Federal Register, Volume 64 Issue 118 (Monday, June 21, 1999)

[Federal Register Volume 64, Number 118 (Monday, June 21, 1999)]
[Proposed Rules]
[Pages 33027-33034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15506]

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Proposed Rules
Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 64, No. 118 / Monday, June 21, 1999 /
Proposed Rules

[[Page 33027]]

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NORTHEAST DAIRY COMPACT COMMISSION

7 CFR Parts 1306, 1307, 1309 and 1310

Over-Order Price Regulation

AGENCY: Northeast Dairy Compact Commission.

ACTION: Supplemental proposed rule; reopening of comment period; notice
of hearings.

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SUMMARY: The Northeast Dairy Compact Commission is continuing to
consider whether to amend the over-order price regulation to establish
a supply management program. The Commission previously proposed an
assessment/refund program and is slightly modifying that proposed
program. As an alternative to the assessment/refund program, the
Commission is now also proposing a base/excess program. The Commission
is reopening the comment period and is requesting additional comment
and testimony on each of these proposed programs.

DATES: Written comments and exhibits may be submitted until 5:00 p.m.,
August 18, 1999. See Supplementary Information section for public
hearing dates and filing dates for pre-filed testimony.

ADDRESSES: Mail, or deliver, sworn and notarized testimony, comments
and exhibits to: Northeast Dairy Compact Commission, 34 Barre Street,
Suite 2, Montpelier, Vermont 05602. See Supplementary Information
section for public hearing locations.

FOR FURTHER INFORMATION CONTACT: Kenneth M. Becker, Executive Director,
Northeast Dairy Compact Commission at the above address or by telephone
at (802) 229-1941, or by facsimile at (802) 229-2028.

SUPPLEMENTARY INFORMATION:

I. Public Hearing Dates, Times and Locations; Filing Dates for
Written Comments

The public hearing dates and locations are:
1. July 7, 1999, 7:00 p.m. at the Storrowton Village White Church
Meeting House, Eastern States Exposition, 1305 Memorial Avenue, on MA
147, Gate 2, West Springfield, MA.
2. August 4, 1999, 7:00 p.m. at the North Stage Opera House, Exit
11, I-91, White River Junction, VT.
3. Pre-filed testimony is encouraged and may be submitted to the
Northeast Dairy Compact Commission at the address in the Addresses
section by 12:00 p.m. June 30, 1999 for the July 7 hearing and by 12:00
p.m. July 28, 1999 for the August 4 hearing.

II. Background

The Northeast Dairy Compact Commission (``Commission'') was
established under authority of the Northeast Interstate Dairy Compact
(``Compact''). The Compact was enacted into law by each of the six
participating New England states as follows: Connecticut--Pub. L. 93-
320; Maine--Pub. L. 89-437, as amended, Pub. L. 93-274; Massachusetts--
Pub. L. 93-370; New Hampshire--Pub. L. 93-336; Rhode Island--Pub. L.
93-106; Vermont--Pub. L. 93-57. In accordance with Article I, Section
10 of the United States Constitution, Congress consented to the Compact
in Pub. L. 104-127 (FAIR Act), Section 147, codified at 7 U.S.C. 7256.
Subsequently, the United States Secretary of Agriculture, pursuant to 7
U.S.C. 7256(1), authorized implementation of the Compact.
Pursuant to its rulemaking authority under Article V, Section 11 of
the Compact, the Commission concluded an informal rulemaking process
and voted to adopt a compact over-order price regulation on May 30,
1997.¹ The Commission subsequently amended and extended the
compact over-order price regulation.² In 1998, the
Commission further amended specific provisions of the over-order price
regulation.³ The current compact over-order price regulation
is codified at 7 CFR Chapter XIII. The Commission published additional
regulatory background information in the original notice of the
proposed supply management plan at 64 FR 19084 (April 19, 1999). A
public hearing on the proposed supply management plan was held on May
5, 1999 and comments were received until May 19, 1999. Following review
of the public testimony and comments received, the Commission is
requesting additional comments, extending the comment period, holding
two additional public hearings and is also proposing an alternative
supply management program.
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\1\ 62 FR 29626 (May 30, 1997).
\2\ 62 FR 62810 (Nov. 25, 1997).
\3\ 63 FR 10104 (Feb. 27, 1998); 63 FR 46385 (Sept. 1, 1998);
and 63 FR 65517 (Nov. 27, 1998).
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III. Proposed Supply Management Programs

The proposed supply management programs are designed to meet the
Commission's responsibilities under Article IV, Section 9(f) of the
Compact. That provision provides that ``[w]hen establishing a compact
over-order price, the commission shall take such action as necessary
and feasible to ensure that the over-order price does not create an
incentive for producers to generate additional supplies of milk.'' The
Commission is proposing to implement one of two distinct programs to
address its responsibilities under Section 9(f) of the Compact. One is
an assessment/refund program and the other is a base/excess program.
The two programs are presented separately below.
It is the intention and judgment of the Commission that the
combination of a supply management program and the recently promulgated
rules limiting compact payments on diverted and transferred milk
⁴ will operate in coordination to regulate the supply of
milk in New England relative to the consumer demand and to ensure that
the compact payments do not create an incentive to generate supplies of
milk in excess of the tolerance levels prescribed for diverted and
transferred milk and deemed to be necessary to assure New England
``consumers of an adequate, local supply of pure and wholesome milk.''
⁵
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\4\ 63 FR 65517 (Nov. 27, 1998).
\5\ Compact, Art. I, Sec. 1.
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Assessment/Refund Program

The Commission initially proposed an assessment/refund program at
64 FR 19084 (April 19, 1999). The Commission proposes slight
modifications to that program and requests comments on that program, as
modified. The modified proposed program would require the Commission to
reduce the producer pay price by five cents per hundredweight in months
when there are compact producer payments. No obligation

[[Page 33028]]

would accrue if there is no compact producer payment in a particular
month. These funds would be accumulated in an escrow account throughout
the calendar year in a supply management-settlement fund.
At the conclusion of the calendar year, producers would have 45
days to submit an application to the Commission for a refund from the
supply management-settlement fund. There would be two categories of
producers eligible for the refund: (1) Producers who reduced their
production as compared to their prior year's production level; and (2)
producers who maintained their milk production level at a rate of
increase not more than 1% compared to the prior year's production. All
eligible producers would receive a refund based on a flat rate per
producer. One-half of the supply management-settlement fund would be
distributed to eligible producers on a per producer basis. The amount
of the flat rate refund would be determined by dividing the total
number of eligible producers into one-half the value of the supply
management-settlement fund.
In addition, producers who reduced their milk production, compared
to the prior year's production, would receive a refund amount based on
a price per hundredweight of reduced milk production. There would be a
maximum refund per producer of $12,000 for the per hundredweight
payment. The maximum would only apply to the per hundredweight portion
of the refund and the producer would still be eligible for the per
producer portion of the refund.
The assessment/refund program would be intended to assure that
compact payments do not create an incentive for producers to generate
additional supplies of milk by creating an incentive for all producers
to maintain a stable, local supply of milk for the New England milk
market. All producers would share equally in the burden of funding this
program through a reduction in the producer pay price. Only those
producers who reduce or maintain their production level would be
eligible for a refund. However, the program would not otherwise
restrict the milk production of those producers who, for business
reasons unrelated to the compact payments, chose to increase their milk
production at a rate greater than 1% per year.
The Commission would also change the regulation regarding any
balance left in an account established to meet a potential liability to
the Commodity Credit Corporation. The supply management program would
be designed to meet the Commission's responsibilities under section
9(f) of the Compact, and therefore, any balance in a CCC escrow account
would be returned to the producer-settlement fund for distribution to
all producers in the next producer pool.
The Commission offers the following examples to assist interested
persons in evaluating the modified proposed assessment/refund program.
In calendar year 1998, there was a compact producer price for eight
months and there was no compact payment for four months. Applying the
proposed program to the actual circumstances of 1998 would result in an
accumulated supply management-settlement fund balance of $2,201,700.
The proposed program would withhold five cents per hundredweight in the
eight months there was a compact payment and there would be no
withholding in the four months with no compact payment. This would
result in an overall assessment of $.0336 per hundredweight for all
producers for the calendar year.
Table 1 shows the cost per producer of a reduction in the producer
pay price of $.0336 per hundredweight on a monthly and annual basis. As
discussed above, the $.0336 reduction in the producer pay price is the
proposed cost of funding the supply management-settlement fund,
averaged over the twelve months in 1998.

Table 1.--Cost of Supply Management Assessment to Selected Size Farms
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Reduced rate/ Cost per Cost per
Number of cows Pounds cwt month year
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40...................................................... 700,000 $.0336 $20 $235
57...................................................... 1,000,000 .0336 28 336
86...................................................... 1,500,000 .0336 42 504
286..................................................... 5,000,000 .0336 140 1,680
1,144................................................... 20,000,000 .0336 560 6,720
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The examples in Tables 2 and 3 assume that each size farm reduces
production by five percent compared to the prior year's production. The
proposed supply management program would pay one-half of the supply
management-settlement fund on a per producer, flat rate basis, and the
other half on a rate per hundredweight of the producer's reduced milk
production. The values used in the examples are determined by assuming
that 1,000 producers are eligible for the supply management refund, and
eligible producers reduced milk production by 91 million pounds. These
assumptions result in a per producer refund payment of $1,100 and a per
hundredweight rate of $1.20.
Table 2 shows the yearly refund different size farms would receive
under the proposed assessment/refund program. The table also reflects
the effect of the proposed $12,000 per hundredweight refund maximum.

Table 2.--Yearly Refund From Supply Management Program: Selected Size Farms
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Reduced Reduced Rate/cwt Per farm Total
Number of cows Pounds pounds rate/cwt refund refund refund
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40.......................... 700,000 35,000 $1.20 $420 $1,100 $1,520
57.......................... 1,000,000 50,000 1.20 600 1,100 1,700
86.......................... 1,500,000 75,000 1.20 900 1,100 2,000
286......................... 5,000,000 250,000 1.20 3,000 1,100 4,100
1,144....................... 20,000,000 1,000,000 1.20 12,000 1,100 13,100
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[[Page 33029]]

Table 3 shows the yearly financial benefit to different size farms
of the proposed assessment/refund program, up to the proposed $12,000
per hundredweight maximum refund. Based on the assumptions used in the
example, the cost of the program is about one-half of the total refund
at the point when the $12,000 per hundredweight maximum would apply.
This point would vary based on other assumptions such as a higher or
lower percentage of reduced milk production, the per hundredweight
payment rate and the yearly cost of the program.

Table 3.--Yearly Benefits From Supply Management Program: Selected Size
Farms
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Total
Number of cows refund Less cost Net refund
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40............................ $1,520 $235 $1,285
57............................ 1,700 336 1,364
86............................ 2,000 504 1,496
286........................... 4,100 1,680 2,420
1,144......................... 13,100 6,720 6,380
------------------------------------------------------------------------

Table 4 shows the increased income a producer would have received
in 1998, on only the volume of milk produced in excess of the prior
year's production. The table uses the assumption that the rate of
increased production was 1.8%. This is the rate of increased production
in the compact region the Commodity Credit Corporation used to set the
amount due from the Compact Commission in 1998. The table also applies
the average compact over-order producer price for 1998 of $.286. The
last column shows the compact payment to the producer for the increased
milk production.

Table 4.--Yearly Increased Income on Average Percentage Increased Production
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Increase
Number of cows Pounds % increase lbs. Av. price Increase $
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40........................................ 700,000 1.8 12,600 $.286 $36
57........................................ 1,000,000 1.8 18,000 .286 51
86........................................ 1,500,000 1.8 27,000 .286 77
286....................................... 5,000,000 1.8 90,000 .286 257
1,144..................................... 20,000,000 1.8 360,000 .286 1,029
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Table 5 shows the comparison between the compact income (reduced
income) a producer would not receive due to decreasing production by
five (5) percent, and the financial benefit for that production
decrease under the proposed supply management program. The table
applies the average compact producer price of $.286 for 1998 to compute
the value of reduced income and applies the same assumptions as used in
Table 3 to show the effect, including the cost to the producer, of the
proposed supply management program (SMP).

Table 5.--Comparison of Reduced Compact Income To Supply Management Benefits for 5% Production Decrease
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Reduced Average Reduced Net SMP Net income
Number of cows pounds price income refund increase
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40........................................ 35,000 $.286 $100 $1,285 $1,185
57........................................ 50,000 .286 143 1,364 1,221
86........................................ 75,000 .286 214 1,496 1,282
286....................................... 250,000 .286 715 2,420 1,705
1,144..................................... 1,000,000 .286 2,860 6,380 3,520
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Base/Excess Program

The Commission also requests comments on a proposed base/excess
program, as an alternative to the proposed assessment/refund program.
Under the proposed base/excess program, all compact qualified producers
would be assigned a base production level for each month. The base
would be the equivalent of the volume of milk produced in the same
month in the prior calendar year. Producers would be required to have
been qualified to receive compact payments in each month that is used
as a base month. Producers who were not qualified to receive compact
payments in the same month in the prior calendar year, would be
assigned a base of 90% of their current monthly milk production in the
months of January, February, July, August, September, October, November
and December and 80% of their current monthly milk production in the
months of March, April, May and June. Producers would then receive
compact payments on only their base production volume, or actual
production volume, whichever is less. Any amount of milk produced in
excess of the base would not receive compact payments.
Under the proposed program, a base could be transferred from one
producer to another only under very limited circumstances. For example,
a partnership of two producers could dissolve and each producer take as
his individual base the same percent of the partnership base as he had
percent ownership in the partnership, or two or more producers may
combine their bases if they form a partnership operating one farm. If a
producer operates more than one farm, then each

[[Page 33030]]

farm would have a separate base, unless the farms and herds are
combined into one dairy farm, in which case the separate bases may be
combined into one base, if approved by the Commission. In addition, the
name of the baseholder could be changed to another member of the
baseholder's immediate family if the milk produced is from the same
herd and on the same farm and the change is approved by the Compact
Commission.
Handlers who operate pool plants and receive milk from producers,
and cooperative associations, in their capacity as a handler, would be
required to provide the necessary documentation to the Commission on
each producer's monthly milk production. The documentation would be
required two times a year. The Commission would use this data to notify
each producer, and the handler or cooperative association receiving the
producer's milk, of the monthly base. The Commission would notify
producer s of the base for the months of January through June by
January and the base for the months of July through December by July of
each calendar year.
If the estimated rate of milk production in the compact region
exceeds the national rate of increase for the period October through
September of the current year, then the Commission would not adjust the
producer base for the following calendar year and the producer base
would be frozen at the monthly base then in effect. After the
conclusion of a period from October 1 through September 30 when the
estimated rate of milk production in the compact region does not exceed
the national rate of increase, then the monthly producer base would be
adjusted in the next calendar year to the volume of milk produced in
the same month in the prior calendar year.
The base/excess program would be intended to assure that compact
payments do not create an incentive for producers to generate
additional supplies of milk by creating an incentive for all producers
to maintain a stable, local supply of milk for the New England milk
market.
The Commission offers the following examples to assist interested
persons in evaluating the proposed base/excess program. The tables show
the impact of the proposed program on different size farms. The actual
pool values for April 1999 milk were used to develop the rate per
hundredweight for the tables, with the assumption that 96.5% of the
milk volume would be ``base'' milk and 3.5% of the milk volume would be
``excess'' milk for which no compact payment would be made.
Table 6 shows the comparison of the monthly compact value for
selected size farms to the compact value without the base/excess
program. The table assumes that each farm produces milk at the same
volume as its base. With the assumptions used in Table 6, the effective
compact rate (which is the amount of the compact payment the producer
receives divided by the volume of all milk produced, including the
excess when applicable) is $1.48 per hundredweight.

Table 6.--Monthly Benefits From Base/Excess Program for Selected Size Farms: No Increase in Milk Production
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Number of cows Base lbs $/cwt Value Actual lbs $/cwt Value Difference
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40.................................................... 58,000 1.48 $858 58,000 1.43 829 29
57.................................................... 83,000 1.48 1,228 83,000 1.43 1,187 41
86.................................................... 125,000 1.48 1,850 125,000 1.43 1,787 63
286................................................... 417,000 1.48 6,172 417,000 1.43 5,963 209
1144.................................................. 1,667,000 1.48 24,672 1,667,000 1.43 23,838 834
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 7 is based on all the same assumptions as Table 6, except it
shows the impact on the monthly compact value to the producer if milk
production is reduced by 5% as compared to the producer's base for the
month. The compact payments would be made on the lesser of the base
production level or the actual production level. With the assumptions
used in Table 7, the effective compact rate (which is the amount of the
compact payment the producer receives divided by the volume of all milk
produced, including the excess when applicable) is 1.48 per
hundredweight.

Table 7.--Monthly Benefits From Base/Excess Program for Selected Size Farms: 5% Reduction in Milk Production
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Value@ Value@
Number of cows Base lbs Actual lbs $1.48/cwt Actual lbs $1.43/cwt Difference
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40.......................... 58,000 55,000 $814 55,000 $787 $27
57.......................... 83,000 79,000 1,169 79,000 1,129 40
86.......................... 125,000 119,000 1,761 119,000 1,702 59
286......................... 417,000 396,000 5,861 396,000 5,663 198
1144........................ 1,667,000 1,584,000 23,443 1,584,000 22,651 792
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Table 8 also uses the same assumptions as Table 6, but shows the
impact on the monthly compact value to the producer of a 5% increase in
milk production over the base. As the table demonstrates, the compact
value becomes a negative, because no compact payment is made on the 5%
excess of milk produced over the base, even though the rate per
hundredweight paid on the base is increased by five cents when
``excess'' milk is excluded from the pool. With the assumptions used in
Table 8, the effective compact rate (which is the amount of the compact
payment the producer receives divided by the volume of all milk
produced, including the excess when applicable) is $1.41 per
hundredweight.

[[Page 33031]]

Table 8.--Monthly Benefits From Base/Excess Program for Selected Size Farms: 5% Increase in Milk Production
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Value@ Value@
Number of cows Base lbs $1.48/cwt Actual lbs $1.43/cwt Difference
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40........................................ 58,000 $858 61,000 $872 -$14
57........................................ 83,000 1,228 87,000 1,244 -$16
86........................................ 125,000 1,850 131,000 1,873 -$23
286....................................... 417,000 6,172 438,000 6,263 -$91
1144...................................... 1,667,000 24,672 1,750,000 25,025 -$353
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IV. Proposed Technical Amendments to the Over-Order Price
Regulation

In conjunction with implementing a supply management program,
either the proposed assessment/refund plan or the base/excess plan, the
Commission proposes to amend section 1306.3(c) to delete subsections
(1) and (2) and to specify that any surplus remaining in an escrow
account established to meet a potential obligation to the Commodity
Credit Corporation (CCC) would be returned to the producer-settlement
fund for distribution to all producers. These changes eliminate the
current provisions for returning the surplus funds to only those
producers who did not increase production in the federal fiscal year.
The Commission proposes this change because, with the implementation of
a specific supply management program, the limitation on the CCC refund
of a surplus to only those producers who did not increase production
would no longer be appropriate.

Assessment Refund Program

The Commission proposes to amend sections 1306.3(c) and (e) and to
add a new Part 1309 to provide the necessary regulations to implement
the proposed supply management assessment/refund program. The
Commission also proposes to make corresponding technical changes
required by the specific amendments and additions to the current
regulations.
The Commission proposes to amend section 1306.3, by first
redesignating existing paragraphs (e) through (g) as paragraphs (f)
through (h) and adding a new paragraph (e). The new paragraph will
allow the Commission to withhold five cents per hundredweight from the
producer pool to fund the supply management-settlement fund.
A new Part 1309 is proposed to provide the regulations to implement
the supply management program. Section 1309.1 defines producer
qualifications for the refund program. Section 1309.2 defines the
procedure for computing the refund prices to be paid to qualified
producers. Section 1309.3 would provide the authority for the
establishment of a supply management-settlement fund. Finally, section
1309.4 would describe the procedure for issuing payments to producers
eligible for a refund under the supply management program and
establishing a maximum per hundredweight payment of $12,000.
If these proposed amendments are adopted corresponding technical
amendments to referencing redesignated paragraphs in section 1306.3
will also be necessary.

Base/Excess Program

The Commission proposes to add a new Part 1310 to provide the
regulations to implement the base/excess supply management program.
Section 1310.1 would define base milk and section 1310.2 would define
excess milk.
Section 1310.3 would provide the method for computing the base for
each producer, including new producers, and also would specify the
circumstances under which the base period would not automatically be
updated from one calendar year to the next. As proposed in section
1310.3(c), if the estimated rate of milk production in the compact
region exceeds the national rate of increase for the period October
through September of the current year, then the Commission would not
adjust the producer base for the following calendar year and the
producer base would be frozen at the monthly base then in effect. After
the conclusion of a period from October 1 through September 30 when the
estimated rate of milk production in the compact region does not exceed
the national rate of increase, then the monthly producer base would be
adjusted in the next calendar year to the volume of milk produced in
the same month in the prior calendar year.
Section 1310.4 specifies the limited circumstances under which a
producer base could be transferred. Section 1310.5 would require the
Commission to notify each producer, the handler receiving the
producer's milk and the producer's cooperative association, of the
monthly base. This notice would be provided twice a year, on or before
January and July, with each notice providing the base for the next six-
month period.
Section 1310.6 would establish the responsibility of handlers who
operate a pool plant and receive milk from producers and cooperative
associations in their capacity as a handler to provide the
documentation to the Commission of each producer's monthly milk
production. The documentation would be required every six months. This
section would also specify that if the handler failed to provide the
documentation, then the Commission would establish the producer base
according to the method used to establish the base of new producers.
If these proposed amendments are adopted, the Commission also
proposes to make corresponding technical changes required by the
specific amendments and additions to the current regulations.

V. Specific Requests for Comments, Data and Testimony

The Commission is considering implementing one of the two proposed
programs and encourages all interested persons to provide comments and
testimony on each proposal. In addition, the Commission is specifically
requesting comments, data and testimony on the following issues:

Assessment/Refund Program

1. The level of refund payment that would best meet the purposes of
the supply management program and the level of assessment necessary to
accomplish this purpose.
2. The level of assessment necessary to accomplish the purpose of
the program to ensure that the compact payments do not create an
incentive to generate additional supplies of milk.
3. Whether the assessment should be a flat rate, or whether it
should fluctuate with the amount of the monthly compact producer price.
4. Whether a refund payment per hundredweight should be paid on the
amount of reduced milk production or the total milk production for the
period.
5. Whether the refund should be paid only on a flat per producer
basis or only

[[Page 33032]]

on a per hundredweight basis to all eligible producers.

Base/Excess Program

1. What percent of production should be used to establish the base
for new producers.
2. Whether the base should be established according to the average
production of the two preceding calendar years.
Official Notice of Technical, Scientific or Other Matters
Pursuant to the Commission regulations, 7 CFR 1361.5(g)(5), the
Commission hereby gives public notice that it may take official notice,
at the public hearings on July 7, 1999 and August 4, or afterward, of
relevant facts, statistics, data, conclusions, and other information
provided by or through the United States Department of Agriculture,
including, but not limited to, matters reported by the National
Agricultural Statistics Service, the Market Administrators, the
Economic Research Service, the Agricultural Marketing Service and
information, data and statistics developed and maintained by the
Departments of Agriculture of the States or Commonwealth within the
Compact regulated area.
Public Participation in Rulemaking Proceedings
The Commission seeks and encourages oral and written testimony and
comments from all interested persons regarding these proposed rules.
The Commission continues to benefit from the valuable insights and
active participation of all segments of the affected community
including consumers, processors and producers in the development and
administration of the Over-order Price Regulation.
Request for Pre-Filed Testimony and Written Comments
Pursuant to the Commission rules, 7 CFR 1361.4, any person may
participate in the rulemaking proceeding independent of the hearing
process by submitting written comments or exhibits to the Commission.
Comments and exhibits may be submitted at any time before 5:00 p.m. on
August 18, 1999.

Please note: Comments and exhibits will be made part of the
record of the rulemaking proceeding only if they identify the
author's name, address and occupation, and if they include a sworn
and notarized statement indicating that the comment and/or exhibit
is presented based upon the author's personal knowledge and belief.
Facsimile copies will be accepted up until the 5:00 p.m. deadline,
but the original must then be sent by ordinary mail.

The Commission is requesting pre-filed testimony from any
interested person. Pre-filed testimony must include the name, address
and occupation of the witness and a sworn notarized statement
indicating that the testimony is presented based upon the author's
personal knowledge and belief. Pre-filed testimony must be received in
the Commission office no later than 12:00 p.m., June 30, 1999 for the
July 7 hearing and by 12:00 p.m., July 28, 1999 for the August 4
hearing.

List of Subjects in 7 CFR Parts 1306, 1307, 1309 and 1310

Milk.

Codification in Code of Federal Regulations

For reasons set forth in the preamble, the Northeast Dairy Compact
Commission proposes to amend 7 CFR part 1306, to make corresponding
technical amendments to part 1307 and to add a new part 1309 or part
1310 as follows:

PART 1306--COMPACT OVER-ORDER PRODUCER PRICE

1. The authority citation for part 1306 continues to read as
follows:

Authority: 7 U.S.C. 7256

2. In Sec. 1306.3 revise paragraph (c) and redesignate paragraphs
(e) through (g) as paragraphs (f) through (h) and add a new paragraph
(e) to read as follows:

Sec. 1306.3 Computation of basic over-order producer price.

* * * * *
(c) In any month when the average percentage increase in production
in the regulated area comes within 0.25 of the average percentage
increase in production for the nation, subtract from the total value
computed pursuant to paragraph (a) of this section, for the purpose of
retaining a reserve, an amount estimated by the commission in
consultation with the USDA for anticipated cost to reimburse the
Commodity Credit Corporation (CCC) at the end of its fiscal year for
any surplus milk purchases. Should those funds not be needed because no
surplus purchases were made by the CCC at the end of its fiscal year or
there is a surplus in the fund, it is to be returned to the producer-
settlement fund.
* * * * *
(e) Subtract .05 cents per hundredweight from the basic over-order
producer price computed pursuant to this section and deposit that
amount in the supply management-settlement fund;
* * * * *

PART 1307--PAYMENTS FOR MILK

3. The authority citation for part 1307 continues to read as
follows:

Authority: 7 U.S.C. 7256.

4. Section 1307.1 is amended in paragraphs (a), (b) and (c) by
removing ``1306.3(f)'' and adding ``1306.3(g)'' in its place.

Option One

5. A new part 1309 is added to read as follows:

PART 1309--SUPPLY MANAGEMENT REFUND PROGRAM

Sec.
1309.1 Producer qualification for supply management refund program.
1309.2 Computation of supply management refund prices.
1309.3 Supply management-settlement fund.
1309.4 Payment to producers of supply management refund.

Authority: 7 U.S.C. 7256.

Sec. 1309.1 Producer qualification for supply management refund
program.

A dairy farmer who is a qualified producer pursuant to Sec. 1301.11
of this chapter for the entire refund year and the dairy farmer's milk
production during the refund year is less than or the increase is not
more than 1% of the milk production of the preceding calendar year.

Sec. 1309.2 Computation of supply management refund prices.

The compact commission shall compute the supply management refund
prices applicable to all qualified milk as follows:
(a) Combine into one total the values, including all interest
earned, deducted pursuant to section 1306.3(e) of this chapter for the
refund year;
(b) Subtract 50% from the total value computed pursuant to
paragraph (a) of this section to be used for the per farm payments to
producers who submitted documentation pursuant to Sec. 1309.4(a);
(c) Add the unobligated balance of the supply management-settlement
fund;
(d) Divide the resulting amount by the sum of all milk production
reduction reported by producers qualified pursuant to Sec. 1309.1 and
who submitted documentation pursuant to Sec. 1309.4(a); and
(e) Subtract not less than one (1) cent nor more than two (2) cents
for the purpose of retaining a cash balance in the supply management-
settlement fund. The result shall be the supply management refund price
for the year.

[[Page 33033]]

Sec. 1309.3 Supply management-settlement fund.

(a) The compact commission shall establish and maintain a separate
fund known as the supply management-settlement fund. It shall deposit
into the fund all amounts deducted pursuant to Sec. 1306.3(e) of this
chapter and the amount subtracted under Sec. 1309.2(e). It shall pay
from the fund all amounts due producers pursuant to Sec. 1309.4 and the
amount added pursuant to Sec. 1309.2(c);
(b) All amounts subtracted under Sec. 1309.2(e), including interest
earned thereon, shall remain in the supply management-settlement fund
as an obligated balance until it is withdrawn for the purpose of
effectuating Sec. 1309.2(c);
(c) The compact commission shall place all monies subtracted under
Sec. 1306.3(e) of this chapter and Sec. 1309.2(e) in an interest-
bearing bank account or accounts in a bank or banks duly approved as a
Federal depository for such monies, or invest them in short-term U.S.
Government securities.

Sec. 1309.4 Payment to producers of supply management refund.

(a) All producers who are qualified pursuant to Sec. 1309.1 shall
become eligible to receive payment of the supply management refund
computed pursuant to Sec. 1309.2 by submitting to the compact
commission documentation that the producer milk production during the
refund year is less than or the increase is not more than 1% of the
milk production of the preceding calendar year. Such documentation
shall be filed with the commission not later than 45 days after the end
of the calendar year.
(b) The commission will make payment to all producers qualified
pursuant to Sec. 1309.1 and eligible pursuant to paragraph (a) of this
section in the following manner:
(1) A per farm payment computed by dividing the amount subtracted
pursuant to Sec. 1309.2(b) by the total eligible producers; and
(2) The value determined by multiplying the supply management
refund price computed pursuant to Sec. 1309.2(e) by the producer's
reduced milk pounds, not to exceed $12,000.

Option Two

6. A new part 1310 is added to read as follows:

PART 1310--BASE-EXCESS PROGRAM

Sec.
1310.1 Base milk.
1310.2 Excess milk.
1310.3 Computation of base for each producer.
1310.4 Base rules.
1310.5 Announcement of base.
1310.6 Responsibility for establishment of producer base.

Authority: 7 U.S.C. 7256.

Sec. 1310.1 Base milk.

Base milk means milk means milk received from a qualified compact
producer by a pool handler which is not in excess of such producer's
monthly base computed pursuant to Sec. 1310.3 of this part.

Sec. 1310.2 Excess milk.

Excess milk means milk received from a qualified compact producer
by a pool handler which is in excess of base milk received from such
producer during the current month.

Sec. 1310.3 Computation of base for each producer.

For each month of the year, the Compact Commission shall announce,
subject to the rules set forth in Sec. 1310.4 of this part, a base for
each producer described in paragraphs (a) and (b) of this section. Each
producer's base in the current month is based upon their milk
production in the same month of the preceding calendar year, except as
provided in paragraph (c) of this section.
(a) For any producer, except as provided in paragraph (b) of this
section, the quantity of milk receipts shall be the total pounds of
producer milk received by all pool handlers from such producer.
(b)(1) Any producer who made no qualifying milk deliveries during
the base-forming period shall have a base reflecting the percentage of
the producer's monthly deliveries or producer milk each month as set
forth in the following table:

------------------------------------------------------------------------
Percentage
of
Month production
as base
------------------------------------------------------------------------
January, February, July, August, September, October, 90
November and December....................................
March, April, May and June................................ 80
------------------------------------------------------------------------

(2) A new monthly base is earned on the basis of the producer's
milk deliveries during the current calendar year.
(c) On or before the 31st of October of each calendar year, the
Commission will announce the base year to be used for the following
calendar year. If the rate of milk production in the compact region for
the preceding federal fiscal year (October through September of the
current year) exceeds the national rate of increase for the same
period, then the Commission shall apply the same base currently in
effect to the following calendar year. If the rate of milk production
in the compact region for the preceding federal fiscal year (October
through September of the current year) is less than or equal to the
national rate of increase for the same period, then the Commission
shall apply the current year production volumes as the base for the
following year. Provided that, a base established pursuant to paragraph
(b) of this section shall not be subject to the freezing provisions of
this section.

Sec. 1310.4 Base rules.

The following shall apply in connection with the establishment of
bases:
(a) A base computed pursuant to paragraph (a) of Sec. 1310.3 of
this part shall be effective January 1, 2000.
(b) A base computed pursuant to paragraph (a) through (e) of this
section may be transferred only in its entirety to another dairy farmer
and only upon discontinuance of milk production because of the entry
into military service of the baseholder.
(c) Base transfer shall be accomplished only through written
application to the Compact Commission on forms prescribed by the
Compact Commission and shall be signed by the baseholder and by the
person to whom such base is to be transferred: Provided, that if a base
is held jointly, except as provided in paragraph (e) of this section,
the entire base only is transferable and only upon receipt of such
application by all joint baseholders.
(d) If a producer operates more than one farm and milk is received
from each at a pool plant or by a cooperative association in its
capacity as a handler pursuant to Sec. 1301.9(d) of this chapter, the
producer shall establish a separate base with respect to producer milk
delivered from such farm; Provided, that if such farm and herds are
combined into one dairy farm, the separate bases may be combined into
one base subject to approval of the Compact Commission.
(e) Only one base shall be allocated with respect to milk produced
by one or more persons where dairy farm is jointly owned or operated;
Provided, that in the case of a base established jointly, if a copy of
the partnership agreement setting forth as a percentage of the total
interest of the partners in the base is filed with the Compact
commission before the end of the base-forming period, then upon
termination of the partnership agreement each partner will be entitled
to the partner's stated share of the base to hold in the partner's own
right or to transfer in conformity with

[[Page 33034]]

the provisions of paragraph (b) or (c) of this section (including
transfer to a partnership of which the partner is a member). Such
termination of a partnership shall become effective as of the end of
any month during which an application for such division of base signed
by each member of such partnership is received by the Compact
Commission.
(f) Two or more producers with bases may combine such bases upon
the formation of a bona/fide partnership operating from one farm. Such
a combination shall be considered a joint base under paragraph (c) of
this section.
(g) Subject to the approval by the Compact Commission, the name of
the baseholder may be changed to that of another member of the
baseholder's immediate family, but only under circumstances where the
base would be applicable to milk production from the same herd and on
the same farm.

Sec. 1310.5 Announcement of base.

On or before January and July the Compact Commission shall notify
each producer, the handler receiving the producer's milk and the
cooperative association of which the producer is a member of the
monthly base established by such producer.

Sec. 1310.6 Responsibility for establishment of producer base.

Handlers who operate a pool plant and receive milk from producers
and a cooperative association in its capacity as a handler pursuant to
Sec. 1301.9(d) of this chapter must submit to the Commission
documentation on each producer's monthly milk production of the
preceding calendar year. Such documentation shall be filed with the
Commission not later than 60 days before January and July of the
current year. Failure to comply with this section will result in
producer bases be established pursuant to Sec. 1310.3(b) of this part.

Dated: June 14, 1999.
Kenneth M. Becker,
Executive Director.
[FR Doc. 99-15506 Filed 6-18-99; 8:45 am]
BILLING CODE 1650-01-U