[Federal Register Volume 63, Number 222 (Wednesday, November 18, 1998)]
[Proposed Rules]
[Pages 64154-64165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30756]



[[Page 64153]]

_______________________________________________________________________

Part III





Department of the Interior





_______________________________________________________________________



Bureau of Reclamation



_______________________________________________________________________



43 CFR Part 428



Information Requirements for Certain Farm Operations In Excess of 960 
Acres and the Eligibility of Certain Formerly Excess Land; Proposed 
Rule

  Federal Register / Vol. 63, No. 222 / Wednesday, November 18, 1998 / 
Proposed Rules  

[[Page 64154]]



DEPARTMENT OF THE INTERIOR

Bureau of Reclamation

43 CFR Part 428

RIN 1006-AA38


Information Requirements for Certain Farm Operations In Excess of 
960 Acres and the Eligibility of Certain Formerly Excess Land

AGENCY: Bureau of Reclamation, Interior.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would add a new part to the Bureau of 
Reclamation's (Reclamation) regulations to supplement the Acreage 
Limitation Rules and Regulations in 43 CFR part 426 that implement the 
Reclamation Reform Act of 1982 (RRA). The proposed rule would require 
certain farm operators to submit RRA forms that describe the services 
they perform and the land they service. The rule would also address the 
eligibility of certain formerly excess land held in trusts or by legal 
entities to receive nonfull-cost Reclamation irrigation water.

DATES: Reclamation must receive written comments on this proposed rule 
by January 19, 1999. We will not necessarily consider comments received 
after the above date during our review of the proposed rule.

ADDRESSES: If you wish to comment, you may submit your comments by any 
one of several methods. You may mail comments to: Administrative 
Record, Commissioner's Office, Bureau of Reclamation, 1849 C Street 
N.W., Washington, D.C. 20240. You may also comment via the Internet to 
[email protected] (see Public Comment Procedures under SUPPLEMENTARY 
INFORMATION). In addition, you may hand-deliver comments to 
Commissioner's Office, Bureau of Reclamation, 1849 C Street N.W., 
Washington, D.C. 20240.

FOR FURTHER INFORMATION CONTACT: Erica Petacchi, (202) 208-3368, or 
Richard Rizzi, (303) 445-2900.

SUPPLEMENTARY INFORMATION: This section provides the following 
information:

I. Public Comment Procedures
II. Introduction
III. Summary of Proposed Changes
IV. Background
V. Public Involvement
VI. Public Comments and Responses on Advance Notice of Proposed 
Rulemaking
VII. Detailed Analysis of Proposed 43 CFR Part 428
VIII. Procedural Matters
IX. List of Subjects in 43 CFR Part 428

I. Public Comment Procedures

    Written comments on the proposed rule should be specific, should be 
confined to issues pertinent to the proposed rule, and should explain 
the reason for any recommended change. Where possible, comments should 
reference the specific section or paragraph of the proposal which the 
commenter is addressing. We may not necessarily consider or include in 
the Administrative Record for the final rule comments which we receive 
after the close of the comment period (see DATES) or comments delivered 
to an address other than those listed above (see ADDRESSES). We will 
not consider anonymous comments.
    If you submit your comments via the Internet, please submit as an 
ASCII file avoiding the use of special characters and any form of 
encryption. Please include in the subject line ``AA38'' and include 
your name and return address in the body of your Internet message. If 
you do not receive a confirmation that we have received your Internet 
message, contact us directly at (202) 208-3368.
    The administrative record and all comments, including names and 
home addresses of respondents, will be available for public review at 
the address listed above (see ADDRESSES), during the hours of 9:00 a.m. 
to 4:00 p.m., Monday through Friday, except holidays. Individual 
respondents may request that we withhold their home address from the 
rulemaking record, which we will honor to the extent allowable by law. 
There also may be circumstances in which we would withhold from the 
rulemaking record a respondent's identity, as allowable by law. If you 
wish us to withhold your name and/or address, you must state this 
prominently at the beginning of your comment. We will make all 
submissions from organizations or businesses, and from individuals 
identifying themselves as representatives or officials of organizations 
or businesses, available for public inspection in their entirety.

II. Introduction

    This proposed rule would supplement the Acreage Limitation Rules 
and Regulations, 43 CFR part 426, that govern implementation and 
administration of the RRA. The proposed rule would create a separate 
CFR part, 43 CFR part 428, addressing information requirements for 
certain farm operators, and the eligibility of certain formerly excess 
land that is operated by a farm operator who was the landowner of that 
land when it was ineligible excess land or land placed under recordable 
contract.
    We are proposing this rule to address comments raised in both the 
rulemaking concluded on December 18, 1996 (the Acreage Limitation Rules 
and Regulations) and in the Advance Notice of Proposed Rulemaking 
(ANPR) published in the Federal Register (61 FR 66827, Dec. 18, 1996). 
Among other things, the comments stated that although we collect 
information from landholders to verify compliance with the RRA, we do 
not collect this information from farm operators. Commenters pointed 
out that we, consequently, may not have adequate information to 
determine if the provisions of a farm operating arrangement constitute 
a ``lease'' under the acreage limitation provisions and thus require 
application of the nonfull-cost entitlements of the RRA. Other comments 
stated that we should analyze all farm operations in excess of 960 
acres to determine compliance with the acreage limitation provisions of 
Federal reclamation law. Public comments from the ANPR are addressed 
below.
    We believe that this rule balances the interests in enforcing the 
law with the interests of limiting paperwork burdens on the public. By 
limiting the applicability of the proposed rule as described below, we 
hope to target our resources to achieve compliance with the acreage 
limitation provisions of Federal reclamation law in an efficient 
manner. We seek comments on whether this rule will meet that goal.

III. Summary of Proposed Changes

    The proposed rule would extend RRA certification and reporting 
forms requirements to farm operators who:
    (1) Provide services to more than 960 acres held (directly or 
indirectly owned or leased) by one trust or legal entity, or
    (2) Provide services to the holdings of any combination of trusts 
and legal entities that exceed 960 acres.
    In addition, this part applies to the eligibility of formerly 
excess land held in trusts or by legal entities, that is operated by a 
farm operator who was the landowner of that land when it was ineligible 
excess land or land placed under recordable contract. The provisions of 
43 CFR part 426 not specifically addressed in this rule are unchanged.
    This section summarizes the differences between the existing 
regulations and the proposed rule. A detailed analysis can be found 
later in this preamble.

[[Page 64155]]

Certification and Reporting Requirements

    Under 43 CFR part 426, landholders (direct or indirect landowners 
or lessees) whose total westwide landholdings exceed the RRA forms 
submittal thresholds must submit RRA forms. Farm operators do not now 
have to submit RRA forms. The new 43 CFR part 428 would extend 
certification and reporting requirements to farm operators who (1) 
provide services to more than 960 acres held by one trust or legal 
entity, or (2) provide services to the holdings of any combination of 
trusts and legal entities that exceed 960 acres. By extending the 
certification and reporting requirements to these farm operators, we 
can get information that we need to determine the following :
    (1) Who has use or possession of the land being farmed under a farm 
operating arrangement; and
    (2) Who is responsible for payment of operating expenses, and who 
is entitled to receive the profits from the farming operation as 
indicators of economic risk.
    We need this information because the acreage limitation provisions 
apply to all owned or leased land. Use or possession of the land and 
who has all or a portion of the economic risk associated with the 
farming enterprises are the factors we use to determine if a farm 
operating arrangement is in fact a lease. If we determine that a farm 
operating arrangement is a lease, then the farm operator leasing the 
land will be subject to the acreage limitation provisions.

Excess Land Provisions

    Part 426 provides that a seller of excess land may not receive 
Reclamation irrigation water if he or she again becomes the landholder 
of that land either voluntarily or involuntarily, with certain 
exceptions. This proposed rule would apply similar restrictions to farm 
operators who sold their excess land at an approved price, and provide 
services to that land if it is held in trust or by a legal entity. The 
only exceptions would be if the formerly excess land became exempt from 
application of the acreage limitation provisions or the full-cost rate 
was paid for deliveries of Reclamation irrigation water to the formerly 
excess land. This provision will not be effective until January 1, 
2000, at which time all farm operating arrangements between farm 
operators and trusts or legal entities that meet the criteria will be 
affected. This includes farm operating arrangements that were in 
existence prior to January 1, 2000, as well as any farm operating 
arrangement initiated on or after that date. We believe this provision 
is consistent with the intent of the RRA excess land provisions, and 
that it parallels excess land provisions that apply to landholders.
    The following example illustrates the situation this provision 
would address: Landowner A, a qualified recipient, owns 5,000 acres 
subject to the acreage limitation provisions, which is 4,040 acres more 
than his 960-acre ownership entitlement. Landowner A sells his excess 
land at a price that Reclamation approved to a trust benefitting 10 
individuals who are each subject to the discretionary provisions; none 
of the beneficiaries' landholdings exceed their acreage limitation 
entitlements. The trustee of the trust then hires Landowner A to 
operate the land owned by the trust. Consequently, Landowner A 
continues to farm the entire 5,000 acres as a farm operator, and the 
land continues to receive Reclamation irrigation water at the nonfull-
cost rate.
    We do not believe the intent of the excess land provisions of 
Federal reclamation law has been met in the preceding example. As part 
of the rulemaking that was completed on December 18, 1996, we included 
as Sec. 426.12(g) a provision that addresses this issue with regard to 
landholders. It provides that a district may not make Reclamation 
irrigation water available at the nonfull-cost rate to excess land 
disposed of by a landholder at a price Reclamation approved, whether or 
not under recordable contract, if the landholder later becomes a direct 
or indirect landholder of that land through either a voluntary or 
involuntary action. Section 426.12(g) provides specific exceptions to 
this provision.
    We believe that, starting on January 1, 2000, this same concept 
should apply to farm operators who provide services to land held in 
trusts or by legal entities or any combination thereof that the farm 
operator formerly owned as excess and sold at an approved price. We are 
seeking comments on the following issues related to formerly excess 
land and farm operators:
     Should we apply this excess land provision more broadly or 
should we include other exceptions to the proposed provision?
     Should we not include either of the two exceptions 
provided in the proposed rule (the land is no longer subject to the 
acreage limitation provisions and payment of the full-cost rate for 
deliveries of Reclamation irrigation water to the land in question) or 
should we otherwise alter them in some manner?
     Is the effective date of January 1, 2000, reasonable for 
this excess land provision or should we apply some other date?

IV. Background

    The RRA modernized Federal reclamation law, while retaining the 
principle of limiting the benefits of receiving Federally subsidized 
water to farmers with relatively small landholdings. The RRA adjusted 
the acreage limitations for farms eligible to receive nonfull-cost 
water. This change was intended to facilitate modern farming practices 
and to limit nonfull-cost water deliveries generally to landholdings of 
960 acres or less, rather than the 160 acres established by the 
Reclamation Act of 1902. However, not only does the RRA provide a 
number of exceptions to the 960-acre limitation, such as those 
associated with certain involuntary acquisitions, it also provides for 
much lower entitlement levels for legal entities that benefit more than 
25 natural persons. In addition, the RRA and the part 426 regulations 
include provisions that exempt trustees acting in a fiduciary capacity 
from application of the acreage limitation provisions if certain 
criteria are met.
    The RRA does not force districts or landholders to conform to the 
new acreage limitation provisions; thus, the prior law provisions still 
apply to some districts and landholders. Any owned land subject to 
acreage limitations that exceeds a landholder's ownership entitlement 
is considered excess land, and must be sold to an eligible buyer at a 
price that Reclamation approves in order for that excess land to be 
eligible to receive Reclamation irrigation water at any price. Any 
owned or leased land subject to acreage limitations that exceeds a 
landholder's nonfull-cost entitlement is considered full-cost land and 
the landholder must pay the full-cost rate for any Reclamation 
irrigation water delivered to that land.
    The part 426 regulations implement certain provisions of the RRA. 
They address the ownership and leasing of land on Federal Reclamation 
irrigation projects, the pricing of Reclamation irrigation water, and 
certain terms and conditions for delivery of Reclamation irrigation 
water. Under part 426, we require all landholders (individuals or legal 
entities that directly or indirectly own or lease land that is subject 
to acreage limitation provisions of Federal reclamation law) whose 
landholdings exceed established RRA forms submittal thresholds to file 
RRA forms. Landholders must provide information on RRA forms about the 
land they hold, and certify that they are in compliance with the 
acreage limitation provisions of Federal reclamation law. The

[[Page 64156]]

regulations also provide that a district may not make available 
Reclamation irrigation water to excess land disposed of by a landholder 
at a price Reclamation approved, whether or not under recordable 
contract, if the landholder subsequently becomes a direct or indirect 
landholder of that land through either a voluntary or involuntary 
action.
    On December 11, 1996, the Natural Resources Defense Council (NRDC) 
and the Departments of Interior and Justice entered into an amended 
settlement contract in the case of NRDC v. Underwood, No. Civ. S-88-
375-LKK (a full description of this litigation may be found in the 
preamble to the final rule for the Acreage Limitation Rules and 
Regulations (61 FR 66757, Dec. 18, 1996)). As a result, the Department 
of the Interior (Interior) published the ANPR and invited comments and 
suggestions on the following:
     Whether to limit nonfull-cost water deliveries to large 
trusts with landholdings in excess of 960 acres (or other applicable 
acreage thresholds under the RRA);
     The criteria used to determine whether landholdings in 
excess of 960 acres, operated under a trust agreement, should be 
eligible to receive nonfull-cost water deliveries;
     Whether nonfull-cost water deliveries to such landholdings 
are consistent with the principles of Federal reclamation law and sound 
public policy and, if not, how to implement a limit on such deliveries;
     What procedures might ensure fairness in transition to new 
regulations that would limit large trusts to 960 acres for nonfull-cost 
water, and what safeguards are necessary to avoid such trusts from 
adopting some other, as yet unregulated form, to escape acreage 
limitations; and
     The extent of Interior's statutory authority to address 
these issues, including the extent of Interior's legal authority to 
regulate: future trusts, trusts established from 1982 to the present, 
and trusts established before 1982.

Need for Applying Excess Land Provisions to Certain Farm Operators

    In considering potential abuses of existing rules concerning 
trusts, we have focused on trusts that hold more than 960 acres 
westwide. In several instances, these large trusts were created by 
owners of excess lands who were required by Section 209 of the RRA to 
dispose of their interests in excess lands or face the permanent 
ineligibility of the lands for receipt of Reclamation irrigation water. 
By requiring the disposal of excess lands, the Congress was attempting 
to assure that the benefits of Federal irrigation water would be more 
widely distributed.
    In some instances owners of excess lands sold or transferred their 
excess lands to large trusts. Then, some of these trusts, which are 
subject to more liberal acreage limitation provisions, entered into 
farm operating agreements with the former owners of such land, creating 
a situation where substantially the same enterprise continued to farm 
the same large acreage.
    The foregoing practice has in fact occurred on a limited basis in 
the Central Valley Project in California, and we are further concerned 
that the practice may occur elsewhere in the future as recordable 
contracts under which excess lands have been temporarily made eligible 
to receive Reclamation irrigation water expire or other excess lands 
are sold.
    While the foregoing arrangements are in literal conformance with 
existing regulations, we believe that they do not meet the intent of 
the law. To address this issue, we are proposing a change in how 
Section 209 is administered to attribute to former owners of excess 
lands any formerly excess land held in trusts and operated by the 
former owner of the excess lands. Essentially, we propose to treat the 
contractual relationship between the trust and the former owner of 
excess lands as a continuing financial interest in such lands by the 
former landowner, an interest that we can regulate in our rulemaking 
power granted by the Congress in Section 224 of the RRA. This change 
would eliminate any incentive for former owners of excess lands to use 
the large trust vehicle to maintain a continuing farming enterprise and 
would curb any abuse of congressional intent inherent in such 
arrangements.
    We propose to apply this concept also to legal entities that hold 
formerly excess land and hire the former owner of such land under a 
farm operating arrangement. We do not believe there are many instances 
where legal entities have bought formerly excess land and then arranged 
for the former owner to farm the land as a farm operator. However, we 
are concerned that application of this concept only to trusts does not 
cover the full scope of possible arrangements and may result in a 
transfer of land ownership to various legal entities that will continue 
to arrange to have the land farmed in the same manner as the trust. We 
want to preclude such actions.
    To ensure a transition and public education period, we will not 
implement this provision until January 1, 2000. This provides an 
opportunity for all trusts and legal entities that would be affected by 
the excess land provision (because their landholdings include formerly 
excess land and they have hired the former landholder to provide 
services to such land as a farm operator) to make other farming 
arrangements. In doing so, affected trusts and legal entities can avoid 
having to pay the full-cost rate for the delivery of Reclamation 
irrigation water to the formerly excess land, or even the ineligibility 
of such land, if they take action before January 1, 2000. Of course, 
affected trusts and legal entities could limit the consequences of the 
excess land provision at any time after January 1, 2000, by making 
alternative arrangements in how the formerly excess land is farmed. In 
addition, this proposed change will not affect the underlying trust 
itself. Trusts are still subject to the requirements of Section 214 of 
the RRA, and as such, the acreage limitation entitlements of the 
landholder(s) to whom the land held in trust is attributed will 
determine if the land is eligible to receive Reclamation irrigation 
water in the holdings of the trust.

Need for Certification and Reporting From Certain Farm Operators

    In December 1987, the Congress amended the RRA by passing the audit 
provisions of the Omnibus Budget Reconciliation Act of 1987 (section 
224[g] of the RRA as amended). Section 224[g] directed the Secretary of 
the Interior (Secretary), or his designee, to undertake audits of 
``those legal entities and individuals whose landholdings or operations 
exceed 960 acres. * * *'' To comply with this mandate, we considered 
requiring all farm operators to submit RRA forms. However, by the time 
a proposed rule was published in the Federal Register (53 FR 21857, 
Jun. 10, 1988) we did not include that concept. Instead, we altered the 
general information requirements of the Acreage Limitation Rules and 
Regulations to make it clear that natural persons or legal entities 
operating land were required to provide records and information upon 
our request. This decision was confirmed in the final rules, which were 
effective on January 17, 1989 (53 FR 50530, Dec. 16, 1988). We then 
revised the RRA forms to require landholders to provide additional 
information concerning their farm operators.
    Since 1989, we have learned that other approaches could be more 
effective and that this procedure places a greater burden on both the 
districts and us than if certain farm operators

[[Page 64157]]

were required to submit RRA forms. The current approach also greatly 
increases the likelihood that all farm operators providing services to 
more than 960 acres westwide will not be identified.
    In order for the current system to work, information concerning 
farm operators must be gathered from all RRA forms landholders submit 
annually. That information then must be collated on a westwide basis to 
determine if any farm operator is providing services to more than 960 
acres. The collation is required because any landholder, other than a 
trust, whose landholding exceeds 960 acres is either (a) not receiving 
Reclamation irrigation water on such land or (b) paying the full-cost 
rate for Reclamation irrigation water received on such land. In the 
case of the former, we have little interest in activities farm 
operators may have on land that is not receiving Reclamation irrigation 
water. In the case of the latter, determining that a farm operator is a 
lessee will have little effect on the eligibility of the land in 
question or the rate associated with the water deliveries to that land, 
since the full-cost rate is already being applied. What we need to 
identify are those farm operators providing services to multiple 
landholdings, the total of which exceed 960 acres. Then we must 
determine if the arrangements under which the services are being 
provided are leases for acreage limitation purposes.
    We knew in 1988 that if only the name and address of farm operators 
were provided by landholders, it would be difficult to collate the 
data. This is due to the fact that operators may be providing services 
under different entity names and, if the operator is an individual, 
landholders may know the operator by different names (e.g., J. Smith, 
John Smith, Johnny Smith, Jack Smith, Smith Enterprises, etc.). In 
addition, there may be multiple farm operators that have the same name. 
If we relied only on addresses, we may be faced with multiple addresses 
for one farm operator which we would not be able to easily determine 
was the same person or entity (e.g., post office boxes, business 
address, residential address, etc.). Thus, we tried to use telephone 
numbers as the unique identifier, but this effort depends on the 
landholder providing such on their RRA forms. Regardless, we have 
determined that the current process does not ensure consistent 
application of the regulations and is inefficient. In addition, it is 
extremely difficult for us to verify that a landholder has or has not 
provided the required farm operator information, since there are few, 
if any, independent sources of information concerning farm operators to 
cross-check information.
    We have considered requiring landholders to provide more 
information, such as taxpayer identification numbers, for their farm 
operators who are legal entities. But this would require the 
landholders to have such knowledge, resulting in a new burden on 
landholders. In addition, this approach would still result in the 
requirement for districts to gather the data and us to collate it, 
thereby increasing the associated burdens to all parties involved.
    Conversely, if certain farm operators were required to submit RRA 
forms, then many of the difficulties in administration we experience on 
this issue would be resolved. For example, an operator would be 
required to include all land on which the operator was providing 
services westwide; thus, no data gathering by the districts or 
collation by us would be required. In fact, the districts would only be 
required to complete a new tabulation sheet concerning farm operators 
and include that sheet with their annual summary forms submittal. In 
addition, with RRA forms being submitted by farm operators, we would 
have a source of verification; specifically, the RRA forms submitted by 
landholders to whom the farm operator is providing services.

Impacts of the Proposed Rule

    We believe that the proposed rule would help to ensure that the 
recipients of Reclamation irrigation water comply with the laws and 
regulations governing Federal Reclamation irrigation projects. It is 
difficult to determine exactly how many entities may be affected by the 
proposed changes, but, for the following reasons, we do not believe 
that the rules will be burdensome.
    If the changes proposed today were adopted as final, it is possible 
that certain farm operators would need to submit RRA forms starting on 
January 1, 2000, and, after we reviewed the associated farm operating 
arrangement, the pricing and availability of Reclamation irrigation 
water could be affected for some farms. For landholders that on January 
1, 2000, have a farm operator providing services to land the farm 
operator formerly owned as ineligible excess land or land placed under 
recordable contract, we would require those landholders or farm 
operators to pay full cost for any Reclamation irrigation water 
received on now eligible land.
    We published a report in 1991 (The Reclamation Reform Act of 1982 
Annual Report to the Congress, February 1991) that indicated there were 
approximately 80 farm operators who were providing services to more 
than 960 acres westwide. Also in that 1991 report, we disclosed that 
there were 35 trusts as of the end of 1990 that held more than 960 
acres. Another large trust was found shortly thereafter for a total of 
36. Recently we reviewed RRA forms submitted by districts for the 1997 
water year and found 75 trusts that exceed 960 acres; this represents 
an 108 percent increase. We have no reason to believe there has been a 
larger increase in the number of farm operators providing services to 
more than 960 acres. Therefore, starting with the 1991 figure of 80 
large operators, there may be approximately 165 such operators today. 
When the focus is narrowed to those farm operators who provide services 
to more than 960 acres held in trusts or by legal entities, the number 
of farm operators who may be affected by the proposed rule should 
decline towards 100. Those farm operators providing services to land 
they formerly owned as excess and sold at an approved price should be 
an even smaller number. But even these farm operators would not be 
immediately affected by the proposed excess land provisions and would 
only be impacted if they continued, on or after January 1, 2000, to 
have an arrangement to provide services to land they formerly owned as 
ineligible excess land or land placed under recordable contract.
    Without the expanded information requirements in this rule, we 
simply do not have data readily available as to exactly how many farm 
operators would be affected by these provisions. The only way we will 
be sure in the near term about how many farm operators are providing 
services to more than 960 acres held in trusts or by legal entities is 
through the expansion of the RRA forms submittal requirements to farm 
operators.
    Once implemented on January 1, 2000, the only impact for all of 
these farm operators would be that they would have to submit RRA forms. 
If a farm was affected by the excess land provision in the future, 
there is no reason the farm has to employ as a farm operator the 
individual or legal entity who formerly owned the land in question as 
excess. Therefore, an affected farm could hire a different farm 
operator and continue to receive Reclamation irrigation water at the 
nonfull-cost rate.

Authority for the Proposed Rule

    Section 224(c) of the RRA gives the Secretary the authority to 
publish regulations to carry out the provisions of

[[Page 64158]]

the RRA and other provisions of Federal reclamation law. Our authority 
for the proposed application of the RRA forms requirements to certain 
farm operators is also section 224(c), which directs the Secretary to 
collect all data necessary to carry out the provisions of the RRA and 
other provisions of Federal reclamation law.
    Section 224(g) provides that the Secretary must thoroughly audit 
compliance with the reclamation law of the United States, including 
with the RRA, by legal entities and individuals subject to the law. 
This section specifically directs the Secretary to audit legal entities 
and individuals whose landholdings or operations exceed 960 acres.
    One of the primary purposes of the acreage limitation provisions of 
Federal reclamation law is to encourage the creation and preservation 
of small family farms, and this is accomplished by limiting the number 
of acres that any one landholder may own and receive Reclamation 
irrigation water on at any price. Allowing the former owner of 
ineligible excess land (ineligible excess land is not eligible to 
receive Reclamation irrigation water at any price) or land placed under 
recordable contract to receive Reclamation irrigation water as a farm 
operator circumvents one of the basic principles of Federal reclamation 
law.

V. Public Involvement

    As part of the ANPR effort, on March 14, 1997, we held a public 
meeting in Sacramento, California concerning the ANPR. We also received 
53 letters during the public comment period on the ANPR that was open 
from December 18, 1996, through April 17, 1997.

VI. Public Comments and Responses on Advance Notice of Proposed 
Rulemaking

    The following section presents general public comments on the ANPR. 
These include comments on authority, process, relationship with other 
documents, relationship with other laws and mandates, water rights and 
contracts, westwide action, and other general comments that were not 
specifically directed toward the new 43 CFR part 428.
    Comment 1. The manager of an irrigation district indicated that 
Reclamation should be prioritizing irrevocable trust reviews to speed 
up the process of compliance determinations which will assist the 
district in its monitoring responsibilities.
    Response. We initially had a large backlog of trusts to review as 
well as other acreage limitation implementation actions to take. We 
have addressed most of this backlog. Regardless, trusts are considered 
to be conditionally approved when submitted to us to assist trustees 
and districts while a trust is being reviewed.
    Comment 2. The same commenter raised concerns about reviewing only 
one part of the RRA regulations, without revisiting other parts.
    Response. We throughly reviewed all aspects of the RRA during the 
rulemaking process that was completed on December 18, 1996. It was 
determined at that time the only issues that needed further review were 
those relating to trusts holding more than 960 acres westwide and how 
such land is farmed. In addition, we recognized that if action was to 
be taken with regard to large landholdings held in trust, we needed to 
ensure the land in question was not just transferred to some other type 
of landholding arrangement and continued to be farmed in the same 
manner.
    Comment 3. Another commenter indicated that Reclamation must 
recognize its obligations to mitigate, conserve, and protect the 
interest of the people as well as the purpose and intent of the RRA. 
Reclamation must clarify policy with reference to protection of trust 
resources, uses, and values to be co-equal with water development and 
delivery.
    Response. While we recognize our various responsibilities, the 
purpose of this rulemaking is specific to collecting information from 
farm operators providing services to more than 960 acres westwide held 
in trusts or by legal entities to determine if such farming 
arrangements are in fact leases for acreage limitation purposes. In 
addition, this proposed rule helps ensure the intent of the excess land 
provisions of Federal reclamation law will be met.
    Comment 4. The same commenter suggests further that the proposed 
rule must include 6 concerns: 1. Must continue to focus on family 
farms. 2. The 960-acre limit must apply to operations, as well as 
farms. 3. Allowing subsidies to more than 960 acres is a violation of 
the intent of law. 4. There must be penalties for violation of the 
acreage limitation. 5. Limit the water subsidy to forcefully encourage 
water conservation measures. 6. The taxpayer should not subsidize any 
farming operation or corporation.
    Response. We concur that one of the primary purposes of acreage 
limitation is to encourage and foster small family farms. The proposed 
rule is intended to facilitate the gathering of information to ensure 
operators providing services to more than 960 acres held in trusts or 
by legal entities are meeting the requirements of the RRA. In addition, 
we are proposing that steps be taken to ensure certain farm operators 
do not circumvent the intent of the excess land provisions of Federal 
reclamation law.
    We have been advised in the past by the Office of the Solicitor 
that legislative action would be required to assess penalties for 
violation of the acreage limitation provisions. In addition, the RRA is 
specific as to the number of acres on which legal entities may receive 
nonfull-cost Reclamation irrigation water.
    Comment 5. A beneficiary of a trust, writing on behalf of the 
beneficiaries of the trust, stated that proposed new regulations are 
not in accordance with law and are contrary to the legislative history 
of RRA.
    Response. Since no new regulations were included as part of the 
ANPR issued on December 18, 1996, we urge everyone to examine the 
proposed regulations published with this Preamble. We believe section 
224(c) of the RRA provides the authority necessary to promulgate these 
proposed regulations as follows:

    The Secretary may prescribe regulations and shall collect all 
data necessary to carry out the provisions of this title and other 
provisions of Federal reclamation law.

    Comment 6. The same commenter stated that the Federal program 
benefits were intended to be limited by the concept of beneficial 
ownership, not by the concept of farm size. In 1979 the Congress 
included a farm size limitation in an earlier version of RRA, but 
deleted such limitation in all subsequent reviews of Reclamation 
regulations.
    Response. We agree that the Congress has not limited farm size. 
However, the Congress did address and limit how much land could be 
owned or leased by an individual or entity and be eligible to receive 
Reclamation irrigation water at the nonfull-cost rate. The collection 
of RRA forms from certain farm operators will help ensure this 
provision is being enforced by providing us with sufficient information 
to determine if a farm operating arrangement is in fact a lease for 
acreage limitation purposes. The Congress also has made it clear that 
the excess land provisions are to preclude the accrual of speculative 
gain in the disposition of excess land, assist in fostering the wide 
distribution of benefits associated with the Reclamation program, and 
encourage the creation of family farms.
    Comment 7. The same commenter stated that the proposed new 
regulations are a dangerous misuse of administrative power.

[[Page 64159]]

    Response. We disagree. In fact, in 1987 (Public Law 100-203, 
section 5302[a]) the Congress directed Interior to use its 
administrative tools to ensure compliance with the acreage limitation 
provisions of the RRA. Section 224(c) of the RRA requires the Secretary 
to collect all data necessary to carry out the acreage limitation 
program and to prescribe regulations needed to carry out those 
provisions.
    Comment 8. Eighteen members of the Congressional Western Water 
Caucus expressed concerns about the ANPR stating their belief that a 
rulemaking for trusts is unnecessary, because Interior already has the 
tools through audits and other investigation techniques to ensure 
compliance with the acreage limitation provisions enacted by the 
Congress and the existing regulations.
    Response. We do not have sufficient information with regard to farm 
operators providing services to more than 960 acres held in trusts or 
by legal entities to determine if the operating arrangements are in 
fact leases for acreage limitation purposes. In addition, we believe 
that these proposed regulations will help ensure the intent of the 
excess land provisions is not being circumvented by farm operators 
farming the land they previously owned as ineligible excess land or 
under recordable contract.
    Comment 9. The general manager of a California municipal utility 
district stated that he and his district were concerned about again 
reopening the rules and regulations. They feel that it is not 
appropriate or necessary to proceed with rulemaking at this time. If 
there is a perceived problem with larger trusts, Reclamation should 
step up the enforcement and audit procedures of such trusts to ensure 
they are complying with the law, rather than reopening the process once 
again.
    Response. We agree that it is unnecessary to reopen 43 CFR part 426 
to ensure compliance with the RRA by certain farm operators providing 
services to more than 960 acres westwide held in trusts or by legal 
entities. By creating 43 CFR part 428, we hope to provide certainty to 
the vast majority of landholders that receive Reclamation irrigation 
water, while taking the necessary steps to ensure compliance with the 
RRA by those farm operators.
    Comment 10. A representative of a national conservation group urged 
Reclamation to adopt policies that would ensure compliance with the 
intent of the RRA. Reclamation should limit irrigation subsidies to 960 
acres, which will strengthen family farms, reduce the Federal deficit, 
and help protect the environment. Commenter urged that the current 
loopholes be closed and bring fairness to Federal irrigation programs.
    Response. We are proposing these additional regulatory provisions 
to ensure compliance with the RRA by farm operators providing services 
to more than 960 acres westwide held in trusts or by legal entities. 
The proposed rule is intended to better ensure compliance by requiring 
certain farm operators to submit RRA forms. In addition, a perceived 
loophole associated with the excess land provisions would be closed.
    Comment 11. The representative of a national taxpayers group stated 
support for strong reforms in the Federal water subsidy program. The 
concern is that each farming operation is only entitled to receive 
subsidized water on 960 acres, regardless of how many individuals 
benefit from the operation. In addition, they are urging encouragement 
of efficient use of water.
    Response. We cannot change the law, but must enforce the acreage 
limitation provisions of the RRA. Part of this effort is to ensure farm 
operators providing services to more than 960 acres held in trusts or 
by legal entities are not lessees for acreage limitation purposes.
    Comment 12. The representative of a brewery in San Francisco, 
California stated that he does not see why the taxpayers should 
subsidize large corporate farmers. He also has a concern about the 
impacts upon the environment in the Delta and the San Francisco Bay. 
Reclamation should adopt the concept of transparency to see through 
some of the fancy legal stuff that lets folks get around the spirit of 
the law.
    Response. We cannot change the statute, but can take the proposed 
additional actions to obtain information needed to ensure compliance 
with the RRA by farm operators providing services to more than 960 
acres westwide held in trusts or by legal entities.
    Comment 13. A commenter from San Carlos, California stated that 
Federal water subsidies should be limited to only farming operations 
which meet the 960-acre limit. Rulemaking must correct the trust 
arrangements. Reclamation should enforce the acreage limits by 
determining when land owned by different parties is actually being 
farmed as one operation.
    Response. We are taking additional steps to obtain information 
needed to ensure compliance with the acreage limitation provisions of 
Federal reclamation law by farm operators providing services to more 
than 960 acres westwide held in trusts or by legal entities.
    Comment 14. The same commenter stated that Reclamation should 
penalize those who do not abide by the acreage limits. Improper water 
subsidies only aggravate our water shortages and encourage the 
inefficient use of resources.
    Response. We vigorously enforce the acreage limitation provisions 
as defined by the Congress. However, we have been advised in the past 
by the Office of the Solicitor that legislative action would be 
required to assess penalties for violations of the acreage limitation 
provisions.
    Comment 15. A commenter representing a water conservation group 
urged a strong stand in implementing the acreage limitation provisions 
of the RRA. Reclamation should write regulations that minimize the 
exceptions to the 960-acre limit on subsidized project water.
    Response. We agree and the current Acreage Limitation Rules and 
Regulations (43 CFR part 426) only allow those exceptions to the 960-
acre limit provided by statute.
    Comment 16. The same commenter stated that Reclamation must take 
action to limit corporate welfare and reduce environmental impacts.
    Response. Our proposed rule will not change the law, but it should 
help to ensure compliance with the RRA by those farm operators who 
provide services to more than 960 acres westwide held in trusts or by 
legal entities.
    Comment 17. A commenter representing two irrigation districts in 
central Arizona stated that farmers of both districts thought that all 
RRA matters were laid to rest with the issuance of the revised 
regulations.
    Response. Because of the concern over trusts holding more than 960 
acres westwide, we chose to create a new 43 CFR part 428 to gather 
information from farm operators providing services to such trusts or 
legal entities or combination thereof. We are also concerned about 
whether the intent of the excess land provisions is being met in 
association with the practices of certain farm operators to provide 
services to the land the farm operator formerly owned as ineligible 
excess land or under recordable contract. Therefore, we have proposed 
in 43 CFR part 428 that action is taken to ensure such farm operators 
are in compliance with the intent of the excess land provisions.
    Comment 18. The same commenter stated that the key question is 
whether Interior has the authority to regulate

[[Page 64160]]

trusts. It would take an act of the Congress to change section 214 of 
the RRA. Changing the application to trusts would undermine what 
farmers in Arizona have relied upon for more than 10 years. To now 
change the law through regulation is not consistent with sound public 
policy.
    Response. We are seeking to enforce the RRA, including section 214, 
by adding a new 43 CFR part 428 to extend the information requirements 
to farm operators providing services to more than 960 acres westwide 
held in trusts or by legal entities. We also want to ensure the intent 
of the excess land provisions is being met. No new provisions directly 
regulating trusts are being proposed.
    Comment 19. The president of a water district in California stated 
that the law should be left alone, as the regulations work well and no 
change is necessary. This is important so that those working under the 
law can operate with some degree of certainty.
    Response. We agree that certainty is important and so we have 
chosen to create a new 43 CFR part 428 to extend the information 
requirements to certain farm operators and to address an excess land 
issue, which will provide greater certainty for all water users.
    Comment 20. A member of the Congress from California expressed 
concern that Reclamation use all its power to revise regulations so as 
to apply the 960-acre limit to all farms, including farms managed or 
operated through trusts, leases, creative management agreements, 
limited partnerships, or other devices used to evade the subsidy limit.
    Response. We agree that the regulations must be equitably applied 
and, accordingly, have proposed provisions to obtain information 
concerning farm operators providing services to more than 960 acres 
westwide held in trusts or by legal entities. In addition, we want to 
ensure that the intent of the excess land provisions is met by those 
farm operators.
    Comment 21. The manager of an irrigation district indicated that he 
was concerned about reopening the rules and regulations. Trusts are not 
a problem in his district, but he sees Reclamation being able to step 
up enforcement and audit procedures regarding trusts to solve any 
problems and does not need to issue new regulations.
    Response. We agree that enforcement is a key element in ensuring 
compliance with the RRA by certain farm operators. We intend the 
proposed rule to provide us with additional information needed for our 
enforcement activities and to address certain excess land concerns 
without disturbing the provisions of 43 CFR part 426.
    Comment 22. A commenter representing a community alliance of small 
farmers expressed concerns that no farm operation should receive 
subsidized water for more than 960 acres.
    Response. A key to any application of the acreage limitation 
provisions is in how certain terms are defined. The RRA defines 
landholding to include directly or indirectly owned or leased land. Any 
farm operator that is determined to be a landholder is subject to 
application of the acreage limitation provisions.
    Comment 23. The same commenter stated that providing Federal water 
at less than full cost to large farm operations results in degradation 
of the communities and the well-being of farm workers.
    Response. The Congress recognized the need to preserve small family 
farms when they limited the availability of nonfull-cost water.
    Comment 24. Legal counsel for a trust in California commented that 
any attempt by Interior to: classify a trust as a ``legal entity'' 
under RRA; treat trustees as the owner of real property held in trust; 
or exempt only trustees from ownership/pricing limitations, would be 
inconsistent with common law of trusts and RRA.
    Response. The proposed rule does not attempt to: classify a trust 
as a ``legal entity'' under RRA; treat trustees as the owner of real 
property held in trust; or exempt only trustees from ownership and 
pricing limitations.
    Comment 25. The same commenter stated that Reclamation should stick 
to the following interpretation of RRA: that no one person can receive 
nonfull-cost water on more than 960 acres, no matter whether the land 
is owned, leased, involved in a trust or other entity.
    Response. We have not altered that interpretation of the RRA; with 
the understanding that the acreage limitation provisions apply to legal 
entities as well as to individuals. Sections 214 of the RRA and 426.7 
of the Acreage Limitation Rules and Regulations include provisions that 
exempt trustees acting in a fiduciary capacity from application of the 
acreage limitation provisions if certain criteria are met. These 
proposed rules have no impact on those provisions.
    Comment 26. The same commenter stated that Reclamation has adequate 
tools to ensure compliance, and should ``follow the money'' to 
determine recipient of benefit of the nonfull-cost water.
    Response. We generally do have adequate tools to ensure compliance. 
However, we believe we need additional information regarding farm 
operators involved in farming more than 960 acres westwide held in 
trusts or by legal entities. We also need additional information to 
determine if farm operators for trusts or legal entities formerly owned 
the land they are providing service to as ineligible excess land or 
under recordable contract. The new RRA forms requirements for farm 
operators are intended to address these issues.
    Comment 27. The same commenter stated that nonfull-cost water to 
trusts should not be limited in any manner, and that Reclamation has no 
statutory authority to restrict the exemption on trusts in RRA section 
214.
    Response. We are required by statute to limit nonfull-cost water 
deliveries to land held in trust if the individuals or entities to whom 
the land held in trust is attributed exceed their acreage limitation 
entitlements. This requirement is addressed in 43 CFR part 426. The 
proposed rule would also limit such deliveries starting on January 1, 
2000, if the land held in trust is being farmed by a farm operator and 
that farm operator formerly owned the land as ineligible excess or 
under recordable contract.
    Comment 28. A national conservation group stated that no matter how 
many individuals benefit from a farming operation, the operation is 
only entitled to receive subsidized water on 960 acres. The limit 
applies both to the farm, and to each individual.
    Response. The acreage limitation provisions are fully applied to 
any farm operation that is determined to be a landholder. The proposed 
rule does seek to ensure congressional intent associated with excess 
land is met by farm operators providing services to trusts or legal 
entities.
    Comment 29. The same commenter stated that the proposed rule must 
address all large farming operations, not just trusts, because if 
Reclamation only regulates trusts, the trusts will find some other way 
to escape acreage limits.
    Response. We recognize this possibility and included farm operators 
providing services to legal entities in both the proposed information 
requirements and the excess land provisions.
    Comment 30. The same commenter stated that trusts are a ``glaring 
loophole'' in RRA's acreage limitations, and Reclamation must ``close 
the loophole'' in order to preserve the purpose of RRA. Reclamation 
should treat trusts like any other legal entity,

[[Page 64161]]

limiting them to subsidized water on no more than 960 acres for 
qualified recipients. The trusts provision of the RRA was intended to 
protect banks or other institutions acting in a purely fiduciary 
capacity.
    Response. We are limiting this proposed rule to extending the 
information requirements to farm operators providing services to more 
than 960 acres westwide held in trusts or by legal entities. In 
addition, an excess land provision involving farm operators is 
included.
    Comment 31. The same commenter stated that established precedent 
requires Reclamation to interpret the RRA trust exception narrowly to 
preserve the central purpose of the RRA. The regulations should read:

    An individual or corporate trustee holding land in a fiduciary 
capacity is not subject to the ownership or pricing limitation 
imposed by title II nor any other provisions of Reclamation law. 
However, the interest of each beneficiary (qualified or limited 
recipients) in trust land in combination with other land he/she may 
own shall not exceed the ownership limitation of title II. Moreover, 
the quantity of land in a trust receiving irrigation water cannot 
exceed the ownership entitlement of title II.

    Response. 43 CFR part 426 already addresses attribution of land 
held in trust to, generally, beneficiaries, and under certain 
circumstances to grantors or trustees. Acreage limitations clearly are 
applicable under those attribution requirements. There is no evidence 
that there have been any problems associated with those provisions and 
further clarification is not needed as part of this rulemaking.
    Comment 32. The same commenter urged that the regulations must 
specifically address situations where the trustee serves as the farm 
operator of the trust property, clearly applying acreage limitations to 
the trustee as well as the trust.
    Response. By requiring farm operators providing services to more 
than 960 acres westwide held in trusts or by legal entities to submit 
RRA forms annually, we will be better able to determine if a trustee 
who is also acting as a farm operator for the land held in trust is in 
fact a lessee of the land.
    Comment 33. The same commenter stated that Reclamation should 
revise the rules governing ``leases'' to use criteria or indicators to 
determine whether a landholding is actually part of a larger farming 
operation. The commenter suggests that Reclamation use indicators 
similar to those suggested by the General Accounting Office (GAO).
    Response. We already use the indicators suggested by the GAO in 
their 1989 report as indicators of economic risk, use, or possession, 
which are then used to determine if an operating arrangement is in fact 
a lease.
    Comment 34. The same commenter stated that there are many reasons 
why limiting subsidies to large corporate farms is sound public policy, 
consistent with Federal reclamation law, including: (1) The purpose of 
the subsidy is to assist small family farms, not individual 
shareholders in large corporate farms or investors in a large business 
trust; (2) Limiting subsidies can benefit the environment, something 
Reclamation is required to do under a variety of statutes and treaties; 
and (3) Irrigation subsidies create economic inefficiencies and poor 
allocation of natural resources.
    Response. The Congress was very clear as to how acreage limitations 
are to be applied to ``large corporate farms.'' Specifically, under the 
discretionary provisions corporations that benefit more than 25 natural 
persons are to be limited recipients with a 640-acre ownership 
entitlement and a 320-acre nonfull-cost entitlement, if the corporation 
received Reclamation irrigation water on or before October 1, 1981. If 
the corporation first received such water after that date, they are to 
pay the full-cost rate for any Reclamation irrigation water received. 
For those ``large corporate farms'' that remain under prior law, they 
continue to have 160-acre ownership and nonfull-cost entitlements. We 
have no authority to further limit subsidies to such entities.

VII. Detailed Analysis of Proposed 43 CFR Part 428

Section 428.1

    This section provides a statement of the purpose of these 
regulations.

Section 428.2

    This section includes a statement of applicability. Rather than 
repeating provisions found in 43 CFR part 426, paragraph (b) of this 
section specifies that 43 CFR part 428 supplements part 426.

Section 428.3

    This section defines the terms ``Custom operator,'' ``Farm 
operator,'' ``we or us,'' and ``you'' for purposes of part 428.

Section 428.4

    This section expands the RRA forms requirements to farm operators 
who provide services to more than 960 nonexempt acres westwide held by 
a single trust or legal entity, or any combination of trusts and legal 
entities. These requirements also apply to any indirect owner of a 
legal entity that is a farm operator that must submit RRA forms. 
Exemptions to this requirement are provided in Sec. 426.18(g)(2) and 
(3) of this chapter.

Section 428.5

    This section establishes how the information collection will occur. 
Paragraph (a) of this section specifies that we will determine what 
forms will be used.
    Paragraph (b) of this section establishes that information must be 
provided by the farm operator for all nonexempt land to which the farm 
operator provides services westwide.
    This section provides in paragraph (c) the types of information we 
would require to be submitted by each farm operator.

Section 428.6

    This section specifies that farm operators required to submit forms 
must submit them to each district westwide that is subject to the 
acreage limitation provisions, and in which the farm operator provides 
services.

Section 428.7

    This section describes what will happen if a farm operator fails to 
meet the RRA forms requirements. Paragraph (a) of this section provides 
that the district is not to deliver water to the land in question until 
the farm operator submits the required forms for that water year. In 
addition, the farm operator, landholder, or trustee of the land in 
question must not accept delivery of such water.
    Paragraph (b) provides that after the farm operator submits the 
forms, we would restore eligibility for the land.
    Paragraph (c) specifies that we will assess administrative costs as 
described in Sec. 426.20(e) of this chapter if Reclamation irrigation 
water is delivered to land that is ineligible because the farm operator 
failed to submit required forms.

Section 428.8

    This section provides that we could prosecute a farm operator for 
submitting false information on the required forms, and suspend the 
farm operator's eligibility to receive Reclamation irrigation water.

Section 428.9

    This section addresses the eligibility of formerly excess land 
being farmed by certain farm operators. Paragraph (a) of this section 
provides (1) if a landholder

[[Page 64162]]

disposed of excess land at a price Reclamation approved, (2) the land 
is held in trust or by a legal entity, and (3) that former landholder 
is the direct or indirect farm operator of that land, then the farm 
operator and landholder may not receive water on such land.
    Paragraph (b) of this section includes the following exceptions to 
the provisions included in paragraph (a) of this section: (1) The land 
becomes exempt from the acreage limitation provisions of Federal 
reclamation law or (2) the landholder or farm operator pays the full-
cost rate for any Reclamation irrigation water delivered to the land in 
question, assuming the formerly excess land is otherwise eligible to 
receive Reclamation irrigation water. If a part owner of a legal entity 
that is the farm operator is the party that held the land as ineligible 
excess or under recordable contract and the full-cost rate is to be 
paid, then application of that rate will be based on the proportional 
share the part owner has in the legal entity.

Section 428.10

    This section specifies that districts must not make water available 
to formerly excess land to which the former owner who sold it at an 
approved price is now providing services as a farm operator. Reference 
is made to the exceptions provided in Sec. 428.9(b).

Section 428.11

    This section establishes an effective date of January 1, 2000, for 
43 CFR part 428. This section also specifies that on January 1, 2000, 
the excess land provisions found in Sec. 428.9 will apply to any farm 
operating arrangements between farm operators and trusts or legal 
entities then in place and any future farm operating arrangements.

VIII. Procedural Matters

National Environmental Policy Act

    We have analyzed this rule in accordance with the criteria of the 
National Environmental Policy Act of 1969 (NEPA) and Departmental 
Manual 516 DM. This rule does not constitute a major Federal action 
significantly affecting the quality of the human environment. A 
detailed statement under NEPA is not required. The rule is 
categorically excluded from NEPA review under 40 CFR 1508.4, 
Departmental Manual 516 DM 2, Appendix 1, paragraph 1.6, and 516 DM 6, 
Appendix 9, paragraph 9.4A.1. In addition, the proposed rule does not 
meet any of the 10 criteria for exceptions to categorical exclusions 
listed in 516 DM 2, Appendix 2.
    As provided in 516 DM 2, Appendix 1, paragraph 1.6, an action is 
excluded from review if it is a ``Non-destructive data collection, 
inventory (including field, aerial and satellite surveying and 
mapping), study, research and monitoring activities.'' This rule 
requires an information collection, and would not have a significant 
effect on the human environment. As provided in 516 DM 6, Appendix 9, 
paragraph 9.4A.1, the following is excluded from review: ``Changes in 
regulations or policy directives and legislative proposals where the 
impacts are limited to economic and/or social effects.'' The only 
impacts associated with the excess land provisions would be that 
certain farm operators that meet the criteria in the proposed 
regulations or the associated landholders would have to pay full cost 
for Reclamation irrigation water delivered to land to which the farm 
operator is providing services, the landholder would have to hire a 
different farm operator to provide the services, or the landholder and 
farm operator could not receive Reclamation irrigation water on that 
land. This provision will not be effective until January 1, 2000.

Executive Order 12866, Regulatory Planning and Review

    Under Executive Order (E.O.) 12866, (58 FR 51735, Oct. 4, 1993), an 
agency must determine whether a regulatory action is significant and 
therefore subject to Office of Management and Budget (OMB) review and 
the requirements of the Executive Order. E.O. 12866 defines a 
``significant regulatory action'' as a regulatory action meeting any 
one of four criteria specified in the Executive Order. This rulemaking 
is considered a significant regulatory action under criterion number 4, 
because it raises novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order. We have therefore submitted the proposed rule to 
the OMB for review.

Regulatory Flexibility Act

    The Department of the Interior certifies that this document will 
not have a significant economic effect on a substantial number of small 
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 
We provide some 140,000 Western farmers with irrigation water. We 
estimate that out of this number, fewer than 200 entities, not 
necessarily small entities, could be affected by the rule. The effect 
on most of these entities starting on January 1, 2000, would be limited 
to the annual completion of RRA forms. For some of these entities, the 
farm operator was also the owner of the land in question when the land 
was ineligible excess or under recordable contract. In cases where such 
a farm operating arrangement is still in place on January 1, 2000, or 
is implemented on or after that date, the full-cost rate would be 
applicable to all deliveries of Reclamation irrigation water to such 
land. However, the landholder in question could avoid paying the full-
cost rate by hiring a different farm operator who did not formerly own 
the land in question as excess. Therefore, we have determined that the 
proposed rule will not have a significant economic effect on a 
substantial number of small entities.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule:
    (1) Will not have an annual effect on the economy of $100 million 
or more. The rule could affect up to an estimated 200 farms, but the 
effects would not approach $100 million or more.
    (2) Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions. There could be an economic effect on 
fewer than an estimated 200 farms, but we do not anticipate that this 
will cause any noticeable increase in costs or prices.
    (3) Will not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises. The 
rule would only affect at most a small sector of the farming industry, 
and would not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises.

Paperwork Reduction Act

    This regulation requires an information collection from 10 or more 
parties and a submission under the Paperwork Reduction Act is required. 
This information collection is described below.

Existing Information Collection Under the Acreage Limitation Rules and 
Regulations

    Sections 206, 224(c), and 228 of the RRA (43 U.S.C. 390ff, 
390ww(c), and 390zz) require, among other things, that (1) as a 
condition to the receipt of Reclamation irrigation water, each

[[Page 64163]]

landholder must annually certify, in a form suitable to the Secretary, 
that they are in compliance with the provisions of the RRA, and (2) 
districts must annually submit to us, in a form suitable to the 
Secretary, records and information necessary to implement the RRA. 
These mandatory requirements are addressed in 43 CFR 426.18. To comply 
with these requirements, we provide forms for the landholders' and 
districts' use. The landholder forms have been approved by OMB under 
control number 1006-0005. The district summary forms have been approved 
under control number 1006-0006. Both clearances expire on December 31, 
1999.

Information Collection Under the Proposed Rule

    The proposed rule contains a change that would increase the 
reporting burden by requiring certain farm operators to submit RRA 
forms starting on January 1, 2000. We estimate that the reporting 
burden would be increased by less than 200 hours as a result of this 
change. The primary purpose of requiring those farm operators who 
provide services to more than 960 acres westwide held in trusts or by 
legal entities to complete and submit RRA forms would be to provide us 
with sufficient information to determine if the farm operating 
arrangement is a lease as defined in section 426.2 of this chapter.
    As with all acreage limitation information collections, we would 
require farm operators to provide identifier information; such as name, 
address, telephone number, etc., and if the farm operator is an entity, 
information concerning the entity's organizational structure and part 
owners. In addition, farm operators would be required to provide 
information concerning the land to which they are providing services; 
such as legal descriptions, number of acres, etc. We would also require 
farm operators to provide information concerning the specific services 
they are providing, who decides when such services are needed, how the 
farm operator is compensated for the services, the control the farm 
operator has over the daily operation of the land in question, etc. If 
different services are provided to different land parcels, such 
distinctions would need to be specified.
    In order to effectively administer and enforce the proposed excess 
land provisions, we would require farm operators to provide information 
as to whether the land to which services are being provided was 
formerly owned by the farm operator as ineligible excess land or under 
recordable contract.
    At this time, we would like comments on the planned RRA forms 
requirements for farm operators. Comments are invited on: (a) whether 
the proposed collection of information is necessary for the proper 
performance of our functions, including whether the information will 
have practical utility; (b) the accuracy of our burden estimate for the 
proposed collection of information; (c) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (d) ways 
to minimize the burden of the collection of information on those who 
are to respond, including through the use of automated collection 
techniques or other forms of information technology. In addition, we 
would like comments on specific issues related to the proposed 
information collection including:
     Should the RRA forms submittal threshold for farm 
operators be 960 acres westwide held in trusts or by legal entities as 
provided in the proposed rules or some other figure (e.g., 40 acres, 
240 acres, etc.)?
     Is the proposed definition of ``farm operator'' sufficient 
or should it be altered? For example, is there a way to define ``farm 
operator'' that reduces how many additional RRA forms would need to be 
submitted, other than through application of the forms submittal 
threshold.
     Is the definition of and exemption for ``custom operator'' 
included in the proposed rule sufficient?
     Should certain specific questions be asked of farm 
operators on the RRA forms? Examples of such include: Whether the farm 
operator is authorized to use his agreements with a landholder as 
collateral in any loan; whether the farm operator can sue or be sued in 
the name of the landholding; and whether the farm operator is 
authorized to apply for any Federal assistance from the United States 
Department of Agriculture in the name of the landholding.
    In considering the issues associated with certain farm operators 
being required to submit RRA forms, we would also like comments as to 
whether current RRA forms should be modified to accommodate the 
additional information requirements applicable to farm operators, or if 
an entirely new form only to be completed by farm operators providing 
services to more than 960 acres westwide held in trusts or by legal 
entities should be developed.
    Submit comments on the RRA information collection changes to us 
along with written comments on the proposed rule, or separately (see 
DATES, ADDRESSES, and Public Comment Procedures under SUPPLEMENTARY 
INFORMATION, above).

Executive Order 12612, Federalism

    In accordance with Executive Order 12612, the rule does not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment. A Federalism Assessment is not required. This 
proposed rule would supplement existing provisions for administering 
the RRA. The regulation would not significantly change the relationship 
or relative roles of the Federal and State Government. It would not 
lead to Federal control over traditional State responsibilities, or 
decrease the ability of the States to make policy decisions with 
respect to their own functions. This regulation would not affect the 
distribution of power and responsibilities among the various levels of 
government and does not preempt State law. In summary, this regulation 
would not have a significant impact on Federalism as described by E.O. 
12612.

Executive Order 12630, Takings

    In accordance with Executive Order 12630, the rule does not have 
significant takings implications. A takings implication assessment is 
not required. This proposed rule would not result in imposition of 
undue additional fiscal burdens on the public. The rule would not 
result in physical invasion or occupancy of private property or 
substantially affect its value or use. Specifically, the rule would not 
result in the taking of contractual rights to storage water in 
Reclamation reservoirs or water rights established under State law.

Unfunded Mandates Reform Act of 1995

    This rule does not impose an unfunded mandate on State, local, or 
tribal governments or the private sector of more than $100 million per 
year. The rule does not have a significant or unique effect on State, 
local, or tribal governments or the private sector. A statement 
containing the information required by the Unfunded Mandates Reform Act 
(2 U.S.C. 1531 et seq.) is not required. The rule would require certain 
farm operators, which are not small governments, to submit RRA forms. 
The excess land provision of the rule will not affect small 
governments. These potential effects would not amount to costs of more 
than $100 million per year.

Executive Order 12988, Civil Justice Reform

    In accordance with Executive Order 12988, the Office of the 
Solicitor has

[[Page 64164]]

determined that this rule does not unduly burden the judicial system 
and meets the requirements of sections 3(a) and 3(b)(2) of the Order.

Clarity of This Regulation

    Executive Order 12866 requires each agency to write regulations 
that are easy to understand. We invite your comments on how to make 
this rule easier to understand, including answers to questions such as 
the following:
    (1) Are the requirements in the rule clearly stated?
    (2) Does the rule contain technical language or jargon that 
interferes with its clarity?
    (3) Does the format of the rule (grouping and order of sections, 
use of headings, paragraphing, etc.) aid or reduce its clarity?
    (4) Would the rule be easier to understand if it were divided into 
more (but shorter) sections? (A ``section'' appears in bold type and is 
preceded by the symbol ``Sec. '' and a numbered heading; for example, 
Sec. 428.4 Who must submit forms under this part.)
    (5) Is the description of the rule in the ``Supplementary 
Information'' section of the preamble helpful in understanding the 
proposed rule? What else could we do to make the rule easier to 
understand?
    Send a copy of any comments that concern how we could make this 
rule easier to understand to: Office of Regulatory Affairs, Department 
of the Interior, Room 7229, 1849 C Street NW, Washington, DC 20240. You 
may also e-mail the comments to this address: E[email protected]

IX. List of Subjects in 43 CFR Part 428

    Agriculture, Irrigation, Reclamation, Reporting and recordkeeping 
requirements, Water resources.

    Dated: November 10, 1998.
Patricia J. Beneke,
Assistant Secretary--Water and Science.

    For the reasons stated in the preamble, the Bureau of Reclamation 
proposes to add a new part 428 to title 43 of the Code of Federal 
Regulations as follows:

PART 428--INFORMATION REQUIREMENTS FOR CERTAIN FARM OPERATIONS IN 
EXCESS OF 960 ACRES AND THE ELIGIBILITY OF CERTAIN FORMERLY EXCESS 
LAND

Sec.
428.1  Purpose of this part.
428.2  Applicability of this part.
428.3  Definitions used in this part.
428.4  Who must submit forms under this part.
428.5  Required information.
428.6  Where to submit required forms and information.
428.7  What happens if a farm operator does not submit required 
forms.
428.8  What can happen if a farm operator makes false statements on 
the required forms.
428.9  Farm operators who are former owners of excess land.
428.10  Districts' responsibilities concerning certain formerly 
excess land.
428.11  Effective date.

    Authority: 5 U.S.C. 301; 5 U.S.C. 553; 16 U.S.C. 590z-11; 31 
U.S.C. 9701; and 32 Stat. 388 and all acts amendatory thereof or 
supplementary thereto including, but not limited to, 43 U.S.C. 390aa 
to 390zz-1, 43 U.S.C. 418, 43 U.S.C. 423 to 425b, 43 U.S.C. 431, 
434, 440, 43 U.S.C. 451 to 451k, 43 U.S.C. 462, 43 U.S.C. 485 to 
485k, 43 U.S.C. 491 to 505, 43 U.S.C. 511 to 513, and 43 U.S.C. 544.


Sec. 428.1  Purpose of this part.

    This part addresses Reclamation Reform Act of 1982 (RRA) forms 
requirements for certain farm operators and the eligibility of formerly 
excess land that is operated by a farm operator who was the landowner 
of that land when it was excess.


Sec. 428.2  Applicability of this part.

    (a) This part applies to farm operators who provide services to:
    (1) More than 960 acres held (directly or indirectly owned or 
leased) by one trust or legal entity; or
    (2) The holdings of any combination of trusts and legal entities 
that exceed 960 acres.
    (b) This part also applies to farm operators who provide services 
to formerly excess land held in trusts or by legal entities if the farm 
operator previously owned that land when the land was ineligible excess 
or under recordable contract.
    (c) This part supplements the regulations in part 426 of this 
chapter.


Sec. 428.3  Definitions used in this part.

    Custom operator means an individual or legal entity that provides a 
specialized, farm-related service that a farm owner, lessee, sublessee, 
or farm operator employs for agreed-upon payments. This includes, for 
example, crop dusters, custom harvesters, grain haulers, and any other 
such services.
    Farm operator means an individual or legal entity other than the 
owner, lessee, or sublessee that performs any portion of the farming 
operation. This includes farm managers, but does not include spouses, 
minor children, employees for whom the employer pays social security 
taxes, or custom operators.
    We or us means the Bureau of Reclamation.
    You means a farm operator.


Sec. 428.4  Who must submit forms under this part.

    (a) You must submit RRA forms to us annually if:
    (1) You provide services to more than 960 nonexempt acres westwide, 
held by a single trust or legal entity or any combination of trusts and 
legal entities; and
    (2) You are not covered by the exceptions found in 
Sec. 426.18(g)(2) and (3).
    (b) Anyone who is the indirect owner of a legal entity that is a 
farm operator meeting the criteria of paragraph (a) of this section 
must submit forms to us annually.


Sec. 428.5  Required information.

    (a) We will determine which forms you must use to submit the 
information required by this section.
    (b) You must declare all nonexempt land to which you provide 
services westwide.
    (c) You must give us other information about your compliance with 
Federal reclamation law, including but not limited to:
    (1) Identifier information, such as your name, address, telephone 
number;
    (2) If you are a legal entity, information concerning your 
organizational structure and part owners;
    (3) Information about the land to which you provide services, such 
as a legal description, and the number of acres;
    (4) Information about whether you formerly owned, as ineligible 
excess land or under recordable contract, the land to which you are 
providing services;
    (5) Information about the services you provide, such as what they 
are, who decides when they are needed, and how much control you have 
over the daily operation of the land;
    (6) If you provide different services to different land parcels, a 
list of services that you provide to each parcel;
    (7) Whether you can use your agreement with a landholder as 
collateral in any loan;
    (8) Whether you can sue or be sued in the name of the landholding; 
and
    (9) Whether you are authorized to apply for any Federal assistance 
from the United States Department of Agriculture in the name of the 
landholding.


Sec. 428.6  Where to submit required forms and information.

    You must submit the appropriate completed RRA form(s) to each 
district westwide that is subject to the acreage limitation provisions 
and in which you provide services.

[[Page 64165]]

Sec. 428.7  What happens if a farm operator does not submit required 
forms.

    (a) If you do not submit required RRA form(s) in any water year, 
then:
    (1) The district must not deliver irrigation water before you 
submit the required RRA form(s); and
    (2) You, the trustee, or the landholder(s) who holds the land 
(including to whom the land held in trust is attributed) must not 
accept delivery of irrigation water before you submit the required RRA 
form(s).
    (b) After you submit all required RRA forms to the district, we 
will restore eligibility.
    (c) If a district delivers irrigation water to land that is 
ineligible because you did not submit RRA forms as required by this 
part, we will assess administrative costs against the district as 
specified in Sec. 426.20(e). We will determine these costs under 
Sec. 426.20(a)(1) through (3).


Sec. 428.8  What can happen if a farm operator makes false statements 
on the required forms.

    If you make a false statement on the required RRA form(s), 
Reclamation can prosecute you under the following statement:

    Under the provisions of 18 U.S.C. 1001, it is a crime punishable 
by 5 years imprisonment or a fine of up to $10,000, or both, for any 
person knowingly and willfully to submit or cause to be submitted to 
any agency of the United States any false or fraudulent statement(s) 
as to any matter within the agency's jurisdiction. False statements 
by the farm operator will also result in loss of eligibility. 
Eligibility can only be regained upon the approval of the 
Commissioner.


Sec. 428.9  Farm operators who are former owners of excess land.

    (a) You or a landholder may not receive irrigation water on land 
held in trust or by a legal entity if:
    (1) You owned the land when the land was excess, whether or not 
under recordable contract;
    (2) You sold the land at a price approved by Reclamation; and
    (3) You are the direct or indirect farm operator of that land.
    (b) This section does not apply if:
    (1) The formerly excess land becomes exempt from the acreage 
limitations of Federal reclamation law; or
    (2) You or the landholder pays the full-cost rate for any 
irrigation water delivered to your formerly excess land that is 
otherwise eligible to receive irrigation water. If you are a part owner 
of a legal entity that is the direct or indirect farm operator of the 
land in question, then the full-cost rate will apply to the 
proportional share of the land that reflects your interest in that 
legal entity.


Sec. 428.10  Districts' responsibilities concerning certain formerly 
excess land.

    Districts must not make irrigation water available to formerly 
excess land that meets the criteria under Sec. 428.9(a), unless an 
exception provided in Sec. 428.9(b) applies.


Sec. 428.11  Effective date.

    This part will be effective beginning on January 1, 2000. On that 
date the provisions of Sec. 428.9 will apply to all farm operating 
arrangements between farm operators and trusts or legal entities that:
    (a) Are then in effect; or
    (b) Are initiated on, or after, January 1, 2000.

[FR Doc. 98-30756 Filed 11-17-98; 8:45 am]
BILLING CODE 4310-94-P