[Federal Register Volume 65, Number 46 (Wednesday, March 8, 2000)]
[Proposed Rules]
[Pages 12146-12151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5585]


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NORTHEAST DAIRY COMPACT COMMISSION

7 CFR Parts 1306, 1307 and 1309


Over-Order Price Regulation

AGENCY: Northeast Dairy Compact Commission.

ACTION: Proposed rule; notice of hearing.

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SUMMARY: The Northeast Dairy Compact Commission proposes to amend the 
over-order price regulation to establish a supply management program. 
The proposed program is an assessment/refund plan under which the 
Commission would withhold $.05 cents from the producer price from each 
Compact monthly pool. At the end of the Commission's fiscal (calendar) 
year, the Commission would refund the withheld funds to compact 
eligible producers who had increased production at a rate of one 
percent or less, as compared to the prior calendar year's production. 
One-half of the assessed funds would be distributed to all eligible 
producers at a flat rate refund amount and one-half would be 
distributed based on the total volume of milk produced for the year, up 
to a maximum per hundredweight refund of $12,000.

DATES: A public hearing will be held on April 5, 2000 to commence at 
1:00 p.m. Sworn and notarized written testimony, comments and exhibits 
may be submitted until 5:00 p.m. on April 19, 2000.

ADDRESSES: The public hearing will be held at the Wayfarer Inn, 121 S. 
River Road, U.S. Route 3, Bedford, New Hampshire. Mail, or deliver, 
sworn and notarized testimony, comments and exhibits to: Northeast 
Dairy Compact Commission, 34 Barre Street, Suite 2, Montpelier, Vermont 
05602.

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. 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. Congressional 
consent to the Compact was extended in Pub. L. 106-113, 115 Stat. 1501, 
November 29, 1999.
    Pursuant to its rulemaking authority under Article V, Section 11 of 
the

[[Page 12147]]

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.
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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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    On November 27, 1998, the Commission issued a notice of proposed 
rulemaking proceedings on several subjects and issues, including 
whether additional supply management policies and provisions should be 
incorporated into the over-order price regulation.\4\ The Commission 
held a public hearing to receive testimony on December 11, 1998 in 
Boxborough, Massachusetts and comments were received until 5:00 p.m. on 
December 31, 1998. The Commission issued a notice of proposed 
rulemaking on April 19, 1999 \5\, in which a specific assessment and 
refund program was proposed. The Commission held a public hearing on 
May 5, 1999 in Concord, New Hampshire and received comments until May 
19, 1999. The Commission subsequently reopened the rulemaking and 
proposed a base/excess plan, in addition to an assessment/refund plan. 
Notice of the supplemental proposed rulemaking proceedings was issued 
on June 21, 1999.\6\ The Commission held public hearings on July 7, 
1999 in West Springfield, Massachusetts and August 4, 1999 in White 
River Junction, Vermont. The Commission received written comments 
through August 18, 1999.
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    \4\ 63 FR 65563 (Nov. 27, 1998).
    \5\ 64 FR 19084 (Apr. 19, 1999).
    \6\ 64 FR 33027 (June 21, 1999).
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    At its deliberative meeting on February 2, 2000, the Commission 
decided to conclude those proceedings. At that meeting, the Commission 
referred the supply management issue to its Committee on Regulations 
and Rulemaking for further study. The Committee was asked to report 
back to the full Commission no later than the March 1, 2000 meeting 
with recommendations for addressing supply management and the 
requirement in Article IV, Section 9(f) of the Compact. That provision 
requires the Commission, when establishing a compact over-order price, 
to ``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.''
    Since promulgation of the Compact Over-order Price Regulation in 
1997, the Commission has closely monitored milk production levels in 
New England. One of the main goals in initially promulgating the Over-
order Price Regulation was to at least stabilize the dairy industry 
supplying the New England consumer milk markets and to increase the 
local supply of milk.\7\
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    \7\ 62 FR 23039-40 (April 28, 1997); 62 FR 29635 (May 30, 1997); 
62 FR 62814 (Nov. 25, 1997).
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    Based on the oral testimony and written comments and exhibits 
received in the December 1998 subjects and issues rulemaking 
proceeding, and the May, July and August 1999 public hearings and 
proposed rulemaking proceedings, the Commission proposes to implement a 
supply management program through an assessment and refund payment to 
producers who maintain their milk production within one percent of the 
prior year's production level. The proposed program is described in 
detail below.

II. Proposed Supply Management Program

    The proposed supply management program is 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 
proposed supply management program is relatively straightforward to 
administer and implement and therefore would be a feasible method of 
addressing supply management. The proposed supply management program is 
necessary to ensure that the compact over-order price does not create 
an incentive for producers to increase milk production, as required by 
section 9(f) of the Compact.
    Table 1 shows the total volume of milk in the Compact pool between 
July 1997 and December 1999. The volume of milk includes milk produced 
outside of New England, and distributed within New England, and does 
not include milk excluded pursuant to the Compact limitations on 
qualification of diverted and transferred milk.

 Table 1.--Volume of Milk in the Compact Pool July 1997 Through December
                                  1999
                         [In millions of pounds]
------------------------------------------------------------------------
                      Month                        1997    1998    1999
------------------------------------------------------------------------
Jan.............................................  ......   544.2   568.3
Feb.............................................  ......   508.1   528.3
Mar.............................................  ......   561.2   563.0
Apr.............................................  ......   541.8   568.5
May.............................................  ......   580.8   599.0
June............................................  ......   552.1   569.2
July............................................   531.0   567.9   564.3
Aug.............................................   532.2   551.3   559.8
Sept............................................   503.9   529.5   530.4
Oct.............................................   517.3   544.3   545.9
Nov.............................................   498.0   527.3   525.3
Dec.............................................   535.1   566.0   560.7
                                                 -----------------------
  Average.......................................   519.6   547.9   556.9
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    Table 2 shows the volume of milk that has been depooled, or 
excluded from qualification for Compact payments, pursuant to the 
Compact limitations on diverted and transferred milk.\8\ The 
limitations on diverted and transferred milk became effective in 
January 1999 and applied to the first Compact pool in April 1999. The 
applicable regulations are codified at 7 CFR 1301.23(d) and 1304.2(c).
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    \8\ 63 FR 65517 (Nov. 27, 1998).

  Table 2.--Volume of Depooled Milk January 1999 Through December 1999
                         [In millions of pounds]
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                                                                Depooled
                            Month                                 milk
------------------------------------------------------------------------
Jan..........................................................
 
Feb..........................................................
 
Mar..........................................................
 
Apr..........................................................        4.3
May..........................................................        1.2
June.........................................................         .9
July.........................................................        1.5
Aug..........................................................        4.8
Sept.........................................................        4.7
Oct..........................................................        2.0
Nov..........................................................        2.2
Dec..........................................................        1.4
                                                              ----------
  Total......................................................       23.0
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[[Page 12148]]

    Table 3 shows the total volume of milk qualified for Compact 
payments, after exclusions pursuant to the diverted and transferred 
milk limitations, by quarter. Table 3 also shows the percent increase 
in milk volume over the same quarter in the prior year.

                   Table 3.--Compact Producer Milk by Quarter, July 1997 Through December 1999
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                                    1997 (million     1998 (million     1999 (million    1997/1998    1998/1999
             Quarter                   pounds)           pounds)           pounds)       (percent)    (percent)
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Jan-Mar.........................  ................           1,613.5           1,659.6  ...........          2.9
Apr-June........................  ................           1,674.7           1,736.7  ...........          3.7
Jul-Sep.........................           1,567.1           1,648.7           1,654.5          5.2          0.4
Oct-Dec.........................           1,550.4           1,637.6           1,631.9          5.6         -0.4
Average.........................          1,558.75           1,643.6           1,670.7          5.4          1.6
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    Table 4 shows the federal blend price, the Compact producer price 
and the percent of total producer price attributed to Compact payments.

                    Table 4.--Total Producer Price and Percent Attributed to Compact Payments
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                                                                Federal      Compact       Total      Percent of
                            Month                             blend price    producer     producer    total due
                                                               (zone 21)      price        price      to compact
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July 1997...................................................       $11.97        $1.28       $13.25         9.66
August......................................................        12.26         1.31        13.57         9.65
September...................................................        12.54         1.36        13.90         9.78
October.....................................................        13.60         0.81        14.41         5.62
November....................................................        14.10         0.44        14.54         3.03
December....................................................        14.06         0.40        14.46         2.77
January 1998................................................        14.02         0.34        14.36         2.37
February....................................................        14.30         0.04        14.34         0.28
March.......................................................        14.10         0.16        14.26         1.12
April.......................................................        13.96         0.14        14.10         1.00
May.........................................................        13.38         0.33        13.71         2.41
June........................................................        13.68         0.71        14.39         2.41
July........................................................        13.14         1.02        14.16         7.20
August......................................................        15.00         0.24        15.24         1.57
September...................................................        16.47         0.00        16.47            0
October.....................................................        16.76         0.00        16.76            0
November....................................................        16.67         0.00        16.67            0
December....................................................        17.18         0.00        17.18            0
January 1999................................................        17.29         0.00        17.29            0
February....................................................        15.82         0.00        15.82            0
March.......................................................        15.69         0.00        15.69            0
April.......................................................        11.76         1.43        13.19         10.8
May.........................................................        12.42         0.82        13.24          6.2
June........................................................        12.79         0.73        13.52          5.4
July........................................................        12.97         1.01        13.98         7.22
August......................................................        13.64         0.70        14.34         4.88
September...................................................        15.34         0.21        15.55         1.35
October.....................................................        15.47         0.00        15.47            0
November....................................................        15.41         0.00        15.41            0
December....................................................        12.15         1.00        13.15         7.60
                                                             ---------------------------------------------------
    Average.................................................        14.26         0.49        14.75         3.32
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    The Commission has considered the data shown in Tables 1 through 4 
above to design a feasible supply management program that ensures that 
the over-order price does not create an incentive for producers to 
generate additional supplies of milk, and that is also consistent with 
its primary responsibility of assuring the viability of dairy farming 
in the northeast, and to assure consumers of an adequate, local supply 
of pure and wholesome milk. Compact Sections 1 and 9(f)
    The proposed program would assess $0.5 per hundredweight from the 
producer price in each monthly Compact pool. By taking an equal rate 
from each producer pool, the impact on the monthly producer pay price 
would be minimized, and predictable, thereby continuing to ensure a 
sufficient and stable pay price to producers to cover their costs of 
production. These funds would be accumulated in a separate 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. Producers would be eligible for the 
refund if they maintained their milk production volume at a rate of 
increase of 1%, or less, 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, eligible producers would receive a refund amount based 
on a price per hundredweight of their total volume of milk produced in 
the calendar year, up to a maximum of $12,000. The other half of the 
supply management-settlement fund would be distributed on the per 
hundredweight

[[Page 12149]]

basis. The amount of this half of the refund would be determined by 
dividing the total volume of milk produced by eligible producers into 
one-half the value of the supply management-settlement fund to 
determine the rate per hundredweight each eligible producer would 
receive.
    The assessment/refund program would provide a reward to those 
producers who stabilize their milk production and would create 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 at 1% or less 
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, choose to increase 
their milk production at a rate greater than 1% per year.
    It is the intention and judgment of the Commission that the 
combination of the proposed supply management assessment/refund program 
and the rules limiting compact payments on diverted and transferred 
milk 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.
    The Commission offers the following examples to assist interested 
persons in evaluating the proposed supply management program. Tables 5 
and 6 show the estimated impact of the assessment/refund program on 
different size farms. The tables are based on the following 
assumptions. The monthly average production in the Compact pool in 1999 
was approximately 556,900,000 pounds, with a yearly production of 
6,682,800,000. Using an assessment figure of $.05 per hundredweight, 
the total assessment/refund pool would be $3,341,400 annually. Assuming 
there are 4,000 Compact eligible producers, the average cost of the 
assessment per producer would be $835. The per hundredweight refund 
amount would be paid on the producers total annual production. The 
Commission estimates that 60-70% of producers could be eligible for the 
refund under the proposed program. Table 5 assumes that 60% (2,400) 
producers would be eligible for a refund and the per producer payment 
would be $696 for all eligible producers and the per hundredweight 
refund rate would be $.041. Table 6 assumes that 70% (2,800) of 
producers would be eligible for the refund and the per producer payment 
would be $595 and the per hundredweight refund rate would be $.035. 
Refund payments on a per hundredweight basis would not exceed $12,000.

                                        Table 5.--60% Eligible Producers
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            No. of cows                Pounds        Cost        $/farm       $/cwt       $ Total     Net refund
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40................................      700,000         $350         $696         $287         $983         $633
57................................    1,000,000          500          696          410        1,106          606
86................................    1,500,000          750          696          615        1,311          561
286...............................    5,000,000        2,500          696        2,050        2,746          246
1,144.............................   20,000,000       10,000          696        8,200        8,896       -1,104
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                                        Table 6.--70% Eligible Producers
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            No. of cows                Pounds        Cost        $/farm       $/cwt       $ Total     Net refund
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40................................      700,000         $350         $596         $245         $841         $491
57................................    1,000,000          500          596          350          946          446
86................................    1,500,000          750          596          525        1,121          371
286...............................    5,000,000        2,500          596        1,750        2,346         -154
1,144.............................   20,000,000       10,000          596        7,000        7,596       -2,404
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III. Proposed Technical Amendments to the Over-Order Price 
Regulation

    The Commission proposes to amend section 1306.3 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 $.05 from each monthly 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.

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 hearing April 5, 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 and the 
November 1999 study conducted by the University of Vermont entitled 
``Impacts of the Northeast Interstate Dairy Compact on the New England 
Milk Supply.''

[[Page 12150]]

    The Commission will also receive into the record of this rulemaking 
proceeding the entire record, including the public hearing transcript 
and written comments and submissions, of the December 1998 subjects and 
issues rulemaking proceeding regarding whether additional supply 
management policies and provisions should be incorporated into the 
Over-order Price Regulation and the proposed rulemaking noticed on 
April 19, 1999 at 64 FR 19084 and the supplemental proposed rulemaking 
proceeding noticed on June 21, 1999 at 64 FR 33027.

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.

Date, Time and Location of the Public Hearing

    The Northeast Dairy Compact Commission will hold a public hearing 
to commence at 1:00 p.m. on April 5, 2000 at the Wayfarer Inn, 121 S. 
River Road, U.S. Route 3, Bedford, New Hampshire.

Written Comments and Exhibits

    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 
April 19, 2000.

    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.

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

    Milk.

Codification in Code of Federal Regulations

    For reasons set forth in the preamble, the Northeast Dairy Compact 
Commission proposes to amend 7 CFR parts 1306 and 1307 and to add a new 
part 1309 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 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.

* * * * *
    (e) Subtract 5 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.
    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 Sec. 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) Divide the resulting amount by the sum of all milk production 
reported by producers qualified pursuant to Sec. 1309.1 and who 
submitted documentation pursuant to Sec. 1309.4(a).


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. It shall pay from the fund all amounts due producers pursuant 
to Sec. 1309.4;
    (b) All amounts subtracted under Sec. 1309.2(c), 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. 1309.4;
    (c) The compact commission shall place all monies subtracted under 
Sec. 1306.3(e) of this chapter 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;
    (d) If, after payments to producers of supply management refund 
pursuant to Sec. 1309.4 there is a surplus in the fund, it is to be 
returned to the producer-settlement fund.


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

[[Page 12151]]

refund price computed pursuant to Sec. 1309.2(e) by the producer's milk 
pounds, not to exceed $12,000.

    Dated: March 2, 2000.
Kenneth M. Becker,
Executive Director.
[FR Doc. 00-5585 Filed 3-7-00; 8:45 am]
BILLING CODE 1650-01-P