[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
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 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
----------------------------------------------------------------------------------------------------------------

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

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

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

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

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