[Federal Register Volume 68, Number 104 (Friday, May 30, 2003)]
[Rules and Regulations]
[Pages 32337-32355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-13024]


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DEPARTMENT OF AGRICULTURE

Natural Resources Conservation Service

7 CFR Part 1466


Environmental Quality Incentives Program

AGENCY: Natural Resources Conservation Service and Commodity Credit 
Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Natural Resources Conservation Service (NRCS) is issuing a 
final rule for the Environmental Quality Incentives Program (EQIP). 
NRCS published a proposed rule for EQIP in the Federal Register on 
February 10, 2003, (68 FR 6655) and solicited comments from the public. 
This final rule establishes the process by which NRCS will administer 
EQIP, responds to comments received from the public during the 30-day 
comment period, and incorporates clarifications to improve 
implementation of the program.

EFFECTIVE DATE: May 30, 2003.

ADDRESSES: This final rule may be accessed via Internet. Users can 
access the Natural Resources Conservation Service (NRCS) homepage at 
http://www.nrcs.usda.gov/programs/eqip/. Select the EQIP rule from the 
menu.

FOR FURTHER INFORMATION CONTACT: Anthony J. Esser, Conservation 
Operations Division, Natural Resources Conservation Service, PO Box 
2890, Washington, DC 20013-2890. e-mail: [email protected]. Phone: 
202-720-1840. Fax: 202-720-4265.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    Pursuant to Executive Order 12866, Regulatory Planning and Review, 
the Natural Resources Conservation Service has conducted a benefit cost 
analysis of the Environmental Quality Incentives Program (EQIP) as 
formulated for the final rule. The Department of Agriculture 
Reorganization Act of 1994 and the Unfunded Mandates Reform Act of 1995 
also require analysis of costs, benefits and risks associated with 
major regulation. These requirements provide decision-makers with the 
opportunity to develop and implement a program that is beneficial, cost 
effective and that minimizes negative impacts to health, human safety 
and the environment.
    The analysis finds EQIP will have a beneficial impact on the 
adoption of conservation practices and, when installed or applied 
according to technical standards, will achieve economic and 
environmental gains. In addition, benefits would accrue to society for 
long-term productivity maintenance of the resource base, reductions in 
non-point source pollution damage, and wildlife enhancements. As a 
voluntary program, EQIP will not impose any obligation or burden upon 
agricultural producers that choose not to participate. In the Farm 
Security and Rural Investment Act of 2002 (FSRIA), EQIP funding was 
authorized at $6.16 billion over the six-year period of FY 2002 through 
FY 2007, with annual amounts for the base program and the ground and 
surface water conservation provisions increasing to $1.36 billion in FY 
2007 after the initial authorization in FY 2002 of $425 million. In 
addition, the 2002 Act authorizes a total of $50 million for the 
Klamath Basin in California and Oregon.
    In considering alternatives for implementing the program, NRCS 
followed the legislative intent to optimize environmental benefits, 
address natural resource problems and concerns, establish an open 
participatory process, and provide flexible assistance to producers who 
apply appropriate conservation measures while complying with Federal, 
State, and tribal environmental laws. The analysis recognizes that 
several other Federal conservation programs will be implemented which 
will generate environmental benefits as well.
    The analysis initially compared the 2002 NOFA (with certain changes 
required by the 2002 Farm Bill) to the original EQIP program as 
established in 1996. Then, benefits and costs for all alternatives for 
the rule were compared to the NOFA, which was used as the analytical 
baseline. Lastly, the new EQIP program as formulated for the final 
rule, is compared to the NOFA together with a display of how benefits 
compared with the original 1996 program.
    Confined Animal Feeding Operations (CAFOs) may participate in the 
new program and it is estimated that $563 million (12.5 percent of the 
total) of EQIP funds will be allocated for that purpose. CAFOs are 
generally defined as those operations with greater than 1,000 animal 
units, subject to some exceptions. However, since the Environmental 
Protection Agency published its final rule for ``National Pollutant 
Discharge Elimination System Permit Regulation and Effluent Limitation 
Guidelines and Standards for Concentrated Animal Feeding Operations'' 
(EPA CAFO) on December 15, 2002, benefits from treatment of those CAFOs 
are attributed to that rule rather than to EQIP, regardless of the 
extent to which EQIP funds may be used to assist the CAFO managers with 
rule compliance. The economic analysis shows estimates from two 
perspective alternatives: (1) with CAFO benefits and costs included, 
and (2) with CAFO benefits and costs excluded.

The Final Rule--Its Major Features and Effects

    Decisions leading to the final rule were made after consideration 
of all comments on the proposed rule and a review of their effects on 
program benefits and costs. Program benefits and costs under 
alternative scenarios in the main body of this report were available to 
guide decision-makers. Decision-makers reviewed these alternatives as 
the final rule was defined.
    The final rule allows for adoption of a combination of the 
alternatives to the NOFA that are described in the report. The 
following scenarios are recommended as a result of the benefit-cost 
analysis in order to achieve benefits described. In particular, the 
final rule incorporates a scenario with the following features:
    (1) Twenty five percent of livestock funds are allocated to each 
AFO/CAFO size class;
    (2) A $450,000 payment ceiling to any contract and to any program 
participant over a six year period;

[[Page 32338]]

    (3) An average cost share rate of 65 percent on any practice;
    (4) National Priority targeting that implies lower cost share rates 
(55 percent) for practices linked to grazing, wind erosion, and 
wildlife habitats (since the benefits computed for the latter two do 
not match the specifications in the rule for air quality and at-risk 
species);
    (5) Fund allocation that varies as a function of cost-share 
(practice/benefit categories with higher priorities are the ones with 
higher cost share rates); and
    (6) A spatial evaluation process focusing on environmentally 
sensitive areas such as impaired watersheds that improves benefits by 
10 percent in all categories except grazing.
    (7) Performance incentive for efficient implementation of EQIP.
    The new EQIP program in the final rule has a substantial beneficial 
effect on the environment compared to continuation of the 1996 program. 
A total of 96 million acres of agricultural land will be treated over 
the six years of the program with the final rule, compared to 41 
million acres under the 1996 program. This includes 70.3 million acres 
of cropland, 15.5 million acres of grazing land (pasture and 
rangeland), and 10.3 million acres for wildlife habitat improvement. 
Resource treatment increases compared to the 1996 rules include an 
additional 2.9 million acres for sheet and rill water erosion (USLE) 
reduction, 3.5 million acres for wind erosion, 14.7 million acres for 
non-waste nutrient management, 22.0 million acres for net irrigation 
water reduction, 6.2 million acres for grazing productivity, and 5.5 
million acres for wildlife habitat will occur on the landscape. Also, 
an additional, 31,000 animal feeding operations (5.6 million animal 
units) will be treated under the final rule, as compared to continuing 
the 1996 program, excluding CAFO treatments (34,000 animal feeding 
operations) and 11.4 million animal units if the CAFOs are included. 
Also, compared to the 1996 rules, an additional 12.8 million animal 
units and 39,468 animal feeding operations will be treated, and water 
induced soil loss from agricultural land will decrease by 24.5 million 
tons/year.
    The Table below shows the costs and benefits (in $ million) of the 
final rule compared to the NOFA and the 1996 program.

----------------------------------------------------------------------------------------------------------------
                                                                  Rules and funding          Final EQIP rule
                                                                according to the 2002  -------------------------
                                              1996 EQIP with    legislation and NOFA
                                               $200 million  --------------------------   Include      Exclude
                                              per year 2002-    Include      Exclude        CAFO         CAFO
                                                   2007           CAFO         CAFO      benefits &   benefits &
                                                               benefits &   benefits &   costs \b\    costs \c\
                                                               costs \b\    costs \c\
----------------------------------------------------------------------------------------------------------------
Benefits:
Animal Waste Management (Total) a...........             322        3,608        1,928        4,085        2,405
By Operation Size Class (AUs):
    1000 b.......................               0        1,680            0        1,680            0
    500-1000................................             142          705          705          871          871
    300-500.................................              98          620          620          773          773
    <300....................................              82          602          602          761          761
Land Treatment Total........................           2,444        4,284        4,284        5,828        5,828
  USLE Reductions...........................             640          827          827        1,243        1,243
  Grazing Improvement.......................             671          934          934        1,078        1,078
  Irrigation Improvement/Water Savings......             716        1,803        1,803        2,519        2,519
  Wind Erosion Reductions...................             115          156          156          198          198
  Non-waste Nutrient Management.............             167          320          320          482          482
  Wildlife..................................             135          244          244          309          309
Benefits from non-analyzed practices d......             587        1,005          791        1,263        1,049
                                             -----------------
        Grand Total Benefits................           3,353        8,897        7,003       11,176        9,282
                                             -----------------
Costs:
  EQIP Funds................................             978        4,480        3,917        4,480        3,917
                                             -----------------
        Grand Total Costs e.................           2,374        6,600        5,673        7,620        6,626
                                             -----------------
    Benefit Cost (BC) Ratios................             1.4          1.3          1.2          1.5          1.4
                                             -----------------
    Net Benefits (Benefits--Total Costs)....             979        2,296        1,329        3,555       2,656
----------------------------------------------------------------------------------------------------------------
a Assumes 7.5 percent of EQIP funds for each small livestock class in ``Old'' and 12.5 percent for each class in
  ``New''.
b Benefits and costs of treating large CAFO benefits and costs are accounted for, even though the benefits are
  attributable to the EPA CAFO rule rather than EQIP.
c Benefits and Costs of large CAFOs not accounted for.
d Assumes that benefits per EQIP dollar for practices not assigned to a benefit category are on average the same
  as the practices analyzed.
e Total costs are calculated based on 74 percent of EQIP funds for cost sharing and 26 percent of EQIP funds for
  Technical Assistance (TA). Note that the costs here are not the sum of costs from analysis of individual
  benefit categories, since that would involve double counting. Total costs include both the EQIP funding as
  well as producers' cost-share.

Conclusions

    As described in the above paragraphs, implementation of the final 
rule will generate significant environmental and economic benefits. The 
final rule benefit cost ratio is equal to the 1996 rule when the costs 
and benefits of CAFOs are excluded and is slightly higher when the 
costs and benefits of CAFOs are included. The final rule has higher net 
benefits than the NOFA because of the prioritization based on natural 
resource concerns.
    This benefit cost analysis represents a comprehensive study of 
alternative ways to implement the new EQIP authorities contained in the 
2002 farm bill. The best available data, including selected data on 
EQIP experiences, and economic and natural resource effects

[[Page 32339]]

analytical models were used in its development.
    Natural Resources Conservation Service decision-makers reviewed the 
findings of the analysis and chose a combination of the elements 
described in the report as they are formulated for the final rule. For 
example, the significant benefits achievable by focusing on reducing 
water erosion and sedimentation from otherwise excessive levels on 
agricultural land resulted in it becoming a National priority. In 
addition, a definition of cost effectiveness was introduced in the 
final rule and will be used selecting conservation practices and 
emphasizing their adoption.
    The complete analysis addressed several issues critical to the 
implementation of the final EQIP rule. These included the impacts of 
selected alternatives concerning: (1) Fund allocations among different 
sized livestock facilities; (2) payment ceiling limits; (3) cost share 
rates; (4) National priority targeting; (5) variable cost-share rates 
to address higher priority problems; and (6) a spatial evaluation 
process to improve benefits.
    A copy of this analysis is available upon request from Anthony J. 
Esser, Conservation Operations Division, Natural Resources Conservation 
Service, PO Box 2890, Washington, DC 20013-2890 or on the Internet at 
http://www.nrcs.usda.gov/programs/eqip.

Regulatory Flexibility Act

    The Regulatory Flexibility Act is not applicable to this rule 
because NRCS is not required by 5 U.S.C. 533 or any other provision of 
law to publish a notice of proposed rulemaking with respect to the 
subject matter of this rule.

Environmental Analysis

    NRCS has determined through an amendment to the ``Environment 
Assessment for the Environmental Quality Incentives Program, April 
2003'' that the issuance of this final rule will not have a significant 
effect on the human environment. Copies of the Environmental 
Assessment, the amendment, and the finding of no significant impact may 
be obtained from Anthony J. Esser, Conservation Operations Division, 
Natural Resources Conservation Service, PO Box 2890, Washington, DC 
20013-2890 or on the Internet at http://www.nrcs.usda.gov/programs/eqip.

Paperwork Reduction Act

    Section 2702(b)(1)(a) of the 2002 Act provides that the 
promulgation of regulations and the administration of Title II of the 
Act shall be made without regard to chapter 35 of Title 44 of the 
United State Code, the Paperwork Reduction Act. Accordingly, these 
regulations and the forms, and other information collection activities 
needed to administer the program authorized by these regulations, are 
not subject to provisions of the Paperwork Reduction Act, including 
review by the Office of Management and Budget.
    NRCS is committed to compliance with the Government Paperwork 
Elimination Act (GPEA) and with the Freedom to E-File Act, which 
require Government agencies in general and NRCS in particular to 
provide the public the option of submitting information or transacting 
business electronically to the maximum extent possible. The forms and 
other information collection activities required for participation in 
the program proposed under this rule are not yet fully developed for 
the public to conduct business with NRCS electronically. However, the 
application form will be available electronically through the USDA 
eForms Web site at http://www.sc.egov.usda.gov for downloading. 
Applications may be submitted at the local USDA Service Centers, by 
mail, or by facsimile. Currently, electronic submission is not 
available because signatures from multiple producers with shares in 
agricultural operations are required.

Executive Order 12998

    This proposed rule has been reviewed in accordance with Executive 
Order 12988, Civil Justice Reform. The provisions of this proposed rule 
are not retroactive. The provisions of this proposed rule preempt State 
and local laws to the extent such laws are inconsistent with this 
proposed rule. Before an action may be brought in a Federal court of 
competent jurisdiction, the administrative appeal rights afforded 
persons at 7 CFR parts 614, 780, and 11 must be exhausted.

Federal Crop Insurance Reform and Department of Agriculture 
Reorganization Act of 1994

    Pursuant to Section 304 of the Federal Crop Insurance Reform and 
Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354), 
USDA classified this proposed rule as major and NRCS conducted a risk 
analysis. The risk analysis establishes that the EQIP proposed rule 
will produce benefits and reduce risks to human health, human safety, 
and the environment in a cost-effective manner. A copy of the risk 
analysis is available upon request from Anthony J. Esser, Conservation 
Operations Division, Natural Resources Conservation Service, PO Box 
2890, Washington, DC 20013-2890, and electronically at http://www.nrcs.usda.gov/programs/eqip.

Unfunded Mandates Reform Act of 1995

    Pursuant to Title II of the Unfunded Mandates Reform Act of 1995 
(Pub. L. 104-4), NRCS assessed the effects of this rulemaking action on 
State, local, and Tribal government, and the public. This action does 
not compel the expenditure of $100 million or more by any State, local, 
or Tribal governments, or anyone in the private sector; therefore, a 
statement under Section 202 of the Unfunded Mandates Reform Act of 1995 
is not required.

Small Business Regulatory Enforcement Fairness Act of 1996

    Pursuant to 5 U.S.C. Section 808 of the Small Business Regulatory 
Enforcement Fairness Act of 1996, it has been determined by NRCS that 
it is impracticable, unnecessary, and contrary to the public interest 
to delay the effective date of this rule. Making this final rule 
effective immediately will permit NRCS to offer the public timely, 
reliable information about funding for conservation practices as early 
before the start of the spring 2003 planting season as possible. 
Information about the availability of the program for establishing 
conservation practices influence planting decisions and should, 
therefore, be disseminated to producers before planting decisions are 
made. Failure to provide this information in a timely manner may mean 
that the realization of important conservation benefits available under 
EQIP may be delayed for another year before the start of another 
planting season. Accordingly, this rule is effective upon publication 
in the Federal Register.

Discussion of Program

    The Farm Security and Rural Investment Act of 2002 (the 2002 Act) 
(Pub. L. 107-171, May 13, 2002) re-authorized and amended the 
Environmental Quality Incentives Program, which had been added to the 
Food Security Act of 1985 (the 1985 Act) (16 U.S.C. 3801 et seq.) by 
the Federal Agriculture Improvement and Reform Act of 1996 (the 1996 
Act) (Pub. L. 104-127). The 2002 Act also amended the Environmental 
Conservation Acreage Reserve Program by changing the section name to 
the Comprehensive Conservation Enhancement Program and removing the 
authority for the Secretary of Agriculture to designate areas as 
conservation priority areas.

[[Page 32340]]

    As provided by section 1241 of the 1985 Act (16 U.S.C. 3841), as 
amended by the 2002 Act, the funds, facilities, and authorities of the 
Commodity Credit Corporation (CCC) are available to NRCS for carrying 
out EQIP. (The Chief of the NRCS is a vice-president of the CCC.) 
Accordingly, where NRCS is mentioned in this rule, it also refers to 
the CCC's funds, facilities, and authorities where applicable.
    Through EQIP, NRCS provides assistance to farmers and ranchers who 
face threats to soil, water, air, and related natural resources on 
their land. These include grazing lands, wetlands, private non-
industrial forest land, and wildlife habitat. Participation in the 
program is voluntary. Under EQIP, NRCS will provide assistance in a 
manner that will promote agricultural production and environmental 
quality as compatible goals, optimize environmental benefits, and help 
farmers and ranchers meet Federal, State, and local environmental 
requirements. NRCS will offer the program throughout the Nation using 
the services of NRCS and Technical Service Providers. NRCS will 
implement a consolidated and simplified process to reduce any 
administrative burdens that would otherwise be placed on producers.
    In this rule, NRCS proposes to incorporate changes in the EQIP 
regulations, 7 CFR 1466, resulting from the passage of the 2002 Act. 
Several important changes were made in the 2002 Act that require 
changes to the regulation. These include:
    (1) Changing the maximum payment limitation from $50,000 per person 
per contract to $450,000 per individual or entity for all contracts 
entered into in fiscal years 2002 through 2007;
    (2) Revising the purpose from ``maximize environmental benefits per 
dollar expended'' to ``optimize environmental benefits'';
    (3) Eliminating the competitive bidding by applicants;
    (4) Allowing payments to be made in the first year of the contract;
    (5) Removing language authorizing targeting of funds to 
Conservation Priority Areas;
    (6) Removing the provision prohibiting a producer from receiving 
cost-shares for an animal waste facility on an animal operation with 
more than 1,000 animal units;
    (7) Allowing cost-share rates of up to 90 percent for limited 
resource farmers or ranchers and beginning farmers or ranchers;
    (8) Reducing the minimum length of a contract from five years to 
one year after installation of the last practice;
    (9) Increasing funding from $200 million per year to $400 million 
in FY 2002 and increasing to $1.3 billion per year in FY 2007; and,
    (10) Imposing an average adjusted gross income (AGI) limitation.
    In an effort to make the program more effective and efficient, the 
Department has initiated several streamlining changes, including:
    (1) Eliminating the program's dual administration by changing Farm 
Service Agency (FSA) participation from concurrence to consultation;
    (2) Reducing the planning requirements needed to develop the 
contract; and
    (3) Allowing producers to have more than one contract per tract at 
any given time.
    The fundamental philosophy of the program, assisting agricultural 
producers install conservation practices to provide environmental 
benefits, has not changed. The statutory and Departmental changes 
respond to limitations and restrictions identified by agency staff and 
participants. Agricultural producers who are interested in 
participating in the program will apply as they have in the past and 
should experience a quicker turn-around on their application. Producers 
also have some expanded financial opportunities with higher contract 
limits and the ability to receive payments earlier in the contract 
period.
    On February 10, 2003, NRCS published a proposed rule with request 
for comments. The proposed rule described the program requirements, 
administrative processes, and eligibility criteria that NRCS would use 
in implementation of EQIP. The proposed rule also described how NRCS 
would manage the program to optimize environmental benefits and what 
information would be considered in designating program funds for 
natural resource concerns to states and to contracts. Over 1,250 
separate responses containing about 4,900 specific comments were 
received during the 30-day comment period: 608 responses from farmers, 
ranchers, and other individuals, 175 from agricultural and rural 
community organizations, 54 from environmental organizations, 268 from 
conservation districts and related groups, 37 from business entities, 
118 from State and local agencies, 24 from tribes and tribal 
organizations, and nine from congressional representatives.
    Additional responses were received from Federal agencies and 
employees; their comments are not included in the following analysis of 
public comments. These responses were treated as inter and intra-agency 
comments and considered along with the public comments where 
appropriate.
    All comments received are available for review in Room 5229 South 
Building, 14th and Independence Ave., SW., Washington, DC, during 
regular business hours (8 a.m. to 5 p.m.) Monday through Friday.

Analysis of Public Comment

    Overall, almost all respondents expressed appreciation for the 
opportunity to comment on the EQIP proposed rule. Many offered valuable 
suggestions for improving or clarifying specific sections of the 
proposed rule. Some of these suggestions were group efforts, where 
individual responses used similar or identical language to identify and 
describe their interests, concerns, and recommended modifications to 
the proposed rule.
    The majority of comments centered on six major issues in the 
proposed rule: (1) Funding, payments and cost-share rates; (2) setting 
priorities, ranking of applications and contract approval; (3) use of 
EQIP assistance for CAFO/AFO; (4) locally-led conservation; (5) limited 
resource producer/ranchers and beginning farmer or rancher; and (6) use 
of conservation planning in the EQIP program. These comments were 
considered as part of the rulemaking record to the extent that they 
were relevant to the provisions of the rulemaking. Numerous minor 
editorial and other language clarification changes were suggested; 
these comments are not included in the following analysis but all were 
considered and many of the minor technical changes were included in the 
final rule.
    To implement the final rule, NRCS will be responsible for 
establishing and documenting in program guidance the overall policies, 
priorities, procedures, and guidelines for EQIP. NRCS will seek the 
review and input by other Federal agencies, as appropriate, when 
developing the guidance documentation.

General Comments on 7 CFR Part 1466

    Under the proposed rule, NRCS would set out EQIP regulations in 7 
CFR part 1466. The following summarizes general comments received on 
the proposed rule and NRCS's response to them.

1. The 1996 Act

    Support for both the legislative and Departmental changes to EQIP 
was expressed in two-thirds of the comments received. One-third of the 
comments expressed concern that proposed rule removed the conservation 
planning requirement from EQIP,

[[Page 32341]]

provided for unrestricted cost-share assistance to new and expanding 
animal operations and CAFOs in flood plains. The Department recognizes 
that Congress made adjustments to the EQIP legislation in response to 
concerns from their constituents. The Department included those 
concerns when developing the proposed rule. The Department is required 
to administer the laws as passed by Congress and provide EQIP 
assistance to all producers. Also, the Department feels EQIP, as 
proposed, fully supports the NRCS progressive planning policy by 
allowing producers to request assistance for only those conservation 
practices they are ready to implement.

2. Preamble Language in the Proposed Rule

    Two comments received were concerned with the length of the public 
comment period and requested an extension of the comment period. 
Several hundred comments appreciated the opportunity given for input 
and the varied mediums by which comments would be accepted. Over 1,250 
responses were received from a range of interested parties from across 
the Nation. NRCS believes that a sufficient length of time was provided 
and it has received sufficient input to proceed to a final rule.
    A basic element of EQIP implementation throughout the proposed rule 
is the use of the locally-led process to adapt EQIP to local 
conditions. The Department received 176 comments in support of locally-
led conservation, frequently commenting that the process in the 
proposed rule over-rides local decision making and is a top down 
process. NRCS believes that the locally-led process is the optimal 
mechanism for implementation of EQIP and believes that the proposed 
rule strengthens the process. The locally-led process utilizing the 
State Technical Committees and Local Work Groups has been discussed in 
detail in the preamble to the 1997 EQIP final rule (FR 28258, vol. 62, 
no. 99, May 22, 1997) and does not need to be reiterated.
    In the preamble NRCS requested comments on eight specific issues. 
Where applicable the public comments and recommendations have been 
incorporated in the final rule or will be included in program guidance 
and delivery activities.
    One of the questions in the proposed rule asked for comments on 
adopting a limited waiver program, as well as on innovative mechanisms 
that NRCS could consider to institutionalize alternatives for 
encouraging conservation implementation. NRCS received 46 comments 
regarding credits and credit trading. Twenty-seven respondents 
suggested pilot programs to resolve the issues discussed, three 
suggested proceeding with caution, seven respondents did not support 
the concept, 4 suggested that the waiver should apply to all previously 
applied practices, and three respondents stated that USDA does not have 
any interest in credits a producer might receive from applying 
conservation practices with EQIP assistance. Some respondents 
interpreted the discussion in the proposed rule that NRCS would 
initiate, support and administer an environmental credit trading 
program. The actual intent is that NRCS would waive all financial 
interest to any environmental credits that accrue to a participant 
implementing conservation practices using EQIP assistance. NRCS has 
determined that NRCS does not have any financial interest in any 
environmental credits that may accrue to a participant who implements 
conservation practices with EQIP assistance.
    The proposed EQIP rule also asked for comments regarding how to 
administer a loan program in accordance with the Ground and Surface 
Water Provisions of the 2002 Farm Bill. NRCS received 13 comments 
suggesting looking into existing funding programs such as the Nonpoint 
Source Partnership, which is a collaborative effort between the state 
and EPA. The Department believes that the 2002 Farm Bill authorizes the 
implementation of a loan program and does not need to address the issue 
in the final rule. NRCS will reserve the option to utilize a loan 
program in the future and will do so with policy and program guidance 
in appropriate manuals and handbooks.
    The proposed rule also requested comments regarding how the Klamath 
Basin water conservation provisions should be implemented. NRCS 
received 10 comments; five suggesting that the Klamath Basin issue was 
more than agriculture and that NRCS should cooperate with other 
stakeholders in the development of a basin plan; 4 recommending water 
quality improvements should be considered as ``net savings'' because 
the end result is more water available for wildlife purposes; and one 
comment that the administrative costs should not be borne by the 
Klamath Basin allocation. NRCS reaffirms the language of the proposal 
rule that the two Klamath Basin State Conservationists will lead a 
basin planning effort that may require additional funding from sources 
other than EQIP funding. NRCS also believes that there is sufficient 
water in certain times of the year that can be captured with on-farm 
storage allowing participants to accomplish the statutory intent of 
``net-savings'' without reducing irrigation water usage. NCRS will 
provide guidance through the EQIP Program Manual that ``net-savings'' 
in the Klamath Basin can be accomplished in three ways; reduced 
irrigation water usage, improved off-site water quality, and increased 
on-farm storage of water.

Section-by-Section Comments on 7 CFR Part 1466

Section 1466.1 Applicability

    The proposed rule indicated that farmers and ranchers could receive 
program assistance to address soil, water, air, and related natural 
resources concerns, and to encourage enhancements on their lands in an 
environmentally beneficial and cost-effective manner. There were seven 
comments expressing support to include language that another purpose of 
the program is to assist producers in complying with environmental 
regulations. Several other comments suggested that wildlife should be 
specifically stated as a resource issue and that NRCS should explicitly 
state which land uses are eligible. EQIP shall be implemented in a 
balanced manner in accordance with the statutory purposes for which 
EQIP was established, including the objective to optimize environmental 
benefits. The proposed rule contained broad language to facilitate the 
identification of a range of priority natural resource concerns at the 
state and local level based on National priorities and the Department 
believes that this is the appropriate approach. The final rule now 
contains, however, compliance with environmental regulations as a 
purpose of the program.

Section 1466.2 Administration

    In this section, NRCS is identified as an agent of CCC and that 
NRCS will consult with FSA at the National level in the development of 
policies, priorities and guidelines. This section also reaffirms NRCS's 
commitment to locally-led conservation through the State Technical 
Committees and Local Work Groups. One hundred and sixty-six comments 
express support for locally-led conservation. One comment suggest 
including private landowners on Local Work Groups. USDA believes that 
it is important for both NRCS and FSA to consult on program 
implementation and that the proposed arrangement takes advantage of the 
proven expertise of both agencies. USDA strongly supports locally-led 
conservation and

[[Page 32342]]

recommends that Local Work Groups include public comment periods in 
their meetings but must limit membership to representatives of state 
and local governments and political subdivisions and agencies thereof 
in accordance with the Federal Advisory Committee Act (FACA).

Section 1466.3 Definitions

Agricultural Operation
    NRCS received 23 comments in response. Ten respondents suggested it 
should be limited to the field where the practice is being implemented, 
whereas one respondent suggested the field plus any contiguous parcels, 
and 13 respondents suggested all the land operated by the producer. The 
definition has been modified in the final rule to include all parcel or 
parcels of land, both contiguous and non-contiguous.
At-Risk Species
    The proposed rule identified at-risk species habitat recovery as a 
National priority. Eight respondents suggested the need for a 
definition of at-risk species. One respondent suggested the definition 
to include invertebrate pollinators, one suggested imperiled species 
and seven respondents suggested to include Federally listed and 
candidate species as well as species of local concern. The Department 
agrees with the suggestion to define at-risk species and a definition 
has been included in the final rule.
Beginning Farmer and Rancher
    Six comments suggesting the 10-year time frame is too long. Three 
respondents recommended five years and one recommended a maximum of 
three years. The Department has an established definition for Beginning 
Farmer and will continue to use the existing definition in the final 
rule.
Confined Livestock Feeding Operation
    Two respondents recommended this definition was not necessary for 
implementation of EQIP. The Department does not use confined livestock 
feeding operation in the implementation of EQIP and has removed the 
definition from the final rule.
Indian Tribe
    Four respondents commented on the definition of Indian tribe and 
how there appeared to be some inconsistency in how it was used in the 
Proposed Rule, including the lack of reference to Conservation District 
established under tribal law. No change to the definition of Indian 
Tribe is proposed because it reflects the definition provided by 25 
U.S.C. 3701. However, the rule has been clarified to reflect the 
appropriate use of Indian Tribe in the text. Conservation Districts 
established under Tribal law has been added to the definition of 
Conservation Districts.
Limited Resource Farmer and Rancher
    Six comments were received; three respondents suggesting that the 
gross farm sales value was too low and three respondents suggesting it 
was deficient by not identifying future year adjustments. The 
Department's interagency task force reviewed the comments and modified 
the definition for the final rule.
Priority Natural Resource Concern
    Three comments were received. One respondent supported the 
definition of priority natural resource concern as written and two 
respondents suggested including a resource objective that is being 
addressed through an environmental regulation. NRCS believe that 
optimization of environmental benefits can be achieved through a 
prioritization process. The definition in the final rule is not 
changed.
Producer
    Fifty-one comments were received. Seventeen suggested that this 
definition specifically include private non-industrial forest land, 17 
want assurance that the definition does not preclude agroforestry, and 
36 suggested language that provides assurance that private non-
industrial forest land is eligible for EQIP assistance. The Department 
recognizes forest products as an agricultural commodity and forest land 
as agricultural land. The definition in the final rule is not changed.
Wildlife
    NRCS received 10 comments to revise the definition of wildlife; 
five suggest a rewording and five respondents suggested crafting the 
definition to allow for exclusion of exotic species. The Department 
believes that the National Invasive Species Council operating under the 
authority of Executive Order 13112 provides sufficient direction and 
guidance for USDA to implement EQIP without specifically including 
invasive species concerns in the definition. In the past, many state 
and local decision-makers have identified invasive species as a 
priority natural resource concern and used EQIP resources to support 
control.
New Definitions
    Several respondents suggest new definitions be included in the 
final rule, including: at-risk species (eight comments). One respondent 
suggested the definition to include invertebrate pollinators, one 
suggested imperiled species and seven respondents suggest the 
definition to include Federally listed and candidate species as well as 
species of local concern. The Department agrees with the suggestion to 
define at-risk species and a definition has been included in the final 
rule.
    The 2002 Farm Bill established an earnings limit for an individual 
or entity. For purposes of consistency, the Department uses FSA's 
Payment Limitation and Payment Eligibility rule (7 CFR 1400) for 
definitions of entities and joint ventures. This rule, however, does 
not contain a definition of individual. The Department added 
definitions of entity and joint operation to the final EQIP rule and 
utilizes the definition of person for individual. NRCS has adjusted 
usage of these terms throughout the EQIP rule to assure the final rule 
is consistent with 7 CFR1400 and the statutory earnings limit.
    During the review process the Department recognized a concern that 
cancellation of EQIP contracts results in a loss of financial 
assistance and an expenditure of unproductive technical assistance. In 
an effort to minimize these losses, NRCS will include a Liquidated 
Damages policy in EQIP for producers who cancel contracts without 
proper cause and include a definition of liquidated damages in the 
final rule.
    Three comments on the Indian trust land definition were considered 
restrictive and there is a need for more land inclusion. To be more 
inclusive a definition for Indian Land, consistent with 25 CFR part 
150, has been included in the final rule and the definition for Indian 
Trust Land was removed from the final rule.

Section 1466.4 National Priorities

    NRCS received 378 comments regarding National priorities; 141 
regarding water resources, 60 related to air resources, 45 regarding 
soil erosion, 56 comments related to at-risk species and wildlife and 
71 of a general nature.
    Of the 141 comments related to water resource; 52 recommended 
separating water quality and water quantity into two priorities; 93 
respondents recommended removing the focus on Total Maximum Daily Loads 
(TMDL), 82 because TMDL does not always include drinking water 
supplies, nine because including TMDL is analogous to targeting, and 
two for including 305(b) reaches (non-TMDL); and one respondent 
suggested the Gulf of Mexico hypoxia and contributing factors

[[Page 32343]]

should be included as a specific National priority.
    Forty four respondents recommended adjusting the air quality 
National priority by adding ``atmospheric concentration'' before or 
emissions and 16 recommended that national air quality priorities 
should not apply to Indian Tribes.
    NRCS received 60 comments that the soil erosion National priority 
limited use of EQIP to land with lower rates of erosion that are of a 
particular concern. Additionally, NRCS has determined that the 
reference to highly erodible land could be misleading with regards to 
providing assistance for compliance with the Highly Erodible Land (HEL) 
provisions of the 1985 Farm Bill.
    The fourth National priority, at-risk species habitat recovery, 
received 56 comments. Thirty two respondents recommended that this 
priority be directed to wildlife and wildlife habitat. Six respondents 
recommended defining at-risk to include Federally listed as well as 
species of regional concern with one of these misinterpreting the 
proposed rule to be Federally listed species only. Four respondents 
supported the priority as presented and 14 respondents suggested 
removing at-risk species priority with two suggesting there were other 
programs to accomplish this objective.
    In addition, NRCS received recommendations to emphasize or add 
National priorities; five suggested EQIP is the implementation vehicle 
for salinity control measures authorized by the Colorado River Basin 
Control Act; five recommended adding quail restoration; eight suggested 
emphasizing grassland, grazing land and rangeland, 13 wanted the 
National priorities to support private non-industrial forest land, and 
three wanted the priorities to include promoting agricultural 
production.
    NRCS received five comments that the National priorities appeared 
to be a compliance assistance program for laws and regulations of other 
agencies. Fifty comments supported the establishment of state level 
conservation priority areas at the state's discretion, three 
respondents suggested that there should not be National priorities but 
national guidance in support of state and local priority resource 
concerns, and two suggested that legislative requirement for 60 percent 
for livestock practices be applied at the state level and not the 
national level. The Department believes that the National priorities in 
the proposed rule meets Congressional intent in providing direction and 
flexibility to the state and local decision-makers to utilize EQIP 
resources to address locally identified priorities and optimize 
environmental benefits. The National priorities in the proposed rule 
are focused on natural resources and resource issues. These priorities 
are sufficient to guide local program delivery and only the soil 
erosion priority will change in the final rule to remove any potential 
conflict with Highly Erodible Land provisions of the 1985 Farm Bill.
    Although the fundamental philosophy of the program, assisting 
agricultural producers to install conservation practices to provide 
environmental benefits, has not changed; the 2002 Farm Bill removed the 
authority of the Department to establish priority areas to which 
program resources are focused. NRCS eliminated the requirement that a 
portion of the funds allocated to the states would be focused into 
Conservation Priority Areas. The Department believes that NRCS 
methodology to optimize environmental benefits through an approach that 
integrates consideration of National Priorities in four key program 
components: (1) The allocation of financial resources to States; (2) 
the allocation of financial resources within states; (3) the selection 
of conservation practices and the establishment of cost-share and 
incentive payment levels; and (4) the application ranking process will 
provide the same level of environmental conservation as targeting to 
conservation priority areas. The intent of EQIP is to provide maximum 
flexibility to local decision-makers to implement the program. The 
identification of National priorities is the first step to accomplish 
this and is the basis for the allocation for funds from the National 
NRCS to state-level NRCS.
    Two respondents commented on the need to include the use of EQIP to 
mitigate the impact of natural disasters in the National priorities. No 
changes to the rule were made because EQIP is not intended to be a 
disaster program.

Section 1466.5 National Allocation and Management

    This section of the proposed rule contains information regarding 
allocation of funds from the national level to the state level, the 
establishment of an incentive payment, reviewing progress and 
accountability, and delegation of authority to the State 
Conservationists to implement the program to achieve National 
priorities.
    USDA received 37 comments related to the National allocation. Nine 
respondents suggested including the amount of tribal land in the 
allocation formula, three suggested adding unmet need based on previous 
year's number of applications, 4 recommended using regulatory 
compliance as a factors, two suggested forest land as a factor, and six 
suggested directing more funding to crop base agriculture and less to 
animal agriculture. Several respondents also recommended adjusting the 
allocation based on the intensity of agriculture in each state. Another 
five respondents suggested that National Association of Conservation 
Districts (NACD) and the Forest Service (USFS) should be consulted when 
making allocation decisions and one respondent supported making 
National Allocation task force report strategy available to the public. 
NRCS is in full support of reviewing and revising, as necessary, the 
National EQIP allocation formula on a regular basis. NRCS intends to 
incorporate a wide variety of partners and customers in this process 
and intends to fully disclose the strategy of the task force to the 
public.
    NRCS also received 10 comments regarding the use and reuse of EQIP 
funds, suggesting that funds made available from cancelled contracts 
should be able to be re-used to fund new contracts. The Department 
understands the position of the respondents, however, the re-use of 
funds is a limitation associated with the authorization language in the 
2002 Farm Bill.
    In the proposed rule, NRCS specifically asked for comments 
regarding implementation of an incentive award; ``what approaches NRCS 
can use to efficiently and effectively implement this award 
incentive''. NRCS received over 472 comments regarding this item, the 
majority of which, 415, supported the concept and suggested that the 
incentive be substantial but did not offer other specifics. Eleven 
respondents suggested that accomplishments with Indian tribes should be 
considered as a factor for determining the incentive award; three 
recommended using only how local conservation needs were addressed; and 
one suggested using leveraging, use of TSPs, and multiple resource and 
long-term benefits. Forty one respondents were against the incentive 
award because they felt it would penalize states for not having 
National priorities, penalizing farmers for reasons beyond their 
control, or establish a bidding competition between states to compete 
for available funds. One respondent suggested using pervious year 
performance to allow the award to be made early in the year. NRCS 
believes there is a potential confusion between the term ``incentive 
award'' used in the proposed rule and the incentive

[[Page 32344]]

payment level established for a producer to implement a land management 
practice and therefore will revise the term to ``performance 
incentive''. NRCS will use the performance incentive as one of its 
approaches to optimize environmental benefits by supporting the state 
decision-makers with additional EQIP resources based on performance. 
The guidelines for administering this award will be developed and made 
available in EQIP program guidance. NRCS is committed to full 
disclosure of program implementation policy and will make this 
information publicly available as it is finalized.
    NRCS received 422 comments in response to the request for comments 
on how best to evaluate the performance of the EQIP program. How should 
environmental changes be measured, and what methodologies would best 
identify environmental effects due to contract activities? What kind of 
output measures and data collection strategies should NRCS consider? 
What approaches could NRCS use to evaluate cost-effectiveness? Four 
hundred and one responders commented on NRCS's intent to move toward 
actual environmental outcomes and benefits rather than the number of 
contracts and practices. Seven respondents suggested a national team to 
develop a framework for monitoring and reporting, 4 respondents wanted 
assurance that NRCS would include forestry performance measures in any 
process that is used, 10 respondents recommended encouraging scientific 
measurement of conservation practices, and seven respondents did not 
support Technical Service Providers as a measure of performance. One 
respondent suggested a crucial element of performance evaluation is 
consideration of the cumulative impact. NRCS is actively developing 
approaches to evaluate performance for EQIP as well as all other 
conservation programs administered by NRCS. NRCS is committed to public 
disclosure and transparency as evidenced by the posting of data and 
information on the NRCS Web site at http://www.nrcs.usda.gov and the 
NRCS Performance and Results Measurement System (PRMS) at http://prms.nrcs.usda.gov/prms/index.html. NRCS will continue to refine its 
accountability system to make performance data available to the public.
    In the final rule, NRCS removed those incentive payment factors 
that are an iteration of the National measures identified in the 
preamble of the proposed rule. The measures: Increasing overall 
environmental benefits, addressing multiple resource concerns, ensuring 
more durable environmental benefits and limiting adverse ancillary 
impacts, encouraging innovation, supporting the statutory mandate to 
apply nationally 60 percent of available financial assistance to 
livestock-related conservation practices, and employing appropriate 
tools to more comprehensively serve EQIP purposes will be reviewed 
periodically and adjusted as necessary. The National measures will be 
provided in the program guidance in the EQIP Manual and will be made 
available to the public.

Section 1466.6 State Allocation and Management

    The proposed rule provides that the State Conservationist with 
advice from the State Technical Committee will determine how EQIP will 
be implemented in the state, identify the priority resource concerns, 
and determine how EQIP funds will be utilized. NRCS received 47 
comments regarding state level fund allocation and program management. 
Twelve respondents recommended that tribal land should be a State 
allocation factor, 4 recommend using regulatory compliance needs, and 
18 suggested multi-tribal collaborative efforts. Another 12 respondents 
wanted assurance that the state and local decision-makers will consider 
forestry issues and private non-industrial forest land as eligible for 
EQIP. NRCS also received one comment raising a concern that if the 
State Conservationist, in support of locally-led conservation, 
allocates EQIP funds to counties in smaller amounts the needs of the 
large animal facilities and large agricultural operations will not be 
satisfied. The Department defines row crop, rangeland, specialty crop, 
animal and agroforestry as agricultural land. The state allocation 
process, which uses locally led conservation through advice from the 
State Technical Committee, is based on state identified priority 
resource concerns and is the second component of NRCS's optimizing 
environmental benefits process. EQIP has been over subscribed since 
1997 and will continue to be so in the future. The economic analysis 
conducted to evaluate the impact of EQIP has determined that EQIP will 
treat approximately 10 percent of crop and grazing land. The final rule 
will provide specific direction to State Conservationist's to 
prioritize resource concerns and to do so in accordance with the 
National priorities.
    Four respondents commented that State allocations should consider 
Indian lands. Two respondents commented that a Tribal Conservation 
Advisory Council should be at the same level as the State Technical 
committee in terms of providing advice to the State Conservationist. No 
rule change has been made because allocations made by the State 
Conservationist consider the natural resource concerns identified with 
advice from the State Technical Committee and Local Work Group. Indian 
tribes are represented on State Technical Committee under 7 CFR 610.

Section 1466.7 Outreach Activities

    One hundred and eighty-seven comments made specific recommendations 
supporting USDA's outreach efforts to assist limited resource 
producers/ranchers, beginning farmers or ranchers and under-served 
populations. These recommendations include: Permit flexible schedules 
for applying practices and systems; offer low-cost conservation 
practice alternatives; consider the value of a producer's labor as the 
producer's share of the cost; utilize local cooperative extension 
service agencies in the education efforts; conduct a survey of 
producers who do not normally participate and ask them the reasons for 
their non-participation; provide flexibility regarding the control of 
land for American Indians and others. The Department remains dedicated 
to increasing program availability to all eligible producers. The 
recommendations made in the public comments have been incorporated in 
the final rule where applicable or will be included in program guidance 
and delivery activities.
    Two respondents asked that NRCS include Tribal level in the 
description of where NRCS will conduct outreach activities. The rule 
has not been amended because the language referred to the NRCS 
organizational structure and Indian tribes are specifically included as 
a targeted group for outreach.

Section 1466.8 Program Requirements

    One respondent recommended that the State Conservationist instead 
of the Chief of NRCS be given the authority to grant waivers for having 
control of the land allotted by the Bureau of Indian Affairs, Tribal 
land and other instances. The rule has not been amended because 
definition of Chief includes a designee.
    NRCS received one comment expressing concern that a complete 
comprehensive nutrient management plan (CNMP) was required to be 
submitted in entirety during the initial

[[Page 32345]]

planning phase of the EQIP application in response to NRCS's request 
for comments regarding how incentive payments to develop a CNMP should 
be implemented. The proposed rule did not require that a full CNMP 
needed to be developed during the initial planning process, the 
proposed rule stated that a participant who receives EQIP assistance 
for an animal waste storage or treatment facility will provide for the 
development and implementation of a CNMP. This provision will remain 
unchanged in the final rule in support of the legislative intent for 
implementation of CNMPs in the 2002 Farm Bill.
    The use of EQIP assistance for new and expanding large animal 
facilities received 520 comments two of which supported using EQIP for 
all animal facilities regardless of size and 518 respondents suggest 
that the final EQIP rule that prohibit funding of new and expanding 
large animal facilities and of large animal facilities in floodplains 
except to move the facility out of the floodplain. The Department 
removed the restriction on providing EQIP assistance to waste storage 
or treatment facilities for large animal facilities in accordance with 
the 2002 Farm Bill. The Department supports the concept that the 
program assistance should be available to all operations and should be 
awarded to those operations that provide the optimal environmental 
benefits. Section 1466.20 and program direction will provide state and 
local decision-makers guidance for ranking of applications and 
selecting contracts to achieve this objective.
    NRCS received 4 comments to remove the provision to start or 
complete a conservation practice within the first twelve months of an 
EQIP contract. NRCS believes that the purpose of EQIP is to implement 
conservation activities. Producers who are not ready to implement 
practices should not apply for assistance. However, NRCS also 
understands that there often are extraneous circumstances that can 
delay implementation, therefore, the final EQIP rule will provide an 
opportunity for the participant to request a waiver from the State 
Conservationist to delay implementation.
    NRCS received five comments regarding allowing more than one 
contract on a tract of land at the same time; 4 in support and one 
against. The proposed EQIP rule removed this eligibility requirement 
from the previous rule. NRCS believes that allowing producers to have 
two or more contracts on a parcel supports the concept of ``progressive 
planning'' which allows producers to implement practices in accordance 
with their ability.
    NRCS received two comments recommending that marketing facilities 
be eligible for EQIP contract. The Department believes that the 
statutory intent is to direct EQIP assistance to producers for 
implementation of conservation practices on working agricultural land. 
NRCS will provide guidance with the EQIP Program Manual that non-
production ancillary businesses such as agricultural supply buyers and 
sellers are not eligible to participate in EQIP. This interpretation 
also applies to producer organizations and cooperatives that provide 
support but do not operate working land for the production of food or 
fiber.
    NRCS received two comments that a producer who prematurely 
terminates an EQIP contract should be eligible to reapply for a new 
contract. NRCS believes that the proposed rule does not prevent a 
participant from reapplying after prematurely terminating a contract. 
NRCS's objectives are to implement cost-effective conservation and 
optimize environmental benefits and will award contracts to those 
applications that best achieve these goals. Since funds released by 
termination of an EQIP contract are not available for reuse on another 
contract, NRCS has provided, in the final rule, an option for 
reimbursement of administrative and assistance expenses (liquidated 
damages) incurred. NRCS will provide guidance in the EQIP Program 
Manual regarding the nature and extent of liquidated damages.

Section 1466.9 EQIP Plan of Operations

    The EQIP plan of operations identifies the time and place of the 
conservation practices that the applicant has decided to implement. The 
Department has received 485 comments requesting NRCS to reinstate the 
provision for conservation planning that was removed from the 1997 EQIP 
rule. One additional comment was received in support of the reduced 
planning requirements but with a caveat that a level of planning should 
be maintained to assure that the implementation of one conservation 
practice that addresses one resource concern will not have a negative 
impact on another resource concern. The Department fully supports the 
comment and feels the policy guidance of NRCS adequately addresses the 
issue. NRCS planning policy contained in the NRCS General Manual and 
NRCS National Planning Procedures Handbook require the assessment of 
positive and negative impacts as part of the technical assistance 
provided to producers. The objective of NRCS planning policy is a whole 
farm resource management plan and NRCS policy incorporates the 
philosophy of ``progressive planning'' that includes development and 
analysis of alternatives and documentation of the producer's decisions. 
The EQIP final rule supports the ``progressive planning'' philosophy 
and allows EQIP assistance to be used to help a producer implement 
conservation practices as they make resource conservation decisions.
    NRCS received 19 comments related to the definition of net-water 
savings. The Department will not create a National definition of ``net 
water savings'' due to the complexity of state and local water rights 
laws, and water programs and policies. In the final rule the 
responsibility for establishing a definition for ``net water savings'' 
is delegated to the State Conservationist.

Section 1466.10 Conservation Practices

    NRCS received 67 comments which did not support the provision in 
the proposed rule to consider only land irrigated in three out of the 
last five years as eligible for EQIP assistance for irrigation 
practices. Sixty one respondents identified that NRCS recommended crop 
rotations for certain crops only required irrigation two years in a 
five year rotation. Six comments supported assistance for irrigation on 
land with no irrigation history to reduce production risk and in 
support of farm viability. The Department believes EQIP resources 
should be utilized to reduce the environmental impacts of irrigation on 
water resources. The Department has changed the restriction in the 
final rule to provide opportunities for irrigation assistance for those 
crops that are irrigated two out of five years.
    NRCS received eight comments opposing the availability of incentive 
payments to participants for development of a CNMP especially when they 
are required to do so by EPA regulation. The Department supports the 
statutory intent to encourage the development of comprehensive nutrient 
management plans and provides the state and local decision-makers the 
authority to offer incentive payments and to determine incentive 
payment levels.
    NRCS received 10 comments supporting allowing NRCS to approve 
interim conservation practices and financial assistance for pilot 
testing new technologies or innovations. Ten respondents recommended 
that state-of-the-art technology should not be the only basis for 
defining innovation and that innovation could also be defined as

[[Page 32346]]

a particular group of producers who have not adopted a commonly 
accepted technology. The Department believes that innovative approaches 
should be supported. NRCS has agency policy to provide for the 
development and implementation of innovative technology. NRCS also 
believes that unproven innovative technology that has not been field 
tested should be used cautiously until its utility is proven for a 
specific or wide spread application. NRCS will provide program guidance 
that innovation is more than state-of-the-art technology; innovation 
could also mean new techniques to certain groups or could also mean 
application evaluation approaches that consider the benefits of 
grouping practices rather than a scattered approach.
    Several general comments were received regarding lack of access to 
USDA programs and need for special considerations for Indian lands. One 
respondent commented about the types of practices to be cost shared. 
Consideration must be given to those large blocks of land that have 
basic conservation practice needs or needs differing from those who 
have had access to programs since inception. Recommend that NRCS: (1) 
Develop ``special project'' areas that warrant the prioritization of 
conservation practices differing from those of the state. (2) Develop 
``allowable rates'' for construction, labor, and material specific to 
the special project areas. The final rule has not changed. The process 
in the proposed rule allows for implementation of EQIP at the local 
level to adapt program delivery for varying resource issues, costs of 
implementation and other unique circumstances.

Section 1466.11 Technical and Other Assistance Provided by Qualified 
Personnel Not Affiliated With USDA

    Four comments were received related to the inclusion of the private 
sector as qualified personnel who can provide EQIP assistance. The 
final rule added individuals who are certified by NRCS as a Technical 
Service Provider (TSP) to the list of providers an EQIP participant may 
select from to provide assistance.
    Selection of appropriate TSP by EQIP participants was a concern of 
two respondents. The proposed EQIP rule allows participants to select a 
TSP. Participants may choose any qualified TSP or NRCS to provide EQIP 
related technical assistance.
    Seven respondents asked to add 1994 Land Grant Colleges to the list 
of potential TSPs. The rule has been edited to show the inclusiveness 
of possible TSP rather than exclusiveness by naming various groups or 
individuals. ``Participants may use technical and other assistance from 
qualified personnel who are certified as Technical Service Providers by 
NRCS.''
    A total 46 comments on Technical Service Provider liability, 
certification, confidentiality and training were received. At the time 
the proposed EQIP rule was developed the specifics of TSP were not 
known. The TSP interim final rule was promulgated in 7 CFR part 652 and 
it addresses the issues of liability, certification, confidentiality, 
and training.

Section 1466.20 Application for Contracts and Selecting Offers From 
Producers

    NRCS received 58 comments suggesting the objective of cost-
effectiveness was to reinstate competitive bidding and 466 respondents 
suggested rewriting the rule to prohibit competitive bidding. Another 
14 responders recommended reinstating competitive bidding. NRCS does 
not believe using cost-effectiveness means competitive bidding since 
the cost refers to the total cost, not just the federal cost-share. 
Cost-effectiveness can be interpreted two ways. First in terms of 
greater environmental benefits for the same cost or second, providing 
EQIP assistance for the least-cost alternative. NRCS believes that the 
first interpretation will be accomplished by the ranking processes 
developed by state and local decision-makers. NRCS will provide program 
direction that in EQIP cost-effectiveness means NRCS will provide 
assistance to implement the least-cost alternative that would achieve 
the desired resource benefits. Participants may choose to adopt more 
costly alternatives but they would have to bear the additional costs. 
The proposed rule will not be changed.
    Two respondents commented that the ranking factors should include 
recognition of the need for outreach or targeting of populations and 
areas with historically low participation rates. Additional comments 
recommended the insertion of tribal law compliance requirements into 
this section and include a reference to consulting with Tribal 
Conservation Advisory Councils. The EQIP ranking criteria consider the 
significance of the resource concerns, not the type of land ownership. 
However, any unique resource concerns identified by underserved 
populations may be added as a priority natural resource concern through 
participation in the State Technical Committees. NRCS also intends to 
conduct outreach to increase program accessibility for underserved 
populations.
    The Department received 56 comments that suggest EQIP assistance 
should not be used for large animal facilities. EQIP should prioritize 
funding to small and medium size producers and two of which supported 
using EQIP for all animal facilities regardless of size. Another 94 
respondents suggest that EQIP should be targeted to small and medium 
farms and 560 recommend language to prevent discrimination against 
small and medium sized farms. The Department has reviewed the economic 
benefits of several alternatives and determined that EQIP can treat the 
waste from the largest number of animal units for the least cost by 
allowing funding for large facilities. However, the Department also 
recognizes that small and medium producers may be least able to afford 
the adoption of conservation practices in their operation, and that 
EQIP may assist these producers avoid future regulations. NRCS has 
therefore included a provision in the final rule that the ranking 
process used to select application for contracts will be size neutral, 
that is, the process will not give preferential treatment to an 
application based on the size of the agricultural operation.
    Additionally NRCS received 466 comments that the EQIP application 
ranking process should explicitly reward sustainable practices and 
exceptional performance and that will prioritize the best solutions not 
the biggest problems. NRCS believes that the state and local decision-
makers will develop processes that achieve both cost-effectiveness and 
optimal environmental benefits. NRCS will provide full public 
disclosure by providing the EQIP ranking processes used at the state 
and local level on the NRCS Web site at http://www.nrcs.usda.gov/programs/eqip. NRCS intends to reward exceptional performance through 
the performance incentive funding.
    NRCS received 162 comments on the approval of EQIP contracts by the 
Regional Conservationist when the contract totals more than $100,000. 
The comments related to the increased administrative burden and delay 
this requirement will have on the development of EQIP contracts and in 
producers implementing practices. The Department feels this is a 
necessary component of EQIP to assure that the program is implemented 
to achieve the stated EQIP program objective. Therefore, the 
requirement is maintained in the final EQIP rule.
    More than 175 comments were received on the requirement that State 
Conservationist approved EQIP

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contracts that included practices with cost share rates greater than 50 
percent. The concern was the delay this would have on EQIP contract 
development and practice implementation. This requirement changed in 
the final rule (1466.23(d)) to allow the State Conservationist, with 
concurrence of the Regional Conservationist, to approve state and local 
EQIP practice cost lists that include any structural practice with a 
cost share rate greater than 50 percent. This change maintains the 
program objective of optimizing environmental benefits and improves 
program delivery compared to the proposed rule.

Section 1466.21 Contract Requirements

    NRCS received 31 comments regarding the amount of an EQIP contract. 
Eight respondents support a $50,000 contract cap, 16 support a $450,000 
contract limit and seven respondents support no limit. Another 34 
responders suggested the $450,000 contract limit was an injustice 
against small farmers since only large farmers can afford 25 percent of 
$450,000. NRCS believes that, due to the large demand for the limited 
resources which have been made available for EQIP, a contract limit is 
appropriate at this time. The final rule will establish the maximum 
amount of financial assistance for an EQIP contract is $450,000.
    NRCS also received 19 comments regarding statutory language. Three 
respondents opposed attribution of payments to individuals and support 
tracking payments to tax identification number of entities. Another 16 
supported payments in the first year of a contract. The Department does 
not have flexibility to change either of these provisions. The 
statutory limit for payments to any individual or entity, directly or 
indirectly, for all EQIP contracts between 2002 and 2007 of $450,000 
requires NRCS to track EQIP payments to an individual. NRCS has removed 
compliance with the triple entity rule (7 CFR 1400.301(a)) as an EQIP 
eligibility requirement.

Section 1466.22 Conservation Practice Operation and Maintenance

    The Department received no comments relative to this section of the 
proposed rule.

Section 1466.23 Cost-Share Rates and Incentive Payment Levels

    NRCS received a total of 638 comments related to the setting of 
cost-share rates and incentive payment levels. The proposed rule's 
preamble stated that NRCS intends to fund most structural practices at 
no more than 50 percent cost-share. Over 545 respondents recommended 
that cost-shares for structural practices should be no less than 75 
percent as permitted by the 2002 Farm Bill. They suggested that this 
provision was analogous to a ``buy-down'' which was removed from the 
previous rule; is contrary to locally-led conservation philosophy, and 
detrimental to the producers who have suffered severe economic 
hardships over the last few years. Another 177 respondents identified 
that the requirement in section 1466.20 of the proposed rule that 
established the State Conservationist as the approving authority for 
any EQIP contract with a structural practice with a cost-share greater 
than 50 percent is an administrative burden. Another 10 respondents 
suggested providing 90 to 100 percent cost-share rates to limited 
resource producers/ranchers and beginning farmers/ranchers, or 75 
percent cost-share for specific practices such as salinity control, 
diesel engine emission control, or wildlife plant species pollinators.
    Two respondents suggested that a practice cap could be used in 
place of a reduced cost-share rate, 4 respondents expressed concern 
that the state and local decision-makers should be allowed to establish 
differential cost-share rates for practice that offer more 
environmental benefits, and three respondents suggested that producers 
required to develop a CNMP under the EPA CAFO/AFO rule should not be 
eligible for incentive payments for the development of a CNMP.
    The setting of cost-share rates and incentive payment levels is the 
third component of optimizing environmental benefits. The guidance for 
optimizing environmental benefits in the proposed rule directs state 
and local decision-makers to identify the priority natural resource 
concerns and then select the most appropriate practices that will 
address those concerns and set rates to encourage the implementation of 
the best suited practices. The Department fully supports using locally-
led conservation to identify the practices that will be used and 
setting the cost-share rates. Except for 100 percent cost-share, the 
final rule does not prohibit any of the recommendations received and 
allows for local innovation to structure a cost-effective program 
delivery. The Department feels the proposed rule provides the 
flexibility necessary for the state and local decision-makers to 
optimize program delivery. However, the final rule will require that 
the State Conservationist, with the Regional Conservationist's 
concurrence, must approve the EQIP cost-share lists used in the state.
    NRCS received 11 comments opposing the guidance provided in the 
preamble of the proposed rule that ``no payments will be made for land 
management practices that are currently accepted and practiced in the 
agricultural community''. The Department believes that EQIP should 
provide cost-effective conservation. Producers who have not adopted 
commonly accepted techniques for their operation are in the minority 
and therefore the funds would most likely have a greater benefit when 
used for other practices. If, however, the particular circumstances 
warrant the implementation of these practices, the proposed rule does 
not prohibit the State Conservationist from offering assistance for 
them. The guidance will continue to be provided in the EQIP Program 
Manual.
    An additional six respondents wanted assurance that the provision 
in the proposed rule to adjust EQIP cost-share to ensure that the 
combined financial contributions (all public and private sources) for a 
structural conservation practice will not exceed 100 percent and would 
not restrict additional cost-shares from non-USDA sources. It is not 
the intent of the Department to restrict additional cost-shares that a 
participant may receive from non-USDA sources but to achieve cost-
effectiveness, USDA will reduce EQIP assistance when non-USDA 
assistance together with USDA assistance for a practice exceeds 100 
percent. The Department does not support providing maximum cost-share 
to a participant when other source of assistance bring the total to 
more than 100 percent of the cost of installing a structural 
conservation practice.
    Six respondents commented that State Tribal Conservation Advisory 
Council (TCAC) should be included in the setting of cost-share rates 
and determination of cost-share rates and incentive payment levels. 
Five commented that cost-share should remain at 75 percent for 
structural practices on Indian Nations because of the economic 
hardships for Indian Nations. The rule has not been amended. Under 
existing rules, TCAC can be a part of the State Technical Committee 
that provides advice to the State Conservationist for setting cost-
share rates incentive payments.

Section 1466.24 EQIP Payments

    Ten respondents commented that a social security number should not 
be the only number used to keep track of EQIP payments to individuals 
because it would create a burden for many Indians

[[Page 32348]]

who do not have them. Additional comments expressed concern for the 
requirement to collect all Tribal member names and numbers within the 
entity because Indian Tribes entering into EQIP contracts frequently 
have thousands of members who actually will not receive any portion of 
the EQIP payment. The rule has been amended to allow the use of 
individual Tribal enrollment numbers or other unique identification 
numbers in lieu of a social security number and only for those members 
who will receive a pro rata share of the EQIP payment. Tribal 
enrollment numbers (TEN) are unique to each individual tribal member. 
If the Tribal member does not have a TEN, then a social security number 
or other unique identifier will be used. Tribal member using the TEN 
identifier for payments received on tribal land will also use the TEN 
identified for all other EQIP contracts.
    Six respondents did not want to be classified as an entity because 
of the perception that the Adjusted Gross Income (AGI) limitation would 
apply to Indian Tribes. Under 7 CFR 1400, Indian Tribes are exempt from 
the AGI qualifications.

Section 1466.25 Contract Modifications and Transfers of Land

    The Department received no comments relative to this section of the 
proposed rule.

Section 1466.26 Contract Violations and Termination

    The Department received no comments relative to this section of the 
proposed rule.

Section 1466.27 Conservation Innovation Grants

    This section is reserved for future regulations that address 
implementation of Conservation Innovation Grants.

Section 1466.30 Appeals

    The Department received no comments relative to this section of the 
proposed rule.

Section 1466.31 Compliance With Regulatory Measures

    NRCS received 15 comments supporting using EQIP funds to assist 
private non-industrial forest land owners develop and prepare Habitat 
Conservation Plans (HCP). NRCS policy requires that all NRCS assistance 
must be compliant with all Federal, State and local laws. EQIP does not 
provide any authority to do otherwise. Therefore private landowners, 
corporations, State or local governments, or other non-Federal 
landowners who wish to conduct activities on their land that might 
incidentally harm (or ``take'') a species listed as endangered or 
threatened must first obtain an incidental take permit from the U.S. 
Fish and Wildlife Service. To obtain a permit, the applicant must 
develop a HCP, designed to offset any harmful effects the proposed 
activity might have on the species. The HCP process allows development 
to proceed while promoting listed species conservation. NRCS will 
provide guidance that will allow technical assistance to be used for 
the development of a HCP for EQIP assisted activities that adversely 
affect listed species but costs or fees associated with the permit 
acquisition will not be an eligible cost. This concept applies to all 
laws, rules, and regulations that may require remedial actions; the 
planning can be provided through EQIP assistance but permit fees and 
costs cannot.

Section 1466.32 Access to Operating Unit

    NRCS received 4 comments recommending that an authorized agent of 
NRCS must first obtain permission before accessing a participant's 
property. NRCS believes there are numerous cases where a participant 
may be absent from the property for a lengthy period of time, or the 
participant is an absentee landowner or tenant who may not be easily 
contacted. In order to conduct its business in a timely manner in these 
cases, USDA believes a reasonable effort should be made to contact the 
participant prior to accessing the property to enable the participant 
to attend at the same time. The program guidance documents will 
stipulate that the NRCS must document in the participant's file the 
efforts made to notify the participant before accessing the operating 
unit. No change was made in the final rule concerning these comments.

Section 1466.33 Performance Based Upon Advice or Action of 
Representatives of NRCS

    The Department received no comments relative to this section of the 
proposed rule.

Section 1466.34 Offsets and Assignments

    The Department received no comments relative to this section of the 
proposed rule.

Section 1466.35 Misrepresentation and Scheme or Device

    The Department received no comments relative to this section of the 
proposed rule.

List of Subjects in 7 CFR Part 1466

    Administrative practices and procedures, Conservation, Natural 
Resources, Water Resources, Wetlands, Cost-Shares, Payment Rates.


0
Accordingly, part 1466 of Title 7 of the Code of Federal Regulations is 
revised to read as follows:

PART 1466--ENVIRONMENTAL QUALITY INCENTIVES PROGRAM

Subpart A--General Provisions
Sec.
1466.1 Applicability.
1466.2 Administration.
1466.3 Definitions.
1466.4 National priorities.
1466.5 National allocation and management.
1466.6 State allocation and management.
1466.7 Outreach activities.
1466.8 Program requirements.
1466.9 EQIP plan of operations.
1466.10 Conservation practices.
1466.11 Technical and other assistance provided by qualified 
personnel not affiliated with USDA.
Subpart B--Contracts and Payments
1466.20 Application for contracts and selecting offers from 
producers.
1466.21 Contract requirements.
1466.22 Conservation practice operation and maintenance.
1466.23 Cost-share rates and incentive payment levels.
1466.24 EQIP payments.
1466.25 Contract modifications and transfers of land.
1466.26 Contract violations and termination.
1466.27 Conservation innovation grants.
 [Reserved]
Subpart C--General Administration
1466.30 Appeals.
1466.31 Compliance with regulatory measures.
1466.32 Access to operating unit.
1466.33 Performance based upon advice or action of representatives 
of NRCS.
1466.34 Offsets and assignments.
1466.35 Misrepresentation and scheme or device.

    Authority: 15 U.S.C. 714b and 714c; 16 U.S.C. 3839aa-3839-8

Subpart A--General Provisions


Sec.  1466.1  Applicability.

    Through the Environmental Quality Incentives Program (EQIP), the 
Natural Resources Conservation Service (NRCS) provides assistance to 
eligible farmers and ranchers to address soil, water, air, and related 
natural resources concerns, and to encourage enhancements on their 
lands in an environmentally beneficial and cost-effective manner and to 
assist producers in complying with environmental regulations. The 
purposes of the program are achieved by

[[Page 32349]]

implementing structural and land management conservation practices on 
eligible land.


Sec.  1466.2  Administration.

    (a) The funds, facilities, and authorities of the Commodity Credit 
Corporation (CCC) are available to NRCS for carrying out EQIP. 
Accordingly, where NRCS is mentioned in this part, it also refers to 
the CCC's funds, facilities, and authorities where applicable.
    (b) NRCS and the Farm Service Agency (FSA) will consult, at the 
National level, in establishing policies, priorities, and guidelines 
related to the implementation of this part. FSA may continue to 
participate in EQIP through participation on State Technical Committees 
and Local Work Groups.
    (c) NRCS supports ``locally-led conservation'' by using State 
Technical Committees at the state level and Local Work Groups at the 
county/parish level to advise NRCS on technical issues relating to the 
implementation of EQIP such as:
    (1) Identification of priority natural resource concerns;
    (2) Identification of which conservation practices should be 
eligible for financial assistance; and
    (3) Establishment of cost-share rates and incentive payment levels.
    (d) No delegation in this part to lower organizational levels shall 
preclude the Chief of NRCS from determining any issues arising under 
this Part or from reversing or modifying any determination made under 
this Part.
    (e) NRCS may enter into agreements with other Federal or State 
agencies, Indian Tribes, conservation districts, units of local 
government, public or private organizations and individuals to assist 
NRCS with implementation of the program in this part.


Sec.  1466.3  Definitions.

    The following definitions will apply to this part and all documents 
issued in accordance with this Part, unless specified otherwise:
    Agricultural land means cropland, rangeland, pasture, private non-
industrial forest land, and other land on which crops or livestock are 
produced.
    Agricultural operation means a parcel or parcels of land whether 
contiguous or noncontiguous, constituting a cohesive management unit 
for agricultural purposes. An agricultural operation shall be regarded 
as located in the county in which the principle dwelling is situated, 
or if there is no dwelling thereon, it shall be regarded to be in the 
county in which the major portion of the land is located.
    Animal waste management facility means a structural conservation 
practice used for storing or treating animal waste.
    Applicant means an individual, entity or joint operation who has an 
interest in a farming operation, as defined in 7 CFR 1400.3, who has 
requested in writing to participate in EQIP.
    At-risk species means any plant or animal species as determined by 
the State Technical Committee to need direct intervention to halt its 
population decline.
    Beginning Farmer or Rancher means an individual or entity who:
    (1) Has not operated a farm or ranch, or who has operated a farm or 
ranch for not more than 10 consecutive years. This requirement applies 
to all members of an entity, and
    (2) Will materially and substantially participate in the operation 
of the farm or ranch.
    (i) In the case of a contract with an individual, individually or 
with the immediate family, material and substantial participation 
requires that the individual provide substantial day-to-day labor and 
management of the farm or ranch, consistent with the practices in the 
county or State where the farm is located
    (ii) In the case of a contract with an entity or joint operation, 
all members must materially and substantially participate in the 
operation of the farm or ranch. Material and substantial participation 
requires that each of the members provide some amount of the 
management, or labor and management necessary for day-to-day 
activities, such that if each of the members did not provide these 
inputs, operation of the farm or ranch would be seriously impaired.
    Chief means the Chief of NRCS, USDA, or designee.
    Comprehensive Nutrient Management Plan (CNMP) means a conservation 
system that is unique to an animal feeding operation (AFO). A CNMP is a 
grouping of conservation practices and management activities which, 
when implemented as part of a conservation system, will help to ensure 
that both production and natural resource protection goals are 
achieved. A CNMP incorporates practices to use animal manure and 
organic by-products as a beneficial resource. A CNMP addresses natural 
resource concerns dealing with soil erosion, manure, and organic by-
products and their potential impacts on all natural resources including 
water and air quality, which may derive from an AFO. A CNMP is 
developed to assist an AFO owner/operator in meeting all applicable 
local, Tribal, State, and Federal water quality goals or regulations. 
For nutrient impaired stream segments or water bodies, additional 
management activities or conservation practices may be required by 
local, Tribal, State, or Federal water quality goals or regulations.
    Conservation district means any district or unit of State, tribal, 
or local government formed under State, tribal, or territorial law for 
the express purpose of developing and carrying out a local soil and 
water conservation program. Such district or unit of government may be 
referred to as a ``conservation district,'' ``soil conservation 
district,'' ``soil and water conservation district,'' ``resource 
conservation district,'' ``land conservation committee,'' or similar 
name.
    Conservation Innovation Grants means competitive grants made under 
EQIP to individuals, governmental and non-governmental organizations to 
stimulate innovative methods to leverage Federal funds to implement 
EQIP to enhance and protect the environment in conjunction with 
agricultural production.
    Conservation practice means a specified treatment, such as a 
structural or land management practice, that is planned and applied 
according to NRCS standards and specifications.
    Contract means a legal document that specifies the rights and 
obligations of any individual or entity who has been accepted to 
participate in the program. An EQIP contract is a binding agreement for 
the transfer of assistance from USDA to the participant to share in the 
costs of applying conservation practices as opposed to procurement 
contract.
    Cost-share payment means the financial assistance from NRCS to the 
participant to share the cost of installing a structural conservation 
practice.
    Cost-effectiveness refers to the least-cost practices or system 
that achieves the stated conservation objectives.
    Designated Conservationist means a NRCS employee whom the State 
Conservationist has designated as responsible for administration of 
EQIP in a specific area.
    Entity means those organizations as defined in 7 CFR 1400.3.
    EQIP plan of operations means the identification, location and 
timing of conservation practices, both structural and land management, 
that the producer proposes to implement on eligible land in order to 
address the priority natural resource concerns and optimize 
environmental benefits.
    Field office technical guide means the official local NRCS source 
of resource information and interpretations of guidelines, criteria, 
and standards for

[[Page 32350]]

planning and applying conservation treatments and conservation 
management systems. It contains detailed information on the 
conservation of soil, water, air, plant, and animal resources 
applicable to the local area for which it is prepared.
    Incentive payment means the financial assistance from NRCS to the 
participant in an amount and at a rate determined appropriate to 
encourage the participant to perform a land management practice that 
would not otherwise be initiated without program assistance.
    Indian Tribe means any Indian Tribe, band, nation, or other 
organized group or community, including any Alaska Native village or 
regional or village corporation as defined in or established pursuant 
to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.) 
that is Federally recognized as eligible for the special programs and 
services provided by the United States to Indians because of their 
status as Indians.
    Indian land is an inclusive term describing all lands held in trust 
by the United States for individual Indians or tribes, or all lands, 
titles to which are held by individual Indians or tribes, subject to 
Federal restrictions against alienation or encumbrance, or all lands 
which are subject to the rights of use, occupancy and/or benefit of 
certain tribes. For purposes of this part, the term Indian land also 
includes land for which the title is held in fee status by Indian 
tribes, and the U.S. Government-owned land under Bureau of Indian 
Affairs jurisdiction.
    Joint operation means a general partnership, joint venture, or 
other similar business arrangement as defined in 7 CFR 1400.3.
    Land management practice means conservation practices that 
primarily use site-specific management techniques and methods to 
conserve, protect from degradation, or improve soil, water, air, or 
related natural resources in the most cost-effective manner. Land 
management practices include, but are not limited to, nutrient 
management, manure management, integrated pest management, integrated 
crop management, irrigation water management, tillage or residue 
management, stripcropping, contour farming, grazing management, and 
wildlife habitat management.
    Lifespan means the period of time during which a conservation 
practice is to be maintained and used for the intended purpose.
    Limited Resource Farmer or Rancher means:
    (1) A person with direct or indirect gross farm sales not more than 
$100,000 in each of the previous two years (to be increased starting in 
FY 2004 to adjust for inflation using Prices Paid by Farmer Index as 
compiled by National Agricultural Statistical Service (NASS), and
    (2) Has a total household income at or below the national poverty 
level for a family of four, or less than 50 percent of county median 
household income in each of the previous two years (to be determined 
annually using Commerce Department Data).
    Liquidated damages means a sum of money stipulated in the EQIP 
contract which the participant agrees to pay NRCS if the participant 
fails to adequately complete the contract. The sum represents an 
estimate of the anticipated or actual harm caused by the failure, and 
reflects the difficulties of proof of loss and the inconvenience or 
non-feasibility of otherwise obtaining an adequate remedy.
    Livestock means animals produced for food or fiber such as dairy 
cattle, beef cattle, buffalo, poultry, turkeys, swine, sheep, horses, 
goats, fish or other animals raised by aquaculture, or animals the 
State Conservationist identifies with the advice of the State Technical 
Committee.
    Livestock production means farm or ranch operations involving the 
production, growing, raising, or reproduction of livestock or livestock 
products.
    Local Work Group means representatives of local offices of FSA, the 
Cooperative State Research, Education, and Extension Service, the 
conservation district, and other Federal, State, and local government 
agencies, including Tribes, with expertise in natural resources who 
advise NRCS on decisions related to EQIP implementation.
    National measures mean measurable criteria identified by the Chief 
of NRCS, with the advice of other Federal agencies and State 
Conservationists, to help EQIP achieve the National Priorities and 
statutory requirements.
    National priorities means resource issues identified by the Chief 
of NRCS, with advice from other Federal agencies and State 
Conservationists, which will be used to determine the distribution of 
EQIP funds and guide local implementation of EQIP.
    Operation and maintenance means work performed by the participant 
to keep the applied conservation practice functioning for the intended 
purpose during its life span. Operation includes the administration, 
management, and performance of non-maintenance actions needed to keep 
the completed practice safe and functioning as intended. Maintenance 
includes work to prevent deterioration of the practice, repairing 
damage, or replacement of the practice to its original condition if one 
or more components fail.
    Participant means a producer who is a party to an EQIP contract.
    Person has the same meaning as set out in 7 CFR 1400.3.
    Priority natural resource concern(s) means an existing or pending 
degradation of natural resource condition(s) as identified locally by 
the State Conservationist or Designee with advice from the State 
Technical Committee and Local Work Groups.
    Producer means an individual or entity who is engaged in livestock 
or agricultural production.
    Regional Conservationist means the NRCS employee authorized to 
direct and supervise NRCS activities in a NRCS region.
    Related natural resources means natural resources that are 
associated with soil and water, including air, plants, and animals and 
the land or water on which they may occur, including grazing land, 
wetland, forest land, and wildlife habitat.
    Secretary means the Secretary of the U. S. Department of 
Agriculture.
    State Conservationist means the NRCS employee authorized to 
implement EQIP and direct and supervise NRCS activities in a State, the 
Caribbean Area, or the Pacific Basin Area.
    State Technical Committee means a committee established by the 
Secretary in a State pursuant to 16 U.S.C. 3861.
    Structural practice means a conservation practice, including 
vegetative practices, that involves establishing, constructing, or 
installing a site-specific measure to conserve, protect from 
degradation, or improve soil, water, air, or related natural resources 
in the most cost-effective manner. Examples include, but are not 
limited to, animal waste management facilities, terraces, grassed 
waterways, tailwater pits, livestock water developments, contour grass 
strips, filterstrips, critical area plantings, tree planting, wildlife 
habitat, and capping of abandoned wells.
    Technical assistance means the personnel and support resources 
needed to: (1) Conduct conservation planning; conservation practice 
survey, layout, design, installation, and certification; (2) training, 
certification, and quality assurance of professional conservationists; 
and (3) evaluation and assessment of the producer's operation and 
maintenance needs.
    Technical Service Provider means an individual, private-sector 
entity, or

[[Page 32351]]

public agency certified by NRCS to provide technical services to 
program participants or to NRCS.
    Wildlife means birds, fishes, reptiles, amphibians, invertebrates, 
and mammals along with all other non-domesticated animals.


Sec.  1466.4  National Priorities.

    (a) The following National priorities will be used in the 
implementation of EQIP:
    (1) Reductions of nonpoint source pollution, such as nutrients, 
sediment, pesticides, or excess salinity in impaired watersheds 
consistent with TMDLs where available as well as the reduction of 
groundwater contamination and the conservation of ground and surface 
water resources;
    (2) Reduction of emissions, such as particulate matter, nitrogen 
oxides (NOX), volatile organic compounds, and ozone 
precursors and depleters that contribute to air quality impairment 
violations of National Ambient Air Quality Standards;
    (3) Reduction in soil erosion and sedimentation from unacceptable 
levels on agricultural land; and
    (4) Promotion of at-risk species habitat conservation.
    (b) With the advice of other Federal agencies, NRCS will undertake 
periodic reviews of the National priorities and the effects of program 
delivery at the state and local level. The Chief intends to annually 
review the National priorities to adapt the program to address emerging 
resource issues. NRCS will:
    (1) Use the National priorities to guide the allocation of EQIP 
funds to the State NRCS offices,
    (2) Use the National priorities in conjunction with state and local 
priorities to assist with prioritization and selection of EQIP 
applications, and
    (3) Periodically review and update the National priorities 
utilizing input from the public and affected stakeholders to ensure 
that the program continues to address national resource needs.


Sec.  1466.5  National Allocation and Management.

    The Chief allocates EQIP funds to the State Conservationists to 
implement EQIP at the state and local level. In order to optimize the 
overall environmental benefits over the duration of the program, the 
Chief of NRCS will:
    (a) Use an EQIP fund allocation formula that reflects National 
priorities and measures and that uses available natural resource and 
resource concerns data to distribute funds to the state level. This 
procedure will be updated periodically to reflect adjustments to 
National priorities and information about resource concerns and program 
performance. The data used in the allocation formula will be updated as 
it becomes available.
    (b) Provide a performance incentive to NRCS in States that 
demonstrate a high level of program performance in implementing EQIP. 
Performance incentives shall consider factors such as strategically 
planning EQIP implementation, effectively addressing National 
priorities and measures and state and local resource concerns, the 
effectiveness of program delivery, the use of Technical Service 
Providers, and the number of contracts with Limited Resource Producers 
and Beginning Farmers. These funds will be made available annually from 
a reserve established at the National level when funds become 
available.
    (c) Use NRCS's accountability system to establish state level EQIP 
performance goals and treatment objectives.
    (d) Ensure that National, state and local level information 
regarding program implementation such as resource priorities, eligible 
practices, ranking processes, allocation of base and reserve funds, and 
program achievements is made available to the public.
    (e) Consult with State Conservationists and other Federal agencies 
with the appropriate expertise and information when evaluating the 
considerations described in this section.
    (f) Authorize the State Conservationist, with advice from the State 
Technical Committee and Local Work Groups, to determine how funds will 
be used and how the program will be administered to achieve National 
priorities and measures in each state.
    (g) Move towards assessment, evaluation and accountability based on 
actual natural resource and environmental outcomes and results.


Sec.  1466.6  State Allocation and Management.

    The State Conservationist will:
    (a) Identify State priority natural resource concerns with the 
advice of the State Technical Committee that directly contribute 
towards meeting National priorities and measures and will use NRCS's 
accountability system to establish local level EQIP performance goals 
and treatment objectives;
    (b) Identify, as appropriate and necessary, Designated 
Conservationists who are NRCS employees that are assigned the 
responsibility to administer EQIP in specific areas, and
    (c) Use the following to determine how to manage the EQIP program 
and how to allocate funds within a state:
    (1) The nature and extent of priority natural resource concerns at 
the state and local level;
    (2) The availability of human resources, incentive programs, 
education programs, and on-farm research programs from Federal, State, 
Indian Tribe, and local levels, both public and private, to assist with 
the activities related to the priority natural resource concerns;
    (3) The existence of multi-county and/or multi-state collaborative 
efforts to address regional priority natural resource concerns;
    (4) Ways and means to measure performance and success; and
    (5) The degree of difficulty that producers face in complying with 
environmental laws.


Sec.  1466.7  Outreach Activities.

    NRCS will establish program outreach activities at the National, 
State, and local levels in order to ensure that producers whose land 
has environmental problems and priority natural resource concerns are 
aware, informed, and know that they may be eligible to apply for 
program assistance. Special outreach will be made to eligible producers 
with historically low participation rates, including but not restricted 
to limited resource producers, small-scale producers, Indian Tribes, 
Alaska Natives, and Pacific Islanders.


Sec.  1466.8  Program requirements.

    (a) Program participation is voluntary. The applicant develops an 
EQIP plan of perations for the agricultural land to be treated that 
serves as the basis for the EQIP contract. NRCS provides participants 
with technical assistance, cost-share and/or incentive payments to 
apply needed conservation practices and land-use adjustments.
    (b) To be eligible to participate in EQIP, an applicant must:
    (1) Be in compliance with the highly erodible land and wetland 
conservation provisions found at 7 CFR part 12.
    (2) Have an interest in the farming operation as defined in 7 CFR 
1400.3.
    (3) Have control of the land for the life of the proposed contract 
period.
    (i) An exception may be made by the Chief of NRCS in the case of 
land allotted by the Bureau of Indian Affairs (BIA), Tribal land, or 
other instances in which the Chief determines that there is sufficient 
assurance of control;
    (ii) If the applicant is a tenant of the land involved in 
agricultural production, the applicant shall provide the Chief of NRCS 
with the written

[[Page 32352]]

concurrence of the landowner in order to apply a structural 
conservation practice.
    (4) Submit an EQIP plan of operations that is acceptable to NRCS as 
being in compliance with the terms and conditions of the program; and
    (5) Supply information, as required by NRCS, to determine 
eligibility for the program; including but not limited to information 
to verify the applicant's status as a limited resource farmer or 
rancher or beginning farmer or rancher and eligibility as per Adjusted 
Gross Income, 7 CFR 1400 subpart G.
    (c) Land used as cropland, rangeland, pasture, private non-
industrial forest land, and other land on which crops or livestock are 
produced, including agricultural land that NRCS determines poses a 
threat to soil, water, air, or related natural resources, may be 
eligible for enrollment in EQIP. However, land may be considered for 
enrollment in EQIP only if NRCS determines that the land is:
    (1) Privately owned land;
    (2) Publicly owned land where:
    (i) The land is under private control for the contract period and 
is included in the participant's operating unit; and
    (ii) The conservation practices will contribute to an improvement 
in the identified natural resource concern; or
    (3) Tribal, allotted, or Indian trust land.
    (d) Sixty percent of available EQIP financial assistance will be 
targeted to conservation practices related to livestock production, 
including practices on grazing lands and other lands directly 
attributable to livestock production, as measured at the National 
level.


Sec.  1466.9  EQIP plan of operations.

    (a) All conservation practices in the EQIP plan of operations must 
be carried out in accordance with the applicable NRCS field office 
technical guide.
    (b) The EQIP plan of operations must include:
    (1) A description of the participant's specific conservation and 
environmental objectives to be achieved;
    (2) To the extent practicable, the quantitative or qualitative 
goals for achieving the participant's conservation and environmental 
objectives;
    (3) A description of one or more conservation practices in the 
conservation management system to be implemented to achieve the 
conservation and environmental objectives;
    (4) A description of the schedule for implementing the conservation 
practices, including timing and sequence; and
    (5) Information that will enable evaluation of the effectiveness of 
the plan in achieving the environmental objectives.
    (c) If an EQIP plan of operations includes an animal waste storage 
or treatment facility, the participant must provide for the development 
and implementation of a comprehensive nutrient management plan.
    (d) Participants are responsible for implementing the EQIP plan of 
operations.
    (e) A participant may receive assistance to implement an EQIP plan 
of operations for water conservation with funds authorized by section 
1240I of the 1985 Act, 16 U.S.C. 3839aa-9, only if the assistance will 
facilitate a net savings in ground or surface water resources in the 
agricultural operation of the producer.


Sec.  1466.10  Conservation practices.

    (a) NRCS will determine which structural and land management 
practices are eligible for program payments. A list of eligible 
practices will be available to the public.
    (b) Cost-share and incentive payments will not be made to a 
participant for a conservation practice that the applicant has applied 
prior to application for the program.
    (c) Cost-share and incentive payments will not be made to a 
participant who has implemented or initiated the implementation of a 
conservation practice prior to approval of the contract unless a waiver 
was granted by the State Conservationist or Designated Conservationist 
prior to the installation of the practice.
    (d) A participant will be eligible for cost-share or incentive 
payments for irrigation related structural and land management 
practices only on land that has been irrigated for two of the last five 
years prior to application for assistance.
    (e) Where new technologies or conservation practices that provide a 
high potential for optimizing environmental benefits have been 
developed, NRCS may approve interim conservation practice standards and 
financial assistance for pilot work to evaluate and assess the 
performance, efficacy, and effectiveness of the technology or 
conservation practices.


Sec.  1466.11  Technical and other assistance provided by qualified 
personnel not affiliated with USDA.

    (a) NRCS may use the services of qualified Technical Service 
Providers in performing its responsibilities for technical assistance.
    (b) Participants may use technical and other assistance from 
qualified personnel of other Federal, State, and local agencies, Indian 
Tribes, or individuals who are certified as Technical Service Providers 
by NRCS.
    (c) Technical and other assistance provided by qualified personnel 
not affiliated with USDA may include, but is not limited to; 
conservation planning; conservation practice survey, layout, design, 
installation, and certification; information, education, and training 
for producers; and training, certification, and quality assurance for 
professional conservationists. Payments to certified Technical Service 
Providers will be made only for an application that has been approved 
for payments.
    (d) NRCS retains approval authority over certification of work done 
by non-NRCS personnel for the purpose of approving EQIP payments.

Subpart B--Contracts and Payments


Sec.  1466.20  Application for contracts and selecting offers from 
producers.

    (a) Any producer who has eligible land may submit an application 
for participation in the EQIP. Applications are accepted throughout the 
year. Producers who are members of a joint operation may file a single 
application for the joint operation.
    (b) The State Conservationist or Designated Conservationist with 
advice from the State Technical Committee or Local Work Groups will 
develop a ranking process to prioritize applications for funding which 
address priority natural resource concerns. The State Conservationist 
or Designated Conservationist will periodically select for funding the 
highest ranked applications based on applicant eligibility and the NRCS 
ranking process. The State Conservationist or Designated 
Conservationist will rank all applications according to the following 
factors:
    (1) The degree of cost-effectiveness of the proposed conservation 
practices,
    (2) The magnitude of the environmental benefits resulting from the 
treatment of National priorities and the priority natural resource 
concerns reflecting the level of performance of a conservation 
practice,
    (3) Treatment of multiple resource concerns,
    (4) Use of conservation practices that provide environmental 
enhancements for a longer period of time,
    (5) Compliance with Federal, state, local or tribal regulatory 
requirements concerning soil, water and air quality; wildlife habitat; 
and ground and surface water conservation, and
    (6) Other locally defined pertinent factors, such as the location 
of the

[[Page 32353]]

conservation practice, the extent of natural resource degradation, and 
the degree of cooperation by local producers to achieve environmental 
improvements.
    (c) If the State Conservationist determines that the environmental 
values of two or more applications for cost-share payments or incentive 
payments are comparable, the State Conservationist will not assign a 
higher priority to the application solely because it would present the 
least cost to the program.
    (d) The ranking will not give preferential treatment to 
applications based on size of the operation.
    (e) The ranking will determine which applications will be awarded 
contracts. The approving authority for EQIP contracts will be the State 
Conservationist or designee except the approving authority for any EQIP 
contract greater than $100,000 is the NRCS Regional Conservationist.
    (f) The State Conservationist will make all information regarding 
priority resources concerns, how the EQIP program is implemented in the 
state, and the cost-list of eligible practices available to the public.


Sec.  1466.21  Contract requirements.

    (a) In order for a participant to receive cost-share or incentive 
payments, the participant must enter into a contract agreeing to 
implement one or more conservation practices. Cost-share payments and 
incentive payments as well as reimbursement for Technical Service 
Provider technical assistance may be included in a contract.
    (b) An EQIP contract will:
    (1) Identify all conservation practices to be implemented, the 
timing of practice installation, the operation and maintenance 
requirements for the practices, and applicable cost-shares and 
incentive payments allocated to the practices under the contract;
    (2) Be for a minimum duration of one year after completion of the 
last practice, but not more than 10 years;
    (3) Incorporate all provisions as required by law or statute, 
including requirements that the participant will:
    (i) Not implement any practices on the farm or ranch unit under the 
contract, or agricultural operation of the producer for ground and 
surface water conservation contracts, that would tend to defeat the 
purposes of the program;
    (ii) Refund any program payments received with interest, and 
forfeit any future payments under the program, on the violation of a 
term or condition of the contract, consistent with the provisions of 
Sec.  1466.26;
    (iii) Refund all program payments received on the transfer of the 
right and interest of the producer in land subject to the contract, 
unless the transferee of the right and interest agrees to assume all 
obligations of the contract, consistent with the provisions of Sec.  
1466.25;
    (iv) Implement a comprehensive nutrient management plan when the 
EQIP contract includes a waste storage or waste treatment facility; and
    (v) Supply information as may be required by NRCS to determine 
compliance with the contract and requirements of the program.
    (4) Specify the participant's requirements for operation and 
maintenance of the applied conservation practices consistent with the 
provisions of Sec.  1466.22; and
    (5) Specify any other provision determined necessary or appropriate 
by NRCS.
    (c) The participant must start at least one financially assisted 
practice within the first 12 months of signing a contract. If a 
participant, for reasons beyond their control, is unable to start a 
practice within the first year of the contract, they can request a 
waiver from the State Conservationist.
    (d) Each contract will be limited to no more than $450,000.


Sec.  1466.22  Conservation practice operation and maintenance.

    The contract will incorporate the operation and maintenance of 
conservation practices applied under the contract. The participant must 
operate and maintain each conservation practice installed under the 
contract for its intended purpose for the life span of the conservation 
practice as determined by NRCS. Conservation practices installed before 
the execution of a contract, but needed in the contract to obtain the 
environmental benefits agreed upon must be operated and maintained as 
specified in the contract. NRCS may periodically inspect a conservation 
practice during the lifespan of the practice as specified in the 
contract to ensure that operation and maintenance are occurring. When 
NRCS finds that a participant is not operating and maintaining 
practices in an appropriate manner, NRCS will request a refund of cost-
share or incentive payments made for that practice under the contract.


Sec.  1466.23  Cost-share rates and incentive payment levels.

    (a) Determining Cost-share payment rates.
    (1) The maximum cost-share payments made to a participant under the 
program will not be more than 75 percent of the actual cost of a 
structural practice, as determined by the State Conservationist or 
Designated Conservationist, except that for a Limited Resource Farmer 
or Rancher or Beginning Farmer and Rancher cost-share payments may be 
up to 90 percent, as determined by the State Conservationist or 
Designated Conservationist.
    (2) The cost-share payments to a participant under the program will 
be reduced proportionately below the rate established by the State 
Conservationist or Designated Conservationist, or the cost-share limit 
as set in paragraph (c) of this section, to the extent that total 
financial contributions for a structural practice from all public and 
private sources exceed 100 percent of the actual cost of the practice.
    (b) Determining Incentive Payment levels. NRCS may provide 
incentive payments to participants for performing a land management 
practice or to develop a comprehensive nutrient management plan in an 
amount and at a rate necessary to encourage a participant to perform 
the practice that would not otherwise be initiated without government 
assistance. The State Conservationist or Designated Conservationist, 
with the advice of the State Technical Committee or Local Work Groups, 
may consider establishing limits on the extent of land management 
practices that may be included in a contract.
    (c) Cost-share rates and incentive payment levels for conservation 
practices will be established by the State Conservationist or 
Designated Conservationist with advice from the State Technical 
Committee and Local Work Groups. The State Conservationist or 
Designated Conservationist will develop a list of eligible conservation 
practices with varied cost-share rates and incentive payment levels 
that considers:
    (1) The conservation practice cost-effectiveness and innovation,
    (2) The degree of treatment of priority natural resource concerns,
    (3) The number of resource concerns the practice will address,
    (4) The longevity of the practice's environmental benefits, and
    (5) Other pertinent local considerations.
    (d) Practice cost lists that include any structural practice with 
greater than 50 percent cost share rate are to be approved by the State 
Conservationist with concurrence of the Regional Conservationist.

[[Page 32354]]

Sec.  1466.24  EQIP payments.

    (a) Except as provided in paragraph (b) of this section, the total 
amount of cost-share and incentive payments paid to an individual or 
entity under this part may not exceed an aggregate of $450,000, 
directly or indirectly, for all contracts entered into during FYs 2002 
through 2007.
    (b) To determine eligibility for payments, NRCS will use the 
following criteria:
    (1) The provisions in 7 CFR part 1400, Payment Limitation and 
Payment Eligibility, subparts A and G.
    (2) States, political subdivisions, and entities thereof will not 
be considered to be individuals or entities eligible for payment.
    (3) To be eligible to participate in EQIP, all individuals 
applying, either alone or as part of a joint operation, must provide a 
social security number. Where applicable; American Indians, Alaska 
Natives, and Pacific Islanders may use another unique identification 
number for each individual eligible for payment.
    (4) To be eligible to participate in EQIP, any entity, as 
identified in 7 CFR part 1400, must provide a list of all members of 
the entity and embedded entities along with the members' social 
security numbers and percentage interest in the entity.
    (5) With regard to contracts on Indian Land, payments exceeding the 
payment limitation may be made to the Tribal venture if an official of 
BIA or a Tribal official certifies in writing that no one individual 
directly or indirectly will receive more than the limitation. The 
Tribal entity must also provide, annually, listing of individuals and 
payments made, by social security number or other unique identification 
number, during the previous year for calculation of overall payment 
limitations. The Tribal entity must also produce, at the request of 
NRCS, proof of payments made to the individuals that incurred the costs 
for installation of the practices.
    (6) Any cooperative association of producers that markets 
commodities for producers will not be considered to be a person 
eligible for payment.
    (7) Eligibility for payments in accordance with 7 CFR part 1400, 
subpart G, average adjusted gross income limitation, will be determined 
at the time of contract approval.
    (8) Eligibility for higher cost-share payments in accordance with 
paragraph (a) of this section will be determined at the time of 
approval of the contract.
    (9) Any participant that utilizes a unique identification number as 
an alternative to a social security number will utilize only that 
identifier for any and all other EQIP contracts that the participant is 
party to. Violators will be considered to have provided fraudulent 
representation and be subject to full penalties of section 1466.35.
    (10) A participant will not be eligible for cost-share or incentive 
payments for conservation practices on eligible land if the participant 
receives cost-share payments or other benefits for the same practice on 
same land under any other conservation program administered by USDA.
    (11) Before NRCS will approve and issue any cost-share or incentive 
payment, the participant must certify that the conservation practice 
has been completed in accordance with the contract, and NRCS or other 
approved Technical Service Provider certifies that the practice has 
been carried out in accordance with the conservation practice standards 
of the applicable NRCS field office technical guide.
    (12) The provisions of 7 CFR 1412.505 except that refunds will be 
determined by the State Conservationist.


Sec.  1466.25  Contract modifications and transfers of land.

    (a) The participant and NRCS may modify a contract if the 
participant and NRCS agree to the contract modification and the EQIP 
plan of operations is revised in accordance with NRCS requirements and 
is approved by the Designated Conservationist.
    (b) The participant and NRCS may agree to transfer a contract to 
another producer. The transferee must be determined by NRCS to be 
eligible to participate in EQIP and must assume full responsibility 
under the contract, including operation and maintenance of those 
conservation practices already installed and to be installed as a 
condition of the contract.
    (c) NRCS may require a participant to refund all or a portion of 
any financial assistance earned under EQIP if the participant sells or 
loses control of the land under an EQIP contract and the new owner or 
controller is not eligible to participate in the program or refuses to 
assume responsibility under the contract.


Sec.  1466.26  Contract violations and termination.

    (a)(1) If NRCS determines that a participant is in violation of the 
terms of a contract or documents incorporated by reference into the 
contract, NRCS shall give the participant a reasonable time, as 
determined by NRCS, to correct the violation and comply with the terms 
of the contract and attachments thereto. If a participant continues in 
violation, NRCS may terminate the EQIP contract.
    (2) Notwithstanding the provisions of paragraph (a)(1) of this 
section, a contract termination shall be effective immediately upon a 
determination by NRCS that the participant has submitted false 
information or filed a false claim, or engaged in any act, scheme, or 
device for which a finding of ineligibility for payments is permitted 
under the provisions of Sec.  1466.35, or in a case in which the 
actions of the party involved are deemed to be sufficiently purposeful 
or negligent to warrant a termination without delay.
    (b)(1) If NRCS terminates a contract, the participant will forfeit 
all rights for future payments under the contract and shall refund all 
or part of the payments received, plus interest determined in 
accordance with 7 CFR part 1403. NRCS may exercise the option of 
requiring only partial refund of the payments received if a previously 
installed conservation practice can function independently, is not 
adversely affected by the violation or the absence of other 
conservation practices that would have been installed under the 
contract, and the participant agrees to operate and maintain the 
installed conservation practice for the lifespan of the practice.
    (2) If NRCS terminates a contract due to breach of contract or the 
participant voluntarily terminates the contract, the participant will 
forfeit all rights for further payments under the contract and shall 
pay such liquidated damages as are prescribed in the contract. NRCS 
will have the option to waive the liquidated damages, depending upon 
the circumstances of the case.
    (3) When making contract termination decisions, NRCS may reduce the 
amount of money owed by the participant by a proportion that reflects 
the good faith effort of the participant to comply with the contract or 
the hardships beyond the participant's control that have prevented 
compliance with the contract.
    (4) The participant may voluntarily terminate a contract if NRCS 
determines that termination is in the public interest.
    (5) In carrying out its role in this section, NRCS may consult with 
the local conservation district.


Sec.  1466.27  Conservation Innovation Grants.

    [Reserved]

Subpart C--General Administration


Sec.  1466.30  Appeals.

    A participant may obtain administrative review of an adverse 
decision under EQIP in accordance with 7 CFR parts 11 and 614. 
Determination

[[Page 32355]]

in matters of general applicability, such as payment rates, payment 
limits, and cost-share percentages, the designation of identified 
priority natural resource concerns, and eligible conservation practices 
are not subject to appeal.


Sec.  1466.31  Compliance with regulatory measures.

    Participants who carry out conservation practices shall be 
responsible for obtaining the authorities, rights, easements, or other 
approvals necessary for the implementation, operation, and maintenance 
of the conservation practices in keeping with applicable laws and 
regulations. Participants shall be responsible for compliance with all 
laws and for all effects or actions resulting from the participant's 
performance under the contract.


Sec.  1466.32  Access to operating unit.

    Any authorized NRCS representative shall have the right to enter an 
operating unit or tract for the purpose of ascertaining the accuracy of 
any representations made in a contract or in anticipation of entering a 
contract, as to the performance of the terms and conditions of the 
contract. Access shall include the right to provide technical 
assistance, inspect any work undertaken under the contract, and collect 
information necessary to evaluate the performance of conservation 
practices in the contract. The NRCS representative shall make a 
reasonable effort to contact the participant prior to the exercise of 
this provision.


Sec.  1466.33  Performance based upon advice or action of 
representatives of NRCS.

    If a participant relied upon the advice or action of any authorized 
representative of NRCS and did not know, or have reason to know, that 
the action or advice was improper or erroneous, NRCS may accept the 
advice or action as meeting the requirements of the program and may 
grant relief, to the extent it is deemed desirable by NRCS, to provide 
a fair and equitable treatment because of the good-faith reliance on 
the part of the participant. The financial or technical liability for 
any action by a participant that was taken based on the advice of a 
NRCS certified non-USDA Technical Service Provider will remain with the 
certified Technical Service Provider and will not be assumed by NRCS 
when NRCS authorizes payment.


Sec.  1466.34  Offsets and assignments.

    (a) Except as provided in paragraph (b) of this section, any 
payment or portion thereof to any person shall be made without regard 
to questions of title under State law and without regard to any claim 
or lien against the crop, or proceeds thereof, in favor of the owner or 
any other creditor except agencies of the U.S. Government. The 
regulations governing offsets and withholdings found at 7 CFR part 1403 
shall be applicable to contract payments.
    (b) Any producer entitled to any payment may assign any payments in 
accordance with regulations governing assignment of payment found at 7 
CFR part 1404.


Sec.  1466.35  Misrepresentation and scheme or device.

    (a) A producer who is determined to have erroneously represented 
any fact affecting a program determination made in accordance with this 
part shall not be entitled to contract payments and must refund to NRCS 
all payments, plus interest determined in accordance with 7 CFR part 
1403.
    (b) A producer who is determined to have knowingly:
    (1) Adopted any scheme or device that tends to defeat the purpose 
of the program;
    (2) Made any fraudulent representation; or
    (3) Misrepresented any fact affecting a program determination, 
shall refund to NRCS all payments, plus interest determined in 
accordance with 7 CFR part 1403, received by such producer with respect 
to all contracts. The producer's interest in all contracts shall be 
terminated.

    Signed in Washington, DC on May 15, 2003.
Bruce I. Knight,
Vice President, Commodity Credit Corporation, Chief, Natural Resources 
Conservation Service.
[FR Doc. 03-13024 Filed 5-29-03; 8:45 am]
BILLING CODE 3410-10-P