[Federal Register Volume 62, Number 177 (Friday, September 12, 1997)]
[Rules and Regulations]
[Pages 47923-47927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24174]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1011

[DA-97-09]


Milk in the Tennessee Valley Marketing Area; Termination of the 
Order

AGENCY: Agricultural Marketing Service, USDA.


[[Page 47924]]


ACTION: Final rule; termination order.

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SUMMARY: This rule terminates all but certain administrative provisions 
of the Tennessee Valley Federal milk marketing order. The remaining 
administrative provisions will be terminated at a later date. On the 
basis of public hearings held in May and December 1996 on proposed 
amendments to 4 southeastern milk orders, including the Tennessee 
Valley milk order, the Department concluded that each of the 4 orders 
should be similarly amended. Although the amended orders were approved 
by producers in 3 of the 4 marketing areas, the issuance of the 
proposed amended order for the Tennessee Valley marketing area did not 
receive the required two-thirds mandate. After reviewing the comments 
filed in response to a notice of proposed termination of the order 
published on July 3, 1997, the Department has concluded that the 
present Tennessee Valley order should be terminated.

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist, 
USDA/AMS/Dairy Division, Order Formulation Branch, Room 2971, South 
Building, PO. Box 96456, Washington, DC 20090-6456, (202) 690-1932, e-
mail address Nicholas__M[email protected].

SUPPLEMENTARY INFORMATION: Prior documents related to this proceeding:
    Notice of Hearing: Issued May 1, 1996; published May 3, 1996 (61 FR 
19861).
    Tentative Partial Final Decision: Issued July 12, 1996; published 
July 18, 1996 (61 FR 37628).
    Interim Amendment of Orders: Issued August 2, 1996; published 
August 9, 1996 (61 FR 41488).
    Extension of Time for Filing Comments: Issued August 16, 1996; 
published August 23, 1996 (61 FR 43474).
    Extension of Time for Filing Comments: Issued October 18, 1996; 
published October 25, 1996 (61 FR 55229).
    Notice of Reopened Hearing: Issued November 19, 1996; published 
November 25, 1996 (61 FR 59843).
    Partial Final Decision: Issued May 12, 1997; published May 20, 1997 
(62 FR 27525).
    Notice of Proposed Termination: Issued June 30, 1997; published 
July 3, 1997 (62 FR 36022).
    Extension of Time for Filing Comments to the Proposed Termination: 
Issued July 9, 1997; published July 14, 1997 (62 FR 37524).
    Order Amending the Orders: Issued July 17, 1997; published July 23, 
1997 (62 FR 39737).
    Partial Recommended Decision: Issued July 17, 1997; published July 
23, 1997 (62 FR 39470).
    The Department is issuing this rule in conformance with Executive 
Order 12866.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have a retroactive 
effect. This rule will not preempt any state or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with this rule.
    The Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674), provides that administrative proceedings must be 
exhausted before parties may file suit in court. Under section 
608c(15)(A) of the Act, any handler subject to an order may request 
modification or exemption from such order by filing with the Secretary 
a petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with the law. A handler is afforded the opportunity for a hearing on 
the petition. After a hearing, the Secretary would rule on the 
petition. The Act provides that the district court of the United States 
in any district in which the handler is an inhabitant, or has its 
principal place of business, has jurisdiction in equity to review the 
Secretary's ruling on the petition, provided a bill in equity is filed 
not later than 20 days after the date of the entry of the ruling.

Small Business Consideration

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), the Agricultural Marketing Service has considered the economic 
impact of this action on small entities and has certified that this 
proposed rule will not have a significant economic impact on a 
substantial number of small entities. For the purpose of the Regulatory 
Flexibility Act, a dairy farm is considered a ``small business'' if it 
has an annual gross revenue of less than $500,000, and a dairy products 
manufacturer is a ``small business'' if it has fewer than 500 
employees. For the purposes of determining which dairy farms are 
``small businesses,'' the $500,000 per year criterion was used to 
establish a production guideline of 326,000 pounds per month. Although 
this guideline does not factor in additional monies that may be 
received by dairy producers, it should be an inclusive standard for 
most ``small'' dairy farmers. For purposes of determining a handler's 
size, if the plant is part of a larger company operating multiple 
plants that collectively exceed the 500-employee limit, the plant will 
be considered a large business even if the local plant has fewer than 
500 employees.
    During the representative month of February 1997, the milk of 1,469 
producers was pooled on the Tennessee Valley order. Of these producers, 
1,442 are considered as small businesses.
    There were 7 handlers operating 8 pool distributing plants 
regulated under the Tennessee Valley milk order for February 1997. Of 
these handlers, 3 are considered small businesses.
    Upon termination of the Tennessee Valley order, it is likely that 
all but 2 of the handlers currently regulated under the order will 
become regulated under the Carolina, Southeast, or Louisville-
Lexington-Evansville Federal milk orders. The regulations under these 
other orders are, for the most part, comparable to those of the 
Tennessee Valley order, but each of these 4 orders has a different 
price structure and a unique uniform price to producers that is 
computed each month. The impact of these regulatory changes on 
producers will depend upon which order the former Tennessee Valley 
handlers become regulated under. In some cases, the uniform price paid 
to producers will be somewhat higher, but in other cases it will be a 
little lower.
    Those handlers who will become regulated under other Federal orders 
will continue to be responsible for the recordkeeping, reporting, and 
compliance requirements of those orders.

Preliminary Statement

    This order of termination is issued pursuant to the provisions of 
the Agricultural Marketing Agreement Act and of the order regulating 
the handling of milk in the Tennessee Valley marketing area.
    Notice of proposed rulemaking was published in the Federal Register 
on July 3, 1997 (62 FR 36022), concerning a proposed termination of the 
order. Interested persons were afforded opportunity to file written 
data, views and arguments thereon.
    In total, 11 comments were received, 3 supporting the termination, 
3 opposed to it, and 5 taking no position on the termination but 
offering comments on questions raised by the Department in the notice 
of proposed termination.
    After consideration of all relevant material, including the 
proposal in the notice, the comments received, and other available 
information, it is hereby found and determined that the current order 
regulating the handling of milk in

[[Page 47925]]

the Tennessee Valley marketing area (7 CFR part 1011) does not tend to 
effectuate the declared policy of the Act.

Statement of Consideration

    This rule terminates the Tennessee Valley Federal milk marketing 
order effective October 1, 1997. On May 12, 1997, the Department issued 
a partial final decision on proposed amendments to the Carolina, 
Southeast, Tennessee Valley, and Louisville-Lexington-Evansville milk 
orders (i.e., Orders 5, 7, 11, and 46) which was published on May 20, 
1997 (62 FR 27525). The final decision document contained proposed 
amended orders for the 4 southeast marketing areas, including the 
Tennessee Valley order, and directed the respective market 
administrators of the 4 orders to ascertain whether producers approved 
the issuance of the amended orders. The final decision concluded that 
amended orders were needed to effectuate the declared policy of the 
applicable statutory authority.
    Less than two-thirds of the producers whose milk is pooled in the 
Tennessee Valley marketing area approved the issuance of the proposed 
amended order. The Act requires approval by at least two-thirds of the 
producers before an amended order may be issued.
    In the Department's Notice of Proposed Termination of the Order, 
interested parties also were requested to specifically address two 
issues: (1) The disposition of the Tennessee Valley order 
transportation credit balancing fund (TCBF) and (2) transportation 
credit ineligibility on milk of producers located in the area 
comprising the Tennessee Valley marketing area under Orders 5, 7, and 
46.
    Comments submitted by two handlers, Mayfield Dairy Farms, Inc., and 
Land-O-Sun Dairies, Inc., both of which operate pool plants currently 
regulated under the Tennessee Valley order, support the Department's 
recommendation that funds accumulated in the Tennessee Valley order's 
TCBF be transferred prorata to the respective orders where such 
handlers will become regulated, based on each handler's contribution to 
the Tennessee Valley order's TCBF.
    A comment submitted by Barber Pure Milk Company (Barber) and Dairy 
Fresh Corporation (Dairy Fresh), handlers regulated under the Southeast 
milk order, states that the handlers support the Department's proposal 
to transfer the money in the Tennessee Valley order's TCBF to the TCBFs 
of the orders under which Tennessee Valley order handlers become 
regulated. Barber and Dairy Fresh also state that it would be unfair to 
return the money that Tennessee Valley order handlers have contributed 
to the Order 11 TCBF to those handlers and then permit these handlers 
to draw credits out of the TCBFs in the Carolina, Southeast, or 
Louisville-Lexington-Evansville orders without having ever contributed 
to such funds. Additionally, the commentors support the Department's 
position that the milk of producers located geographically within the 
Tennessee Valley marketing area be ineligible for transportation 
credits under the other 3 southeastern milk orders.
    The Fleming Companies, Inc. (Fleming), a handler operating a pool 
plant regulated under the Southeast order, submitted a comment urging 
the Department to speedily complete the process of termination of the 
Tennessee Valley milk marketing order. The handler contends that 
termination will result in handlers becoming regulated along 
competitive lines rather than artificial geographic lines.
    Fleming supports the recommendation that funds in the Tennessee 
Valley order's TCBF be transferred prorata into the comparable funds of 
markets under which the Order 11 handlers will become regulated. 
Fleming states that the prorated share of any transportation credit 
balancing funds to follow each handler should be based on that 
handler's proportionate share of Class I milk marketed under the 
Tennessee Valley order. The handler also supports the interpretation 
that milk of producers located geographically within the Tennessee 
Valley marketing area should be ineligible for transportation credits 
subsequent to its termination.
    A comment filed on behalf of Mid-America Dairymen, Inc. (Mid-Am), a 
cooperative association with producers on the 4 southeastern orders, 
states that Mid-Am supports the Department's proposal concerning the 
disbursement of the Tennessee Valley's TCBF and contends that a prorata 
transfer of funds is the most equitable method of disbursement. The 
cooperative states that in the event that two of the handlers that are 
currently regulated under Order 11 become unregulated, these handlers 
should be reimbursed for their contributions. Mid-Am also recommends 
the adoption of the Department's interpretation concerning the 
ineligibility for transportation credits for milk of producers located 
within the geographic boundaries of the Tennessee Valley marketing 
area.
    Associated Milk Producers, Inc. (AMPI), stated that the Tennessee 
Valley order should be terminated since the order, as amended, was not 
approved by the producers voting in the referendum. AMPI also contends 
that since the major handlers on Order 11 will become regulated under 
Orders 5, 7, or 46, all of which provide similar transportation credit 
provisions, it is only fair and reasonable that the transportation 
credit assessments which have been contributed by those Order 11 
handlers follow them to their new market of regulation and be added to 
the fund balance of that market.
    AMPI concurs with the Department's determination that milk of 
producers located within the boundaries of the Tennessee Valley 
marketing area should be ineligible to receive transportation credits.
    A comment submitted by Peeler Jersey Farms, Inc. (Peeler), a 
handler with distributing plants regulated under the Carolina and 
Southeast milk orders, states that a termination of the Tennessee 
Valley milk order may not be in the best interest of the Federal milk 
order program if an environment is created in which regulated milk 
competes with unregulated milk. Peeler states that to prevent this 
inequity the Department should modify pooling standards so that all 
handlers currently regulated under the Tennessee Valley milk order will 
be regulated under one of the other 3 southeastern milk orders.
    Peeler supports the Department's proposal to transfer the funds in 
the Tennessee Valley order's TCBF to the TCBF of the respective order 
where handlers will become regulated based upon their contributions to 
the Order 11 TCBF. Additionally, the handler states that the milk of 
dairy farmers pooled on the Tennessee Valley milk order should not be 
eligible for transportation credits if the order is terminated.
    A comment submitted by Carolina-Virginia Milk Producers 
Association, Inc. (Carolina-Virginia), a cooperative association 
representing producers whose milk is pooled on the Carolina, Southeast, 
and Tennessee Valley milk orders, states that Carolina-Virginia takes 
no position on the proposed termination of the Tennessee Valley milk 
order. However, the cooperative association does favor the Department's 
proposal to transfer prorated funds accumulated in the Tennessee Valley 
order's TCBF to each of the TCBFs of the respective orders where the 
former Tennessee Valley handlers become regulated. Carolina-Virginia 
also supports the return of the prorata share of the TCBF to the 2 
handlers who will likely become unregulated and recommends the adoption 
of the Department's interpretation concerning the reference to the 
Tennessee Valley marketing area as it pertains to transportation credit 
ineligibility.

[[Page 47926]]

    Southeastern Graded Milk Producers Association, a cooperative 
association with nearly 300 producers located in Kentucky, filed a 
comment in opposition to the termination of the Tennessee Valley order 
as proposed.
    Southern Belle Dairy, a handler operating a pool distributing plant 
in Somerset, Kentucky, regulated under the Tennessee Valley milk order, 
also filed a comment opposing the termination of the Tennessee Valley 
milk marketing order. Southern Belle states that the current Tennessee 
Valley milk order continues to effectuate the declared policy of the 
Act and, therefore, should not be terminated. In addition, the handler 
argues that since less than 50% of the producers requested termination, 
the Secretary is not required to terminate the order. According to the 
handler, any termination of the order will create the very disorderly 
marketing of milk and plant price inequities the Act tends to 
eliminate.
    Southern Belle maintains that in the event that Order 11 is 
terminated and Southern Belle becomes regulated under Order 7, the 
handler would be placed at a competitive disadvantage. The handler 
states that the disadvantage in the milkshed resulting from termination 
will require Southern Belle to pay significantly more for milk in order 
to secure a supply. According to the handler, despite the lower Class I 
price that Southern Belle would be responsible for under regulation of 
the Southeast order, the blend price at the plant's location would be 
reduced relative to the blend price of nearby Order 46 handlers 
competing for milk supplies and, therefore, interfere with Southern 
Belle's procurement of milk.
    The handler also requests that if the Tennessee Valley order is 
terminated the funds paid into the Order 11 TCBF be returned to 
Southern Belle since it did not receive transportation credits in 1996 
and does not intend to apply for credits in 1997 or thereafter. 
Southern Belle states that such reimbursement is the only equitable 
method of distribution of the TCBF.
    Milk Marketing Inc. (MMI), a regional cooperative representing 
7,500 producers whose milk is pooled under 8 different Federal milk 
orders, submitted a comment fully supporting the continuation of the 
Tennessee Valley order. MMI believes that the Federal Order Program has 
served the public very well and states there is no reason to terminate 
the Tennessee Valley order.
    According to MMI, many businesses would encounter severe economic 
hardship if the Tennessee Valley order were terminated. MMI indicated 
that Southern Belle, which is supplied in part by MMI, would be 
financially harmed. MMI stated that Southern Belle would most likely 
become regulated under the Southeast Order. Were this to happen, it 
states, Southern Belle would experience a 32.5 cents reduction in its 
Class I price, but this reduction would be more than offset by a 
substantial increase in its procurement cost for all milk received at 
the Southern Belle plant because its blend price under Order 7 would be 
well below (e.g., 41 cents during 1996) the blend price at Somerset 
under Order 46. Thus, the cooperative noted, the prices received by 
producers servicing this plant would be severely reduced.
    MMI agreed with the Department's interpretation that milk of 
producers located in the Tennessee Valley marketing area should still 
be ineligible for a transportation credit under Orders 5, 7, and 46.
    Conclusion. The Department has determined that the Tennessee Valley 
milk order must be terminated since the existing order does not tend to 
effectuate the declared policy of the Act. The comments that were filed 
in response to the notice of proposed termination provide no basis for 
questioning the validity of the vote on the proposed amended order or 
the determination that the existing order needed to be amended.
    The Act specifically prohibits the issuance of any milk order that 
is not favored by more than two-thirds of producers by number or by 
volume of milk marketed. Accordingly, since less than two-thirds of the 
producers, by number and volume of milk marketed, approved of the 
proposed new amended Tennessee Valley order, it cannot be issued. No 
comments disputed this point.
    Several comments suggested that the Secretary was not required to 
terminate the existing Tennessee Valley marketing order. In the Partial 
Final Decision, however, the Secretary determined that recent 
experience under the existing marketing order demonstrated there were 
certain serious problems with the order that needed to be corrected (62 
FR 27532-27536). The Secretary determined that the new proposed amended 
order was ``the detailed and appropriate means of effecting'' these 
corrections, and he specifically rejected the previous findings and 
determinations for the existing marketing order in this regard (62 FR 
27537-27538). Thus, the existing marketing order does not tend to 
effectuate the declared policy of the Act. None of the comments dispute 
the Secretary's conclusions on this point.
    The comments essentially just claim that a particular handler may 
feel competitive pressure if it is pooled under Order 7. Under Federal 
marketing orders, a handler located in an unregulated area is pooled 
under the particular marketing order where it has most of its sales. 
This is the main area where it chooses to compete with other handlers. 
If such a handler does not wish to be regulated under a particular 
order, it is free to sell its milk in a different geographic area and, 
thus, effectively choose the marketing order under which it is 
regulated. Similarly, any handler is free to purchase its milk supply 
from any producers wherever located. But certainly the existence or 
boundaries of Federal marketing orders should not be controlled by the 
marketing or procurement strategies of one particular milk plant. 
Furthermore, as noted above, such a claim is not even directly relevant 
to the question of whether the existing marketing order required 
certain changes in order to continue to effectuate the declared policy 
of the Act.
    The termination of the Tennessee Valley order will not result in a 
regulatory void in the Tennessee Valley marketing area. In fact, it 
appears that all but two of the handlers now regulated under Order 11 
will continue to be fully regulated under Order 5, Order 7, or Order 
46. The two handlers likely to become unregulated have very limited 
distribution areas. Virtually all of the producers whose milk is priced 
under the Tennessee Valley order will continue to receive the benefits 
of a Federally mandated minimum price, albeit under a different order.
    As requested, many of the comments received addressed the issue of 
disbursement of the Order 11 TCBF. A majority of the commentors support 
the Department's proposal to transfer the funds prorata based upon 
handlers' contributions to the funds of the orders that they will 
become regulated under. Since the handlers will be eligible to request 
transportation credits once they become regulated under the Carolina, 
Southeast or Louisville-Lexington-Evansville orders, it is the most 
equitable means for disbursement in accordance with 7 CFR 1000.4.
    It is also reasonable, and fully supported by the comments 
received, to continue to exclude transportation credits under Orders 5, 
7, and 46 for milk received from a dairy farm within the defined area 
known as the Tennessee Valley marketing area. Accordingly, there will 
be no change in the interpretation of Section 82(c)(2)(iii)

[[Page 47927]]

of Orders 5, 7, and 46 after Order 11 is terminated.
    It is hereby found and determined that the Tennessee Valley milk 
marketing order should be terminated pursuant to 7 U.S.C. 
608(c)(16)(A).
    It is hereby found and determined that thirty days' notice of the 
effective date hereof is impractical, unnecessary and contrary to the 
public interest in that:
    (a) The termination is necessary to reflect current marketing 
conditions and to assure orderly marketing conditions in the marketing 
area;
    (b) This termination does not require of persons affected 
substantial or extensive preparation prior to the effective date; and
    (c) Notice of proposed rulemaking was given interested parties and 
they were afforded opportunity to file written data, views or arguments 
concerning this termination.
    Therefore, good cause exists for making this order effective less 
than 30 days from the date of publication in the Federal Register.

List of Subjects in 7 CFR Part 1011

    Milk marketing orders.

Order

    It is therefore ordered, That the terms and provisions of the 
order, as amended, regulating the handling of milk in the Tennessee 
Valley marketing area, (7 CFR part 1011) except Sec. 1011.1 which 
incorporates the General Provisions in part 1000, are hereby terminated 
effective October 1, 1997.

PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA

    1. The authority citation for 7 CFR part 1011 continues to read as 
follows:

    Authority: Secs. 1-19, 48 Stats. 31, as amended; 7 U.S.C. 601-
674.


Secs. 1011.2 through 1011.86  [Removed]

    2. Part 1011 is amended by removing Secs. 1011.2 through 1011.86.

    Dated: September 5, 1997.
Lon Hatamiya,
Administrator, Agricultural Marketing Service.
[FR Doc. 97-24174 Filed 9-11-97; 8:45 am]
BILLING CODE 3410-02-U