 
handlers who honored their contracts on negative wheat will be 
determined in the same manner. However, if the salvage value is used in 
the calculation, the rate of compensation will be different than the 
rate that has been paid to other handlers under the interim rule, 
because the salvage value appropriate for negative wheat will be used 
in the calculation. Compensation payments will be issued by the Farm 
Service Agency (FSA).
    One commenter requested that we provide compensation for lost 
income due to the quarantine on wheat straw. Many growers sell wheat 
straw to supplement their wheat grain income. Straw is sold for use at 
places such as racetracks, highway shoulders, feed yards, and parks for 
erosion control and to minimize muddy conditions. Wheat straw is listed 
in the Karnal bunt regulations as a regulated article and is prohibited 
from being moved outside of the regulated area. This has prevented many 
wheat straw producers from shipping their 1995-1996 crop season straw 
to the intended markets. Some wheat straw was sold to alternative 
markets within the regulated area for a lower price; other wheat straw 
was not able to be sold.
    We are considering what, if any, compensation should be provided 
for lost income due to the restrictions that have been placed on the 
movement of 1995-1996 crop season wheat straw. We will publish any 
proposed compensation for wheat straw producers in a future edition of 
the Federal Register.
    The interim rule did not provide compensation for any losses 
concerning wheat grown outside the area regulated for Karnal bunt. 
APHIS is conducting a National Karnal Bunt Survey to demonstrate to our 
trading partners that areas producing wheat for export are free of the 
disease. APHIS is receiving voluntary cooperation from many grain 
storage facilities in wheat producing areas both within and outside the 
States in which the Secretary of Agriculture has declared an 
extraordinary emergency.
    Some commenters asked that we clarify what compensation we plan to 
offer to participants in the National Karnal Bunt Survey who are found 
to have positive grain or whose grain storage facility outside of the 
regulated area is found to have Karnal bunt. We have every intention of 
making sure that all participants in the survey whose wheat or grain 
storage facilities are found to be positive for Karnal bunt will be 
compensated for the loss in value of their wheat and for the costs for 
part of

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decontaminating their grain storage facilities.
    The declarations of extraordinary emergency authorize the Secretary 
of Agriculture to take emergency action in those States with regard to 
Karnal bunt, and authorize the Secretary to compensate growers and 
other persons in those States for economic losses incurred by them as a 
result of those emergency actions. USDA is not authorized to pay 
compensation to individuals who are not in States for which an 
extraordinary emergency has been declared. If a grain storage facility 
participating in the National Survey in one of the States for which an 
extraordinary emergency has been declared tests positive for Karnal 
bunt, USDA will regulate the facility under an Emergency Action 
Notification (PPQ Form 523), and will compensate the owner of the grain 
storage facility for the loss in value of the wheat and for up to 50 
percent of the direct cost of decontaminating the facility (not to 
exceed $20,000) on a one time only basis for wheat harvested in 1996, 
if the facility is required to be decontaminated. In the event that a 
grain storage facility participating in the National Survey that is in 
a State not covered by a declaration of extraordinary emergency should 
test positive for Karnal bunt, the State may offer to compensate the 
owner of the facility for the loss in value of the positive wheat and 
for the cost of decontamination. If the State is unwilling or unable to 
offer compensation at a level equal to that offered by USDA, USDA will 
consider, after consultation with the State Department of Agriculture, 
declaring an extraordinary emergency in that State. USDA could then 
compensate the owner of the facility.
    We completed the National Survey for the 1995-1996 crop season in 
the fall of 1996. In this final rule, we are adding a new paragraph 
Sec. 301.89-14(f) to the 1995-1996 crop season compensation regulations 
stating that if a grain storage facility participating in the National 
Karnal Bunt Survey tests positive for Karnal bunt, the facility will be 
regulated under an Emergency Action Notification (PPQ Form 523), and 
the owner may be required to decontaminate the facility to remove the 
quarantine. If a Declaration of Extraordinary Emergency has been 
declared in the State in which the grain storage facility is located, 
the owner of the facility will be compensated for the loss in value of 
the wheat. Compensation will equal the estimated market price for the 
relevant class of wheat minus the salvage value (as described in 
Sec. 301.89-14(b)(3)). The estimated market price will be calculated by 
APHIS for each class of wheat, taking into account the prices offered 
by relevant terminal markets (animal feed, milling, or export) for the 
period between October 1 and November 30, 1996, with adjustments for 
transportation and other handling costs. However, compensation will not 
exceed $2.50 per bushel under any circumstances. Compensation payments 
for loss in value of wheat will be issued by FSA. To claim 
compensation, the owner of the facility must submit to the local FSA 
office a copy of the Emergency Action Notification under which the 
facility is or was quarantined. The owner must also submit to the FSA 
office verification as to the actual (not estimated) weight of the 
wheat (such as a copy of the limited permit under which the wheat was 
moved to a mill or a copy of the bill of lading for the wheat, if the 
actual weight appears on those documents, or other verification).
    The owner of the facility will also be compensated for the direct 
cost of decontamination at the same rate provided by the interim rule 
for decontamination of grain storage facilities (a maximum of $20,000 
per facility, paid on a one time only basis for wheat harvested in 
1996). Compensation payments for decontamination of grain storage 
facilities will be issued by APHIS.
    A few commenters requested compensation for damage to harvesting 
equipment caused by disinfection in accordance with the Karnal bunt 
regulations. We are still considering what compensation would be 
appropriate for grain harvesters and are continuing to gather 
information to help us make that determination. If we determine to take 
regulatory action to compensate grain harvesters, we will publish 
proposed compensation regulations in a future edition of the Federal 
Register.
    Commenters also requested compensation for loss in value of 1995-
1996 crop season seed. We stated in the interim rule that we do intend 
to compensate seed producers for the loss in value of their seed. That 
intention has not changed, and we plan to publish proposed compensation 
regulations for seed producers in a future edition of the Federal 
Register.
    Several commenters requested that we add compensation provisions to 
cover numerous circumstances other than those provided for in the 
interim rule and those discussed previously in this document. These 
include requested compensation for demurrage charges on railcars; the 
cost of cleaning and sanitizing railcars prior to loading; declines in 
transporter operations due to delays caused by the Karnal bunt 
regulations; extra labor to clean and disinfect combines; loss in 
customers for harvesters due to delays in waiting for field test 
results; loss in wheat income and soil nutrients due to a 5-year 
quarantine on wheat production; and loan interest on funds borrowed to 
see producers through delays in selling 1996 wheat. Commenters also 
requested several other changes to the compensation provisions in the 
interim rule. Two commenters requested that we lower the $3.60 minimum 
salvage value because they do not believe it adequately reflects the 
costs to handlers of freight charges and railcar cleaning. One 
commenter said that the maximum $20,000 per premises compensation for 
decontamination of grain storage facilities is inadequate. Another 
commenter said that the same compensation offered to flour millers for 
heat-treating millfeed should be available to all producers, grain 
handlers, and millers regardless of whether or not the wheat originated 
in the quarantined area.
    We have considered all of these comments very carefully, but we are 
not making any changes to the compensation regulations in response to 
these comments. We recognize that the compensations we have offered do 
not fully account for every loss or expense due to the Karnal bunt 
quarantine and emergency actions. However, we believe the compensation 
provisions in this final rule do significantly mitigate losses and 
expenses due to the actions taken to control Karnal bunt. We are 
continuing to consider the effects of the Karnal bunt quarantine and 
emergency actions on all affected individuals. If we make any further 
determinations as to additional compensations, we will publish another 
document in the Federal Register.

Miscellaneous Changes

    We are making a number of miscellaneous changes to the interim 
rule. Many of these changes are necessary to clarify the intent of the 
regulations and to deal with circumstances identified during 
implementation of the interim rule.
    The compensation regulations established by the interim rule were 
intended to apply to the 1995-1996 crop season. Therefore, we are 
revising the heading and introductory text for the compensation 
regulations in this rule to make it clear that they apply only to the 
1995-1996 crop season. For the same reason, we are revising 
Sec. 301.89-14(d) to clarify that compensation for

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decontamination of grain storage facilities under this rule will be 
made on a one time only basis for each covered crop year wheat.
    This final rule will add a requirement to Sec. 301.89-14 that all 
claims for compensation for the 1995-1996 crop season must be made by 
May 31, 1997. In addition, we are adding a provision that the 
Administrator may extend this deadline upon request in specific cases 
when unusual and unforeseen circumstances occur which prevent or hinder 
a claimant from requesting compensation on or before May 31, 1997.
    The term ``contract price'' is used several times in Sec. 301.89-
14. In some cases, the contract price is a determining factor in the 
amount of compensation received by a claimant. Some contracts provide 
for adjustments in the contract price contingent on grain quality or 
other factors. To ensure that growers or handlers are not paid 
compensation for quality issues not related to Karnal bunt, and to 
clarify what we intended to mean by the term ``contract price,'' we are 
adding a definition to Sec. 301.89-1 of the regulations, to read as 
follows:
    Contract price. The net price after adjustment for any premiums or 
discounts stated in the contract.
    Paragraph (b)(1) of Sec. 301.89-14 contains compensation 
calculations for growers who sell nonpropagative wheat; one for wheat 
grown under contract, and one for wheat not grown under contract. In 
implementing the interim rule, it became apparent that different 
calculations were needed to account for other contracting 
circumstances. For example, not all contracted wheat had a price in the 
contract prior to the discovery of Karnal bunt in March 1996. 
Therefore, even though the wheat was contracted prior to the discovery 
of Karnal bunt, the price eventually agreed on may have reflected the 
loss-in-value of wheat due to Karnal bunt.
    Contracts without prices set before March 1996 normally stipulated 
that the price was to be determined at harvest. The 1996 harvest began 
in April 1996 and was not complete in all regulated areas until August 
1996. Compensation regulations were not in effect until June 27, 1996 
(see Docket No. 96-016-7, published in the Federal Register on July 5, 
1996), mid-way through the 1996 harvest, and claims for compensation 
could not be processed for several more weeks. Because growers and 
handlers did not know what compensation APHIS would offer, some 
contract prices set at harvest reflected the loss-in-value of wheat due 
to the Karnal bunt regulations, while some contract prices set at 
harvest were based on what market prices would have been without the 
presence of Karnal bunt. This situation warranted calculating 
compensation using the higher of either the contract price or the 
estimated market price. This procedure for calculating compensation 
would not unfairly disadvantage growers whose contract prices set at 
harvest reflected the loss-in-value of wheat due to the Karnal bunt 
regulations. Contract prices settled after August 1996 may have 
reflected the compensation offered by APHIS, and would not have been 
consistent with the original intent of the contract that the price be 
determined at harvest. For these reasons, we are changing the 
compensation calculations for growers who sell nonpropagative wheat to 
accommodate three circumstances, as follows:
    If the wheat was grown under contract and a price was determined in 
the contract before March 1, 1996, compensation will equal the 
contracted price minus the higher of either the salvage value or the 
actual price received by the grower. If the wheat was grown under 
contract and a price was determined in the contract on or after March 
1, 1996, and on or before August 1, 1996, compensation will equal the 
higher of either the contract price or the estimated market price minus 
the higher of either the salvage value or the actual price received by 
the grower. If the wheat was not grown under contract or the price was 
determined in the contract after August 1, 1996, compensation will 
equal the estimated market price for the relevant class of wheat minus 
the higher of either the salvage value or the actual price received by 
the grower.
    We are also revising the requirements for growers and handlers for 
claiming compensation to ensure that growers and handlers supply all 
the information necessary to determine the amount of compensation for 
which they are eligible. In addition to the documentation already 
required by Sec. 301.89-14(b), growers will have to submit a copy of 
the receipt for the final sale of the wheat, showing the intended use 
for which the wheat was sold, total bushels sold, and the total amount 
paid to the grower by the handler. Handlers will have to submit a copy 
of the receipt for the purchase of the wheat from the grower, showing 
the total bushels purchased and the amount the handler paid to the 
grower, and a copy of the receipt for the final sale of the wheat, 
showing the intended use for which the wheat was sold. Both growers and 
handlers must submit a copy of the Karnal bunt certificate issued by 
APHIS that shows Karnal bunt test results.
    At the time that Karnal bunt was discovered in Arizona in March 
1996, some handlers and growers in the regulated area had wheat 
inventories on hand from past crop seasons. These inventories became 
subject to the same restrictions as 1995-1996 crop season wheat from 
the regulated area, and handlers and growers with such inventories 
experienced a loss in value of that wheat. For this reason, we are 
revising Sec. 301.89-14(b)(2) to clarify that handlers and growers in 
the regulated area are eligible to be compensated for 1995-1996 crop 
season wheat and for wheat inventories in their possession that were 
unsold as of March 1, 1996.
    We are revising the provision in Sec. 301.89-14(c) of the 
regulations for growers and handlers who do not sell their wheat. The 
interim rule stated that compensation will only be paid to growers and 
handlers on wheat that is not sold if the wheat has been buried in a 
sanitary landfill. In implementing the regulations, APHIS has approved 
sites for burying wheat other than a sanitary landfill. These sites 
were determined to be acceptable because they were in areas where 
burying the wheat would not pose a risk of spreading Karnal bunt (for 
example, the desert). To accommodate these situations, we are amending 
paragraph (c) to state that unsold wheat must be buried in a landfill 
or other site that has been approved by APHIS. To claim compensation, 
the interim rule required that a grower or handler must submit 
verification of how much wheat was buried, in the form of a receipt 
from the landfill. We are adding that the verification may also be in 
the form of a document signed by an APHIS inspector.
    The interim rule stated at Sec. 301.89-14(d) that compensation for 
decontamination of grain storage facilities will not exceed $20,000 per 
premises. The term premises has proven to be confusing to both affected 
entities and inspectors in determining the amount of compensation for 
which an owner is eligible. We believe the term ``facility'' would be 
more clear. To clarify our intent, we are revising paragraph (d) to 
state that compensation will not exceed $20,000 per grain storage 
facility. We are also removing the definition of premises from 
Sec. 301.89-1 of the regulations and adding a definition for grain 
storage facility, to mean ``That part of a grain handling operation or 
unit of a grain handling operation, consisting of structures, 
conveyances, and equipment that receive, unload, and store grain, and 
that is able to operate as an independent unit from other units of the 
grain handling operation. A grain handling

[[Page 24750]]

operation may be one grain storage facility or may be comprised of many 
grain storage facilities on a single premises.''
    We are revising the provisions at Sec. 301.89-14(e) by which flour 
millers must claim compensation. The interim rule provided that, to 
claim compensation, flour millers must submit verification that the 
millfeed was heat-treated, in the form of a copy of the limited permit 
under which the wheat was moved to a treatment facility. However, some 
flour millers have purchased their own heat treating equipment and do 
not need to move the wheat under a limited permit to a treatment 
facility. To accommodate this, we are stating that verification of 
treatment may also be provided in the form of a copy of PPQ Form 700, 
which includes a certification of processing, signed by the inspector 
who monitors the mill.
    We are adding sentences to Sec. 301.89-14(a), (b)(4), and (c), 
concerning growers and handlers, to clarify that these compensation 
payments will be issued by FSA. We are also adding sentences to 
Sec. 301.89-14(d) and (e), concerning grain storage facilities and 
flour millers, to clarify that these compensation payments will be 
issued by APHIS.
    The interim rule requires certain claimants to file three forms: 
ASCS Form 574, ASCS Form 578, and FCI Form 73. The correct names for 
ASCS Form 574 and ASCS Form 578 are FSA Form 574 and FSA Form 578, 
respectively. We are making this change in this final rule.
    A final rule published in the Federal Register on October 4, 1996, 
and effective on November 4, 1996 (61 FR 52189-52213, Docket No. 96-
016-14), established ``regulated areas'' to replace the areas 
previously called ``quarantined areas.'' To reflect this change, we are 
removing the term ``quarantined area'' each time it appears in 
Sec. 301.89-14 and replacing it with the term ``regulated area.''
    Further, the interim rule provided that growers and handlers will 
be compensated for wheat ``grown in the quarantined area.'' In addition 
to changing the term to ``regulated area,'' we would add a provision 
that growers and handlers in States where the Secretary has declared an 
extraordinary emergency would also be compensated for wheat grown in an 
area for which an Emergency Action Notification (PPQ Form 523) has been 
issued by an inspector, in accordance with Sec. 301.89-3(d) of the 
regulations. Section 301.89-3(d) of the regulations allows the 
Administrator or an inspector to temporarily designate any nonregulated 
area as a regulated area. When this occurs, an inspector provides 
written notice of this action to the owner or person responsible for 
the management of the area, in the form of an Emergency Action 
Notification. Areas temporarily regulated under an Emergency Action 
Notification will not necessarily be listed in the regulations as 
``regulated areas,'' but are subject to the same restrictions (and 
potential losses or expenses) as areas that are listed in the 
regulations.
    Therefore, based on the rationale set forth in the interim rule and 
in this document, we are adopting the provisions of the interim rule as 
a final rule, with the changes discussed in this document.
    This final rule also affirms the information contained in the 
interim rule concerning Executive Orders 12372 and 12988.

Effective Date

    Pursuant to the administrative procedure provisions in 5 U.S.C. 
553, we find good cause for making this rule effective less than 30 
days after publication in the Federal Register. This rule provides 
compensation to individuals who were and are required to take emergency 
actions to eliminate the spread of Karnal bunt or who experience 
economic losses because of the quarantine for Karnal bunt. Immediate 
action is necessary to compensate these losses and expenses. Therefore, 
the Administrator of the Animal and Plant Health Inspection Service has 
determined that this rule should be effective upon signature.

Executive Order 12866 and Regulatory Flexibility Act

    This rule has been reviewed under Executive Order 12866. This rule 
has been determined to be economically significant for purposes of 
Executive Order 12866 and, therefore, has been reviewed by the Office 
of Management and Budget.
    This action makes final with certain changes an interim rule that 
amended the regulations to provide compensation for certain growers and 
handlers, owners of grain storage facilities, and flour millers in 
order to mitigate losses and expenses incurred in the 1995-1996 crop 
season because of the Karnal bunt quarantine and emergency actions. The 
quarantine and regulations for Karnal bunt were established by a series 
of interim rules and a final rule published in the Federal Register on 
October 4, 1996. The interim rules and the final rule were published on 
an emergency basis. We stated in those rules that the emergency 
situation made timely compliance with section 6, subsections (3)(B)(ii) 
and (3)(C), of Executive Order 12866 impracticable. We also stated that 
we would complete the required cost-benefit analysis for those rules as 
soon as possible and make the information available to the public. 
Elsewhere in the ``Rules'' section of this issue of the Federal 
Register, we are publishing a companion docket (Docket No. 96-016-20) 
to this final rule that includes a Regulatory Impact Analysis that 
analyzes the costs and benefits of the interim rules and the final rule 
we have already published, as well as those of the provisions of this 
final rule.
    On April 3, 1997, we published in the Federal Register a Regulatory 
Flexibility Analysis for the interim rules and the final rule we have 
already published regarding the Karnal bunt quarantine and regulations 
(62 FR 15809-15819, Docket No. 96-016-18).
    In accordance with 5 USC 604, we have performed a Final Regulatory 
Flexibility Analysis regarding the impact of this final rule on small 
entities, and are publishing that analysis in a companion docket 
(Docket No. 96-016-20) to this final rule elsewhere in the ``Rules'' 
section of this issue of the Federal Register.

Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 
104-121, USC 801-808)

    This rule has been designated by the Administrator, Office of 
Information and Regulatory Affairs, Office of Management and Budget, as 
a major rule under the Small Business Regulatory Enforcement Fairness 
Act of 1996 (Act). The Administrator of the Animal and Plant Health 
Inspection Service has determined, however, that there is good cause 
for making this rule effective less than 60 days after submission of 
the rule to each House of Congress and to the Comptroller General 
because a delay in the implementation of this rule would be contrary to 
the public interest. This final rule adds handlers of negative grain, 
handlers with past crop season wheat inventories, and participants in 
the National Karnal Bunt Survey to the list of individuals eligible for 
compensation. It is necessary to make this rule effective upon 
publication in the Federal Register in order that these individuals can 
be compensated for economic losses and expenses in the 1995-1996 crop 
season resulting from the quarantine and emergency actions taken by the 
Department because of Karnal bunt. Section 808 of the Act provides that 
rules which would be exempted from the notice and comment provisions of 
the Administrative Procedure Act may be excepted from

[[Page 24751]]

section 801(a)(1)(A), and the delay in the effective date for major 
rules under section 801(a)(3). Such rules may be made effective as the 
agency promulgating the rule determines. A 60-day or longer delay of 
the effective date for this final rule would clearly be contrary to the 
public interest, since it would delay compensation for affected 
handlers and National Survey participants.

Paperwork Reduction Act

    In accordance with section 3507(d) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), the information collection or 
recordkeeping requirements included in this final rule have been 
submitted for approval to the Office of Management and Budget (OMB). 
When OMB notifies us of its decision, we will publish a document in the 
Federal Register providing notice of the assigned OMB control numbers 
or, if approval is denied, providing notice of what action we plan to 
take.
    The information collection or recordkeeping requirements included 
in the interim rule that preceded this final rule were approved by OMB. 
However, this final rule contains an information collection requirement 
that was not included in the interim rule. Specifically, this final 
rule requires a claimant to make a request in order to be granted an 
extension of the deadline for filing compensation claims.
    Estimate of burden: Public reporting burden for this collection of 
information is estimated to average .166 hours per response.
    Respondents: 10.
    Estimated number of responses per respondent: 1.
    Estimated total annual burden on respondents: 2 hours.

List of Subjects in 7 CFR Part 301

    Agricultural commodities, Plant diseases and pests, Quarantine, 
Reporting and recordkeeping requirements, Transportation.

    Accordingly, the interim rule amending 7 CFR part 301 which was 
published at 61 FR 35102-35107 on July 5, 1996, is adopted as a final 
rule with the following changes:

PART 301--DOMESTIC QUARANTINE NOTICES

    1. The authority citation for part 301 continues to read as 
follows:

    Authority: 7 USC 150bb, 150dd, 150ee, 150ff, 161, 162, and 164-
167; 7 CFR 2.22, 2.80, and 371.2(c).

    2. In Sec. 301.89-1, the definition for Premises is removed and 
definitions for Contract price and Grain storage facility are added in 
alphabetical order to read as follows:


Sec. 301.89-1  Definitions.

* * * * *
    Contract price. The net price after adjustment for any premiums or 
discounts stated in the contract.
* * * * *
    Grain storage facility. That part of a grain handling operation or 
unit of a grain handling operation, consisting of structures, 
conveyances, and equipment that receive, unload, and store grain, and 
that is able to operate as an independent unit from other units of the 
grain handling operation. A grain handling operation may be one grain 
storage facility or may be comprised of many grain storage facilities 
on a single premises.
* * * * *
    3. Section 301.89-14 is revised to read as set forth below.


Sec. 301.89-14  Compensation for the 1995-1996 crop season.

    The following individuals are eligible to receive compensation from 
the United States Department of Agriculture (USDA) for the 1995-1996 
crop season to mitigate losses or expenses incurred because of the 
Karnal bunt regulations and emergency actions, as follows:
    (a) Growers who have destroyed crops. Growers in New Mexico and 
Texas who have destroyed crops of wheat pursuant to an Emergency Action 
Notification (PPQ Form 523) issued by an inspector are eligible to be 
compensated at the rate of $300 per acre of destroyed crop. 
Compensation payments will be issued by the Farm Service Agency (FSA). 
To claim compensation, the grower must complete and submit to a local 
FSA county office whichever of the following three forms are 
applicable, as determined by FSA: FSA Form 574, FSA Form 578, and FCI 
Form 73. The forms will be furnished by FSA. Claims for compensation 
must be received by FSA on or before May 31, 1997. The Administrator 
may extend this deadline, upon request in specific cases, when unusual 
and unforeseen circumstances occur which prevent or hinder a claimant 
from requesting compensation on or before May 31, 1997.
    (b) Growers and handlers who sell nonpropagative wheat. Growers and 
handlers in a State where the Secretary has declared an extraordinary 
emergency, and who sell nonpropagative wheat grown in the regulated 
area or in an area for which an Emergency Action Notification (PPQ Form 
523) has been issued in accordance with Sec. 301.89-3(d), are eligible 
to be compensated for the loss in value of their wheat due to the 
Karnal bunt regulations, as follows:
    (1) Growers who sell nonpropagative wheat. Growers are eligible to 
be compensated for nonpropagative 1995-1996 crop season wheat and for 
nonpropagative wheat inventories in their possession that were unsold 
as of March 1, 1996, as described in paragraphs (b)(1)(i), (b)(1)(ii), 
and (b)(1)(iii) of this section. However, compensation will not exceed 
$2.50 per bushel under any circumstances.
    (i) If the wheat was grown under contract and a price was 
determined in the contract before March 1, 1996, compensation will 
equal the contracted price minus the higher of either the salvage 
value, as described in paragraph (b)(3) of this section, or the actual 
price received by the grower.
    (ii) If the wheat was grown under contract and a price was 
determined in the contract on or after March 1, 1996, and on or before 
August 1, 1996, compensation will equal the higher of either the 
contract price or the estimated market price for the relevant class of 
wheat (meaning type of wheat, such as durum or hard red winter) minus 
the higher of either the salvage value, as described in paragraph 
(b)(3) of this section, or the actual price received by the grower. The 
estimated market price will be calculated by APHIS for each class of 
wheat, taking into account the prices offered by relevant terminal 
markets (animal feed, milling, or export) for the period between May 1 
and June 30, 1996, with adjustments for transportation and other 
handling costs.
    (iii) If the wheat was not grown under contract or a price was 
determined in the contract after August 1, 1996, compensation will 
equal the estimated market price for the relevant class of wheat 
(meaning type of wheat, such as durum or hard red winter) minus the 
higher of either the salvage value, as described in paragraph (b)(3) of 
this section, or the actual price received by the grower. The estimated 
market price will be calculated by APHIS for each class of wheat, 
taking into account the prices offered by relevant terminal markets 
(animal feed, milling, or export) for the period between May 1 and June 
30, 1996, with adjustments for transportation and other handling costs.
    (2) Handlers who sell nonpropagative wheat. Handlers are eligible 
to be compensated for nonpropagative 1995-1996 crop season wheat and 
for nonpropagative wheat inventories in their possession that were 
unsold as of March 1, 1996, only under the circumstances described in 
paragraphs (b)(2)(i), (b)(2)(ii), and (b)(2)(iii) of this section. 
Compensation for the

[[Page 24752]]

circumstances in paragraphs (b)(2)(i) and (b)(2)(ii) will equal the 
estimated market price for the relevant class of wheat (meaning type of 
wheat, such as durum or hard red winter) minus the salvage value, as 
described in paragraph (b)(3) of this section. Compensation for the 
circumstance in paragraph (b)(2)(iii) will equal the estimated market 
price for the relevant class of wheat (meaning type of wheat, such as 
durum or hard red winter) minus the higher of either the salvage value, 
as described in paragraph (b)(3) of this section, or the actual price 
received by the handler. The estimated market price will be calculated 
by APHIS for each class of wheat, taking into account the prices 
offered by relevant terminal markets (animal feed, milling, or export) 
for the period between May 1 and June 30, 1996, with adjustments for 
transportation and other handling costs. However, compensation will not 
exceed $2.50 per bushel under any circumstances.
    (i) Handlers who honor contracts by paying the grower full contract 
price on wheat grown for nonpropagative purposes in the regulated area 
that was tested by APHIS and found positive for Karnal bunt;
    (ii) Handlers who purchase contracted or noncontracted wheat grown 
for nonpropagative purposes in the regulated area that was tested by 
APHIS and found negative for Karnal bunt prior to purchase but that was 
tested by APHIS and found positive for Karnal bunt after purchase; or
    (iii) Except as explained in this paragraph, handlers who honor 
contracts by paying the grower or another handler full contract price 
on nonpropagative wheat grown in the regulated area that was tested by 
APHIS and found negative for Karnal bunt if a price was determined in 
the contract before March 1, 1996. Handlers who had contracted to sell 
the wheat at a price determined in the contract before March 1, 1996, 
and who received the full contract price, are not eligible for 
compensation.
    (3) Salvage value. Salvage values will be as follows:
    (i) If the wheat is positive for Karnal bunt and is sold for use as 
animal feed, salvage value equals $6.00 per hundredweight or $3.60 per 
bushel for all classes of wheat.
    (ii) If the wheat is positive for Karnal bunt and is sold for a use 
other than animal feed, salvage value equals whichever is higher of the 
following: the average price paid in the region of the regulated area 
where the wheat is sold for the relevant class of wheat (meaning type 
of wheat, such as durum or hard red winter) for the period between May 
1 and June 30, 1996; or, $3.60 per bushel.
    (iii) If the wheat is negative for Karnal bunt and is sold for any 
use, salvage value equals whichever is higher of the following: the 
average price paid in the region of the regulated area where the wheat 
is sold for the relevant class of wheat (meaning type of wheat, such as 
durum or hard red winter) for the period between May 1 and June 30, 
1996; or, $3.60 per bushel.
    (4) To claim compensation. Compensation payments will be issued by 
the Farm Service Agency (FSA). Claims for compensation must be received 
by FSA on or before May 31, 1997. The Administrator may extend this 
deadline, upon request in specific cases, when unusual and unforeseen 
circumstances occur which prevent or hinder a claimant from requesting 
compensation on or before May 31, 1997. To claim compensation, a grower 
or handler must complete and submit to the local FSA county office the 
following documents:
    (i) Both growers and handlers. A grower or handler must submit 
whichever of the following three forms are applicable, as determined by 
FSA: FSA Form 574, FSA Form 578, and FCI Form 73. A grower or a handler 
must also submit a copy of the receipt for the final sale of the wheat, 
showing the intended use for which the wheat was sold, and a copy of 
the Karnal bunt certificate issued by APHIS that shows the Karnal bunt 
test results.
    (ii) Growers. In addition to the documents required in paragraph 
(b)(4)(i), growers must submit a copy of the contract the grower has 
for the wheat, if the wheat was under contract; and a copy of the 
receipt for the final sale of the wheat, showing the intended use for 
which the wheat was sold, total bushels sold, and the total amount paid 
to the grower by the handler.
    (iii) Handlers. In addition to the documents required in paragraph 
(b)(4)(i), handlers must submit a copy of the contract the handler had 
with the grower for the wheat, if the wheat was under contract; a copy 
of the receipt for the purchase of the wheat from the grower or 
handler, showing the total bushels purchased and the amount the handler 
paid for the wheat; and a copy of the receipt for the final sale of the 
wheat, showing the intended use for which the wheat was sold. Handlers 
who had contracted to sell the wheat at a price determined in the 
contract before March 1, 1996, must submit a copy of the contract for 
the sale of the wheat.
    (c) Nonpropagative wheat that is not sold. If a grower or handler 
of nonpropagative wheat grown in the regulated area in a State where 
the Secretary has declared an extraordinary emergency is not able to or 
elects not to sell their wheat, they will be eligible to receive 
compensation at the rate of $2.50 per bushel. Compensation will only be 
paid if the grower or handler has destroyed the wheat by burying it in 
a sanitary landfill or other site that has been approved by APHIS. 
Compensation claims will be issued by the Farm Service Agency (FSA). To 
claim compensation, the grower or handler must complete and submit to 
the local FSA county office whichever of the following three forms are 
applicable, as determined by FSA: FSA Form 574, FSA Form 578, and FCI 
Form 73. In addition, the grower or handler must submit verification of 
how much wheat was buried, in the form of a receipt from the sanitary 
landfill or verification signed by an APHIS inspector. Claims for 
compensation must be received by FSA on or before May 31, 1997. The 
Administrator may extend this deadline, upon request in specific cases, 
when unusual and unforeseen circumstances occur which prevent or hinder 
a claimant from requesting compensation on or before May 31, 1997.
    (d) Decontamination of grain storage facilities. Owners of grain 
storage facilities that are in States where the Secretary has declared 
an extraordinary emergency, and who have decontaminated their grain 
storage facilities pursuant to an Emergency Action Notification (PPQ 
Form 523) issued by an inspector, are eligible to be compensated, on a 
one time only basis for each facility and each covered crop year wheat, 
for up to 50 percent of the cost of decontamination. However, 
compensation will not exceed $20,000 per grain storage facility (as 
defined in Sec. 301.89-1). General clean-up, repair, and refurbishment 
costs are excluded from compensation. Compensation payments will be 
issued by APHIS. To claim compensation, the owner of the grain storage 
facility must submit to an inspector records demonstrating that 
decontamination was performed on all structures, conveyances, or 
materials ordered to be decontaminated by the Emergency Action 
Notification on the facility. The records must include a copy of the 
Emergency Action Notification, contracts with individuals or companies 
hired to perform the decontamination, receipts for equipment and 
materials purchased to perform the decontamination, time

[[Page 24753]]

sheets for employees of the grain storage facility who performed 
activities connected to the decontamination, and any other 
documentation that helps show the cost to the owner and that 
decontamination has been completed. Claims for compensation must be 
received by APHIS on or before May 31, 1997. The Administrator may 
extend this deadline, upon request in specific cases, when unusual and 
unforeseen circumstances occur which prevent or hinder a claimant from 
requesting compensation on or before May 31, 1997.
    (e) Flour millers. Flour millers who, in accordance with a 
compliance agreement with APHIS, heat-treat millfeed made from wheat 
produced in regulated areas that require such treatment are eligible to 
be compensated at the rate of $35.00 per short ton of millfeed. The 
amount of millfeed compensated will be calculated by multiplying the 
weight of wheat from the regulated area received by the miller by 25 
percent (the average percent of millfeed derived from a short ton of 
grain). Compensation payments will be issued by APHIS. To claim 
compensation, the miller must submit to an inspector verification as to 
the actual (not estimated) weight of the wheat (such as a copy of the 
limited permit under which the wheat was moved to the mill or a copy of 
the bill of lading for the wheat, if the actual weight appears on those 
documents, or other verification). Flour millers must also submit 
verification that the millfeed was heat treated (such as a copy of the 
limited permit under which the wheat was moved to a treatment facility 
and a copy of the bill of lading accompanying that movement; or a copy 
of PPQ Form 700 (which includes certification of processing) signed by 
the inspector who monitors the mill). Claims for compensation must be 
received by APHIS on or before May 31, 1997. The Administrator may 
extend this deadline, upon request in specific cases, when unusual and 
unforeseen circumstances occur which prevent or hinder a claimant from 
requesting compensation on or before May 31, 1997.
    (f) National Karnal Bunt Survey participants. If a grain storage 
facility participating in the National Karnal Bunt Survey tests 
positive for Karnal bunt spores, the facility will be regulated and may 
be ordered decontaminated pursuant to an Emergency Action Notification 
(PPQ Form 523) issued by an inspector. If a Declaration of 
Extraordinary Emergency has been declared for the State in which the 
grain storage facility is located, the owner of the grain storage 
facility will be eligible for compensation as follows:
    (1) Loss in value of positive wheat. The owner of the grain storage 
facility will be compensated for the loss in value of positive wheat. 
Compensation will equal the estimated market price for the relevant 
class of wheat minus the salvage value, as described in paragraph 
(b)(3) of this section. The estimated market price will be calculated 
by APHIS for each class of wheat, taking into account the prices 
offered by relevant terminal markets (animal feed, milling, or export) 
for the period between October 1 and November 30, 1996, with 
adjustments for transportation and other handling costs. However, 
compensation will not exceed $2.50 per bushel under any circumstances. 
Compensation payments for loss in value of wheat will be issued by the 
Farm Service Agency (FSA). To claim compensation, the owner of the 
facility must submit to the local FSA office a copy of the Emergency 
Action Notification under which the facility is or was quarantined and 
verification as to the actual (not estimated) weight of the wheat (such 
as a copy of the limited permit under which the wheat was moved to a 
mill or a copy of the bill of lading for the wheat, if the actual 
weight appears on those documents, or other verification). Claims for 
compensation must be received by FSA on or before May 31, 1997. The 
Administrator may extend this deadline, upon request in specific cases, 
when unusual and unforeseen circumstances occur which prevent or hinder 
a claimant from requesting compensation on or before May 31, 1997.
    (2) Decontamination of grain storage facilities. The owner of the 
facility will be compensated on a one time only basis for each grain 
storage facility and each covered crop year wheat for the direct costs 
of decontamination of the facility at the same rate described under 
paragraph (d) of this section (up to 50 per cent of the direct costs of 
decontamination, not to exceed $20,000 per grain storage facility). 
Compensation payments for decontamination of grain storage facilities 
will be issued by APHIS, and claims for compensation must be submitted 
in accordance with the provisions in paragraph (d) of this section. 
Claims for compensation must be received by APHIS on or before May 31, 
1997. The Administrator may extend this deadline, upon request in 
specific cases, when unusual and unforeseen circumstances occur which 
prevent or hinder a claimant from requesting compensation on or before 
May 31, 1997.

    Done in Washington, DC, this 30th day of April 1997.
Donald W. Luchsinger,
Acting Administrator, Animal and Plant Health Inspection Service.
[FR Doc. 97-11719 Filed 5-1-97; 11:27 am]
BILLING CODE 3410-34-P