[Federal Register Volume 67, Number 190 (Tuesday, October 1, 2002)]
[Proposed Rules]
[Pages 61565-61568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24539]



[[Page 61565]]

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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1424

RIN 0560-AG84


Bioenergy Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: The Commodity Credit Corporation (CCC) is proposing to amend 
its Bioenergy Program (program) regulations to bring them into 
compliance with changes made by the Farm Security and Rural Investment 
Act of 2002. Changes include modifying the definitions for biodiesel, 
conversion factor, eligible commodities and ethanol, extending the 
program beyond Fiscal Year (FY) 2002, and allowing producers to enter 
into multi-year contracts for program payments. Also, the payment 
calculations are being revised for eligible commodities. CCC's new 
authorizing legislation requires these changes and will result in an 
overall improvement of the program by benefitting more participants.

DATES: Comments on this rule must be received on or before October 31, 
2002 to be assured of consideration.

ADDRESSES: Comments should be sent to James Goff, Commodity Operations, 
FSA, United States Department of Agriculture (USDA), STOP 0553, 1400 
Independence Avenue, SW., Washington, DC 20250-0553. Telephone (202) 
720-5396 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: James Goff at telephone number (202) 
720-5396.
    Comments Requested: Public comments (submitted to the address 
above) are requested on any aspect of the Program. However, specific 
comments are requested on how CCC makes payments under the Program and 
how those payments are calculated under section 1424.8 of the 
regulation proposed in this rule. Comments received may be viewed 
during regular business hours by calling the information contact for an 
appointment. All comments, including names and addresses, will become a 
matter of public record.

SUPPLEMENTARY INFORMATION:

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

    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 law to 
publish a notice of proposed rulemaking for 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 Assessment

    The environmental impacts of this proposed rule have been 
considered under the National Environmental Policy Act of 1969 (NEPA), 
42 U.S.C. 4321 et seq., the regulations of the Council on Environmental 
Quality (40 CFR parts 1500-1508), and FSA's regulations for compliance 
with NEPA, 7 CFR part 799. FSA has completed a draft environmental 
assessment which will be made available to the public for comment.

Executive Order 12988

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

Executive Order 12612

    This proposed rule does not have sufficient Federalism implications 
to warrant the preparation of a Federalism Assessment. Provisions of 
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 government levels.

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 
sections 202 and 205 of UMRA.

Paperwork Reduction Act

    The changes proposed in this rule will affect the paperwork burden 
that is currently approved by OMB. Thus, in this rule the Agencies are 
requesting public comment in accordance with 5 CFR 1320.8(d)(1), and 
welcome suggestions from the public on reducing the requirements in 7 
CFR part 1424 proposed herein. An estimate of the paperwork burden of 
the regulations as affected by this proposed rule are as follows:
    Title: Bioenergy Program.
    OMB Control Number: 0560-0207.
    Expiration Date: November 30, 2003.
    Type of Request: Request for a revision and extension of a 
currently approved 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.
    Estimate of Respondent Burden: Public reporting burden for the 
collection of information is estimated to average 1 hour and 10 minutes 
per response.
    Respondents: U.S. bioenergy producers who use agricultural 
commodities to make bioenergy are eligible to receive payments.
    Estimated Number of Respondents: 100.
    Estimated Number of Responses per Respondent: 11 responses per 
year.
    Estimated Total Annual Burden Hours on Respondents: 1,286 hours.
    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; (c) ways to enhance 
the quality, utility, and clarity of the information technology; or (d) 
minimizing the burden of the collection of the information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology.

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Comments may be sent to the Desk Officer for Agriculture, Office of 
Information and Regulatory Affairs, OMB, Washington, DC 20503, and to 
Jim Goff, USDA, FSA, STOP 0553, 1400 Independence Avenue, SW., 
Washington, DC 20250-0553. Copies of the information collection package 
may be obtained from Jim Goff at the address listed above.

Background

    In November of 2000, using discretionary authority contained in 
Section 5 of the CCC Charter Act, 15 U.S.C. 714c, the Department of 
Agriculture implemented, by rules codified in 7 CFR part 1424, a 
bioenergy program. Rules for the program were published at 65 FR 67608 
(November 13, 2000). Recently, in section 9010 of the 2002 Act, Public 
Law 107-171, Congress extended authorization of the program.
    Section 9010 of the 2002 Act provided that, for purposes of that 
section, the term ``bioenergy'' would mean both biodiesel and fuel 
grade ethanol. In turn, it specified that ``biodiesel'' would mean a 
``monoalkyl ester that meets the requirements of an appropriate 
American Society for Testing and Materials standard.'' ``Eligible 
commodity'' for purposes of that section was defined to mean (A) wheat, 
corn, grain sorghum, barley, oats, rice, soybeans, sunflower seed, 
rapeseed, canola, safflower, flaxseed, mustard, crambe, sesame seed, 
and cottonseed; (B) a cellulosic commodity (such as hybrid poplar and 
switch grass); (C) fats, oils, and greases (including recycled fats, 
oils, and greases) derived from an agricultural product; and (D) any 
animal byproduct (in addition to oils, fats, and greases) that may be 
used to produce bioenergy, as determined by the Secretary. ``Eligible 
producer'' was defined to mean a producer that uses an eligible 
commodity to produce bioenergy. With those definitions set out, section 
9010 went on to specify that the Secretary would continue the bioenergy 
program of part 1424 under which the Secretary makes payments to 
eligible producers to encourage increased purchases of eligible 
commodities for the purpose of expanding production of such bioenergy 
and supporting new production capacity for such bioenergy. Section 9010 
specified, too, that to be eligible to receive a payment, a producer 
would be required to (a) enter into a contract with the Secretary to 
increase bioenergy production for 1 or more fiscal years; and (b) 
submit to the Secretary such records as the Secretary may require as 
evidence of increased purchase and use of eligible commodities for the 
production of bioenergy. With respect to payment, the law specified 
that the Secretary would make payments to eligible producers, based on 
the quantity of bioenergy produced by the eligible producer during a 
fiscal year that exceeds the quantity of bioenergy produced by the 
eligible producer during the preceding fiscal year. And, the statute 
specified that the payment rate to an eligible producer that produces 
less than 65,000,000 gallons of bioenergy would be such as to provide 
reimbursement for 1 feedstock unit for every 2.5 feedstock units of 
eligible commodity used for increased production. For the producers of 
65,000,000 or more gallons the law specified that the producer would be 
reimbursed 1 feedstock unit for every 3.5 feedstock units of eligible 
commodity used for increased production. Too, section 9010 specified 
that the Secretary would make payments to an eligible producer for each 
quarter of the fiscal year. The new law also addresses the possibility 
that the amount made available for a fiscal year under section 9010 
might not be sufficient to allow full payment to all producers. If so, 
the Secretary was directed to prorate the funds among eligible 
producers.
    Also, the statute specified that if the total amount of payments 
that an eligible producer receives for a fiscal year exceeds the amount 
that the producer should have received, they must repay the excess with 
interest. Further, the legislation provided that no producer could 
receive more than 5 percent of the total amount made available for a 
fiscal year. And, it was specified that, to be eligible to receive a 
payment, a producer had to meet all other requirements of Federal law 
(including regulations) applicable to the production of bioenergy.
    Finally, with respect to funding, the new law provided that of the 
funds of the Commodity Credit Corporation, the Secretary would be 
directed to use not more than $150,000,000 for each of FY 2003 through 
FY 2006. The statute explicitly provided no funding for 2007.
    Many of the provisions of the new law reiterate provisions of the 
existing regulations. This proposed rule would implement the provision 
of the new law to the extent that the provisions of the new law are 
different than those that are contained in the current regulations in 
part 1424. Accordingly, the proposed rule would: (1) Add cotton seed as 
an eligible commodity; (2) expand the definition of eligible cellulosic 
commodities by removing the requirement that cellulosic crops had to be 
grown on farms for the purpose of bioenergy production; (3) specify 
that animal fats and oils, including recycled fats, oils and greases, 
are eligible commodities; and (4) add that ``any animal byproduct (in 
addition to oils, fats and greases) that may be used to produce 
bioenergy, as determined by the Secretary'' may be an eligible 
commodity for the production of bioenergy under the program. The 
definitions for biodiesel and ethanol are also being amended to 
indicate that biodiesel and ethanol produced in the United States' 
territories are eligible for program payments when made from eligible 
commodities. Also, clarifying changes are made in the regulations to 
reflect that multi-year contracts will be entertained. However, as to 
compliance, the rule provides that such compliance will be determined 
on a fiscal-year by fiscal-year basis. This would mean, for example, 
that if a producer with a multi-year contact produced more energy in FY 
2004 than in FY 2003 (as measured under the regulations), the producer 
could receive a FY 2004 payment. If the producer's production in 2005 
was under that for FY 2004, then the producer would not receive a FY 
2005 payment but could retain the FY 2004 payment. Also, the rule, to 
allow maximum flexibility, proposes removing explicit conversion 
factors which translate additional energy into amounts of those 
commodities used to make it. Such a translation is part of the payment 
formula. This flexibility will allow for fine tuning the program 
without additional rulemaking. The conversion factors that will apply 
to a particular FY program would, under the proposal, be announced in a 
press release and otherwise made known to producers wanting to 
participate in the program. Also, an amendment is proposed with respect 
to the appeal of determinations made under part 1424. The new language 
would add a reference to 7 CFR part 11 which allows for appeals to the 
Department's National Appeals Division (NAD). The amendment would also 
eliminate an explicit requirement for a prior appeal to the Deputy 
Administrator overseeing the operation of the program. To the extent 
that such a pre-NAD appeal would be required would be subject to the 
same rules that apply to other cases within NAD's jurisdiction.
    Encouraging bioenergy producers to expand bioenergy (ethanol and 
biodiesel) production by reimbursing them for part of their input 
commodity costs reduces reliance on foreign imports and improves 
agricultural markets. The bioenergy program began

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in FY 2001 in accordance with Executive Order 13134. Expenditures of up 
to $150 million of funding were apportioned in FY 2001 and FY 2002. In 
FY 2002 the announced eligible commodity listing was expanded to 
include biodiesel production from animal fats and oils. Program 
payments for FY 2001 totaled $40.7 million on 147.7 million gallons of 
increased bioenergy production. For the first two quarters of FY 2002, 
payments totaled $32.0 million on 107.0 million gallons of increased 
bioenergy production.

Cost Benefit Assessment

    As required under Executive Order 12866, a regulatory impact 
analysis (cost benefit assessment) is available. Funding is authorized 
for FY 2003 through 2006 at $150 million per year from the Commodity 
Credit Corporation (CCC). Thus the additional cost from this change is 
a maximum of $600 million. The program was first implemented in 2001 
and funded for FY 2001 and FY 2002 at $150 million per year. Payments 
have been well under the annual funding levels--FY 2001 payments 
totaled $40.7 million, and for the first half of FY 2002 they were $32 
million. The list of eligible commodities is expanded to include 
cottonseed and any animal byproduct (in addition to oils, fats, and 
greases) that may be used to produce bioenergy. However, because 
payments have been made on only corn, grain sorghum, wheat, soybeans, 
and animal fats and oils, it is difficult to forecast additional 
payments on the newly eligible commodities. Assuming that some of the 
new commodities do enter the program, the volume is likely to be small, 
and the outlay effects negligible.
    The primary economic effects of the rule results from revising the 
payment calculations for biodiesel from a soybean basis to soybean oil 
basis. This will reduce the payment rate and outlays for biodiesel 
payments. Soybeans have predominated commodity biodiesel payments to 
date. Had payments made so far in FY 2002 for soybeans been calculated 
instead on soybean oil, outlays would have been $3.1 million lower for 
this period--about a 60 percent reduction. Future savings on biodiesel 
will depend on the prevailing market prices and volume of 
participation. Biodiesel savings could result in reduced total program 
costs provided available funding is sufficient to allow full payments 
to all producers (no proration). The switch to a soybean oil payment 
basis will reduce producer incentives and likely participation. The 
increased cost from more eligible commodities will only slightly offset 
these savings.

List of Subjects in 7 CFR Part 1424

    Administrative practice and procedure, Application process, Payment 
amounts, Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, the Commodity Credit 
Corporation proposes to amend 7 CFR Part 1424 as follows:

PART 1424--BIOENERGY PROGRAM

    1. Revise the authority citation for part 1424 to read as follows:

    Authority: 7 U.S.C. 8108.

    2. Amend Sec.  1424.3 by removing the definition of ``Gallon 
Conversion factor'', revising the definitions of ``Biodiesel'', 
``Eligible commodity'', and ``Ethanol'', and adding a new definition of 
``Conversion factor'' as follows:


Sec.  1424.3  Definitions.

* * * * *
    Biodiesel is a mono alkyl ester manufactured in the United States 
and its territories that meets the requirements of an appropriate 
American Society for Testing and Materials Standard.
* * * * *
    Conversion factor is the number of bioenergy gallons produced per 
commodity unit or the number of commodity units used per gallon of 
bioenergy produced, as applicable. Example: In FY 2002, the conversion 
factor for corn used in ethanol production was 2.5 gallons of ethanol 
produced per bushel of corn and from animal fats and oils it was 7.7 
pounds of animal fats and oils per gallon of biodiesel produced.
    Eligible commodity means barley; corn; grain sorghum; oats; rice; 
wheat; soybeans; cotton seed; sunflower seed; canola; crambe; rapeseed; 
safflower; sesame seed; flaxseed; mustard seed; cellulosic crops, such 
as switchgrass and hybrid poplars; fats, oils, and greases (including 
recycled fats, oils and greases) derived from an agricultural product; 
and any animal byproduct (in addition to oils, fats and greases) that 
may be used to produce bioenergy, as the Secretary determines, which is 
produced in the United States and its territories.
* * * * *
    Ethanol is anhydrous ethyl alcohol manufactured in the United 
States and its territories and sold:
    (1) For fuel use and which has been rendered unfit for beverage use 
in a manner and which is produced at a facility approved by the ATF for 
the production of ethanol for fuel, or
    (2) As denatured ethanol used by blenders and refiners which has 
been rendered unfit for beverage use.
* * * * *
    3. Amend Sec.  1424.4 by removing paragraph (a), redesignating 
paragraphs (b) through (j) as paragraphs (a) through (i) respectively, 
and revising the introductory text and newly designated paragraph (a) 
to read as follows:


Sec.  1424.4  General eligibility rules.

    To obtain program payments, a producer must do all of the 
following:
    (a) During the sign-up period as CCC announces for the applicable 
FY, submit a completed Agreement on a form as prescribed by CCC.
* * * * *
    4. Amend Sec.  1424.5 by revising paragraph (b) to read as follows:


Sec.  1424.5  Application process.

* * * * *
    (b) Obtain an Application from FSA;
* * * * *
    5. Amend Sec.  1424.8 by revising paragraphs (a), (b), (d), (e) 
introductory text, and (e)(1) through (e)(4), and adding paragraph (f) 
to read as follows:


Sec.  1424.8  Payment amounts.

    (a) Eligible producers may be paid the amount specified in this 
section, subject to funds availability. Available funds shall be $150 
million each FY for 2003 through 2006.
    (b) To participate, an eligible producer must submit a signed 
Agreement during the announced time period that Agreements will be 
accepted (sign-up period). Agreements may be for single or multiple 
FY's. However, multiple FY Agreements require annual production 
estimate reports be submitted during each applicable FY sign-up period. 
Such reports must comply with the terms of the Agreement and these 
regulations. In all cases, the accounting for compliance will be made 
on a per FY basis.
* * * * *
    (d) The submitted agreements filed during the sign-up period will 
require that the applicant set out the expected increase in production 
and other information as CCC or FSA may demand. Based on expected 
commodity prices, following the formula set out in this section, all 
such submissions will be assigned an expected value. Should the total 
expected value of all such agreements exceed available funding, then a 
proration factor may, at CCC's discretion, be developed to factor the 
agreements down to funding CCC makes available.

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    (e) Subject to the provisions of this section and conditions 
specified in the Agreement, a producer's payment eligibility shall be 
adjusted at the end of each quarter, and figured as follows:
    (1) Unless CCC otherwise determines, the extra production in energy 
from eligible inputs will be converted to gross payable units by:
    (i) If, as measured under paragraph (f) of this section, a units 
per gallon conversion factor is applicable, multiplying the applicable 
conversion factor times the number of gallons of increased bioenergy; 
or
    (ii) If, as measured under paragraph (f) of this section, a gallons 
per unit conversion factor is applicable, dividing the gallons of 
increased bioenergy by the applicable conversion factor.
    (2) Gross payable units, calculated using paragraph (e)(1) of this 
section, shall then be converted to net payable units by dividing the 
gross payable units, for producers whose annual bioenergy production 
is:
    (i) Less than 65 million gallons, by 2.5;
    (ii) Equal to or more than 65 million gallons, by 3.5;
    (3) The net payable unit amount calculated under paragraph (e)(2) 
of this section, shall be then converted to a gross payment by 
multiplying that commodity amount by the per unit value for the 
commodity determined as follows:
    (i) For those agricultural commodities with established terminal 
market prices, CCC will use the applicable terminal market price for 
the last day of the program quarter that KCCO, FSA announces daily, 
adjusted by the county average differential for the county in which the 
plant is located and the applicable quality factors CCC determines. For 
this purpose the terminal market and county average differential CCC 
uses wording for different locations will, to the extent practicable, 
be the same as that CCC uses under other major CCC commodity programs 
for determining marketing loan gains and other matters.
    (ii) For those agricultural commodities that do not, as CCC 
determines, have acceptable established terminal prices, the price 
shall be as CCC determines, based on such market data as appears to be 
appropriate for a fair evaluation.
    (4) The gross payment calculated under paragraph (e)(3) of this 
section may, when CCC determines it necessary, be reduced to a net 
payment by multiplying the gross payment figure by the proration factor 
determined under paragraph (d) of this section.
* * * * *
    (f) Announcing conversion factors. When the commodity's conversion 
factor has been established, that factor will be announced in the 
annual sign-up announcement for the FY. If the commodity's conversion 
factor is not determined when the sign-up is announced, the conversion 
factor will be provided in the cover letter that accompanies accepted 
Agreements sent to producers. Also, the announcement will indicate 
commodities which use a units per gallon versus a gallons per unit 
conversion factor for purposes of the calculations required in 
paragraph (e) of this section.
    6. Amend Sec.  1424.12 by revising paragraphs (a) and (b) to read 
as follows:


Sec.  1424.12  Appeals.

    (a) Any participant who is subject to an adverse determination made 
under this part may 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. To receive consideration, the participant 
must file the appeal within 30 days after written notice of the 
decision which is the subject of the appeal is mailed or otherwise made 
available to the participant. An appeal shall be considered to have 
been filed when personally delivered in writing to the Deputy 
Administrator or when the properly addressed request, postage paid, is 
postmarked. The Deputy Administrator may accept and act upon an appeal 
even though it is not timely filed if, in the judgement of the Deputy 
Administrator, circumstances warrant such action.
    (b) The regulations at 7 CFR part 11 apply to decisions made under 
this part.
* * * * *

    Signed in Washington, DC, on September 20, 2002.
James R. Little,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 02-24539 Filed 9-30-02; 8:45 am]
BILLING CODE 3410-05-P