[Federal Register Volume 67, Number 84 (Wednesday, May 1, 2002)]
[Rules and Regulations]
[Pages 21561-21566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10723]



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  Federal Register / Vol. 67, No. 84 / Wednesday, May 1, 2002 / Rules 
and Regulations  

[[Page 21561]]



DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 301

[Docket No. 01-112-1]
RIN 0579-AB45


Karnal Bunt Compensation

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Interim rule and request for comments.

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SUMMARY: We are amending the Karnal bunt regulations to provide 
compensation for certain growers and handlers of grain and seed 
affected by Karnal bunt who are not currently eligible for 
compensation, and for certain wheat grown outside the regulated area 
that was commingled with wheat grown in regulated areas in Texas. The 
payment of compensation is necessary in order to encourage the 
participation of, and obtain cooperation from, affected individuals in 
our efforts to contain and reduce the prevalence of Karnal bunt.

DATES: This interim rule is effective May 1, 2002. We will consider all 
comments we receive that are postmarked, delivered, or e-mailed by July 
1, 2002.

ADDRESSES: You may submit comments by postal mail/commercial delivery 
or by e-mail. If you use postal mail/commercial delivery, please send 
four copies of your comment (an original and three copies) to: Docket 
No. 01-112-1, Regulatory Analysis and Development, PPD, APHIS, Station 
3C71, 4700 River Road Unit 118, Riverdale, MD 20737-1238. Please state 
that your comment refers to Docket No. 01-112-1. If you use e-mail, 
address your comment to [email protected]. Your comment must 
be contained in the body of your message; do not send attached files. 
Please include your name and address in your message and ``Docket No. 
01-112-1'' on the subject line.
    You may read any comments that we receive on this docket in our 
reading room. The reading room is located in room 1141 of the USDA 
South Building, 14th Street and Independence Avenue, SW., Washington, 
DC. Normal reading room hours are 8 a.m. to 4:30 p.m., Monday through 
Friday, except holidays. To be sure someone is there to help you, 
please call (202) 690-2817 before coming.
    APHIS documents published in the Federal Register, and related 
information, including the names of organizations and individuals who 
have commented on APHIS dockets, are available on the Internet at 
http://www.aphis.usda.gov/ppd/rad/webrepor.html.

FOR FURTHER INFORMATION CONTACT: Mr. Robert G. Spaide, Director for 
Surveillance and Emergency Programs Planning and Coordination, PPQ, 
APHIS, 4700 River Road Unit 98, Riverdale, MD 20737-1231; (301) 734-
7819.

SUPPLEMENTARY INFORMATION:

Background

    Karnal bunt is a fungal disease of wheat (Triticum aestivum), durum 
wheat (Triticum durum), and triticale (Triticum aestivum X Secale 
cereale), a hybrid of wheat and rye. Karnal bunt is caused by the smut 
fungus Tilletia indica (Mitra) Mundkur and is spread by spores, 
primarily through the movement of infected seed. In the absence of 
measures taken by the U.S. Department of Agriculture (USDA) to prevent 
its spread, the establishment of Karnal bunt in the United States could 
have significant consequences with regard to the export of wheat to 
international markets. The regulations regarding Karnal bunt are set 
forth in 7 CFR 301.89-1 through 301.89-16 (referred to below as the 
regulations). Among other things, the regulations define areas 
regulated for Karnal bunt and restrict the movement of certain 
regulated articles, including wheat seed and grain, from the regulated 
areas. The regulations also provide for the payment of compensation for 
certain growers, handlers, seed companies, owners of grain storage 
facilities, flour millers, and participants in the National Karnal Bunt 
Survey who incurred losses and expenses because of Karnal bunt during 
certain years. These provisions are in Sec. 301.89-15, ``Compensation 
for growers, handlers, and seed companies in the 1999-2000 and 
subsequent crop seasons,'' and Sec. 301.89-16, ``Compensation for grain 
storage facilities, flour millers, and National Survey participants for 
the 1999-2000 and subsequent crop seasons.''
    On August 6, 2001, the Animal and Plant Health Inspection Service 
(APHIS) published in the Federal Register a final rule (66 FR 40839-
40843, Docket No. 96-016-37) that established the compensation levels 
for the 1999-2000 growing season and subsequent years and made several 
other changes to the compensation regulations. One of these changes was 
that, after the 2000-2001 growing season, compensation would no longer 
be made available to persons growing or handling crops that were 
knowingly planted in previously regulated areas.
    We have recently identified and analyzed five situations where 
certain wheat growers, handlers, and other parties covered by the 
compensation regulations appear to be ineligible to receive 
compensation for grain or seed affected by Karnal bunt due to 
restrictive language used in the regulations that did not anticipate 
certain complications in the harvest and storage of grain that arose 
following discovery of Karnal bunt in four counties in northern Texas. 
The situations we are addressing primarily affect growers and handlers 
in Texas, and certain handlers who moved grain from other States to 
Texas for storage. In particular, four counties in northern Texas 
became regulated areas during the latter part of the 2000-2001 growing 
season, and due to the need to quicky declare these counties as 
regulated areas, we were unable to modify the compensation regulations 
at that time to address certain relevant aspects of the way seed and 
grain are moved, stored, and used in the newly regulated areas. We are 
now revising the compensation regulations to address five particular 
situations in Texas regulated areas. These cases represent 
unanticipated circumstances applicable only to the 2000-2001 growing 
season where we believe the parties affected should, in fairness, be 
eligible for compensation.
    We are revising the compensation regulations to allow persons 
included in

[[Page 21562]]

these five situations to apply for compensation. The situations covered 
by these regulatory changes are described below.

Compensation for Certain Karnal Bunt Negative Wheat

    In 2001, we have added four counties in Texas (Archer, Baylor, 
Throckmorton, and Young Counties) to the list of Karnal bunt regulated 
areas (66 FR 32209-32210, Docket No. 01-058-1, June 14, 2001, and 66 FR 
37575-37576, Docket No. 01-063-1, July 19, 2001). Approximately 7.4 
million bushels of negative-tested wheat from the four counties added 
in 2001 are currently stored in grain elevators.
    Even though this wheat is Karnal bunt negative, it cannot be 
exported to major markets as it normally would be, because it was 
tested after harvest at the elevator, not in the field. Major foreign 
importers will accept U.S. wheat only if it can be certified as coming 
from an area where Karnal bunt is not known to exist. Such 
certification is currently based on testing at the field level.
    For this reason, when a producer near an area affected by Karnal 
bunt knows his wheat is destined for export, he generally arranges to 
have his fields tested for Karnal bunt. However, in northern Texas this 
past crop season, most wheat had already been harvested when Karnal 
bunt was discovered in the four counties subsequently added as 
regulated areas, so that wheat could only be tested in bins. The result 
is that approximately 7.4 million bushels of this wheat are still in 
storage, cannot be exported, must move under limited permit, and are 
currently ineligible for compensation under the regulations.
    We are making this wheat eligible for compensation payments by 
adding a new paragraph (d) to Sec. 301.89-15, ``Compensation for 
growers, handlers, and seed companies in the 1999-2000 and subsequent 
crop seasons.'' This new paragraph reads as follows: ``(d) Special 
allowance for negative wheat grown in Archer, Baylor, Throckmorton, and 
Young Counties, TX, in the 2000-2001 growing season. Notwithstanding 
any other provision of this section, wheat that was harvested from 
fields in Archer, Baylor, Throckmorton, or Young Counties, TX, in the 
2000-2001 growing season, and that tested negative for Karnal bunt 
after harvest, is eligible for compensation in accordance with 
paragraph (a) of this section.''

Compensation for the Cost of Replacing Uncertified Seed

    With regard to seed, the regulations in effect prior to this rule 
limit compensation payments to certified seed and seed being grown as 
certified seed. This provision does not address compensation in 
situations where a producer holds back grain from sale in order to use 
it as seed the next season. This practice of holding back grain for use 
as seed is common in regulated areas of Texas but is rare in other 
regulated States. The regulations do not address losses associated with 
the inability of producers to use held-back grain as seed for planting 
the next year's crop if Karnal bunt spores are detected in that grain. 
Because they cannot use spore-positive held-back grain as seed for 
planting, growers must purchase replacement seed to plant next year's 
crop.
    Growers who hold back wheat in order to use it as seed only to find 
that it contains Karnal bunt spores may be able to sell that wheat as 
grain, but the cost of replacement seed will exceed the income 
generated from the sale of the seed as grain. Approximately 176 
growers, and 483,000 bushels of uncertified seed, are affected by this 
situation. The growers involved will incur losses between $2 and $3 per 
bushel. As an incentive for program participation, we intend to 
partially mitigate this loss by changing the regulations to make 
producers in this situation eligible for compensation for held-back 
grain intended for use as seed that is determined to be Karnal bunt 
spore-positive. The current compensation cap on both grain and seed is 
$1.80 per bushel in an area under the first regulated crop season and 
$0.60 per bushel in previously regulated areas, regardless of the 
actual loss.
    To accomplish this change, we are changing the last sentence of the 
introductory text of Sec. 301.89-15(a) to read ``The compensation 
provided in this section is for wheat grain, certified wheat seed, 
wheat held back from harvest by a grower in the 2000-2001 growing 
season for use as seed in the next growing season, and wheat grown with 
the intention of producing certified wheat seed.''

Compensation for the Cost of Disposing of Uncertified Treated Seed

    Another case where the regulations in effect prior to this rule did 
not provide compensation applies to the owners of uncertified Karnal 
bunt spore-positive seed that has been treated with fungicides or other 
chemicals, and thus cannot be sold as grain. The regulations did not 
allow compensation for uncertified seed, or provide any reimbursement 
for disposal costs. An estimated 56,000 bushels of uncertified treated 
seed tested positive for spores in the 2000-2001 growing season. This 
treated seed cannot be used for consumption by humans or animals; it 
must be disposed of in an approved manner, such as burying in a 
landfill or on-farm disposal.
    We are adding a paragraph to provide compensation for the disposal 
costs for treated uncertified wheat seed. This compensation for 
disposal costs is in addition to the payments discussed in the previous 
section regarding compensation for replacing uncertified seed. The cost 
to bury wheat seed, whether on the producer's premises or at a 
landfill, is about $1.00 per bushel. In addition, there are 
transportation costs involved in moving seed to a landfill, which 
average about $0.20 per bushel. Therefore, we are adding new paragraph 
Sec. 301.89-15(e) to read as follows: ``(e) Special allowance for 
disposal costs for treated uncertified wheat seed in Archer, Baylor, 
Throckmorton, and Young Counties, TX, in the 2000-2001 growing season. 
Notwithstanding any other provision of this section, growers in Archer, 
Baylor, Throckmorton, or Young Counties, TX, who own treated 
uncertified wheat seed that tested positive for Karnal bunt spores 
during the 2000-2001 growing season are eligible for compensation in 
accordance with this paragraph. The grower is eligible for compensation 
for the costs of disposing of such wheat seed, by burial on the 
grower's premises, by burial at a landfill, or through another means 
approved by APHIS. The compensation for disposing of wheat seed by 
burial on the grower's premises is $1.00 per bushel. The compensation 
for disposing of wheat seed by burial at a landfill, or through another 
means approved by APHIS, is the actual cost of disposal, up to $1.20 
per bushel, as verified by receipts for disposal costs. To apply for 
this compensation, the grower must submit a Karnal Bunt Compensation 
Claim form, provided by the Farm Service Agency, and must also submit a 
copy of the Karnal bunt certificate issued by APHIS that shows the 
Karnal bunt test results, and verification as to the actual (not 
estimated) weight of the uncertified wheat seed that tested positive 
for spores (such as a copy of a facility weigh ticket, or other 
verification). For seed disposed of by burial at a landfill, the grower 
must also submit one or more receipts for the disposal costs of the 
uncertified wheat seed, showing the total bushels destroyed and the 
total disposal costs (landfill fees, transportation costs, etc.).''

[[Page 21563]]

Compensation for Affected Wheat Grown Outside of Regulated Areas

    Approximately 2.8 million bushels of wheat stored in bins in Texas 
is considered Karnal bunt positive; some of this wheat was grown in 
regulated areas and an unknown amount was grown by Texas producers 
located outside the regulated area and by producers located in 
Oklahoma. Because of commingling, all 2.8 million bushels--including 
that wheat grown outside of the regulated area--is considered positive. 
The regulations provide that to be eligible for compensation, the wheat 
must be grown in a State where the Secretary has declared an 
extraordinary emergency and must meet certain other criteria. 
Therefore, prior to this rule, compensation could be paid for that 
portion of the 2.8 million bushels that was grown in Texas, but the 
wheat grown in Oklahoma was not eligible for compensation, because the 
Secretary has not declared an extraordinary emergency in that State.
    To address this, we are adding a new sentence to Sec. 301.89-15(a), 
the paragraph that describes eligibility for compensation of growers 
and handlers. The new sentence reads ``Growers and handlers of wheat 
grown in Oklahoma during the 2000-2001 growing season are eligible to 
receive compensation if the wheat was commingled in storage with wheat 
that meets the above requirements of this paragraph.'' This change 
allows compensation to be paid to Oklahoma growers and handlers whose 
wheat has been commingled in Texas with Texas-grown Karnal bunt 
positive wheat during storage. The Oklahoma growers and handlers will 
receive the same compensation as the Texas growers; i.e., payments of 
up to $1.80 per bushel.

Eligibility for Compensation in the 2001-2002 Crop Season

    The regulations state that, beginning with the 2001-2002 crop 
season, growers who knowingly plant wheat in previously regulated areas 
are not eligible for compensation. We included this requirement based 
on our belief that the regulations should not provide ``insurance'' for 
growers who knowingly take the risk of planting in an area where their 
wheat crop faces an increased risk of testing positive for Karnal bunt. 
Growers who are aware that previously regulated areas present a greater 
risk of contaminating their crop with Karnal bunt can choose to alter 
their planting or contracting decisions to avoid experiencing losses 
due to Karnal bunt. However, when this policy was announced in the 
August 6, 2001, final rule, growers in northern Texas were faced with a 
situation where they had incomplete knowledge upon which to base their 
business decisions for the next growing season. Karnal bunt was 
discovered in northern Texas well into the 2000-2001 growing season, 
reducing the time growers had to plan for the next season. While APHIS 
had declared four entire counties as regulated areas, there had been 
only limited testing of certain fields in those counties (about 150 
fields were tested before the final rule), and growers knew that the 
regulated area might be either reduced to less than the entire 
counties, or conversely expanded to include fields in adjacent 
counties, depending on future test results. Therefore, growers could 
not make fully informed business decisions on whether it was prudent to 
plant wheat in the four regulated counties, or adjacent areas, in the 
2001-2002 growing season. The discovery of Karnal bunt in these 
counties also came at the same time growers were making commitments for 
field usage, seed, and equipment for the next growing season, and some 
growers had already committed to growing wheat the following year in 
what became a regulated area. Finally, the weather and moisture 
conditions in this part of northern Texas make it unlikely that growers 
could successfully substitute another crop for wheat in the regulated 
areas.
    For these reasons, growers in the four northern Texas counties have 
sought 1-year deferral of the regulatory requirement that growers who 
knowingly plant wheat in previously regulated areas are not eligible 
for compensation. We agree that to enforce the requirement in this case 
would represent an unanticipated and unintended hardship on growers in 
the Texas counties of Archer, Baylor, Throckmorton, and Young, and are 
changing the regulations to make this provision take effect, with 
regard only to only those counties, beginning with the 2002-2003 crop 
season instead of the 2001-2002 crop season. This deferral does not 
apply to the 27 fields in northern Texas that were discovered to be 
infected (i.e., to contain one or more bunted kernels) in the course of 
Karnal bunt surveys in 2001, as owners of these fields had timely 
notice of the survey results and had a reasonable opportunity to change 
their planting plans for the next season.
    To accomplish this change, we are adding an exception to the 
second-to-last sentence of the introductory text of Sec. 301.89-15(b), 
``Growers, handlers, and seed companies in previously regulated 
areas.'' As amended, that sentence reads: ``Growers, handlers, and seed 
companies in previously regulated areas will not be eligible for 
compensation for wheat from the 2001-2002 and subsequent crop seasons; 
except that, for growers or handlers of wheat harvested in any field in 
the Texas counties of Archer, Baylor, Throckmorton, and Young during 
the 2000-2001 crop season that has not been found to contain a bunted 
wheat kernel, this requirement applies to compensation for wheat from 
the 2002-2003 and subsequent crop seasons.''

Deadline for Submission of Claims

    As discussed previously, this rule extends existing compensation 
provisions to cover certain additional growers, handlers, and owners of 
grain storage facilities to mitigate losses and expenses incurred in 
the 2000-2001 crop season because of the Karnal bunt quarantine and 
emergency actions. The regulations in Sec. 301.89-15(c) provide that 
compensation payments to growers, handlers, and seed companies will be 
issued by the Farm Service Agency (FSA), and that claims for 
compensation must be received by FSA on or before March 1 of the year 
following the crop season during which the losses occurred. Thus, 
claims for compensation for the 2000-2001 crop season were due on March 
1, 2002. The regulations in Sec. 301.89-15(c) also provide that the 
Administrator may extend the deadline, upon request in specific cases, 
when unusual and unforeseen circumstances occur that prevent or hinder 
a claimant from requesting compensation on or before these dates. Given 
that the effective date of this rule falls after the March 1, 2002, 
deadline cited above, we are extending, for a period of 90 days from 
the effective date of this rule, the 2000-2001 crop season claims 
deadline to provide for the submission of claims for the compensation 
provided for by this interim rule. Such claims must be received by FSA 
on or before July 30, 2002.

Emergency Action

    This rulemaking is necessary on an emergency basis to eliminate the 
risk presented by maintaining large stores of Karnal bunt-positive 
wheat, which cannot be destroyed until its eligibility for indemnity is 
clarified. The indemnity payments authorized by this rule are also 
necessary in order to reduce the economic effect of the Karnal bunt 
regulations on affected wheat growers and other individuals and to help 
obtain cooperation from affected individuals in our efforts to contain 
and

[[Page 21564]]

reduce the prevalence of Karnal bunt. Under these circumstances, the 
Administrator has determined that prior notice and opportunity for 
public comment are contrary to the public interest and that there is 
good cause under 5 U.S.C. 553 for making this rule effective less than 
30 days after publication in the Federal Register.
    We will consider comments we receive during the comment period for 
this interim rule (see DATES above). After the comment period closes, 
we will publish another document in the Federal Register. The document 
will include a discussion of any comments we receive and any amendments 
we are making to the rule as a result of the comments.

Executive Order 12866 and Regulatory Flexibility Act

    This rule has been reviewed under Executive Order 12866. The 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.
    This rule extends existing compensation provisions to cover certain 
additional growers, handlers, and owners of grain storage facilities to 
mitigate losses and expenses incurred in the 2000-2001 crop season 
because of the Karnal bunt quarantine and emergency actions. The 
affected parties are primarily growers and handlers in four northern 
Texas.
    Below is an economic analysis for this interim rule. The economic 
analysis provides a cost-benefit analysis as required by Executive 
Order 12866 and an analysis of the potential economic effects on small 
entities as required by the Regulatory Flexibility Act.
    The following economic analysis indicates that the cost of the rule 
would be about $4.8 million. It would be necessary to obtain these 
funds from the Commodity Credit Corporation. Benefits cannot be 
monetized with accuracy, but would include averting future wheat crop 
losses that would occur without the improved producer participation 
this rule is expected to achieve.
    Benefits would also include greater likelihood of grower 
cooperation in Karnal bunt testing requirements and participation in 
the National Karnal Bunt Survey.

Compensation for Certain Karnal Bunt-Negative Wheat

    Prior to this rule, the regulations did not allow for compensation 
for any Karnal bunt-negative wheat.\1\ This rule allows compensation 
for losses associated with certain negative wheat, i.e., elevator-
tested-negative wheat harvested in the 2000-2001 crop season in 
northern Texas. The level of compensation offered is the same as that 
currently being offered for positive-testing grain and certified seed 
in first regulated areas, i.e., up to $1.80/bushel. The four-county 
regulated area in northern Texas became a regulated area in the 2000-
2001 crop season.
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    \1\ This is because there are no regulatory restrictions on the 
movement of negative wheat, and thus generally no costs or losses 
imposed on its owners. However, there is precedent for paying 
compensation for negative wheat when its value is affected by 
movement restrictions applied to positive wheat. In the 1995-1996 
crop season, when Karnal bunt was first discovered in Arizona, 
compensation was paid for the loss in value of negative-testing 
wheat, due to regulatory restrictions that existed at that time, 
which included a requirement that the negative-testing wheat could 
be moved only under a limited permit.
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    Approximately 7.4 million bushels of negative-tested wheat from the 
four-county regulated area in northern Texas is currently stored in 
grain elevators. Even though it is Karnal bunt-negative, this wheat 
cannot be exported to major markets as it normally would be because it 
was tested after harvest at the elevator, not in the field. (Major 
foreign importers will accept U.S. wheat only if it can be certified as 
coming from an area where Karnal bunt is not known to exist. Such 
certification is currently based on testing at the field level.) In 
northern Texas this past crop season, most wheat had already been 
harvested when Karnal bunt was discovered, so it could only be tested 
in bins. The glut on the local domestic market created by the absence 
of an export outlet, and the reluctance of some mills to accept 
``tainted'' wheat that may move only under a limited permit, have 
severely limited the market for this negative wheat, resulting in a 
loss in its value.
    The loss in value of the negative grain is estimated at about 
$0.35/bushel. Based on this per bushel loss estimate, compensation will 
total about $2.6 million for all 7.4 million bushels of grain.
    It is estimated that approximately 20 to 30 handlers will be 
affected by this rule, including two handlers who, together, account 
for 70 percent of the 7.4 million affected bushels.

Compensation for the Cost of Replacing Certain Uncertified Seed

    Prior to this rule, the regulations limited compensation payments 
to certified seed and seed being grown as certified seed, and did not 
address losses associated with the inability of growers to use held-
back grain that is found to be spore-positive for planting the next 
year's crop. This rule makes compensation available for such losses on 
a one crop season-only basis, i.e., for grain grown in the 2000-2001 
crop season intended for use in planting the 2001-2002 season's crop. 
The level of compensation offered is the same as that currently being 
offered for positive-testing grain and certified seed in the 2000-2001 
crop season, i.e., up to $1.80/bushel in first regulated areas and 
$0.60/bushel in previously regulated areas.
    Growers in Texas normally hold back a quantity of grain for use as 
seed in the next planting season. During the 2000-2001 crop season, 
approximately 483,000 bushels of this seed (457,000 bushels in the four 
northern Texas counties and 26,000 bushels in San Saba County, Texas) 
tested negative for bunted kernels but positive for spores, which means 
that it can be used for grain but not seed. Growers, therefore, will 
have to purchase replacement seed. However, the cost of replacement 
seed will exceed the income generated from the sale of the seed as 
grain, meaning that growers involved will incur losses. Grower losses, 
before any compensation from USDA, are estimated to range between $2 
and $3/bushel.
    Total compensation is estimated at $838,200; i.e., $822,600 for the 
457,000 bushels in the four newly regulated northern Texas counties 
(457,000  x  $1.80), and $15,600 for the 26,000 bushels in previously 
regulated San Saba County (26,000  x  $0.60). Since grower losses are 
expected to range between $2 and $3/bushel, growers and handlers 
qualify for compensation at the maximum levels offered. Approximately 
176 growers will be affected by this aspect of the rule.

Compensation for the Cost of Disposing of Certain Uncertified Treated 
Seed

    Prior to this rule, there was no compensation for the cost of 
disposing of uncertified treated seed that tests positive for spores or 
bunted kernels. This rule allows for such compensation on a one crop 
season-only basis, i.e., for seed grown in the 2000-2001 crop season. 
This compensation for disposal costs is in addition to the payments 
discussed in the previous paragraphs regarding compensation for 
replacing uncertified seed. The level of compensation offered for the 
cost of disposing of uncertified treated seed that tests positive for 
spores or bunted kernels is $1.00/bushel, or up to $1.20/bushel, 
depending on whether the seed is disposed of in a landfill or on-farm. 
The former is for on-farm disposal, the

[[Page 21565]]

latter for landfill disposal.\2\ The landfill disposal cost of $1.00/
bushel is based on a telephone survey of regional landfills conducted 
by the APHIS Texas area office.
---------------------------------------------------------------------------

    \2\ For landfill disposal, the maximum level of compensation 
(i.e., $1.20/bushel) is derived based on the estimated cost to buy 
wheat seed at a landfill ($1.00/bushel) and the estimated cost to 
transport the seed to the landfill ($0.20/bushel). Although on-farm 
disposal eliminates the need to transport the seed to the landfill, 
that disposal method still involves additional costs for growers. 
For these purposes, it is assumed that the cost of on-farm disposal 
and the estimated cost of landfill disposal (excluding 
transportation costs) are the same. If on-farm disposal costs do 
exceed $1.00/bushel, growers always have the option of landfill 
disposal. The transportation cost of $0.20/bushel is the approximate 
cost to transport one bushel of wheat from the four county regulated 
area in northern Texas to the landfill site, near Wichita Falls, 
Texas. In January 2002, the Texas Department of Natural Resources 
began accepting applications for permits to dispose of the seed at 
the landfill site.
---------------------------------------------------------------------------

    As indicated above, approximately 457,000 bushels of uncertified 
seed grown in the four northern Texas counties in the 2000-2001 crop 
season tested positive for spores. Of that total, about 38,000 bushels 
were treated with fungicides prior to testing, which means that it 
cannot be used for consumption by humans or animals; it must be 
disposed of in an approved manner, e.g., burying it in a landfill or 
disposing of it on-farm. Such disposal requirements impose additional 
costs on growers.
    In addition, about 18,000 bushels of uncertified seed grown in the 
four northern Texas counties in the 2000-2001 crop season tested 
positive for bunted kernels. These 18,000 bushels, because they were 
treated with fungicides prior to testing, must also be disposed of in 
an approved manner.
    For all 56,000 bushels, compensation is estimated to total $66,080. 
This compensation estimate assumes that 50,400 bushels, or 90 percent 
of the total affected bushels, will be disposed of in a landfill at a 
cost of $1.20/bushel, and that the remainder (5,600 bushels) will be 
disposed of on-farm at a cost of $1.00/bushel.\3\ Approximately 15 to 
20 growers will be affected by this change.
---------------------------------------------------------------------------

    \3\ For several reasons, including the fact that many growers 
lease rather than own their land, on-farm disposals are assumed to 
be much fewer in number than landfill disposals.
---------------------------------------------------------------------------

Compensation for Handlers With Positive Wheat Grown Outside the 
Regulated Area

    Prior to this rule, handlers in Texas were not eligible for 
compensation for losses associated with any wheat grown outside the 
regulated area that was declared positive because it was commingled in 
storage with positive wheat grown in the regulated areas. This rule 
offers such compensation. The level of compensation offered will be the 
same as that currently being offered for positive-testing grain and 
certified seed in first regulated areas, i.e., up to $1.80/bushel.
    Approximately 2.8 million bushels of Karnal bunt-positive wheat is 
stored in bins in Texas, including a relatively small amount (no more 
than 25,000 bushels) of wheat grown by producers located in Oklahoma. 
(Because of commingling, all of the grain--including that grown outside 
the regulated area is considered positive.) The one handler who owns 
all of the Oklahoma-grown wheat has incurred losses, because it was 
purchased from the Oklahoma producers at the price for Karnal bunt-
negative wheat but can now be sold only at the much lower price for 
positive wheat. Prior to this rule, the regulations provided that, for 
handlers and others to be eligible for compensation, the wheat must 
have been grown in a State where the Secretary has declared an 
extraordinary emergency and meet certain other criteria. Thus, 
compensation was available for that portion of the 2.8 million bushels 
that was grown in Texas, but the wheat grown in Oklahoma, because the 
Secretary has not declared an extraordinary emergency in that State, 
was not eligible for compensation.
    Compensation is estimated to total no more than $45,000 (25,000 
bushels x $1.80). One handler will be affected by this aspect of the 
rule.

Eligibility for Compensation in 2001-2002 Crop Season

    The regulations in effect prior to this interim rule stated that, 
effective with the 2001-2002 crop season, growers who knowingly plant 
wheat in previously regulated areas are not eligible for compensation. 
This rule defers, for 1 year, the effective date of that ineligibility 
provision with regard to the four-county regulated area in northern 
Texas (excluding areas in or near one of the 27 known infected fields).
    Growers in northern Texas have argued that, because of limited 
testing, they and USDA have limited knowledge about the status of 
fields in the regulated area and the risk of infection next year. The 
growers requested the 1-year deferral to allow for the completion of 
next year's delimiting survey.
    The estimated amount of compensation that will result from the 1-
year deferral for growers in the four-county regulated area in northern 
Texas is unknown, because future infection rates are unknown. However, 
based on operational experience conducting the Karnal bunt program in 
other areas, there is no reason to believe that next year's 
compensation costs will be higher than this year's total. If 43 percent 
of the 5 million bushels expected to be produced in the four-county 
regulated area during 2000-2001 turn up positive, the compensation 
would total $1,290,000 (2,150,00 bushels  x  $0.60). The infection rate 
of 43 percent is an average of last year's infection rate in Arizona's 
largest production area and in San Saba County, TX. This aspect of the 
rule will affect approximately 400 to 450 growers in northern Texas.
    The Regulatory Flexibility Act requires that agencies consider the 
economic impact of rules on small businesses, organizations, and 
governmental jurisdictions. Growers and handlers of wheat grain and 
seed are those most affected by this rule. It is estimated that there 
are a total of 420 to 480 wheat growers and handlers potentially 
affected by this rule, most of whom are located in the four northern 
Texas counties of Archer, Baylor, Throckmorton, and Young. Most of 
these entities have total annual sales of less than $750,000, the Small 
Business Administration's threshold for classifying wheat producers as 
small entities. Accordingly, most economic impacts of this rule will be 
on small entities.
    This rule is expected to have a positive economic impact on all 
affected entities, large and small. Although most of the affected 
entities are small in size, the bulk of this rule's benefits, in dollar 
terms, are likely to accrue to two large handlers. Compensation for 
Karnal bunt-related losses and expenses serves to encourage compliance 
with testing requirements within the regulated areas, thereby aiding in 
the preservation of an important wheat growing region in the United 
States. It also serves to encourage participation in the National 
Karnal Bunt Survey program.
    Under these circumstances, the Administrator of the Animal and 
Plant Health Inspection Service has determined that this action will 
not have a significant economic impact on a substantial number of small 
entities.

Executive Order 12372

    This program/activity is listed in the Catalog of Federal Domestic 
Assistance under No. 10.025 and is subject to Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials. (See 7 CFR part 3015, subpart V.)

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice

[[Page 21566]]

Reform. This rule: (1) Preempts all State and local laws and 
regulations that are inconsistent with this rule; (2) has no 
retroactive effect; and (3) does not require administrative proceedings 
before parties may file suit in court challenging this rule.

Paperwork Reduction Act

    This interim rule contains no new information collection or 
recordkeeping requirements under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501 et seq.).

List of Subjects in 7 CFR Part 301

    Agricultural commodities, Plant diseases and pests, Quarantine, 
Reporting and recordkeeping requirements, Transportation.

    Accordingly, we are amending 7 CFR part 301 as follows:

PART 301--DOMESTIC QUARANTINE NOTICES

    1. The authority citation for part 301 continues to read as 
follows:

    Authority: 7 U.S.C. 166, 7711, 7712, 7714, 7731, 7735, 7751, 
7752, 7753, and 7754; 7 CFR 2.22, 2.80, and 371.3.
    Section 301.75-15 also issued under Sec. 204, Title II, Pub. L. 
106-113, 113 Stat. 1501A-293; sections 301.75-15 and 301.75-16 also 
issued under Sec. 203, Title II, Pub. L. 106-224, 114 Stat. 400 (7 
U.S.C. 1421 note).


    2. Section 301.89-15 is amended as follows:
    a. In the introductory text of paragraph (a), by removing the last 
two sentences and by adding three sentences in their place to read as 
follows.
    b. In the introductory text of paragraph (b), by removing the last 
two sentences and by adding two sentences in their place to read as 
follows.
    c. By adding new paragraphs (d) and (e) to read as follows.


Sec. 301.89-15  Compensation for growers, handlers, and seed companies 
in the 1999-2000 and subsequent crop seasons.

* * * * *
    (a) * * * Growers and handlers of wheat grown in Oklahoma during 
the 2000-2001 growing season are eligible to receive compensation if 
the wheat was commingled in storage with wheat that meets the above 
requirements of this paragraph. Growers, handlers, and seed companies 
in areas under the first regulated crop season are eligible for 
compensation for 1999-2000 or subsequent crop season wheat and for 
wheat inventories in their possession that were unsold at the time the 
area became regulated. The compensation provided in this paragraph is 
for wheat grain, certified wheat seed, wheat held back from harvest by 
a grower in the 2000-2001 growing season for use as seed in the next 
growing season, and wheat grown with the intention of producing 
certified wheat seed.
* * * * *
    (b) * * * Growers, handlers, and seed companies in previously 
regulated areas will not be eligible for compensation for wheat from 
the 2001-2002 and subsequent crop seasons; except that, for growers or 
handlers of wheat harvested in any field in the Texas counties of 
Archer, Baylor, Throckmorton, and Young during the 2000-2001 crop 
season that has not been found to contain a bunted wheat kernel, this 
requirement applies to compensation for wheat from the 2002-2003 and 
subsequent crop seasons. The compensation provided in this paragraph is 
for wheat grain, certified wheat seed, and wheat grown with the 
intention of producing certified wheat seed.
* * * * *
    (d) Special allowance for negative wheat grown in Archer, Baylor, 
Throckmorton, and Young Counties, TX, in the 2000-2001 growing season. 
Notwithstanding any other provision of this section, wheat that was 
harvested from fields in Archer, Baylor, Throckmorton, or Young 
Counties, TX, in the 2000-2001 growing season, and that tested negative 
for Karnal bunt after harvest, is eligible for compensation in 
accordance with paragraph (a) of this section.
    (e) Special allowance for disposal costs for treated uncertified 
wheat seed in Archer, Baylor, Throckmorton, and Young Counties, TX, in 
the 2000-2001 growing season. Notwithstanding any other provision of 
this section, growers in Archer, Baylor, Throckmorton, or Young 
Counties, TX, who own treated uncertified wheat seed that tested 
positive for Karnal bunt spores during the 2000-2001 growing season are 
eligible for compensation in accordance with this paragraph. The grower 
is eligible for compensation for the costs of disposing of such wheat 
seed, by burial on the grower's premises, by burial at a landfill, or 
through another means approved by APHIS. The compensation for disposing 
of wheat seed by burial on the grower's premises is $1.00 per bushel. 
The compensation for disposing of wheat seed by burial at a landfill, 
or through another means approved by APHIS, is the actual cost of 
disposal, up to $1.20 per bushel, as verified by receipts for disposal 
costs. To apply for this compensation, the grower must submit a Karnal 
Bunt Compensation Claim form, provided by FSA, and must also submit a 
copy of the Karnal bunt certificate issued by APHIS that shows the 
Karnal bunt test results, and verification as to the actual (not 
estimated) weight of the uncertified wheat seed that tested positive 
for spores (such as a copy of a facility weigh ticket, or other 
verification). For seed disposed of by burial at a landfill the grower 
must also submit one or more receipts for the disposal costs of the 
uncertified wheat seed, showing the total bushels destroyed and the 
total disposal costs (landfill fees, transportation costs, etc.).

(Approved by the Office of Management and Budget under control 
number 0579-0182)

    Dated: Done in Washington, DC, this 26th day of April 2002.
Bill Hawks,
Under Secretary for Marketing and Regulatory Programs.
[FR Doc. 02-10723 Filed 4-30-02; 8:45 am]
BILLING CODE 3410-34-U