[Federal Register Volume 65, Number 145 (Thursday, July 27, 2000)]
[Proposed Rules]
[Pages 46115-46119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18709]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1424

RIN 0560-AG16


Bioenergy Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Commodity Credit Corporation (CCC) is considering a new 
initiative to accelerate the development and use of bio-based 
technologies which would stimulate the industrial use of agricultural 
commodities into bio-based fuels and products. Accordingly, CCC seeks 
comments concerning the establishment of a bioenergy program to expand 
agricultural markets by promoting increased production of bioenergy 
through ethanol and biodiesel. Using the authority of the CCC Charter 
Act, which states in part, that CCC is authorized to use its general 
powers to ``increase domestic consumption of agricultural commodities 
by expanding or aiding in the expansion of domestic markets for 
agricultural commodities * * *'', CCC proposes to make incentive cash 
payments to bioenergy producers who increase their purchases of 
eligible agricultural commodities, as compared to the corresponding 
period in the prior fiscal year (FY) and convert that commodity into 
increased bioenergy production.

DATES: Comments on this rule must be received on or before August 28, 
2000 to be assured of consideration. Comments regarding the information 
collection requirements of the Paperwork Reduction Act must be received 
on or before September 25, 2000 to be assured of consideration.

ADDRESSES: Comments should be sent to Alex King, Acting Deputy 
Administrator, Commodity Operations, FSA, United States Department of 
Agriculture (USDA), STOP 0550, 1400 Independence Avenue, SW., 
Washington, DC 20250-0550, telephone (202) 720-3217 or e-mail address, 
[email protected]. Persons with disabilities who require 
alternative means for communication for regulatory information 
(braille, large print, audiotape, etc.) should contact USDA's TARGET 
Center at (202) 720-2600 (voice and TDD).

FOR FURTHER INFORMATION CONTACT: Jim Goff, (202) 720-5396.

SUPPLEMENTARY INFORMATION:

Comments Requested

    Public comments (submitted to the address above) are requested 
generally and specifically on the following topics in this proposed 
rule:
    1. Producers of what forms of bioenergy should be eligible for 
program payments? Ethanol and biodiesel are proposed in this rule.
    2. What agricultural commodities used in bioenergy production 
should be included in the program? This rule proposes potentially 
making payments on barley, corn, grain sorghum, oats, rice, wheat, 
soybeans, sunflower seed, canola, crambe, rapeseed, safflower, 
flaxseed, and mustard seed used in either ethanol or biodiesel 
production.
    3. At what facility capacity should program payment rates change to 
account for plant efficiency variances by eligible program commodity? 
This rule proposes making larger payments to plants with under 30 
million gallon per year capacity than to plants with 30 million gallon 
or more capacity.
    4. How should payment rates be established, especially for 
commodities without CCC announced terminal market prices? This rule 
only proposes making payments to commodities with established CCC 
announced terminal prices.
    5. When payments are limited by the budget, how should payments be 
distributed?
    (a) Capped at a certain dollar amount or percentage of total 
payments. For example, no more than $X or X percent of total funds 
available to any one firm;
    (b) Prorate payments to eligible producers over the quarter or FY; 
or
    (c) First come, first paid basis.
    This proposed rule uses a combination of all of the above by having 
a sign-up period before the fiscal year begins to determine a payment 
factor as defined in Sec. 1424.3 and then using the payment factor on a 
first come, first paid basis. A payment restriction is proposed in 
Sec. 1424.10.
    6. Should the payment factor be capped as proposed in this rule at 
100 percent ? And, if so, should the cap be 100 percent?
    7. How should increases in bioenergy production be established for 
the various commodities receiving program payments?
    8. What are the expected impacts of this program on agricultural 
commodity prices, fossil fuel energy prices, farm income, bioenergy 
production and prices, and international trade in agricultural and 
energy products?

Executive Order 12866

    This proposed rule has been determined to be significant for the 
purposes of Executive Order 12866 and, therefore, has been reviewed by 
the Office of Management and Budget (OMB).

Regulatory Flexibility Act

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

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See the notice related to 7 CFR part 3015 subpart V 
published at 48 FR 29115 (June 24, 1983).

Environmental Evaluation

    An environmental evaluation for this action will be completed 
before publication of the final rule.

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988, Civil Justice Reform. The provisions of this proposed rule 
do not preempt State laws, are not retroactive, and do not involve 
administrative appeals.

Executive Order 12612

    It has been determined that this proposed rule does not have 
sufficient Federalism implications to warrant the preparation of a 
Federalism Assessment. The provisions contained in this proposed rule 
will not have a substantial direct effect on States or their political 
subdivisions or on the distribution of power and responsibilities among 
the various levels of government.

Unfunded Mandates Reform Act of 1995

    This proposed rule contains no Federal mandates under the 
regulatory provisions of Title II of the Unfunded Mandates Reform Act 
of 1995 (UMRA) for State, local, and tribal governments or the private 
sector. Therefore, this rule is not subject to the requirements of

[[Page 46116]]

sections 202 and 205 of the UMRA regulations.

Background

    To encourage bioenergy producers to expand agricultural markets by 
promoting increased bioenergy (ethanol and biodiesel) production, CCC, 
in accordance with Executive Order 13134, and the CCC Charter Act, 
proposes to make incentive cash payments to bioenergy producers who 
increase their purchases of agricultural commodities over previous FY 
purchases and convert that commodity into increased ethanol and 
biodiesel production over previous FY ethanol and biodiesel production. 
This rule proposes potentially making payments on barley, corn, grain 
sorghum, oats, rice, wheat, soybeans, sunflower seed, canola, crambe, 
rapeseed, safflower, flaxseed, and mustard seed used in either ethanol 
or biodiesel production.
    Eligible bioenergy producers will receive incentive cash payments 
quarterly, based on the producer's total annual bioenergy production 
increase for the quarter compared to the same quarter in the previous 
FY. Quarterly payments will be reconciled with the total increase in 
production for the FY at the end of the fourth quarter. If, at the end 
of the fourth quarter, overpayments have been made, the bioenergy 
producer shall repay the overpayment plus interest from the date of the 
overpayment through the date of repayment to CCC. Eligible bioenergy 
producers with less than 30 million gallons annual production capacity 
will receive a higher payment rate than bioenergy producers with 30 
million gallons or more annual production capacity to encourage the 
number of bioenergy producers, increase the incentive for smaller 
plants, and promote expansion of bioenergy production. A higher 
incentive is needed for smaller plants because, compared to larger 
plants, they tend to produce a more limited product range during 
refining, are less able to capture economies of scale, and may not have 
access to attractive risk management strategies.
    Except for FY 2000, bioenergy producers will enter into annual 
agreements with CCC establishing their eligibility to receive program 
payments before October 1. Once an agreement is entered into, eligible 
bioenergy producers will submit quarterly applications within 30 
calendar days after the end of each quarter requesting payments for the 
prior quarter. For example, during January 2001, producers may request 
payments for the period beginning October 1, 2000 through December 31, 
2000. CCC would make payments to eligible bioenergy producers within 30 
calendar days of receiving a complete eligible application.
    It is anticipated that CCC would make available up to $100 million 
in FY 2000, $150 million in FY 2001, and $150 million in FY 2002. CCC 
expects payment requests to exceed available program funding. 
Therefore, producers would be required to complete an agreement during 
a sign-up period to be announced by CCC for each FY of the program. 
Eligible agreement holders would be able to submit applications for 
program payments after each FY quarter. Information gathered from 
agreement holders would be used to establish a payment factor. The 
payment factor would be used when funding is less than anticipated 
payment requests for either or both ethanol and biodiesel production by 
quarter during the applicable FY to fairly distribute available 
funding. In contrast, when sign up results in fewer requests than 
funding permits, a payment factor of 100 percent would be used to 
allocate the applicable FY's funding. Once the payment factors are 
established, CCC would issue payments under the program on a first 
application received first paid basis. For example, if funding is 
limited to $100 million and $250 million in agreements are approved, 70 
percent from ethanol producers and 30 percent from biodiesel producers, 
an individual ethanol producer with an approved agreement requests a 
payment of $100,000 would receive $28,000 ($100,000 times 40 percent 
($100 million budget divided by $250 million agreement requests) times 
70 percent (ethanol factor)). Once the payment factor is established, 
it would be used for the entire FY. If funds are exhausted, payments 
would stop. Under no circumstances would previous payments be adjusted 
except as specified in Sec. 1424.8(b).
    As provided for in 31 U.S.C. 3720B the proposed rule provides that 
persons who are delinquent on other Federal debts will be ineligible 
for payments under this program. Also, bioenergy producers, to be 
eligible for this program, may have to meet additional requirements 
specific to the bioenergy fuel being produced. For example, to receive 
program payments, ethanol producers must also be licensed by the Bureau 
of Alcohol, Tobacco, and Firearm (BATF) for fuel ethanol production.

Paperwork Reduction Act

    Title: 7 CFR 1424, Bioenergy Program.
    OMB Control Number: 0560-NEW.
    Type of Request: Request for approval of a new information 
collection.
    Abstract: USDA will collect information from bioenergy producers 
that request payments under the Bioenergy Program as the Secretary may 
require to ensure the benefits are paid only to eligible bioenergy 
producers for eligible commodities. Bioenergy producers seeking program 
payments will have to meet minimum requirements by providing 
information concerning the production of bioenergy. Applicants must 
certify that they will abide by the Bioenergy Program Agreement's 
provisions. Burden calculations have been rounded up to nearest quarter 
hour.
    Estimate of Respondent Burden: Public reporting burden for the 
collection of information is estimated to average 2 hours per response.
    Respondents: U.S. bioenergy producers who use agricultural 
commodities to make bioenergy are eligible to receive payments.
    Estimated Number of Respondents: 50.
    Estimated Number of Responses per Respondent: 5 responses per year.
    Estimated Total Annual Burden Hours on Respondents: 500 hours.
    In addition to commenting on the substance of the regulation, the 
public is invited to comment on the information collection. Proposed 
topics include the following: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (b) the accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used; or (c) ways to enhance the quality, 
utility, and clarity of the information technology. Comments may be 
sent to the Desk Officer for Agriculture, Office of Information and 
Regulatory Affairs, OMB, Washington, DC 20503, and to Alex King, Acting 
Deputy Administrator, Commodity Operations, FSA, USDA, STOP 0550, 1400 
Independence Avenue, SW., Washington, DC 20250-0550.
    Copies of the information collection package may be obtained from 
Alex King, at the address listed above.

List of Subjects in 7 CFR Part 1424

    Administrative practice and procedure, Energy--bioenergy, Reporting 
and recordkeeping requirements.

    For the reasons stated in the preamble, the Commodity Credit

[[Page 46117]]

Corporation proposes to add 7 CFR Part 1424.

PART 1424--BIOENERGY PROGRAM

Sec.
1424.1   Applicability.
1424.2   Administration.
1424.3   Definitions.
1424.4   General eligibility rules.
1424.5   Application process.
1424.6   Eligibility determinations.
1424.7   [Reserved]
1424.8   Payment amounts.
1424.9   Reports required.
1424.10   Payment restriction.
1424.11   Maintenance and inspection of records.
1424.12   Appeals.
1424.13   Misrepresentation and scheme or device.
1424.14   OMB control numbers.

    Authority: Section 5(e) of the Commodity Credit Corporation 
Charter Act.


Sec. 1424.1  Applicability.

    This part establishes the Bioenergy Program (Program). It sets 
forth the terms and conditions a bioenergy producer must meet to obtain 
payments from the Commodity Credit Corporation (CCC) for eligible 
bioenergy production. A bioenergy producer meeting these terms and 
conditions may obtain payments under the Program. Additional terms and 
conditions are set forth in Form CCC-850, Bioenergy Program, Agreement 
Section.


Sec. 1424.2  Administration.

    (a) On behalf of CCC, the Farm Service Agency (FSA), will 
administer the provisions of this part under the general direction and 
supervision of the FSA, Deputy Administrator, Commodity Operations 
(Deputy Administrator).
    (b) The Deputy Administrator or a designee may authorize a waiver 
or modification of deadlines and other program requirements in cases 
where lateness or failure to meet such other requirements does not 
adversely affect the operation of the Program.


Sec. 1424.3  Definitions.

    The definitions set forth in this section shall be applicable for 
all purposes of program administration under this subpart.
    Agreement means the Bioenergy Program Application and Agreement, 
Agreement Section, Form CCC-850.
    Application means the Bioenergy Program Application and Agreement, 
Application Section, Form CCC-850.
    BATF is the Bureau of Alcohol, Tobacco and Firearms of the 
Department of the Treasury.
    Biodiesel is a nontoxic, biodegradable replacement for or additive 
to petroleum diesel derived from the oils and fats of plants and 
animals. Chemically, biodiesel is described as a mono alkyl ester.
    Biodiesel producer is a producer that produces and sells biodiesel 
commercially.
    Bioenergy means ethanol and biodiesel produced from eligible 
commodities.
    Conversion factor shall be:
    (1) 2.5 gallons, unless otherwise determined by CCC, of ethanol 
produced per bushel of corn used in ethanol production
    (2) 1.4 gallons, unless otherwise determined by CCC, of biodiesel 
per bushel of soybeans used in biodiesel production.
    (3) As announced by CCC for other than above.
    Eligible Commodity means barley, corn, grain sorghum, oats, rice, 
wheat, soybeans, sunflower seed, canola, crambe, rapeseed, safflower, 
flaxseed, and mustard seed or any other commodity or commodity by-
product as determined and announced by CCC used in ethanol and 
biodiesel production which is produced in the United States and its 
territories.
    Eligible producer means a bioenergy producer who has been 
determined by CCC to be eligible to receive Program payments and has 
entered into an Agreement with CCC .
    Ethanol is anhydrous ethyl alcohol manufactured in the United 
States and sold:
    (1) For fuel use which has been rendered unfit for beverage use in 
a manner and at a facility approved by the BATF for the production of 
ethanol for fuel, or
    (2) As denatured ethanol used by blenders and refiners which is 
composed of 95 percent ethanol and 5 percent gasoline.
    Ethanol producer is a producer that has authority from the BATF to 
produce ethanol.
    FSA means the Farm Service Agency, USDA.
    FY means fiscal year beginning each October 1 and ending September 
30 of the following year.
    KCCO means Kansas City Commodity Office.
    Payment factor is the factor, not to exceed 100 percent, CCC 
establishes, based on Agreements submitted by eligible producers during 
the sign-up period, to reflect the percentage of funding that will go 
to ethanol versus biodiesel producers for the FY further adjusted for 
available funding. For example, if funding is limited to $100 million 
and $250 million in agreements are approved, 70 percent from ethanol 
producers and 30 percent from biodiesel producers, the payment factor 
for ethanol that FY will be 28 percent ($100 million budget divided by 
$250 million agreement submissions) times 70 percent (ethanol)). 
Similarly, the factor for biodiesel for the same FY will be 12 percent 
($100 million budget divided by $250 million agreement submissions) 
times 30 percent (biodiesel factor)).
    Payment rate. The payment rate CCC will use in payment 
calculations, based on the amount of increased eligible commodity used 
by eligible bioenergy producers for bioenergy production for the 
application quarter versus the same quarter in the previous FY, for 
producers that have annual bioenergy production of:
    (1) Under 30 million gallons, will be 1 bushel for every 2.5 
bushels of corn or soybeans used for production.
    (2) 30 million gallons or more, will be 1 bushel for every 3.5 
bushels of corn or soybeans used for production.
    (3) Other than set forth in paragraphs (1) and (2) of this 
definition, as announced by CCC.
    Per unit value used by CCC to determine the payment amount issued 
under this Agreement will be for commodities:
    (1) With established terminal market prices:
    (A) the applicable terminal market price announced daily by the 
KCCO, FSA, adjusted by the county average differential in the county in 
which the plant is located and the applicable quality factors. Note: 
The county average differential used by CCC in determining the monetary 
amount will be the same as that used for producers under commodity loan 
programs.
    (B) Based on the terminal market price(s) in effect on the last day 
of the production quarter for which application is made.
    (2) Without established terminal market prices, as announced by 
CCC.
    Producer is a producer of bioenergy making application under this 
Program.
    Quarter means the time periods of October 1 through December 31, 
January 1 through March 31, April 1 through June 30, and July 1 through 
September 30 each FY.
    USDA means the United States Department of Agriculture.


Sec. 1424.4  General eligibility rules.

    To obtain program payments, a producer must do all of the 
following:
    (a) Obtain an Agreement, Form CCC-850, Bioenergy Program 
Application and Agreement, from the KCCO, Bulk Commodities Division, 
P.O. Box 419205, Kansas City, Missouri 64141-6205;
    (b) Submit a completed Form CCC-850, Agreement Section, to CCC no 
later

[[Page 46118]]

than August 31 each year or a later date, if announced by CCC, to the 
address in paragraph (a) of this section;
    (c) Be assigned an Agreement number by KCCO indicating the producer 
is eligible for Program payments;
    (d) Maintain records indicating:
    (1) Commodities for which it seeks payment;
    (2) The quantity of bioenergy produced from an eligible commodity 
by location during the quarter compared to the same quarter in the 
previous FY; and
    (3) The quantity of eligible commodity used to produce the 
bioenergy stated in paragraph (d)(2) of this section during the quarter 
compared to the same quarter in the previous FY;
    (e) Furnish CCC such certification, and access to such records, as 
CCC considers necessary to verify compliance with program provisions;
    (f) Once Program payments are received, continue to make 
Application submissions in accordance with Sec. 1424.9;
    (g) If not purchasing raw commodity input, be able to prove to 
CCC's satisfaction that both purchases of eligible commodities and 
production of bioenergy increased. Example: A producer that purchases 
soy oil from a soybean crushing plant for further refinement into 
biodiesel must be able to prove to CCC's satisfaction that both soy oil 
purchases and biodiesel production increased for the applicable 
quarter;
    (h) Certify the accuracy and truthfulness of the information 
provided in their Agreement on Form CCC-850; and
    (i) Allow verification by CCC of all information provided. Refusal 
to allow CCC or any other agency of USDA to verify any information 
provided will result in a determination of ineligibility.


Sec. 1424.5  Application process.

    To receive payments under this program during a FY, an eligible 
producer must:
    (a) Have an approved Agreement in accordance with Sec. 1424.4 and 
an Agreement number assigned by KCCO under Sec. 1424.4(c);
    (b) Obtain an Application, Form CCC-850, Bioenergy Program 
Application and Agreement, Application section from the KCCO, Bulk 
Commodities Division, P.O. Box 419205, Kansas City, Missouri 64141-
6205;
    (c) Submit applications within 30 calendar days of the end of the 
quarter for which payment is requested. Example: Applications for the 
quarter January 1 through March 31, 2001, must be submitted by April 
30, 2001. If the actual deadline is a non workday, the deadline will be 
the next business day;
    (d) Submit other relevant documents as required by CCC for the 
specific commodity; and
    (e) Certify with respect to the accuracy and truthfulness of the 
information provided.


Sec. 1424.6  Eligibility determinations.

    Applicants will, after either Agreements or Applications are 
submitted, if:
    (a) Determined eligible, receive notification of eligibility or 
payment, as applicable;
    (b) Determined ineligible, be notified in writing of ineligibility 
for program participation or payment, as applicable, and reason for 
determination; or
    (c) Additional information is needed for CCC to determine 
eligibility, be contacted for additional supporting documentation.


Sec. 1424.7  [Reserved]


Sec. 1424.8  Payment amounts.

    (a) The monetary amount paid by CCC to eligible producers on an 
eligible commodity under the Program will be determined by multiplying 
the applicable payment rate times conversion factor times per unit 
value times the payment factor. Whatever the result, once a payment 
factor is established, it will be used for the entire FY. If funds are 
exhausted, payments will stop. Similarly, if payments are less than 
expected, remaining funds at the end of the FY will be carried over 
into the next FY. Under no circumstances will previous payments be 
adjusted except as specified in paragraph (b) of this section.
    (b) Quarterly payments will be reconciled with the total increase 
in commodity purchases and bioenergy production for the FY at the end 
of the fourth quarter. If, at the end of the fourth quarter, 
overpayments have been made, the bioenergy producer shall repay the 
overpayment plus interest from the date of the overpayment through the 
date of repayment to CCC.


Sec. 1424.9  Reports required.

    Once funds have been made available under this program to an 
eligible producer, that producer shall file Form CCC-850, Application 
Section, quarterly through the end of the applicable FY.


Sec. 1424.10  Payment restriction.

    No single producer may receive more than ten percent of total FY 
payments for the applicable bioenergy fuel made under the program in 
this part for the applicable FY.


Sec. 1424.11  Maintenance and inspection of records.

    (a) For the purpose of verifying compliance with the requirements 
of this part, each eligible producer shall make available at one place 
at all reasonable times for examination by representatives of USDA, all 
books, papers, records, contracts, scale tickets, settlement sheets, 
invoices, written price quotations, or other documents related to the 
program that is within the control of such entity.
    (b) To facilitate examination and verification of the records and 
reports required by this part, copies of Form CCC-850, Bioenergy 
Program Application and Agreement, shall be filed in an orderly manner, 
and must be made available for inspection by representatives of USDA 
for not less than 6 years from the payment date.


Sec. 1424.12  Appeals.

    Any person who is subject to an adverse determination made under 
this part shall have a right to appeal the determination by filing a 
written request with the Deputy Administrator at the following address:

    Deputy Administrator, Commodity Operations, Farm Service Agency, 
United States Department of Agriculture, STOP 0550, 1400 
Independence Avenue, SW., Washington, DC 20250-0550.


Sec. 1424.13  Misrepresentation and scheme or device.

    (a) A producer shall be ineligible to receive payments under this 
program if CCC determines the producer:
    (1) Adopted any scheme or device which tends to defeat the purpose 
of the program in this part;
    (2) Made any fraudulent representation; or
    (3) Misrepresented any fact affecting a program determination.
    (b) Any funds disbursed pursuant to this part to a producer engaged 
in a misrepresentation, scheme, or device, or to any other person as a 
result of the bioenergy producer's actions, shall be refunded with 
interest together with such other sums as may become due, plus damages 
as may be determined by CCC.
    (c) Interest charged under this part shall at the rate of interest 
which the United States Treasury charges CCC for funds, as of the date 
CCC made such funds available. Such interest shall accrue from the date 
such payments were made available to the date of repayment or the date 
interest increases as determined in accordance with applicable 
regulations.

[[Page 46119]]

    (d) CCC may waive the accrual of interest and or damages if CCC 
determines that the cause of the erroneous determination was not due to 
any action of the bioenergy producer.
    (e) Any producer or person engaged in an act prohibited by this 
section and any producer or person receiving payment under this part 
shall be jointly and severally liable for any refund due under this 
section and for related charges.
    (f) The remedies provided in this part shall be in addition to 
other civil, criminal, or administrative remedies which may apply.
    (g) Late payment interest shall be assessed on all refunds in 
accordance with the provisions of, and subject to the rates prescribed 
in, 7 CFR Part 1403.


Sec. 1424.14  OMB control numbers.

    [The information collection requirements for the regulations will 
be submitted to OMB with the final rule.]

    Signed in Washington, DC, on July 19, 2000.
Keith Kelly,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 00-18709 Filed 7-26-00; 8:45 am]
BILLING CODE 3410-05-P