[Federal Register Volume 63, Number 63 (Thursday, April 2, 1998)]
[Proposed Rules]
[Pages 16142-16148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8505]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1468

RIN 0578-AA20


Conservation Farm Option

AGENCY: Commodity Credit Corporation, Department of Agriculture.

ACTION: Proposed Rule.

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SUMMARY: Section 335 of the Federal Agriculture Improvement and Reform 
Act of 1996 (the 1996 Act) amended the Food Security Act of 1985 (the 
1985 Act) to establish the Conservation Farm Option (CFO) Program. The 
Commodity Credit Corporation (CCC) administers the CFO under the 
supervision of the Vice President of the CCC who is the Chief of the 
Natural Resources Conservation Service (NRCS), with concurrence 
throughout the process by a Executive Vice President of the CCC who is 
the Administrator of the Farm Service Agency (FSA). The CCC is issuing 
a proposed rule for the CFO. This proposed rule describes how CCC will 
implement CFO as authorized by the 1985 Act. The CCC seeks comments 
from the public which will be used to make revisions, if necessary, 
that will be issued in a final rule.

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

ADDRESSES: All comments concerning this proposed rule should be 
addressed to Gary R. Nordstrom, Director, Conservation Operations 
Division, Natural Resources Conservation Service, PO Box 2890, 
Washington, DC 20013-2890. Attention: CFO. FAX: 202-720-1838. This rule 
may also be accessed,

[[Page 16143]]

and comments submitted, via Internet. Users can access the Natural 
Resources Conservation Service (NRCS) homepage at http://
www.ftw.nrcs.usda.gov; select the 1996 Farm Bill Conservation Programs 
from the menu.

FOR FURTHER INFORMATION CONTACT: Daniel Smith, Water Issues Team 
Leader, Conservation Operations Division, Natural Resources 
Conservation Service; phone: 202-720-3524; fax: 202-720-4265; e-mail: 
[email protected], Attention: CFO; or Edward Rall, Economic and Policy 
Analysis Staff, Farm Service Agency; phone: 202-720-7795; fax: 202-720-
8261; e-mail: [email protected], Attention: CFO.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    Pursuant to Executive Order 12866, Regulatory Planning and Review 
(58 FR 51735, October 4, 1993), the Office of Management and Budget 
(OMB) has determined that this proposed rule is a significant 
regulatory action. It will not result in an annual effect on the 
economy of $100 million or more, and therefore is not an economically 
significant regulatory action. The administrative record is available 
for public inspection in Room 6037, South Building, USDA, 14th and 
Independence Ave, SW, Washington, D.C.
    Pursuant to Executive Order 12866, CCC conducted an economic 
analysis of the potential impacts associated with this program, and 
included the analysis as part of a Cost Benefit Analysis document 
prepared for this rule. The analysis estimates CFO will have a 
beneficial impact on the adoption of conservation practices and, when 
installed or applied to technical standards, will increase net farm 
income. In addition, benefits would accrue to society through 
maintenance of long-term productivity, enhancement of the resource 
base, non-point source pollution damage reductions, and wildlife 
enhancements. As a voluntary program, CFO will not impose any 
obligation or burden upon agricultural producers that choose not to 
participate.

Regulatory Flexibility Act

    The Regulatory Flexibility Act is not applicable to this rule 
because CCC is not required by 5 U.S.C. 553 or any other provision of 
law to publish a notice of proposed rulemaking with respect to the 
subject matter of this rule.

Environmental Analysis

    CCC has determined through an Environmental Assessment for the 
Conservation Farm Option Program, dated August 1, 1996, that the 
issuance of this proposed rule will not have a significant effect on 
the human environment. Copies of the Environmental Assessment and the 
Finding of No Significant Impact may be obtained from Daniel Smith, 
Conservation Operations Division, Natural Resources Conservation 
Service, PO Box 2890, Washington, DC 20013-2890.

Paperwork Reduction Act

    This proposed rule sets forth procedures for implementing CFO. CCC 
needs certain information from potential applicants in order to carry 
out the requirements of the program. CCC submitted information 
collection requirements to the Office of Management and Budget (OMB) 
for approval under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. 
FSA has requested reinstatement of OMB 0560-0174 which covers both CFO 
and EQIP. This package contains the forms necessary for program 
implementation and include Forms CCC-1200, CCC 1210, and CCC-1245.
    Form CCC-1200 is the Conservation Program Contract used in both the 
CFO and Environmental Quality Incentive Program (EQIP) and allows a 
farmer, rancher, or landowner to apply for conservation benefits under 
the terms and conditions of the contract.
    Form CCC-1210 is the Conservation Farm Option Pilot Proposal form 
used only in the CFO program and allows farmers, groups and other 
entities to propose geographic areas for inclusion as pilot areas in 
the CFO.
    Form CCC-1245 is the Practice Approval and Payment Application used 
in both the CFO and EQIP and allows the participant to submit 
performance data in order to be paid for the practices installed by the 
participant under the program.
    A regular information collection submission for CFO and EQIP is in 
clearance and a notice will be published in the Federal Register 
shortly.

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this proposed rule are not retroactive. 
Furthermore, the provisions of this proposed rule preempt State and 
local laws to the extent such laws are inconsistent with this proposed 
rule. Before an action may be brought in a Federal court of competent 
jurisdiction, the administrative appeal rights afforded persons at 7 
CFR parts 11 and 614 must be exhausted.

Federal Crop Insurance Reform and Department of Agriculture 
Reorganization Act of 1994

    USDA classified this proposed rule as not major, therefore, 
pursuant to Section 304 of the Department of Agriculture Reorganization 
Act of 1994, a risk assessment is not required.

Unfunded Mandates Reform Act of 1995

    Pursuant to Title II of the Unfunded Mandates Reform Act of 1995, 
CCC assessed the effects of this rulemaking action on State, local, and 
tribal governments, and the public. This action does not compel the 
expenditure of $100 million or more by any State, local, or tribal 
governments, or anyone in the private sector; therefore a statement 
under Section 202 of the Unfunded Mandates Reform Act of 1995 is not 
required.

Discussion of Program

Background

    Traditional agricultural conservation programs provide farmers and 
ranchers with cost share and land retirement payments as incentives to 
protect and conserve soil, water, and other natural resources, and 
provide technical assistance to implement conservation practices. In 
certain cases, however, these traditional programs lack sufficient 
flexibility to allow farmers and ranchers to operate in a manner they 
consider optimal or to address natural resource concerns which warrant 
innovative solutions. The CFO is intended to promote innovative and 
environmentally-sound methods for addressing these concerns.

Overview of the Conservation Farm Option Pilot Program

    In accordance with the 1985 Act, CCC will establish CFO pilot 
programs for producers of wheat, feed grains, upland cotton, and rice. 
Only those owners and producers that have a farm with contract acres 
enrolled in production flexibility contracts established under the 1996 
Act are eligible to participate in the CFO. Producers accepted into the 
CFO must enter into 10-year contracts which may be extended an 
additional 5 years. The purposes of CFO pilot programs include: (1) 
Conservation of soil, water, and related resources; (2) water quality 
protection or improvement; (3) wetland restoration, protection, and 
creation; (4) wildlife habitat development and protection; and (5) 
other similar conservation purposes. To enroll in the program, the 1985 
Act requires producers to prepare a conservation farm plan which 
becomes part of the

[[Page 16144]]

CFO contract. The plan describes all conservation practices to be 
implemented and maintained on acreage subject to contract. An important 
goal is to promote the adoption of resource conserving crop rotations 
while maintaining agricultural production and maximizing environmental 
benefits. The 1985 Act also requires the plan to contain a schedule for 
the implementation and maintenance of the practices, comply with highly 
erodible land and wetland conservation requirements of Title XII of the 
1985 Act, and contain such other terms as the Secretary may require. 
Producers must also agree to forgo payments under the Conservation 
Reserve Program (CRP), the Wetlands Reserve Program (WRP), and the 
Environmental Quality Incentives Program (EQIP). In lieu of these 
payments, the 1985 Act requires the Secretary to offer annual payments 
under the contract that are equivalent to the payments the owner or 
producer would have received had the owner or producer participated in 
the CRP, the WRP and the EQIP. CCC will determine the CFO payment rates 
taking into consideration the payments that would have been received 
under the CRP, WRP, and EQIP, as applicable. CRP payments will not 
exceed the maximum bid price accepted for similar land in the vicinity.
    The CFO pilot program will substitute a single annual payment for 
the different types of payments available under the CRP, the WRP, and 
EQIP, provide an incentive for coordinated, long-term natural resource 
planning, and be flexible enough to allow farmers and ranchers to 
operate in economically efficient, but innovative ways. The CFO 
provides for a locally-led approach by allowing individual farmers and 
ranchers, or groups of farmers and ranchers to implement innovative 
solutions to natural resource problems and encourages implementation of 
sustainable agricultural production practices. The CFO is a program 
that permits farmers and ranchers to maximize environmental benefits 
with minimal land retirement, while maintaining agricultural 
production.
    CCC will determine CFO participation in a two step process: First, 
CCC will select CFO pilot project areas based on proposals submitted by 
the public; then, CCC will accept applications from eligible producers 
within the selected pilot project area.

CFO Pilot Projects

    CFO pilot projects will address resource problems and needs that 
are well documented and on a scale that will facilitate the evaluation 
of the effectiveness of the systems and practices installed, as well as 
that of the entire program. CFO pilot projects are intended to be 
simple, flexible, and should encourage sustainable agricultural 
production practices and support locally led conservation goals.
    CCC will select CFO pilot project areas based on the extent of the 
proposal:
    1. Demonstrates innovative approaches to conservation program 
delivery and administration;
    2. Demonstrates innovative conservation technologies and systems;
    3. Creates environmental benefits in a cost effective manner;
    4. Addresses conservation of soil, water, and related resources, 
water quality protection or improvement; wetland restoration, 
protection, and creation; and wildlife habitat development and 
protection;
    5. Ensures effective monitoring and evaluation of the pilot effort;
    6. Considers multiple stakeholder participation (partnerships) 
within the pilot area; and
    7. Provides additional non-Federal funding.
    An interdepartmental committee made up of representatives of 
several Federal agencies will review the proposals and make 
recommendations to the Chief, NRCS, who is a Vice President of the CCC, 
based on criteria available to the public in the CFO proposal package. 
The CFO proposal package includes the CFO Pilot Proposal Form CCC-1210, 
instructions for completion of the CCC-1210, and the criteria for 
evaluating proposals. The CFO proposal package is available from any 
FSA or NRCS office. CCC will give preference to proposals that have 
high ratings based on the criteria upon which proposals will be 
evaluated.
    Pilot projects can involve either an individual or a group. In 
either case, to be considered for enrollment in CFO, each individual or 
entity within an approved pilot project area must submit an application 
which is the basis for the contract between the participant and CCC.

Pilot Project Area Proposal Submission

    CCC requests recommendations from the public regarding 
establishment of pilot project areas for fiscal year (FY) 1998. In FY 
1999 through FY 2002, the CCC may establish additional pilot projects, 
as funding allows. Pilot projects will be fully funded upon selection.
    CFO proposals may be developed for a group of eligible producers by 
organizations or entities that desire to coordinate individual producer 
plan development and implementation activities. These group proposals 
may promote the adoption of sustainable farming or other conservation 
practices on several farms, thus, expanding the opportunity for greater 
acceptance of innovative and environmentally sound farming practices. 
Achievements from these efforts may serve as on-farm models to 
encourage others to accept new measures without government assistance. 
Moreover, groups participating will promote program success stories to 
enhance the CFO based on proven results.
    The proposals for pilot project areas must be for the purpose(s) of 
conserving soil, water, and related resources; protecting or improving 
water quality; restoring, protecting and creating wetlands; developing 
and protecting wildlife habitat; or other similar conservation 
purposes.
    An individual, organization, or entity submitting the proposal will 
be responsible for providing leadership in the overall local planning 
effort, including activities such as education, information delivery, 
monitoring and coordination with local agencies, States or subdivisions 
thereof, tribal, and Federal agencies.

Selection Of Participants Within Pilot Project Areas

    Upon selection of pilot project areas, all producers with 
production flexibility contracts within the project area will be 
eligible to participate in the CFO. NRCS will approve CFO conservation 
farm plans and the local FSA office will approve the CFO contracts and 
make payments on behalf of CCC.
    Participation in CFO projects is open to all production flexibility 
contract holders without regard to race, color, national origin, sex, 
religion, age, disability, political beliefs and marital or familial 
status.

List of Subjects in 7 CFR Part 1468

    Administrative practices and procedures, Conservation plan, 
Contracts, Natural resources, Payment rates, Soil conservation, 
Technical assistance, Water resources, and Wetlands.
    Accordingly, Title 7 of the Code of Federal Regulations is amended 
by adding a new part 1468 to read as follows:

PART 1468--CONSERVATION FARM OPTION

Subpart A--General Provisions

Sec.
1468.1  Applicability.
1468.2  Administration.

[[Page 16145]]

1468.3  Definitions.
1468.4  Program requirements.
1468.5  CFO pilot project areas.
1468.6  Conservation plan.

Subpart B--Contracts

1468.20  Application for CFO program participation.
1468.21  Contract requirements.
1468.22  Conservation practice operation and maintenance.
1468.23  Annual payments.
1468.24  Contract modifications and transfers of land.
1468.25  Contract violations and termination.

Subpart C--General Administration

1468.30  Appeals.
1468.31  Access to operating unit.
1468.32  Performance based upon advice or action of representatives 
of CCC.
1468.33  Offsets and assignments.
1468.34  Misrepresentation and scheme or device.

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

Subpart A--General Provisions


Sec. 1468.1  Applicability.

    Through the Conservation Farm Option, the Commodity Credit 
Corporation (CCC) provides financial assistance to eligible farmers and 
ranchers to address soil, water, and related natural resources 
concerns, water quality protection or improvement; wetland restoration, 
protection, and creation; wildlife habitat development and protection 
and other similar conservation purposes on their lands in an 
environmentally beneficial and cost-effective manner. An important 
purpose is to promote the adoption of resource-conserving crop 
rotations while maintaining agricultural production and maximizing 
environmental benefits through the implementation of structural, 
vegetative, and land management practices on eligible land.


Sec. 1468.2  Administration.

    (a) Administration of CFO is shared by the Natural Resources 
Conservation Service (NRCS) and the Farm Service Agency (FSA) as set 
forth below.
    (b) NRCS shall:
    (1) Provide overall program management and implementation of the 
CFO;
    (2) Establish policies, procedures, priorities, and guidance for 
program implementation, including determination of pilot project areas;
    (3) Establish annual payment rates;
    (4) Make funding decisions and determine allocations of program 
funds;
    (c) FSA shall be responsible for the administrative processes and 
procedures for applications, contracting, financial matters, program 
accounting and distribution of allocations;
    (d) NRCS and FSA shall cooperate in establishing program policies, 
priorities, and guidelines related to the implementation of this part.
    (e) No delegation herein to lower organizational levels shall 
preclude the Chief of NRCS, or the Administrator of FSA, or a designee, 
from determining any question arising under this part or from reversing 
or modifying any determination made under this part that is the 
responsibility of their respective agencies.


Sec. 1468.3  Definitions.

    The following definitions shall apply to this part and all 
documents issued in accordance with this part, unless specified 
otherwise:
    Applicant means a producer who has requested in writing to 
participate in CFO.
    Chief means the Chief of NRCS, or designee.
    Conservation district means a political subdivision of a State, 
Indian tribe, or territory, organized pursuant to the State or 
territorial soil conservation district law, or tribal law. The 
subdivision may be a conservation district, soil conservation district, 
soil and water conservation district, resource conservation district, 
natural resource district, land conservation committee, or similar 
legally constituted body.
    Conservation plan means a record of a participant's decisions, and 
supporting information for treatment of a unit of land or water, 
including the schedule of operations, activities, and estimated 
expenditures needed to solve identified natural resource problems.
    Conservation practice means a specified treatment, such as a 
structural or vegetative practice or a land management practice, which 
is planned and applied according to NRCS standards and specifications.
    Contract means a legal document that specifies the rights and 
obligations of any person who has been accepted for participation in 
the program.
    County executive director means the FSA employee responsible for 
directing and managing program and administrative operations in one or 
more FSA county offices.
    County Farm Service Agency Committee means a committee elected by 
the agricultural producers in the county or area, in accordance with 
Sec. 8(b) of the Soil Conservation and Domestic Allotment Act, as 
amended, or designee.
    Field office technical guide means the official NRCS guidelines, 
criteria, and standards for planning and applying conservation 
treatments and conservation management systems. It contains detailed 
information on the conservation of soil, water, air, plant, and animal 
resources applicable to the local area for which it is prepared.
    Indian tribe means any Indian tribe, band, nation, or other 
organized group or community, including any Alaska Native village or 
regional or village corporation as defined in or established pursuant 
to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.) 
which is recognized as eligible for the special programs and services 
provided by the United States to Indians because of their status as 
Indians.
    Land management practice means conservation practices that 
primarily require site-specific management techniques and methods to 
conserve, protect from degradation, or improve soil, water, or related 
natural resources in the most cost-effective manner. Land management 
practices include, but are not limited to, nutrient management, manure 
management, integrated pest management, integrated crop management, 
irrigation water management, tillage or residue management, 
stripcropping, contour farming, grazing management, and wildlife 
habitat management.
    Liquidated damages means a sum of money stipulated in the contract 
which the participant agrees to pay, in addition to refunds and other 
charges, if the participant breaches the contract, and represents an 
estimate of the anticipated or actual harm caused by the breach, and 
reflects the difficulties of proof of loss and the inconvenience or 
nonfeasibility of otherwise obtaining an adequate remedy.
    Operation and maintenance means work performed by the participant 
to keep the applied conservation practice functioning for the intended 
purpose during its life span. Operation includes the administration, 
management, and performance of non-maintenance actions needed to keep 
the completed practice safe and functioning as intended. Maintenance 
includes work to prevent deterioration of the practice, repairing 
damage, or replacement of the practice to its original condition if one 
or more components fail.
    Participant means an applicant who is a party to a CFO contract.
    Secretary means the Secretary of the United States Department of 
Agriculture.
    State conservationist means the NRCS employee authorized to direct 
and supervise NRCS activities in a State, the Caribbean Area, or the 
Pacific Basin Area.

[[Page 16146]]

    State technical committee means a committee established by the 
Secretary in a State pursuant to 16 U.S.C. 3861.
    Technical assistance means the personnel and support resources 
needed to conduct conservation planning; conservation practice survey, 
layout, design, installation, and certification; training, 
certification, and quality assurance for professional conservationists; 
and evaluation and assessment of the program.
    Unit of concern means a parcel of agricultural land that has 
natural resource conditions that are of concern to the participant.


Sec. 1468.4  Program requirements

    (a) Program participation is voluntary. The participant is 
responsible for the development of a conservation plan for the farm or 
ranching unit of concern. The participant's conservation plan is a part 
of the CFO contract. CCC will provide annual payments to a participant 
to apply needed conservation practices and land use adjustments as 
specified in a time schedule set forth in the conservation plan.
    (b) To be eligible to participate in CFO, an applicant must have a 
production flexibility contract in accordance with part 1412 of this 
chapter.
    (c) Participants in the CFO must:
    (1) Agree to forgo payments under the Conservation Reserve Program 
authorized by part 1410 of this chapter, the Wetlands Reserve Program 
authorized by part 1467 of chapter, and Environmental Quality 
Incentives Program authorized by part 1466 of this chapter, on the farm 
enrolled in the CFO.
    (2) Be in compliance with the highly erodible land and wetland 
conservation provisions found at part 12 of this title;
    (3) Have control of the land for the term of the proposed contract 
period.
    (i) An exception may be made by the Chief in the case of land 
allotted by the Bureau of Indian Affairs (BIA), tribal land, or other 
instances in which the Chief determines that there is sufficient 
assurance of control;
    (ii) and if the applicant is a tenant of the land involved in 
agricultural production the applicant shall provide CCC with the 
written authorization by the landowner to apply the structural or 
vegetative practice.
    (4) Submit a proposed conservation plan to CCC. When considering 
the acceptability of the plan, CCC will consider whether the 
participant will use the most cost-effective conservation practices to 
solve the natural resource concerns and maximize environmental benefits 
per dollar expended. The conservation practices must be eligible 
practices under CRP, WRP, or EQIP, or some other innovative 
conservation measure approved by the State Conservationist.
    (5) Comply with the provisions at Sec. 1412.304 of this chapter for 
protecting the interests of tenants and sharecroppers, including 
provisions for sharing, on a fair and equitable basis, payments made 
available under this part, as may be applicable;
    (6) Supply information as required by CCC to determine eligibility 
for the program.
    (7) Comply with all the provisions of the CFO contract which 
includes the conservation plan approved by CCC.
    (d) States, political subdivisions, and agencies thereof are not 
eligible to participate in CFO.
    (e) Land may be eligible for enrollment in CFO if such land is 
otherwise eligible for the program and used as:
    (1) Cropland;
    (2) Rangeland;
    (3) Pasture;
    (4) Forest land;
    (5) Other land on which crops or livestock are produced; and
    (6) Other agricultural land that NRCS determines poses a serious 
threat to soil, water, or related natural resources by reason of the 
soil types, terrain, climate, soil, saline characteristics, or other 
factors or natural hazards, such as the existing agricultural 
management practices of the applicant.
    (f) In addition to meeting the land eligibility requirements in 
paragraph(e) of this section, land may be only considered for 
enrollment in CFO if CCC determines that the land is:
    (1) Privately-owned land;
    (2) Publicly-owned land where--
    (i) The land is under private control for the contract period and 
is included in the participant's operating unit;
    (ii) Installation of conservation practices will not primarily 
benefit the government landowner;
    (iii) Conservation practices will contribute to an improvement in 
the identified natural resource concern; and
    (iv) The participant has provided CCC with written authorization 
from the government landowner to apply the conservation practices; or
    (3) Tribal, allotted, or Indian trust land.


Sec. 1468.5  CFO Pilot project areas

    (a)(1) CCC may solicit proposals from the public to establish pilot 
project areas.
    (2) CCC shall select pilot project areas based on the extent the 
individual proposal:
    (i) Demonstrates innovative approaches to conservation program 
delivery and administration;
    (ii) Proposes innovative conservation technologies and system;
    (iii) Proposes cost effective solutions to environmental concerns;
    (iv) Ensures effective evaluation of the pilot effort; and
    (v) Addresses the following:
    (A) Conservation of soil, water, and related resources,
    (B) Water quality protection or improvement,
    (C) Wetland restoration, protection, and creation, and
    (D) Wildlife habitat development and protection.
    (b) Pilot projects may involve one or more participants. Each 
individual or entity within an approved pilot project area must submit 
an application in order to be considered for enrollment in the CFO.


Sec. 1468.6  Conservation plan

    (a) The conservation plan for the farm or ranch unit of concern 
shall:
    (1) Describe any resource conserving crop rotation, and all other 
conservation practices, to be implemented and maintained on the acreage 
that is subject to contract during the contact period; and
    (2) Address the resource concerns identified in the CFO Pilot 
Proposal through the methods, systems or practices specified in the CFO 
Pilot Proposal.
    (3) Contain a schedule for the implementation and maintenance of 
the practices described in the conservation farm plan; and
    (b) The conservation plan is part of the CFO contract.
    (c) The conservation plan must allow the participant to achieve a 
cost-effective resource management system, or some appropriate portion 
of that system, identified in the applicable NRCS field office 
technical guide or as approved by the State Conservationist.
    (d) Upon a participant's request, the NRCS may provide technical 
assistance to a participant.
    (1) NRCS may utilize the services of qualified personnel of 
cooperating Federal, State, or local agencies, Indian tribes, or 
private agribusiness sector or organizations, in performing its 
responsibilities for technical assistance.
    (2) Participants may, at their own cost, use qualified 
professionals to provide technical assistance. NRCS retains approval 
authority over the technical adequacy of work done by non-NRCS 
personnel for the purpose of determining CFO contract compliance.
    (3) Technical and other assistance provided by qualified personnel 
not

[[Page 16147]]

affiliated with NRCS may include, but not limited to: conservation 
planning; conservation practice survey, layout, design, and 
installation; information, education, and training for producers; and 
training, and quality assurance for professional conservationists.
    (e) Participants are responsible for implementing the conservation 
plan. A participant may seek additional assistance from other public or 
private organizations or private agribusiness sector as long as the 
activities funded are in compliance with this part.
    (f) All conservation practices scheduled in the conservation plan 
are to be carried out in accordance with the applicable NRCS field 
office technical guide. The State Conservationist may approve use of 
innovative conservation measures that are not contained in the NRCS 
field office technical guide.
    (g)(1) To simplify the conservation planning process for the 
participant, the conservation plan may be developed, at the request of 
the participant, as a single plan that incorporates, other Federal, 
State, tribal, or local government program or regulatory requirements; 
and the CCC development or approval of a conservation plan shall not 
constitute compliance with program, statutory and regulatory 
requirements administered or enforced by another agency, except as 
agreed to by the participant and the relevant Federal, State, local or 
tribal entities.
    (2) CCC may accept an existing conservation plan developed and 
required for participation in any other CCC or USDA program if the 
conservation plan otherwise meets the requirements of this part. When a 
participant develops a single conservation plan for more than one 
program, the participant shall clearly identify the portions of the 
plan that are applicable to the CFO contract. It is the responsibility 
of the participant to ascertain and comply with all applicable 
statutory and regulatory requirements.

Subpart B--Contracts


Sec. 1468.20  Application for CFO Program Participation

    (a) Any eligible farmer or rancher within an approved pilot project 
area, may submit an application for participation in the CFO to a 
service center or other USDA county or field office of FSA or NRCS.
    (b) CCC will accept applications throughout the year. CCC will rank 
and select the offers of applicants periodically, as determined 
appropriate by CCC.
    (c) CCC will develop ranking criteria to prioritize applications 
within a pilot project area; and will accept applications in a pilot 
project area based on eligibility factors of the applicant and this 
ranking.
    (d) An applicant has the option of offering and accepting less than 
the maximum program payments allowed.
    (e) CCC will rank all applications using criteria that will 
consider
    (1) The degree to which the application is consistent with the 
pilot project proposal;
    (2) The environmental benefits that will be derived by applying the 
conservation practices in the conservation plan which will meet the 
purposes of the program;
    (3) An estimate of the cost of annual payments; and
    (4) The environmental benefits per dollar expend;
    (f) If two or more applications have an equal rank, the application 
that will result in the least cost to the program will be given greater 
consideration.


Sec. 1468.21  Contract requirements

    (a) In order for an applicant to receive annual payments, the 
applicant shall enter into a contract agreeing to implement a 
conservation plan.
    (b) A CFO contract shall:
    (1) Incorporate by reference all portions of a conservation plan 
applicable to CFO;
    (2) Be for a duration of 10 years, and may be renewed, subject to 
the availability of funds, for a period not to exceed 5 years upon 
mutual agreement of CCC and the participant;
    (3) Provide that the participant will:
    (i) Not conduct any practices on the farm or ranch unit of concern 
consistent with the goals of the contract that would attend to defeat 
the purposes of the contract, and reduce net environmental and societal 
benefits,
    (ii) In accordance with the provisions of Sec. 1468.25 of this 
part, refund with interest any program payments received and forfeit 
any future payments under the program, on the violation of a term or 
condition of the contract.
    (iii) Refund all program payments received on the transfer of the 
right and interest of the producer in land subject to the contract, 
unless the transferee of the right and interest agrees to assume all 
obligations of the contract, in accordance with the provisions of 
Sec. 1468.24 of this part, and
    (iv) Supply information as required by CCC to determine compliance 
with the contract and requirements of the program;
    (4) Specify the participant's requirements for operation and 
maintenance of the applied conservation practices in accordance with 
the provisions of Sec. 1468.22 of this part, and
    (5) Include any other provision determined necessary or appropriate 
by CCC.
    (c) There is a limit of one CFO contract at any one time for each 
farm, as identified with FSA number, determined at the time of the 
application for CFO assistance.


Sec. 1468.23  Annual payments.

    (a) Annual payments, subject to the availability of funds, will be 
based on the value of the expected payments that would have been paid 
to the participant under CRP, WRP, or EQIP, as applicable.
    (b) The participant must certify that a conservation practice is 
completed in accordance with the conservation plan to establish 
compliance with the contract.


Sec. 1468.24  Contract modifications and transfers of land.

    (a) The participant and CCC may modify a contract if the 
participant and CCC agree to the contract modification and the 
conservation plan is revised in accordance with CCC requirements.
    (b) The parties may agree to transfer a contract with the agreement 
of all parties to the contract. The transferee must be determined by 
CCC to be eligible and shall assume full responsibility under the 
contract, including operation and maintenance of those conservation 
practices already installed and to be installed as a condition of the 
contract.


Sec. 1468.25  Contract violations and termination.

    (a)(1) If CCC determines that a participant is in violation of the 
terms of a contract or the provisions of this part, CCC may give the 
participant a reasonable time to correct the violation. If a 
participant continues in violation, CCC will terminate the CFO 
contract.
    (2) Notwithstanding the provisions of (a)(1), a contract 
termination shall be effective immediately upon a determination by CCC, 
that the participant has submitted false information, filed a false 
claim, or engaged in any act for which a finding of ineligibility for 
payments is permitted under the provisions of Sec. 1468.35 of this 
part, or in a case in which the actions of the party involved are 
deemed to be sufficiently purposeful or negligent to warrant a 
termination without delay.
    (b)(1) If CCC terminates a contract, the participant shall forfeit 
all rights for future payments under the contract and

[[Page 16148]]

shall refund all or part of the payments received, plus interest, 
determined in accordance with part 1403 of this chapter. The county FSA 
committee, in consultation with NRCS, has the option of requiring only 
partial refund of the payments received if a previously installed 
conservation practice can function independently, is not affected by 
the violation or other conservation practices that would have been 
installed under the contract, and the participant agrees to operate and 
maintain the installed conservation practice for the life span of the 
practice.
    (2) If CCC terminates a contract due to breach of contract or the 
participant voluntarily terminates the contract before any contractual 
payments have been made, the participant shall forfeit all rights for 
further payments under the contract and shall pay such liquidated 
damages as are prescribed in the contract.
    (3) When making all contract termination decisions, CCC may reduce 
the amount of money owed by the participant by a proportion which 
reflects the good-faith effort of the participant to comply with the 
contract, or the hardships beyond the participant's control that have 
prevented compliance with the contract.
    (4) The participant may voluntarily terminate a contract if, based 
on CCC's determination that such termination would be in the public 
interest, CCC approves the termination.

Subpart C--General Administration


Sec. 1468.30  Appeals.

    (a) An applicant or participant may obtain administrative review of 
an adverse decision made with respect to this part and the CFO contract 
in accordance with parts 2 and 614 of this title, except as provided in 
paragraph (b) of this section.
    (b) The following decisions are not appealable:
    (1) CCC funding allocations;
    (2) Eligible conservation practices; and
    (3) Other matters of general applicability.


Sec. 1468.31  Access to operating unit.

    Any authorized CCC representative shall have the right to enter an 
operating unit or tract for the purpose of ascertaining the accuracy of 
any representations made in a contract or in anticipation of entering a 
contract, or as to the performance of the terms and conditions of the 
contract. Access shall include the right to provide technical 
assistance and inspect any work undertaken under the contract. The CCC 
representative shall make a reasonable effort to contact the 
participant prior to the exercise of this right to access.


Sec. 1468.32  Performance based upon advice or action of 
representatives of CCC.

    If a participant relied upon the advice or action of any authorized 
representative of CCC, and did not know or have reason to know that the 
action or advice was improper or erroneous, the county FSA committee, 
in consultation with NRCS, may accept the advice or action as meeting 
the requirements of the program and may grant relief, to the extent it 
is deemed desirable by CCC, to provide a fair and equitable treatment 
because of the good-faith reliance on the part of the participant.


Sec. 1468.33  Offsets and assignments.

    (a) Except as provided in paragraph (b) of this section, any 
payment or portion thereof to any participant shall be made without 
regard to questions of title under State law and without regard to any 
claim or lien against the crop, or proceeds thereof, in favor of the 
owner or any other creditor except agencies of the United States. The 
regulations governing offsets and withholdings found at part 1403 of 
this chapter shall apply to contract payments.
    (b) Any participant entitled to any payment may assign any payments 
in accordance with regulations governing assignment of payment found at 
part 1404 of this chapter.


Sec. 1468.34  Misrepresentation and scheme or device.

    (a) A participant who is determined to have erroneously represented 
any fact affecting a program determination made in accordance with this 
part shall not be entitled to contract payments and must refund to CCC 
all payments, plus interest determined in accordance with part 1403 of 
this chapter.
    (b) An applicant or participant who is determined to have knowingly 
adopted any scheme or device that tends to defeat the purpose of the 
program, made any fraudulent representation, or misrepresented any fact 
affecting a program determination, shall refund to CCC all payments, 
plus interest determined in accordance with part 1403 of this chapter, 
received by such applicant or participant with respect to CFO 
contracts.

    Signed in Washington, D.C. on March 26, 1998.
Pearlie S. Reed,
Vice President, Commodity Credit Corporation.
[FR Doc. 98-8505 Filed 4-1-98; 8:45 am]
BILLING CODE 3410-16-P