[Federal Register Volume 70, Number 57 (Friday, March 25, 2005)]
[Rules and Regulations]
[Pages 15201-15223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-5894]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

Natural Resources Conservation Service

7 CFR Part 1469

RIN 0578-AA36


Conservation Security Program

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

ACTION: Interim final rule with request for comments.

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SUMMARY: This document establishes an amendment to the interim final 
rule governing activities under the Conservation Security Program (CSP) 
which is administered by the Natural Resources Conservation Service 
(NRCS). The CSP sets forth a mechanism to provide financial and 
technical assistance to agricultural producers who, in accordance with 
certain requirements, conserve and improve the quality of soil, water, 
air, energy, plant and animal life, and support other conservation 
activities. The CSP regulations implement provisions of the Food 
Security Act of 1985, as amended by the Farm Security and Rural 
Investment Act of 2002, and are intended to assist agricultural 
producers in taking actions that will provide long-term beneficial 
effects to our Nation.

DATES: Effective date: March 25, 2005. Comments must be received by 
July 25, 2005.

ADDRESSES: Send comments by mail to Financial Assistance Programs 
Division, Natural Resources Conservation Service, P.O. Box 2890, or by 
e-mail to [email protected]; Attn: Conservation Security Program. 
You may access this interim final rule via the Internet through the 
NRCS homepage at http://www.nrcs.usda.gov. Select ``Farm Bill. The rule 
may also be reviewed and comments submitted via the Federal 
Government's centralized rulemaking Web site at http://www.regulations.gov.''

FOR FURTHER INFORMATION CONTACT: Craig Derickson, Conservation Security 
Program Manager, Financial Assistance Programs Division, NRCS, P.O. Box 
2890, Washington, DC 20013-2890, telephone: (202) 720-1845; fax: (202) 
720-4265.

SUPPLEMENTARY INFORMATION: This document establishes an amendment to 
the interim final rule governing activities under the Conservation 
Security Program (CSP). The CSP is a voluntary program administered by 
NRCS, using the authorities and funds of the Commodity Credit 
Corporation (CCC). CSP provides financial and technical assistance to 
producers who advance the conservation and improvement of soil, water, 
air, energy, plant and animal life, and other conservation purposes on 
Tribal and private working lands. Such lands include cropland, 
grassland, prairie land, improved pasture, and rangeland, as well as 
forested land and other non-cropped areas that are an incidental part 
of an agricultural operation. The amendment may be reviewed via the 
Federal Government's centralized rulemaking Web site at http://www.regulations.gov.
    The CSP regulations implement provisions set out in Title XII, 
Chapter 2, Subchapter A, of the Food Security Act of 1985, 16 U.S.C. 
3801 et seq., as amended by the Farm Security and Rural Investment Act 
of 2002, Public Law 107-171, and are intended to assist agricultural 
producers in taking actions that will provide long-term beneficial 
effects to our Nation.
    The CSP helps support those farmers and ranchers who reach the 
pinnacle of good land stewardship, and encourage others to conserve 
natural resources on their farms and ranches. During 2004, NRCS held a 
CSP sign-up in 18 watersheds covering 22 states. This phased-in 
approach to CSP implementation brought forth several issues and 
concerns that encompass the broad range of agricultural production at 
all scales including mainstream commodity production and small-scale 
niche producers. Additional questions are incorporated below with a 
request for public comment in order to more

[[Page 15202]]

fully harness the program potential for environmental performance and 
streamline the underlying delivery system. NRCS intends to finalize the 
CSP rule once additional programmatic experience is gathered with a 
full-scale sign-up in 2005.
    The CSP amendment is based on an interim final rule that was 
published in the Federal Register on June 21, 2004 (69 FR 34501). The 
comment period for that rulemaking proceeding ended October 5, 2004 (69 
FR 56159). NRCS received more than 13,400 submissions that raised 
numerous issues. NRCS received over 13,300 submissions from farmers, 
ranchers, and other individuals, 8 from businesses, 41 from non-
governmental organizations (including, but not limited to, conservation 
and agricultural industry organizations), one from an unidentified 
organization, two from academic institutions, and ten from State, 
local, and Tribal governments. Ninety-seven percent of the submissions 
were form letters, and most of the issues raised during the comment 
period were already raised and addressed in the interim final rule. 
This document affirms these earlier responses and discusses only the 
new issues that were not already discussed in the interim final rule. 
Accordingly, based on the rationale set forth in the interim final rule 
and this document, the provisions of the interim final rule are adopted 
as an amendment with changes discussed below. NRCS intends to finalize 
the CSP rule once additional programmatic experience is gathered with a 
full-scale sign-up in 2005.

Responses to Comments

    We first address general comments and then present our response to 
comments and explanation of changes associated with specific sections 
of the interim final rule. In addition to the changes discussed below, 
NRCS also made non-substantive changes for purposes of clarification.
    Commenters asserted that NRCS should adopt the highly successful 
model of producer-initiated grants under USDA's Sustainable Agriculture 
Research and Education (SARE) program in establishing protocols and 
payment rates for on-farm research and demonstration. Although NRCS 
made no changes based on these comments, NRCS is reviewing the SARE 
program and other programs to determine whether to expand the eligible 
list of enhancements that could be allowed under the statutory 
provisions.
    Commenters asserted that NRCS should not allow participation in the 
CSP by farmers who spray any toxics based on the argument that such 
farmers would have already despoiled the land. NRCS made no changes 
based on these comments. To be eligible for CSP payments, producers 
must meet minimum soil and water requirements which could not be met 
unless producers followed appropriate practices regarding the use of 
fertilizers, manure, and pesticides.
    Commenters asserted that NRCS should reconsider whether the 
Conservation Security Program is the proper program to provide 
incentives for types of renewable energy production that already 
qualify for Federal incentives, such as tax credits and grant funding. 
NRCS made no changes based on these comments. The statutory provisions 
at 16 U.S.C. 3838a specifically provide for the CSP to assist producers 
of agricultural operations in promoting, among other things, the 
``conservation and improvement of the quality of * * * `energy' and 
identifies energy conservation measures as eligible conservation 
practices.'' This rule is constructed to include energy management and 
energy creation when it ultimately leads to conservation or 
improvement.
    Commenters asserted that the regulations should include provisions 
reflecting the statutory provisions for renewal of contracts. NRCS made 
no changes based on these comments. This is covered adequately by the 
statute.

Section by Section Discussion

Section 1469.2 Administration

    Commenters asserted that to prevent administrative overreaching, 
NRCS should delete the provisions in Sec.  1469.2(b) that grant the 
NRCS Chief authority to modify or waive provisions of the CSP. NRCS 
made no changes based on these comments. The provisions of Sec.  
1469.2(b) contain appropriate safeguards by allowing a waiver only if 
the Chief determines (for a particular limited situation) that the 
provisions to be waived would be inappropriate and inconsistent with 
the goals of the program.

Section 1469.3 Definitions

    There were several changes and comments to the definition of 
agricultural land eligible to be enrolled in the CSP. The statutory 
provisions at 16 U.S.C. 3838a includes as eligible land for CSP 
``private agricultural land (including cropland, grassland, prairie 
land, improved pasture land, and rangeland).'' Commenters asserted that 
NRCS should remove silvopasture as pastureland eligible for CSP in 
order to better encourage environmentally sound management of invasive 
species and to protect wildlife and habitat. NRCS made no changes based 
on these comments. Silvopasture is improved pasture land and, 
therefore, is eligible for CSP.
    NRCS experience during the 2004 sign-up was that certain 
agricultural products, such as sugar maple and ginseng, might be 
excluded from the program by the exclusion of forestland as defined in 
the rule. Such products are cultivated more like orchards, typically 
consisting of a monoculture requiring more intensive agricultural 
inputs than a forestland. NRCS proposes to adjust the definition of 
agricultural land to include land of varying cover types, primarily 
managed through a low input system, for the production of food, fiber 
or other agricultural products to allow inclusion of these products. 
NRCS is proposing a conforming change to the definition of forest land.
    Less intensively managed forest systems used for foraging 
activities are not currently included in CSP. The commercial harvest of 
products, such as landscaping plants, fungi, floral greens, and wild 
edible plants, is on the rise. Most forestland managed for these 
products will qualify for CSP since very rarely are nutrients of any 
kind applied, the areas are not grazed so protection of streams is not 
an issue, pest issues are generally sporadic in nature so few if any 
pesticides are used, harvesting of most non-wood products is 
accomplished by hand so equipment use is limited to existing roads, and 
for the most part irrigation is not used. However, the tools commonly 
used for assessing cropland, such as RUSLE2, are not suited for these 
forested conditions and there is no consistent system for collecting 
data to determine sustainability or quality criteria. NRCS expects that 
tools assessing the applicable quality criteria for the various 
resource concerns would need to be developed or existing tools would 
need to be modified to allow the agency to determine the appropriate 
tier and enrollment categories in which to place such operations. NRCS 
is seeking comment and information about the best way to accommodate 
and consider forested land products in CSP. Specifically, if included 
in future program implementation, on which landuse should the 
stewardship payments be based and what analytical tools should measure 
performance?
    Commenters asserted that NRCS should modify the definition of 
``agricultural operation'' to encourage efficient NRCS spending, to 
facilitate eligibility determinations for the agency and the producer, 
and to guard against program fraud and abuse. NRCS made

[[Page 15203]]

no changes as a result of these comments. The delineation of an 
agriculture operation is not a condition of eligibility. It determines 
contract boundaries and tier placement. Also, the definition is not the 
place to promote efficient spending. Program efficiency is an outcome 
of the eligibility, minimum requirements, and tier criteria. Fraud and 
abuse is handled as a separate section within the rule and has no 
relevance to this definition.
    The interim final rule at Sec.  1469.6(b)(3)(ii) gives some 
preferences to limited resource producers by allowing limited resource 
producer participation to be a factor considered in developing the 
enrollment subcategories. Commenters asserted that NRCS should change 
the definition of ``limited resource producer'' to increase the gross 
farm sales and poverty level tests and thereby include a larger number 
of producers to be within the category. Commenters also asserted that 
NRCS should change the definition of ``beginning farmer'' and 
``beginning rancher'' in the interim final rule to help target the 
cost-share bonuses to individuals without large net incomes. NRCS made 
no changes based on these comments. NRCS notes that the definition of 
limited resource producers includes a yearly adjustment for inflation 
using the Prices Paid by Farmer Index as compiled by National 
Agricultural Statistical Service. Also, these are definitions used in 
other USDA programs. Moreover, NRCS believes that placing additional 
emphasis on monetary factors would be inconsistent with the statutory 
criteria which, except for the cost share rate discussed above, does 
not place emphasis for monetary payments based on income.
    The statutory provisions at 16 U.S.C. 3838a also state that 
``forested land that is an incidental part of an agricultural operation 
shall be eligible for enrollment in the conservation security 
program.'' The definition of ``incidental forest land'' at Sec.  1469.3 
stated that ``Areas of incidental forest land that are not part of a 
linear conservation practice are limited individually in size to 10 
acres or less and limited to 10 percent in congregate of the total 
offered acres.'' Commenters asserted that NRCS should remove the 
maximum parcel size requirement for eligible incidental forestland and 
increase the allowable total to 20 percent of the enrolled acreage. 
NRCS made no changes based on these comments. CSP is an agricultural 
working lands program for specifically named land uses, which does not 
include forestry. NRCS believes that such suggested changes are simply 
beyond the concept of ``incidental.''
    NRCS experience in the 2004 sign-up revealed a potential need to 
limit the total amount of incidental land eligible for payment in a 
contract. For simplicity, incidental land was included with the 
adjacent land for purposes of calculating the stewardship and existing 
practice payments. NRCS proposes to limit the amount to ten percent of 
the total contract acreage for payment purposes.
    The statutory provisions at 16 U.S.C. 3838a specify that land 
eligible for CSP includes rangeland. The regulations at Sec.  1469.3 
define rangeland to include ``areas where introduced hardy and 
persistent grasses, such as crested wheatgrass, are planted.'' 
Commenters asserted that the specific reference to acreage planted in 
crested wheatgrass should be deleted from the definition of rangeland. 
NRCS made a change based on these comments by removing the specific 
reference. NRCS did add additional examples of the types of land 
included in rangeland to be consistent with Society for Range 
Management definitions.
    Under the regulations, ``resource-conserving crop rotation'' may be 
considered for enhancement payments. The provisions of 16 U.S.C. 
3838(10) define ``resource-conserving crop rotation'' as ``a crop 
rotation that--(A) Includes at least 1 resource-conserving crop (as 
defined by the Secretary); (B) reduces erosion; (C) improves soil 
fertility and tilth; (D) interrupts pest cycles; and (E) in applicable 
areas, reduces depletion of soil moisture (or otherwise reduces the 
need for irrigation).'' Commenters asserted that NRCS should confine 
the regulatory definition of a ``resource-conserving crop rotation'' to 
the statutory wording, and make the necessary and appropriate revisions 
to the conservation practice standard for conservation crop rotation. 
Commenters also asserted that NRCS should add the following to the end 
of the definition of ``resource-conserving crops'': ``a winter annual 
oilseed crop which provides soil protection; and such other plantings, 
including non-traditional crops with substantially reduced water use 
needs, as the Secretary considers appropriate for a particular area.'' 
NRCS made no changes based on these comments. The regulations more 
closely relate the ``resource-conserving crop rotation'' to enhancement 
payments and provide examples of resource conserving crops. There are 
situations where one or more of the listed practices would provide 
additional environmental performance above the quality criteria for a 
specific resource concern. In these cases, the performance of the 
practice above the minimum criteria would qualify as an enhancement 
payment, such as the soil quality enhancement.

Section 1469.5 Eligibility Requirements

    The provisions of Sec.  1469.5 set forth eligibility requirements 
for CSP, including provisions regarding minimum level of treatment for 
water quality on cropland. These provisions state that the minimum 
treatment for water quality on cropland for Tier I and Tier II is 
considered achieved if the benchmark inventory indicates that the 
current level of treatment meets or exceeds the quality criteria 
according to the NRCS technical guides for these specific resource 
considerations: nutrients, pesticides, salinity and sediment for 
surface waters and nutrients, pesticides, and salinity for groundwater.
    NRCS determines applicants' eligibility for Tier I and Tier II by 
verifying that a producer has implemented specific conservation 
practices and activities that at least meet the agency's technical 
guides for soil and water quality standards. NRCS is considering 
options for augmenting and enhancing its ability to evaluate 
applications in order to better identify producers who are effectively 
managing their agricultural operations from an environmental 
stewardship perspective. By evaluating not only which conservation 
practices have been implemented, but also how well the practices and 
activities are performing, CSP will be able to more cost effectively 
measure and encourage beneficial conservation outcomes.
    NRCS is seeking comment on the amended eligibility provision that 
encompasses the agency's enhanced methodology for determining water 
quality performance. The amended provision states that the minimum 
level of treatment for water quality on cropland for Tier I and Tier II 
is considered achieved if the benchmark inventory indicates that the 
current level of treatment addresses the risks that nutrients, 
pesticides, sediment, and salinity present to water quality by meeting 
or exceeding the quality criteria. NRCS may determine that the quality 
criteria have been addressed both by implementing specific conservation 
practices or activities and by reducing the risks associated with 
agricultural practices to below acceptable thresholds.
    NRCS is developing risk assessment indices that measure how 
conservation activities reduce risks to human health

[[Page 15204]]

and environmental quality. These new performance-based indices measure 
water quality risk reduction for several resource concerns, including 
salinity, sediment, pesticides, and nutrients. The indices use models, 
such as WIN-PST (a quantitative tool that examines the risks caused by 
certain pesticides). With WIN-PST, NRCS can develop bundles of 
conservation practices and management techniques that address the risks 
presented by pesticides. Other examples include the Phosphorous Indexes 
and Nitrate Leaching Indexes that allow NRCS to identify water quality 
risks caused by nutrients and to develop mitigation practices to reduce 
those risks. Other models such as APEX determine sediment delivery to 
surface waters and provide information about how to mitigate these 
risks. The Irrigation Water Management Index allows for the 
determination of irrigation water management practices to address the 
risks of salinity for water quality.
    Performance indices used in CSP serve many functions including 
establishing basic program eligibility by determining if quality 
criteria have been met. In addition, they are used in calculating 
levels of performance above the minimum, and providing a gradational 
scale of performance which allows for direct environmental payment 
calculations. The Soil Conditioning Index is an example of a simple 
tool that performs all of these functions. NRCS is committed to further 
developing performance-based tools, models and associated indices that 
depict and measure environmental outcomes. It is also the agency's 
intent to use outcome-based tools for all its programs in the future to 
determine the effectiveness and impact of conservation planning and 
implementation in treating natural resource concerns. NRCS is also 
seeking comment on the potential for other performance-based indices 
for determining eligibility and assessing performance. In particular, 
NRCS is interested in public comment on indices for measuring pasture 
and rangeland management, as well as wildlife habitat management.
    Also, with respect to the minimum level of treatment for soil 
quality and water quality on cropland, NRCS has added provisions 
stating that ``The Chief may make minor exceptions to criteria for 
areas, such as tropical and tundra regions, where technology tools are 
being refined or testing is needed to review performance data.'' 
Technology tools and standards are typically developed for the majority 
of the climatic situations, but there may be areas that have unique 
resource concerns where the minimum of treatment must be adjusted to 
provide the same level of environmental performance.
    NRCS is seeking comment on the rigor of the minimum level of 
treatment for grazing lands for Tier I and Tier II. NRCS has modified 
the interim final rule to require pastureland and rangelands to have 
vegetation and animal management accomplished by following a grazing 
management plan that provides a forage-animal balance; proper livestock 
distribution; timing of use and managing livestock access to water 
courses.
    Forage and animal balance means that the total amount of available 
grazing forage and the addition of any roughage supply (hay, silage, or 
green chop) is balanced with the amount consumed by the total number of 
livestock and wildlife to meet their daily consumption needs. The 
knowledge of how much forage is available, when it is available, its 
nutritive value, and location in the agricultural operation outlines 
the design of the livestock distribution and timing of use portions of 
the grazing plan. The determination of available forage includes 
leaving an appropriate level of the plant for proper regeneration and 
reproduction. The consumption estimates includes an amount for wildlife 
species which consume herbaceous plants available in the grazing unit. 
If there is a negative balance (not enough forage) during certain times 
of the year, then the producer provides supplemental feed. If there is 
a positive balance (too much forage), the producer might take on extra 
animals during that period. In highly intensive grazing rotations, the 
animal movement and supplemental feeding may occur more than once a 
day, such as after milking. In low intensity systems, such as high 
mountain desert areas, the animal movement will be much less often and 
animals are typically managed by water, shade, and salt placement or 
herding.
    Proper timing of use prevents locating animals in overly wet 
pastures or high mountain zones to protect the soil from compaction and 
potential gully initiation. Managing the plant community addresses soil 
quality concerns and most of the water quality criteria for sediment 
and salinity and nutrient or pesticide concerns relating to runoff. 
Managing access to water courses addresses other water quality 
concerns. Depending on the topographic situation and climate, the 
grazing land might necessitate management options from fencing of 
entire stream reaches and the use of ``flash'' grazing to only fencing 
fragile areas in the desert and assuring that during the stream flow 
peaks animals are managed to be away from those areas by salt and shade 
placement. NRCS is seeking comment regarding the sufficiency of this 
minimum level of treatment for those conservation stewards to meet soil 
quality and water quality minimums as described in the rule.
    NRCS has made several modifications to the eligibility requirements 
for Tier III to further clarify the agency's expectations for the 
highest tier of participation. NRCS is clarifying that producers 
seeking to be placed in Tier III must use a resource management system 
that addresses the entire agricultural operation. NRCS believes that a 
comprehensive and operational resource management system is essential 
for meeting and documenting the eligibility requirement that all the 
applicable resource concerns are addressed in accordance with the NRCS 
quality criteria.
    NRCS has added an explicit reference to the field-based tool that 
NRCS will utilize to determine if an agricultural operation is 
addressing the wildlife resource concern. NRCS intends to rely on 
either a general or species specific habitat assessment guide as the 
basis for determining whether an index value of at least 0.5 is 
achieved. The intent of the general habitat assessment guide is to 
provide an alternative for landscapes where there is no species of 
conservation concern. The general guide evaluates the suitability of 
the types, amounts, and distribution of habitat elements that support 
diverse populations of wildlife species. The species specific habitat 
assessment guide was also included so that watersheds can assess 
conservation efforts on behalf of a single species in need of special 
assistance. The species guide evaluates the quality and quantity of 
elements such as shelter, food and water that are needed to satisfy the 
life requirements of a particular species of conservation concern. NRCS 
has determined that either assessment technique is valid and 
appropriate to document the impact of conservation activities on 
working lands.
    NRCS has added a specific eligibility requirement for Tier III 
contracts that all riparian corridors within the agricultural lands or 
incidental parcels offered for CSP contracts are buffered to restore, 
protect, and enhance riparian resources. Riparian corridors are 
essential elements of working landscapes. Practices and activities on 
agricultural lands can have a profound positive impact on riparian 
corridors, especially when they are positioned to intercept sediment, 
nutrients,

[[Page 15205]]

pesticides, and other materials in surface runoff, reduce nutrients and 
other pollutants in shallow subsurface water flow, retard stream-bank 
mass movement, and provide litter or other habitat components to 
address fish and wildlife needs. NRCS is adding this specific 
eligibility requirement to highlight the importance of riparian zone 
practices and activities in contributing to stream and river health and 
providing other benefits such as wildlife habitat.
    There are a number of conservation practices and activities that 
can be utilized to comprehensively protect riparian areas and enhance 
their function as habitat for aquatic species.
    For example, vegetative filter strips help improve water quality 
benefits and surface runoff control. Forest buffers and herbaceous 
cover promote wildlife habitat benefits. Streambank stabilization 
structures and bio-engineering actions, such as, willow-plugs help 
stabilize shorelines and reduce streambank erosion. Other practices, 
such as fencing, livestock walkways, and livestock watering facilities, 
also work in concert to protect riparian areas from degradation.
    Riparian corridor resource concerns will be included and documented 
as part of the benchmark condition inventory for Tier III contracts and 
will be included as part of any resource management system developed 
for CSP contracts transitioning to Tier III. Riparian areas that are 
enrolled in the Conservation Reserve Program and the Wetlands Reserve 
Program are not eligible for CSP payments but may be used to 
demonstrate eligibility for Tier III contracts.
    NRCS is proposing to use the NRCS Stream Visual Assessment Protocol 
(SVAP) to determine if riparian corridors have been adequately treated 
in future rulemaking. SVAP is a field technique used to evaluate the 
ecological condition of a stream and its riparian corridor. It contains 
standard evaluation elements (e.g., channel condition, hydrologic 
alteration, riparian zone, bank stability) that combine to yield an 
overall quality rating for a stream reach or other aquatic habitat. 
NRCS is considering requiring in the final rule that riparian corridors 
within agricultural operations offered for the program will meet the 
minimum eligibility criteria for Tier III if the SVAP indicates that 
50% of the habitat potential is provided. NRCS is seeking comment on 
the rigor of the minimum level of treatment for riparian corridors for 
Tier III if such a measure is used. NRCS will evaluate the use of SVAP 
during the 2005 sign-up to determine if it would be feasible to use it 
to determine minimum eligibility for Tier III.
    The CSP rewards stewards who improve and protect riparian areas 
through a wide variety of enhancement options. Producers demonstrating 
the top levels of total resource conservation, including protecting and 
enhancing riparian areas, will qualify for the highest level of CSP 
participation.
    Environmental performance and actual field based outcomes have 
proven difficult for agencies to establish and report. Typically 
agencies report progress toward achieving environmental goals as 
outputs such as acres managed (for example resource management systems 
planned or applied on grazing lands), acres created (such as wetlands), 
or permits issued (for regulatory agencies). NRCS broke through the 
performance outcome barrier with its use of the soil conditioning index 
(SCI) during the 2004 CSP sign-up. The SCI estimates the amount of net 
carbon stored in the soil and the reduction in sediment leaving the 
land on an annual basis. The enhancement payment is based on the value 
of the outcomes rather than calculated on the paradigm for cost-share 
programs--the cost of implementing an activity. Additionally NRCS is in 
the process of developing performance-based indices similar to the Soil 
Conditioning Index for the major resource concerns along with a payment 
structure that corresponds with the environmental benefit produced. 
NRCS seeks comment of this approach to enhancement payments as a basis 
for rewarding environmental performance.

Section 1469.20 Application for Contracts

    During the 2004 sign-up, NRCS recognized that despite the ``one 
contract at any one time'' provision of the regulation, this limit was 
only applied to the producer who actively managed the agricultural 
operation, and not to any other participant in the CSP contract. NRCS 
seeks to clarify that the one contract limit applies to all signatories 
to the CSP contract and is seeking comments on this interpretation 
which will be utilized in the FY 2005 sign-up. Conforming changes were 
made to the definition of ``participant'' and elsewhere in the rule to 
recognize that the CSP contract may be signed by multiple parties whom 
may not all be producers.

Section 1469.21 Contract Requirements

    Commenters asserted that clarification was needed regarding the 
contract length when a contract transitions from Tier I to a higher 
tier. The provisions of the interim final rule did not allow contracts 
to extend beyond the original five-year contract length once the 
transition to a higher tier occurred. NRCS agrees with the comments and 
has added Sec.  1469.21(d)(4) to allow for a contract adjustment once 
the transition occurs. NRCS will assure that the conservation criteria 
are met prior to the transition by conducting a field visit and review 
of those contracts.
    Commenters asserted that clarification was needed regarding the 
watershed rotational cycle. They were concerned that the watershed 
might come again into sign-up before the Tier II and Tier III 10-year 
contracts were completed. The interim final rule states in Sec.  
1469.5(b) that ``Producers who are participants in an existing 
conservation stewardship contract are not eligible to submit another 
application.'' and in Sec.  1469.20(d) that ``Producers can only have 
one active contract at any one time.'' NRCS made no changes based on 
these comments.
    Commenters requested that NRCS give the watersheds selected to 
participate in the FY 2004 pilot sign-up another chance to participate 
in the Conservation Security Program in the next year or two based on 
the argument that there was too little time allowed for the sign-ups to 
occur, contracts to be signed, and payments to be made before the end 
of the fiscal year. Additionally, sign-up occurred during harvest 
period which further decreased participation. In the May 4, 2004, 
notice on watershed process and in the preamble to the June 21, 2004, 
interim final rule NRCS discusses the benefits of a watershed rotation 
and further states, ``The watershed approach includes a rotation system 
aspect in that all watersheds will be selected once before any are 
selected for a second time.'' (69 FR 34505, June 21, 2004). 
Additionally 69 FR 24560, May 4, 2004, states, ``NRCS expects that the 
selection of different watersheds for each sign-up will result in every 
farmer and rancher being potentially eligible for CSP over the next 8 
years. No qualifying producer will be left out.''
    However, due to the concerns expressed to NRCS, the agency has 
determined that the 18 watersheds will be reopened only for new 
applicants during the 2005 sign-up. The agency is still committed to 
the established watershed rotation process and will continue to utilize 
it in subsequent

[[Page 15206]]

years. However, NRCS recognizes that there were unique circumstances in 
the program's first year and it seeks to fairly treat the farmers and 
ranchers in those first watersheds.
    The provisions of the interim final rule at Sec.  1469.21(c)(2) 
provided that to be eligible for Tier II, a participant must include 
``the treatment of an additional locally significant resource concern'' 
by the end of their contract period. This was originally included to 
assure that Tier II participants achieved additional resource benefits 
beyond the minimum level of soil and water quality. NRCS's experience 
with the 2004 sign-up revealed that this requirement may be difficult 
to implement in cases where the producer has either already addressed 
the relevant locally significant resource concerns or no locally 
significant resource concerns existed on the operation. In some cases, 
NRCS and the producers had to identify a resource concern that added 
little environmental benefit compared to its cost to fulfill this 
contract requirement.
    To ensure that CSP Tier II participants focus on significant 
resource concerns that provide substantial offsite environmental 
benefits and to streamline application review and acceptance, NRCS will 
determine, for each participating watershed, a pressing locally 
significant resource concern. Tier II applicants will only be required 
to address this concern if it is applicable to their operation and not 
already fully addressed to NRCS's quality criteria. Otherwise this 
requirement will be considered satisfied. Participants may receive 
cost-share payments for new practices required to address this resource 
concern, if offered as part of the sign-up, to assist them in 
fulfilling this contract requirement.
    The provisions of the interim final rule at Sec. Sec.  
1469.21(d)(3), 1469.23(c)(5), and 1469.24(b) required that a 
participant achieve a higher Tier for at least 12 months before 
becoming eligible for corresponding payments based on the higher Tier. 
Commenters asserted that the regulations should not impose such a 
barrier based on the argument that participants have earned the higher 
payments when they meet the requirements for a higher Tier and that 
removal of the barrier would encourage participants to obtain a higher 
Tier as soon as possible. In response, NRCS has deleted the 12-month 
requirement based on the arguments submitted by the commenters, but 
have added the provision that a field verification will be conducted by 
NRCS prior to transition to assure program compliance with the new tier 
requirement.

Section 1469.23 Program Payments

    The provisions of 16 U.S.C. 3838c(b)(3) state that payment to a 
producer shall not be provided for ``construction or maintenance of 
animal waste storage or treatment facilities or associated waste 
transport or transfer devices for animal feeding operations.'' Pursuant 
to this authority, the regulations at Sec.  1469.23(c)(3)(i) state that 
NRCS may not make new practice payments for such facilities or devices. 
Commenters asserted that the prohibitions should apply to all payment 
components and not just to the new practice component. NRCS agrees with 
the comments and has made adjustments in Sec.  1469.23(c)(3) and added 
a new subsection, Sec.  1469.23(i).
    Commenters asserted that the regulations should include feedlots in 
the stewardship payment computation. NRCS made no changes based on 
these comments. Feedlots are not a land type eligible for CSP.
    To be eligible for payments under CSP, the provisions of 16 U.S.C. 
3838a(b) require a producer to develop and submit to NRCS a 
conservation security plan. Commenters asserted these provisions should 
be utilized. NRCS made no changes based on these comments. The 
statutory term ``conservation security plan'' is more descriptively 
described in the regulations as the ``conservation stewardship plan.'' 
To be eligible for payments under CSP, the provisions of Sec.  1469.7 
require a participant to develop and submit to NRCS a conservation 
stewardship plan.
    Commenters also asserted that NRCS had abandoned the statutory 
provision giving beginning farmers a higher cost-share rate. NRCS 
considered these comments and has adjusted the section to continue the 
50 percent cost-share for new practice payments, except the cost-share 
limit is raised to 65 percent for limited resource and beginning 
producers.
    The statutory provisions at 16 U.S.C. 3838c(b)(2) constrain 
spending through a contract cap of $20,000 for Tier I, $35,000 for Tier 
II, and $45,000 for Tier III. The interim final rule also provided the 
following regulatory cap: ``The total of the stewardship component, the 
existing practice component, and the enhancement component may not 
exceed 0.15 of the stewardship payment amount without any reductions 
for Tier I, may not exceed 0.25 of the stewardship payment amount 
without any reductions for Tier II, and may not exceed 0.4 of the 
stewardship payment amount without any reductions for Tier III.'' Many 
of the commenters asserted that the payment formula should allow for 
payments without any reductions or caps and that the reduction is 
unfair to small acreage farms and dairies. NRCS agrees that the 
regulatory cap should be deleted because it disadvantaged small farms 
in areas with low rental rates.
    Specifically, NRCS was concerned that tying the enhancement payment 
to the stewardship payment penalized small operations with significant 
opportunities for enhancement activities. Accordingly, NRCS deleted the 
specific section containing the regulatory cap, but retained the 
authority of the Chief to limit payments for any component in order to 
focus funding toward targeted activities and conservation benefits the 
Chief identifies in the sign-up notice and any subsequent addenda.
    In the FY 2004 sign-up notice, NRCS used this authority to specify 
that the total annual enhancement payments per contract may not exceed 
$10,000 for Tier I, $17,500 for Tier II and $22,500 for Tier III, 
regardless of operation size. NRCS is seeking comment about the 
effectiveness of capping total enhancement payments. NRCS intends to 
cap enhancement payments in the 2005 sign-up at higher levels of 
$13,750 for Tier I, $21,875 for Tier II, and $28,125 for Tier III.
    NRCS is seeking to encourage participants to further improve their 
environmental performance through CSP. CSP allows contract payment for 
existing enhancements based on the benchmark inventory and application. 
NRCS will be requiring applicants in the 2005 sign-up to agree to a 
variable payment rate for enhancement activities that are part of the 
initial contract. The annual enhancement payment will be calculated at 
a variable payment rate with the rate initiating at 150% for the first 
contract year and then at a declining rate for the remainder of the 
contract. This will provide contract capacity to add additional 
enhancements in the out-years and will encourage participants to make 
continuous improvements to their operation. Additionally this mechanism 
will allow for a more consistent number of contracts accepted for each 
sign-up year according to the current budget projections. In order to 
maintain the same level of payment over the life of the contract, the 
participant may add additional enhancement activities of their choice. 
The variable rate would be established in the sign-up announcement. 
NRCS is seeking comment on this action. NRCS believes that with the 
changes made by this document, each of the reductions and caps will 
help create the appropriate

[[Page 15207]]

balance between allowing the largest number of participants in each of 
the categories yet providing meaningful payments (see also the 
discussion regarding payment formulas in the interim final rule at 69 
FR 34503).
    NRCS is considering including enhancement payment limits in the 
final rule. NRCS is seeking comments on whether the enhancement payment 
limits imposed in 2004 or 2005 are appropriate and whether they should 
be included in the final rule to provide more consistency and 
regulatory certainty across different sign-ups. NRCS is also seeking 
comments about the establishment of individual payment sub-caps for 
groups of enhancement activities addressing specific resource concerns 
(such as air quality, energy, etc.) to encourage participants to adopt 
a variety of enhancement activities that would target the full suite of 
resource concerns on their agricultural operations.
    Commenters asserted that enhancement payments should be adjusted to 
include maintenance costs. NRCS made no changes based on these 
comments. Enhancement components already are calculated to include 
compensation for maintenance (operation and management) in Sec.  
1469.23(d)(5)(ii). NRCS is seeking comments on the process used to 
determine the appropriate level of enhancement payments for practices 
and activities. NRCS seeks to base its enhancement payments on an 
objective measure of either adoption cost or environmental benefit. In 
some cases, especially with respect to changes in management, 
environmental benefits may be realized but the cost to the producer is 
difficult to determine. Similarly, it is not always possible to 
quantify and monetize the benefits generated by enhancement activities. 
In the cases that both are determinable, NRCS prefers to compensate 
producers based on the economic value of environmental benefits to 
recognize the environmental performance achieved by adopting a practice 
or activity. NRCS recognizes that the cost lists used to calculate 
enhancement payments are still being developed for participating 
watersheds and is seeking suggestions about the most effective and 
equitable method to determine the cost or benefits of enhancement 
activities.
    Commenters asserted that payments should be made retroactive to the 
application date. NRCS made no changes based on these comments. The CSP 
payments are made within the same fiscal year as the application is 
made and includes payment for the entire year as the first contract 
year.

Section 1469.24 Contract Modifications and Transfers of Land

    Under the provisions of Sec.  1469.24, conservation stewardship 
contracts may be modified, including modifications to add or subtract 
land to the contract. Commenters asserted that NRCS should not allow 
land to be added or subtracted once a contract is signed. They asserted 
that this is necessary to guard against program fraud and abuse. NRCS 
made no changes based on these comments. The government will be a party 
to modifications and has expertise to help avoid fraud and abuse. The 
addition and subtraction of land follows the typical flow of 
agricultural operations in American production agriculture.

Section 1469.30 Fair Treatment of Tenants and Sharecroppers

    Commenters asserted that NRCS should establish a limit for the 
landlord's share of any payments for land operated by a tenant. NRCS 
made no changes based on these comments. NRCS believes that this a 
contract issue that should be resolved between the landlord and the 
tenant.

Section 1469.31 Appeals

    The regulations at Sec.  1469.31 sets forth provisions regarding 
appeals. These provisions do not allow appeal of payment rates. 
Commenters asserted that appeals should be allowed regarding payment 
rates. NRCS made no changes based on these comments. As indicated in 
Section 1469.31, participants are not allowed to appeal matters of 
general applicability. Such appeals would affect all participants and 
would be administratively unworkable.

Executive Order 12866

    The Conservation Security Program (CSP) is a voluntary Natural 
Resources Conservation Service (NRCS) program that recognizes the 
stewardship of natural resources by farmers and ranchers on working 
lands. The CSP takes an innovative approach in that it rewards the best 
stewards of the land. Over the next 8 years, CSP will be offered to all 
eligible farmers and ranchers in the United States.

Discussion of the Economic Analysis Benefit Cost Model

    The economic analysis is based on a model that was designed to 
simulate producers' willingness to participate in CSP. The model 
includes a number of simplifying assumptions, some of which are 
discussed below. Because of the assumptions used, the model should not 
be relied on to predict actual participation rates, tier and regional 
distribution, or the magnitude of payments. The model is best used to 
predict the direction of how participation would change if a particular 
program feature is changed, rather than the magnitude of the change. 
Because program implementation has only begun, the model has not been 
validated so its ability to predict program participation has not been 
assessed.
    The model provides results reflecting total participation over the 
next 15 years, rather than information on any particular year's sign-
up. Annualized values are also presented for informational purposes, 
but they represent an average over the time period covered by the 
model, rather than any particular year. A budget constraint has not 
been incorporated into the model and the results do not reflect the use 
of enrollment categories intended to comply with any such budget 
constraint.
    Farms--The model used ARMS 2002 Phase 3 data to construct 6,105 
farm types representing the 2.1 million farms in the U.S. Such farms 
are likely more numerous than the agricultural operations that may 
enroll in CSP because several ``farms'' may be operated by a single 
applicant. Additionally, the model assumes that farms as small as five 
acres will enroll in CSP. In reality, the cost of fulfilling the 
eligibility requirements and applying to the program may exceed the 
benefits for such small farms.
    Information about each representative farm includes acreage needing 
treatment (from the NRCS work load assessment database), acreage 
already treated (from the NRCS Performance and Results Measurement 
System), cost of installing practices, and county rental rates. Such 
information represents the average for the farm type and watershed in 
which each farm is located, and so may differ from the characteristics 
of actual farms enrolled in CSP. Additionally, some the data are only 
available on a statewide basis, so allocations to the watershed are 
based on the acreage covered by each land type. To the extent that 
agricultural operations in a watershed may have adopted conservation 
practices to a higher or lower degree than average, such estimates may 
not be accurate.
    Eligibility--The model includes several assumptions about the 
treatment of natural resource concerns for CSP eligibility. Due to lack 
of data, the model considered up to six resource concerns that need to 
be addressed and assumed that 1.5 selected practices per acre are 
needed to fully treat each resource concern. If different practices or 
combination of practices are needed

[[Page 15208]]

to treat resource concerns in actual agricultural operations, producers 
may be less or more likely to sign up for CSP or they may enroll in a 
different tier than predicted by the model.
    The model constructed a set of uniform decision rules to predict 
whether a producer would apply to CSP. These decision rules include:
     A return of at least seven percent on conservation costs 
to the producer during the contract,
     Minimum size farm of five acres,
     The cost of complying with eligibility requirements prior 
to enrollment cannot exceed 10 percent of annual rental rate of the 
land,
     A willingness to participate factor based on socioeconomic 
data from participants in other conservation programs,
     Tier selection that maximizes net return, and
     Producers are assumed to recognize only 25 percent of the 
onsite benefits derived from conservation practices.
    To the extent producers use a different set of decision rules or 
consider additional factors in their decision to apply to CSP, the 
model results may differ from actual participation. Note for example 
that the decision rules do not include the cost of adopting practices 
to become eligible for any enrollment categories since the categories 
were not incorporated into the model.
    Payments--The model used estimated rental rates for the purpose of 
calculating stewardship payments. In watersheds where there was no data 
on rental rates, the rates had to be imputed. The model assumes that 
only Tier II contracts or contracts transitioning to a higher tier will 
receive new practice payments. In the model for Alternatives 1 and 3, 
enhancement payments are assumed to either equal 50 percent of the 
contract statutory limit or 70 percent of the contract payment, 
whichever is less. For the baseline and Alternative 2, enhancement 
payments are assumed to either equal 50 percent of the contract 
statutory limit or the difference between the regulatory limit and the 
sum of the stewardship payments and existing practice payments. These 
constraints differ from the limits placed by NRCS either in the rule or 
in the 2004 sign-up and so the model does not reflect actual contract 
requirements. Producer costs for enhancement activities are assumed to 
be 25 percent of the enhancement payments. This may be lower or higher 
than actual costs and so may affect producers' willingness or ability 
to undertake enhancement activities.
    Benefits--Due to a lack of data, no attempt was made to estimate 
the benefits generated by the implementation of enhancement activities. 
The model results therefore show a negative net benefit for the various 
program alternatives, because enhancements activities, which constitute 
a large portion of the contracts' cost, are assigned zero benefits. It 
is likely that enhancement activities do provide significant benefits, 
and therefore the results of the model should be viewed as a lower 
threshold of expected benefits. Tables 1a-1c provide the results of 
several sensitivity analyses that use different assumptions regarding 
enhancement activities' benefits to illustrate a range of other 
potential outcomes.

Discussion of Differences Between Model and Other Program Estimates

    The benefit-cost model results differ from the estimate of the Cost 
of Program (COP) model used to predict the actual number of contracts 
that could be funded based on the President's budget baseline. The 
benefit-cost model results have a much greater participation estimate 
and lower average acres per contract. These differences occur because 
the model enrolls a greater proportion of small farms than the 
President's budget estimate which reduces the average payments per farm 
and increases the number of CSP participants. The benefit-cost model 
predicts a larger number of enrolled small farms than the President's 
budget because the model assumes that farms as small as 5 acres would 
participate, whereas in reality transaction costs may reduce 
participation of such small operations. This assumption results in a 
prediction that the average farm size would be about 200 acres. In 
contrast, the COP model using 2004 sign-up data indicates that the 
participating farm size would be about 750 acres on average. Varying 
the benefit-cost model assumption of minimum farm size has a dramatic 
effect on the benefit-cost model results. For example, increasing the 
smallest farm size to 50 acres decreases the number of farms predicted 
to enroll in CSP by the model by 40 percent and total government costs 
by 20 percent, all else being equal.
    In addition to different farm sizes, the COP model assumes both a 
constrained budget consistent with a programmatic ramp-up funding 
scenario and that only about five percent of the farms would meet the 
minimum level of treatment for CSP. These different assumptions lead 
the COP model to estimate CSP participation at about 89,000 over the 
budget cycle of ten years while the benefit cost model estimates 
participation to total about 990,000 over fifteen years for the 
baseline (similar to the 2004 Interim Final Rule) scenario. The results 
of the unconstrained benefit-cost model underscore the need to use 
enrollment categories or other means to comply with the program's 
budget.
    The COP is utilized by the agency to predict CSP participation 
using assumed budget caps within the President's budget and calculate 
the number of contracts alternative budget scenarios might fund. This 
model has assumptions that can be easily modified to reflect ever 
changing programmatic data. For example, the average acreage per 
contract and average cost per contract by tier can be estimated based 
on projections and then compared with actual sign-up data. The 
projections for the 2005 sign-up are estimated at 520 acres for a Tier 
I, 850 acres for Tier II and 1,400 acres for Tier III contracts. The 
projections for the annual average cost per existing contract are 
estimated at $6,000 for a Tier I, $12,500 for Tier II, and $26,600 for 
Tier III in FY 2005.

Discussion of Program Alternatives and Results

Baseline--No Action: The Baseline Assumes That CSP, as Implemented in 
2004 Under the Interim Final Rule, Will Continue Under the Interim 
Final Rule Conditions

    National participation in CSP under the Baseline is estimated to be 
a total of 989,000 farms (or about 47 percent of all ``farms'' across 
the U.S., as defined by the ARMS Phase 3 survey) over a fifteen year 
period. The Midwest leads all regions in number of participants with 
about 37 percent of all enrollees, followed by the Southeast (about 21 
percent) and the Northern Plains (about 14 percent). Almost eighty-
three percent of participation is estimated to be at the Tier I level; 
10 percent either at Tier II or Tier I transitioning into Tier II; and, 
about seven percent in Tier III. Over 75 percent of contract payments 
consist of enhancement payments. An estimate of the conservation 
assurance payments are found in Table 1 in the ``Baseline'' column of 
data. Eligible producers receive these payments to increase assurance 
that conservation measures will continue to provide a broad and ongoing 
stream of environmental benefits for the public. Conservation assurance 
payments may induce other farmers and ranchers to install additional 
conservation measures that further enhance environmental quality so 
that they can qualify for the CSP program.

[[Page 15209]]



                                   Table 1.--Selected Results of Modeling Alternative Program Structures, FY 2005-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                      Participation totals--total over entire 15 years and average annual estimates
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Difference from baseline from                                Difference from baseline
                                         Baseline--over                 baseline                Baseline--average --------------------------------------
               Tier level                   15 years    ---------------------------------------     annual \1\
                                                            Alt. 1       Alt. 2       Alt. 3                          Alt. 1       Alt. 2       Alt. 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tier 1.................................        817,617       -83,069        4,967      -78,185         272,539          -27690         1656       -26062
Tier 2.................................         73,958        -1,995       -1,809       -3,914          49,305           -1330        -1206        -2609
Tier 3.................................         66,940             0           15           15          44,626               0           10           10
Tier 1 to 2............................         27,345         1,478       -3,538       -1,950          13,673             739        -1769         -975
Tier 2 to 3............................          3,520             0         -440         -440           2,347               0         -293         -293
                                        -----------------
    Total..............................        989,380       -83,586         -804      -84,474         382,490          -28281        -1602       -29929
----------------------------------------
                                                                  Average Annual Payout
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Tier level                       Dollars per year on a 7% annualized rate
                                                Dollars per year on a 3% annualized rate
----------------------------------------
Tier 1.................................          1,082          -672           -3         -674           1,006            -625           -1         -627
Tier 2.................................          2,244          -331           55         -275           2,273            -327           58         -269
Tier 3.................................          6,952           389            4          393           7,026             393            5          398
Tier 1 to 2............................          2,502        -1,233        1,478           15           2,432          -1,166        1,491          120
Tier 2 to 3............................          7,308            69          263          325           7,338              96          156          240
----------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
                Location                      Millions of dollars on a 7% annualized rate
                                              Millions of dollars on a 3% annualized rate
----------------------------------------
On-site................................             72            -4           -3           -7              74              -4           -3           -7
Off-site \2\...........................             99            -9            0           -9              99              -9            0           -9
                                        -----------------
    Total Benefits.....................            171           -13           -2          -16             174             -13           -3          -17
----------------------------------------
                                                                Program Cost Information
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Costs                        Millions of dollars on a 7% annualized rate
                                              Millions of dollars on a 3% annualized rate
----------------------------------------
Producer...............................            198           -64            2          -62             127             -42            1          -41
Gov't TA...............................            115           -32            2          -30             113             -30            2          -28
Gov't FA...............................            767          -212           13         -199             750            -197           13         -184
----------------------------------------
                                              Net Benefits, Net Returns, and Conservation Assurance Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits \3\.......................           -143            82           -6           76             -66              59           -6           52
Net Returns \4\........................            641          -152            9         -144             697            -159            9         -150
Conservation Assurance Payments \5\....            569          -148           11         -137             623            -155           12        -143
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Average annual participation assumes that \1/3\ of all Tier 1 participants are enrolled in any one year: participants in other tiers are enrolled \2/
  3\ of the time due to longer contract lives.
\2\ Off-site benefits are environmental benefits.
\3\ Net benefits are total benefits less producer conservation costs less the cost of technical assistance. Financial assistance to producers is a
  benefit for producers but a cost to taxpayers and, therefore cancels out of the net benefit calculation.
\4\ Net returns represents the financial assistance plus on-site benefits less producer conservation costs.
\5\ Conservation assurance payments are considered to be payments to producers that exceed the total cost of practice installation and adoption.
  Conservation assurance payments are a cost to society, and although they are a benefit to CSP participants, they are neither a net cost nor a net
  benefit to the economy at large.

    Features Common to all Alternatives--Enhancement payments are 
limited to 50 percent of the tier specific statutory limit; however, 
the calculation of enhancement payments differs by alternatives. 
Existing practice payments are calculated as 25 percent of the total 
stewardship payments, which is consistent with the Baseline (Interim 
Final Rule or Baseline scenario above). Cost-share rates for new 
practices installed with CSP funds are assumed to be consistent with 
Environmental Quality Incentives Program (EQIP) cost share rates of 50 
percent.
    Program Alternative 1--This alternative is similar to the Interim 
Final Rule, except the enhancement payments are not calculated as the 
difference between the regulatory limit and the sum of the stewardship 
payments and existing practice payments and are instead calculated as 
70 percent limit of the total contract payment. The regulatory limit is 
not a constraint in this alternative.
    National participation under Alternative 1 registers declines in 
all regions with especially large decreases shown in the Midwest and 
the South Central regions as compared with the Baseline. Although a 
small increase in participation occurs in those transitioning from Tier 
I to Tier II, the large declines in Tier I and II participants cause 
over-all participation to drop. The participation changes noted above 
result from drops in contract payments for Tier I and II while payments 
for Tier III and for contracts transitioning to Tier III increase. All 
of the change in total payments results from changes in the benefit-
cost model limits on enhancement payments. Annualized net benefits, 
producer net

[[Page 15210]]

returns, and an estimate of the conservation assurance payment are 
found in Table 1.
    Program Alternative 2--This alternative is the same as the Baseline 
except contracts that include movement between Tier I and Tier II are 
allowed to increase the length of the contract from a maximum of 5 
years to 10 years.
    This alternative assumes that all the constraints consistent with 
the Interim Final Rule are in place (that is, similar to the Baseline) 
however it assumes that if a producer enters a contract at a Tier I 
level and wants to move up to a Tier II level, the contract life is 
extended from 5 years to 10 years. This removes the disincentive of 
limiting the contract life for producers willing to implement 
conservation plans that would yield greater potential environmental 
benefits.
    National participation is virtually the same as under the Baseline. 
Slight drops in participation are registered in the Midwest and West 
with a slight increase in the Southeast and virtually no change in any 
other region. A higher participation level in Tier I is off-set by 
greater declines in Tier II and those transitioning from Tier I to II 
and from Tier II to III. Average contract payment amounts are similar 
in Alternative 2 as compared with the Baseline for Tier I, II, and III 
participants, but are lower for those participants transitioning from 
Tier I to II and lower for those transitioning from Tier II to III. 
Annualized benefits are similar to those under the Baseline while 
annualized government costs (FA) are slightly higher (Table 1, 
Alternative 2 column).
    Program Alternative 3--This alternative combines the features of 
Alternatives 1 and 2: Removing the regulatory limit on contract 
payments; calculating enhancement payments as 70 percent of total 
contract payments; and, allowing the length of contracts that include 
movement between Tier I and Tier II to increase from a maximum of 5 
years to 10 years.
    This alternative combines all the assumptions included in the 
previous alternatives. It is most similar to the Amendment to the 
Interim Final Rule, with the exception that the enhancement payments 
are limited as in Alternative 1.
    National participation declines by about 8 percent compared to the 
Baseline--the lowest of all scenarios. Participation drops in all 
regions with the largest declines registered in the South Central 
region. As compared to the baseline, participation decreases in all 
tiers except Tier III. Regional and Tier level participation declines 
are caused by an overall drop in contract payments. The large number of 
Tier I participants and their lower payment rates masks the much larger 
payments to participants in the other tiers and the transition between 
tiers.

Selected Alternative

    Alternative 3 is the most similar to the changes adopted by the 
Amendment to the Interim Final Rule. The model predicts that 
Alternative 3 will produce higher social net benefits than the 
Baseline. However, Alternative 3 results in lower net benefits than 
Alternative 1. There are programmatic reasons for selecting Alternative 
3 (Amendment to the Interim Final Rule) over Alternative 1. In response 
to public comments, the agency also decided that contracts that include 
a transition from Tier I to Tier II should be granted the same contract 
length limit that is provided to Tier II contracts.
    Alternative 3 provides lower net returns to producers than the 
Baseline (2004 Interim Final Rule). This is primarily the result of 
assuming more stringent limits on enhancement payments in the model 
than those provided either in the 2004 Interim Final Rule or in the 
2005 Amendment to the Interim Final Rule. To the extent that the agency 
would likely select less stringent limits for the 2005 sign-up, 
producers' actual net returns may be higher and more comparable to 
those provided by the Baseline.

Results Viewed Under Varying Assumptions Concerning Enhancement 
Benefits and Costs

    The benefit cost analysis discusses the uncertainty in calculating 
enhancement benefits and the interpretation of costs. The following 
three tables highlight some of the results as found in Table 1, but 
report them under different assumptions regarding the annualized 
benefits and costs of enhancement activities. As would be expected, 
these assumptions have a great effect on expected program net benefits. 
Table 1a excludes all enhancement benefits and implementation costs 
from producer conservation costs and government financial assistance. 
Thus, net benefits are higher than those found in Table 1. Table 1b 
reports the results after enhancement benefits are set equal to 
enhancement implementation costs. Table 1c summarizes the model results 
the same way as in Table 1, but producer net returns now reflect that 
the ratio of enhancement benefits and costs are assumed to be the same 
as the ratio of existing annualized practice benefits and costs. Under 
all alternatives, the calculations produce the same level of 
conservation assurance payment received by producers, regardless of the 
assumptions made.

     Table 1a.--Summary of Total Benefits and Costs, and Incremental Change by Alternative, Excluding Enhancement Benefits and Implementation Costs
                                                       [Annualized at 7 percent, FY 2005-2020] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Benefits                             Gov't expenditure               Producer
                                                ---------------------------------   Producer   ----------------------    Net        net     Conservation
                  Alternative                                Offsite              conservation    Tech.       Fin.     benefits   returns     assurance
                                                   Onsite      \2\       Total        costs      assist.     assist      \3\        \4\      payment \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Annual Payment Value, $ Millions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.......................................        $72        $99       $171          $53         $28       $185        $90       $204         $132
1..............................................         -4         -9        -13          -11           0         -2         -2          5            9
2..............................................         -3          0         -2            4           3         22        -10         16           18
3..............................................         -7         -9        -16          -12           0          2         -4          7           14
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 15211]]


  Table 1b.--Summary of Total Benefits and Costs, and Incremental Change by Alternative, With Enhancement Benefits Equal to Enhancement Implementation
                                                                          Costs
                                                       [Annualized at 7 percent, FY 2005-2020] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Benefits                             Gov't expenditure               Producer
                                                ---------------------------------   Producer   ----------------------    Net        net     Conservation
                  Alternative                                Offsite              conservation    Tech.       Fin.     benefits   returns     assurance
                                                   Onsite      \2\       Total        costs      assist.     assist      \3\        \4\      payment \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Annual Payment Value, $ Millions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.......................................       $319       $434       $753         $198        $115       $767       $439       $887         $569
1..............................................         25        -40        -66          -64         -32       -212         30       -173         -148
2..............................................         -5          0         -5            2           2         13         -8          6           11
3..............................................        -28        -38        -66          -62         -30       -199         26       -165         -137
--------------------------------------------------------------------------------------------------------------------------------------------------------


   Table 1c.--Summary of Total Benefits and Costs With Enhancements Benefits Using Same Ratio as New Practice and Existing Practice Benefits and Costs
                                                       [Annualized at 7 percent, FY 2005-2020] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Benefits                             Gov't expenditure               Producer
                                                ---------------------------------   Producer   ----------------------    Net        net     Conservation
                  Alternative                                Offsite              conservation                         benefits   returns     assurance
                                                   Onsite      \2\       Total        costs         TA         FA        \3\        \4\      payment \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Annual Payment Value, $ Millions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.......................................       $343     $1,182     $1,525         $198        $115       $767     $1,211       $912         $569
1..............................................        -75       -292       -367          -64         -32       -212       -271       -223         -148
2..............................................         -3         -1         -4            2           2         13         -8          8           11
3..............................................        -70       -260       -330          -62         -30       -199       -238       -206        -137
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Annual Payment over 15 years at 7% interest.
\2\ Offsite Benefits are environmental benefits.
\3\ Net Benefits are total benefits less producer conservation costs (i.e., the cost of installing and maintaining conservation practices) and the cost
  of technical assistance that accompanies those activities. Financial assistance to producers is a benefit for producers but a cost to taxpayers and,
  therefore, cancels out of the net benefit calculation.
\4\ Producer net returns is financial assistance plus on-site benefits less producer conservation cost.
\5\ Conservation Assurance Payments, in this case, are considered to be payments to producers that exceed the total cost of practice installation/
  adoption. Conservation Assurance Payments are a cost to society, and although they are a benefit to CSP participants, therefore are neither a net cost
  nor net benefit to the economy at large.

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.

Executive Order 13132, Federalism

    This interim final rule has been reviewed in accordance with the 
requirements of Executive Order 13132, Federalism. USDA has determined 
that the rule conforms to the federalism principles set forth in the 
Executive Order; would not impose any compliance cost on the States; 
and would not have substantial direct effects on the States, on the 
relationship between the Federal Government and the States, or on the 
distribution of power and responsibilities on the various levels of 
government.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    Pursuant to Section 2702 of the Farm Security and Rural Investment 
Act of 2002 (2002 Farm Bill), the Secretary ``shall use the authority 
provided under section 808(2) of title 5, United States Code.'' As 
required by 5 U.S.C. 808(2), NRCS hereby finds that additional public 
notice and comment prior to the effective date of this amendment to the 
interim final rule are unnecessary and contrary to the public interest. 
Even though proposed rulemaking was not required for this rulemaking, 
NRCS published in the Federal Register an Advance Notice of Proposed 
Rulemaking on February 18, 2003 (68 FR 7720), and a Notice of Proposed 
Rulemaking on January 2, 2004 (69 FR 194). In the interim final rule 
published in the Federal Register on June 21, 2004 (69 FR 34501), NRCS 
responded to the comments received during the comment period for the 
proposed rulemaking. The comment period for the original interim final 
rule ended October 5, 2004 (69 FR 56159). In this amendment to the 
interim final rule, NRCS responds to the comments received pursuant to 
the interim final rule, and makes some minor adjustments based on those 
comments and its experience from implementing CSP in FY 2004 in 18 
watersheds encompassing 22 States. In FY 2005, NRCS will implement CSP 
in 202 watersheds encompassing all 50 States and the Caribbean. NRCS 
would like to gain additional information based on the more extensive 
sign-up prior to finalizing the CSP regulatory provisions, and thus is 
providing an additional opportunity to comment. However, NRCS does not 
believe that additional public notice through 5 U.S.C. 808(1) is 
necessary prior to the effective date of this amendment to the interim 
final rule. Congress authorized $202 million to be available to 
implement CSP in FY 2005. NRCS needs to obligate these funds by 
September 30, 2005, in order for them to be available for payment to 
CSP program participants. To ensure that

[[Page 15212]]

NRCS has the adjusted regulatory framework in place for the FY 2005 
sign-up, NRCS determines that it is in the public interest for this 
amendment to the interim rule to be in effect upon its publication in 
the Federal Register.

Environmental Analysis

    A final Environmental Assessment (EA) has been prepared to assist 
in determining whether this amendment would have a significant impact 
on the quality of the human environment. Based on the results of the 
final EA, NRCS issued a Finding of No Significant Adverse Impact 
(FONSI) on December 16, 2004. Copies of the final EA and FONSI may be 
obtained from Kevin Brown, Director, Financial Assistance Programs 
Division, Natural Resources Conservation Service, Room 5241-S, 
Washington, DC 20250-2890, and electronically at http://www.nrcs.usda.gov/programs/csp/index.html under ``Program 
Information''.

Paperwork Reduction Act

    Section 2702 of the Farm Security and Rural Investment Act of 2002 
requires that the implementation of this provision be carried out 
without regard to the Paperwork Reduction Act, Chapter 35 of title 44, 
United States Code. Therefore, NRCS is not reporting record keeping or 
estimated paperwork burden associated with this amendment.

Government Paperwork Elimination Act

    NRCS is committed to compliance with the Government Paperwork 
Elimination Act, which requires Government agencies, in general, to 
provide the public the option of submitting information or transacting 
business electronically to the maximum extent possible. To better 
accommodate public access, NRCS is proposing to develop an online 
application and information system for public use.

Executive Order 12988

    This amendment has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. The provisions of this interim final rule 
are not retroactive. The provisions of this amendment preempt State and 
local laws to the extent that such laws are inconsistent with this 
amendment. 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 rule as major and NRCS conducted a risk 
assessment. The risk assessment examined environmental degradation of 
soil, water and air quality, water quantity, and plant and wildlife 
habitat in absence of the program. The risk assessment is available 
upon request from Kevin Brown, Director, Financial Assistance Programs 
Division, Natural Resources Conservation Service, P.O. Box 2890, 
Washington, DC 20013-2890, and electronically at http://www.nrcs.usda.gov/programs/csp/index.html under ``Program 
Information''.

Unfunded Mandates Reform Act of 1995

    NRCS assessed the effects of this rulemaking action on State, 
local, and Tribal governments, 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.

List of Subjects in 7 CFR Part 1469

    Agricultural operations, Conservation practices, Conservation 
stewardship contract, Conservation stewardship plan, Plant and animal 
management, Soil and water conservation, Soil quality, Water and air 
quality.


0
Accordingly, Title 7, Chapter XIV of the Code of Federal Regulations is 
amended by revising part 1469 to read as follows:

PART 1469--CONSERVATION SECURITY PROGRAM

Subpart A--General Provisions
Sec.
1469.1 Applicability.
1469.2 Administration.
1469.3 Definitions.
1469.4 Significant resource concerns.
1469.5 Eligibility requirements.
1469.6 Enrollment criteria and selection process.
1469.7 Benchmark condition inventory and conservation stewardship 
plan.
1469.8 Conservation practices and activities.
1469.9 Technical assistance.
Subpart B--Contracts and Payments
1469.20 Application for contracts.
1469.21 Contract requirements.
1469.22 Conservation practice operation and maintenance.
1469.23 Program payments.
1469.24 Contract modifications and transfers of land.
1469.25 Contract violations and termination.
Subpart C--General Administration
1469.30 Fair treatment of tenants and sharecroppers.
1469.31 Appeals.
1469.32 Compliance with regulatory measures.
1469.33 Access to agricultural operation.
1469.34 Performance based on advice or action of representatives of 
NRCS.
1469.35 Offsets and assignments.
1469.36 Misrepresentation and scheme or device.

    Authority: 16 U.S.C. 3830 et seq.

Subpart A--General Provisions


Sec.  1469.1  Applicability.

    (a) This part sets forth the policies, procedures, and requirements 
for the Conservation Security Program (CSP) as administered by the 
Natural Resources Conservation Service (NRCS) for enrollment during 
calendar year 2004 and thereafter.
    (b) CSP is applicable only on privately owned or Tribal lands in 
any of the 50 States, the District of Columbia, the Commonwealth of 
Puerto Rico, Guam, the Virgin Islands of the United States, American 
Samoa, and the Commonwealth of the Northern Marianna Islands.
    (c) The Commodity Credit Corporation (CCC), by and through the 
NRCS, provides financial assistance and technical assistance to 
participants for the conservation, protection, and improvement of soil, 
water, and other related resources, and for any similar conservation 
purpose as determined by the Secretary.


Sec.  1469.2  Administration.

    (a) The regulations in this part will be administered under the 
general supervision and direction of the Chief, Natural Resources 
Conservation Service (NRCS), who is a Vice President of the CCC.
    (b) The Chief may modify or waive a provision of this part if the 
Chief determines that the application of such provision to a particular 
limited situation is inappropriate and inconsistent with the goals of 
the program.
    (c) The Chief determines fund availability to provide financial and 
technical assistance to participants according to the purpose and 
projected cost of contracts in a fiscal year. The Chief allocates the 
funds available to carry out CSP to the NRCS State

[[Page 15213]]

Conservationist. Contract obligations will not exceed the funding 
available to the Agency.
    (d) The State Conservationist may obtain advice from the State 
Technical Committee and local workgroups on the development of State 
program technical policies, payment related matters, outreach efforts, 
and other program issues.
    (e) NRCS may enter into agreements with Federal agencies, State and 
local agencies, conservation districts, Indian Tribes, private 
entities, and individuals to assist NRCS with educational efforts, 
outreach efforts, and program implementation assistance.
    (f) For lands under the jurisdiction of an Indian Tribe or Tribal 
Nation, certain items identified in paragraph (d) of this section may 
be determined by the Indian Tribe or Tribal Nation and the NRCS Chief.


Sec.  1469.3  Definitions.

    The following definitions apply to this part and all documents 
issued in accordance with this part, unless specified otherwise:
    Activity means an action other than a conservation practice that is 
included as a part of a conservation stewardship contract; such as a 
measure, incremental movement on a conservation index or scale, or an 
on-farm demonstration, pilot, or assessment.
    Agricultural land means cropland, rangeland, pastureland, hayland, 
private non-industrial forest land if it is an incidental part of the 
agricultural operation, and other land on which food, fiber, and other 
agricultural products are produced. Areas used for strip-cropping or 
alley-cropping and silvopasture practices will be included as 
agricultural land. This includes land of varying cover types, primarily 
managed through a low input system, for the production of food, fiber 
or other agricultural products.
    Agricultural operation means all agricultural land and other lands 
determined by the Chief, whether contiguous or noncontiguous, under the 
control of the applicant and constituting a cohesive management unit, 
that is operated with equipment, labor, accounting system, and 
management that is substantially separate from any other. The minimum 
size of an agricultural operation is a field.
    Applicant means a producer as defined in this rule who has 
requested in writing to participate in CSP.
    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, as defined in 7 U.S.C. 
1991(a). 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, solely, 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, 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.
    Benchmark condition inventory means the documentation of the 
resource condition or situation pursuant to Sec.  1469.7(a) that NRCS 
uses to measure an applicant's existing level of conservation 
activities in order to determine program eligibility, to design a 
conservation stewardship contract, and to measure the change in 
resource conditions resulting from conservation treatment.
    Certified Conservation Planner means an individual certified by 
NRCS who possesses the necessary skills, training, and experience to 
implement the NRCS nine-step planning process to meet client objectives 
in solving natural resource problems. The certified conservation 
planner has demonstrated skill in assisting producers to identify 
resource problems, to express the client's objectives, to propose 
feasible solutions to resource problems, and assists the producers 
select and implement an effective alternative that treats resource 
concerns and consistent with client's objectives.
    Chief means the Chief of NRCS, USDA or designee.
    Conservation district means any district or unit of State or local 
government formed under State, territorial, or Tribal law for the 
express purpose of developing and carrying out a local soil and water 
conservation program. Such a 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 practice means a specified treatment, such as a 
structural or land management practice, that is planned and applied 
according to NRCS standards and specifications.
    Conservation Reserve Program (CRP) means the Commodity Credit 
Corporation program administered by the Farm Service Agency pursuant to 
16 U.S.C. 3831-3836.
    Conservation stewardship contract means a legal document that 
specifies the rights and obligations of any participant who has been 
accepted to receive assistance through participation in CSP.
    Conservation stewardship plan means the conservation planning 
document that builds on the inventory of the benchmark condition 
documenting the conservation practices currently being applied; those 
practices needing to be maintained; and those practices, treatments, or 
activities to be supported under the provisions of the conservation 
stewardship contract.
    Conservation system means a combination of conservation practices, 
measures and treatments for the treatment of soil, water, air, plant, 
or animal resource concerns.
    Conservation treatment means any and all conservation practices, 
measures, and works of improvement that have the purpose of alleviating 
resource concerns, solving or reducing the severity of natural resource 
use problems, or taking advantage of resource opportunities.
    Considered to be planted means a long term rotation of alfalfa or 
multi-year grasses and legumes; summer fallow; typically cropped wet 
areas, such as rice fields, rotated to wildlife habitat; or crops 
planted to provide an adequate seedbed for re-seeding.
    Cropland means a land cover/use category that includes areas used 
for the production of adapted crops for harvest, including but not 
limited to land in row crops or close-grown crops, forage crops that 
are in a rotation with row or close-grown crops, permanent hayland, 
horticultural cropland, orchards, and vineyards.
    Designated conservationist means an NRCS employee whom the State 
Conservationist has designated as responsible for administration of CSP 
in a specific area.
    Enhancement payment means CSP payments available to all tiers as 
described in Sec.  1469.23(d).
    Enrollment categories means a classification system used to sort 
out applications for payment. The enrollment category mechanism will

[[Page 15214]]

create distinct classes for funding defined by resource concerns, 
levels of treatment, and willingness to achieve additional 
environmental performance.
    Existing practice component of CSP payments means the component of 
a CSP payment as described in Sec.  1469.23(b).
    Field means a part of an agricultural operation which is separated 
from the balance of the agricultural operation by permanent boundaries, 
such as fences, permanent waterways, woodlands, and crop-lines in cases 
where farming practices make it probable that such crop-line is not 
subject to change, or other similar features.
    Field Office Technical Guide (FOTG) means the official local NRCS 
source of resource information and the interpretations of guidelines, 
criteria, and standards for 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. Guides 
can be reviewed at the local USDA Service Center or online at http://
www.nrcs.usda.gov/technical/efotg.
    Forage and animal balance means that the total amount of available 
grazing forage and the addition of any roughage supply (hay, silage, or 
green chop) is balanced with the amount consumed by the total number of 
livestock and wildlife to meet their daily consumption needs.
    Forest land means a land cover/use category that is at least 10 
percent stocked by single-stemmed woody species of any size that will 
be at least 4 meters (13 feet) tall at maturity. Also included is land 
bearing evidence of natural regeneration of tree cover (cut over forest 
or abandoned farmland) that is not currently developed for nonforest 
use. Ten percent stocked, when viewed from a vertical direction, 
equates to an aerial canopy cover of leaves and branches of 25 percent 
or greater. The minimum area for classification as forest land is 1 
acre, and the area must be at least 100 feet wide. Exceptions may be 
made by the Chief for land primarily managed through a low-input system 
for food, fiber or other agricultural products.
    Hayland means a subcategory of ``cropland'' managed for the 
production of forage crops that are machine harvested. The crop may be 
grasses, legumes, or a combination of both.
    Incidental forest land means forested land that includes all 
nonlinear forested riparian areas (i.e., bottomland forests), and small 
associated woodlots located within the bounds of working agricultural 
land or small adjacent areas and that are managed to maximize wildlife 
habitat values and are within the NRCS FOTG standards for a wildlife 
practice. However, silvopasture that meets NRCS practice standards will 
be considered as pasture or range land and not incidental forestland 
since silvopasture is one type of intense grazing system. Areas of 
incidental forest land that are not part of a linear conservation 
practice are limited individually in size to 10 acres or less and 
limited to 10 percent in congregate of the total offered acres.
    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 recognized as eligible for the special programs and services 
provided by the United States to Indians because of their status as 
Indians.
    Indian trust lands means real property in which:
    (1) The United States holds title as trustee for an Indian or 
Tribal beneficiary; or
    (2) An Indian or Tribal beneficiary holds title and the United 
States maintains a trust relationship.
    Joint operation means a general partnership, joint venture, or 
other similar business arrangement as defined in 7 CFR 718.2.
    Land cover/use means a term that includes categories of land cover 
and categories of land use. Land cover is the vegetation or other kind 
of material that covers the land surface. Land use is the purpose of 
human activity on the land; it is usually, but not always, related to 
land cover. The National Resources Inventory uses the term land cover/
use to identify categories that account for all the surface area of the 
United States.
    Land management practice means conservation practices and measures 
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, energy management, manure management, integrated pest 
management, integrated crop management, resource conserving crop 
rotations, irrigation water management, tillage or residue management, 
stripcropping, contour farming, grazing management, and wildlife 
habitat management.
    Limited resource producer means a producer:
    (1) 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) Who 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 2 years (to be 
determined annually using Commerce Department Data).
    Liquidated damages means a sum of money stipulated in the 
conservation stewardship 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.
    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 Indian Tribes, with expertise in natural resources 
who advise NRCS on decisions related to implementation of USDA 
conservation programs.
    Maintenance means work performed to keep the applied conservation 
practice functioning for the intended purpose during its life span. 
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.
    Management intensity means the degree and scope of practices or 
measures taken by a producer which are beyond the quality criteria for 
a given resource concern or beyond the minimum requirements of a 
management practice, and which may qualify as additional effort 
necessary to receive an enhancement payment.
    Measure means one or more specific actions that is not a 
conservation practice, but has the effect of alleviating problems or 
improving the treatment of the resources.
    Minimum level of treatment means the specific conservation 
treatment NRCS requires that addresses a resource concern to a level 
that meets or exceeds the quality criteria according to NRCS technical 
guides or the minimum tier

[[Page 15215]]

requirements to address resource concerns as defined in Sec.  
1469.5(e).
    Nationally significant resource concerns means the significant 
resource concerns identified by NRCS in this rule and in the sign-up 
notice as basic program eligibility requirements.
    New practice payment means the payment as described in Sec.  
1469.23(c).
    Operator means an individual, entity, or joint operation who is in 
general control of the farming operations on the farm at the time of 
application.
    Participant means a producer who is accepted into CSP and any 
signatory to a CSP contract.
    Pastured cropland means a land cover/use category that includes 
areas used for the production of pasture in grass-based livestock 
production systems that could support adapted crops for harvest, 
including but not limited to land in row crops or close-grown crops, 
and forage crops that are in a rotation with row or close-grown crops. 
Pastured cropland will receive the same stewardship payment as 
cropland.
    Pastureland means a land cover/use category of land managed 
primarily for the production of introduced forage plants for grazing 
animals and includes improved pasture. Pastureland cover may consist of 
a single species in a pure stand, a grass mixture, or a grass-legume 
mixture. Management usually consists of cultural treatments: 
fertilization, weed control, reseeding or renovation, and control of 
grazing.
    Practice life span means the time period in which the conservation 
practices are to be used and maintained for their intended purposes as 
defined by NRCS technical references.
    Priority resource concern means nationally significant resource 
concerns and local resource concerns, approved by the Chief, for which 
enhancement payments will be available.
    Producer means an owner, operator, landlord, tenant, or 
sharecropper who shares in the risk of producing any crop or livestock; 
and is entitled to share in the crop or livestock available for 
marketing from a farm (or would have shared had the crop or livestock 
been produced).
    Quality criteria means the minimally acceptable level of treatment 
as defined in the technical guide of NRCS, required to achieve a 
resource management system for identified resource considerations for a 
particular land use.
    Rangeland means a land cover/use category on which the climax or 
potential plant cover is composed principally of native grasses, 
grasslike plants, forbs, or shrubs suitable for grazing and browsing, 
and introduced forage species that are managed like rangeland. This 
term would include areas where introduced hardy and persistent grasses 
are planted and such practices as deferred grazing, burning, chaining, 
and rotational grazing are used, with little or no chemicals or 
fertilizer being applied. Grasslands, savannas, prairie, many wetlands, 
some deserts, tundra, coastal marshes and wet meadows are considered to 
be rangeland. Certain communities of low forbs and shrubs, such as 
mesquite, chaparral, mountain shrub, and pinyon-juniper, are also 
included as rangeland.
    Resource concern means the condition of natural resources that may 
be sensitive to change by natural forces or human activity. Resource 
concerns include the resource considerations listed in Section III of 
the FOTG, such as soil erosion, soil condition, soil deposition, water 
quality, water quantity, animal habitat, air quality, air condition, 
plant suitability, plant condition, plant management, and animal 
habitat and management.
    Resource-conserving crop rotation means a crop rotation that 
reduces erosion, maintains or improves soil fertility and tilth, 
interrupts pest cycles, or conserves soil moisture and water and that 
includes at least one resource-conserving crop, such as a perennial 
grass, a legume grown for use as forage, seed for planting, or green 
manure, a legume-grass mixture, a small grain grown in combination with 
a grass or legume, whether inter-seeded or planted in rotation.
    Resource management system means a system of conservation practices 
and management relating to land or water use that is designed to 
prevent resource degradation and permit sustained use of land, water, 
and other natural resources, as defined in accordance with the 
technical guide of NRCS.
    Secretary means the Secretary of the U.S. Department of 
Agriculture.
    Sharecropper means an individual who performs work in connection 
with the production of the crop under the supervision of the operator 
and who receives a share of such crop in return for the provision of 
such labor.
    Sign-up notice means the public notification document that NRCS 
provides to describe the particular requirements for a specific CSP 
sign-up.
    Significant resource concerns means the list of resource concerns, 
identified by NRCS, associated with an agricultural operation that is 
subject to applicable requirements under CSP, such as the additional 
Tier II contract requirement.
    Soil quality means resource concerns and/or opportunities related 
to depletion of soil organic matter content through soil disturbance or 
by sheet, rill, and wind erosion, and the physical condition of the 
soil relative to ease of tillage, fitness as a seedbed, the impedance 
to seedling emergence or root penetration, salinity, and overall soil 
productivity.
    State Conservationist means the NRCS employee authorized to direct 
and supervise NRCS activities within a specified State, the Pacific 
Basin, or the Caribbean Area.
    State Technical Committee means a committee established by the 
Secretary in a State pursuant to 16 U.S.C. 3861.
    Stewardship payment means the CSP base payment component of the 
payment as described in Sec.  1469.23(a).
    Structural practice means a land-based 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, 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 activities as defined in 7 CFR part 
1466.
    Technical Service Provider means an individual, private-sector 
entity, or public agency certified or approved by NRCS to provide 
technical services through NRCS or directly to program participants, as 
defined in 7 CFR part 652.
    Tenant means one who rents land from another in consideration of 
the payment of a specified amount of cash or amount of a commodity; or 
one (other than a sharecropper) who rents land in consideration of the 
payment of a share of the crops or proceeds there from.
    Tier means one of the three levels of participation in CSP.
    Water quality means resource concerns or opportunities, including 
concerns such as excessive nutrients, pesticides, sediment, 
contaminants, pathogens and turbidity in surface waters, and excessive 
nutrients and pesticides in ground waters, and any other concerns 
identified by state water quality agencies.
    Watershed or regional resource conservation plan means a plan 
developed for a watershed or other geographical area defined by the 
stakeholders. The plan addresses identified resource problems, contains 
alternative solutions that meet the stakeholder objectives for each 
resource,

[[Page 15216]]

and addresses applicable laws and regulations as defined in the NRCS 
National Planning Procedures Handbook.
    Wetlands Reserve Program (WRP) means the Commodity Credit 
Corporation program administered by NRCS pursuant to 16 U.S.C. 3837-
3837f.


Sec.  1469.4  Significant resource concerns.

    (a) Soil quality and water quality are nationally significant 
resource concerns for all land uses.
    (b) For each sign-up, the Chief may determine additional nationally 
significant resource concerns for all land uses. Such significant 
resource concerns will reflect pressing conservation needs and 
emphasize off-site environmental benefits. In addition, the Chief may 
approve other priority resource concerns for which enhancement payments 
will be offered for specific locations and land uses.


Sec.  1469.5  Eligibility requirements.

    (a) In general--To be eligible to participate in CSP:
    (1) Applicants must meet the requirements for eligible applicants, 
including any additional eligibility criteria and contract requirements 
that may be included in a CSP sign-up notice pursuant to Sec.  
1469.6(c);
    (2) Land must meet the definition of eligible land; and
    (3) The application must meet the conservation standards 
established pursuant to this section.
    (b) Applicants may submit only one application for each sign-up. 
Producers who are participants in an existing conservation stewardship 
contract are not eligible to submit another application.
    (c) Eligible applicants. To be eligible to participate, an 
applicant must--
    (1) Be in compliance with the highly erodible land and wetland 
conservation provisions found in 7 CFR Part 12;
    (2) Have control of the land for the life of the proposed contract 
period.
    (i) The Chief may make an exception for 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; and
    (ii) If the applicant is a tenant, the applicant must provide NRCS 
with the written evidence or assurance of control from the landowner;
    (3) Share in risk of producing any crop or livestock and be 
entitled to share in the crop or livestock available for marketing from 
the agricultural operation (landlords and owners are ineligible to 
submit an application for exclusively cash rented agricultural 
operations);
    (4) Complete a benchmark condition inventory for the entire 
agricultural operation or the portion being enrolled in accordance with 
Sec.  1469.7(a); and
    (5) Supply information, as required by NRCS, to determine 
eligibility for the program, including but not limited to information 
related to eligibility criteria in the sign-up notice, and information 
to verify the applicant's status as a beginning or a limited resource 
farmer or rancher.
    (d) Eligible land:
    (1) To be eligible for enrollment in CSP, land must be:
    (i) Private agricultural land;
    (ii) Private non-industrial forested land that is an incidental 
part of the agricultural operation;
    (iii) Agricultural land that is Tribal, allotted, or Indian trust 
land;
    (iv) Other incidental parcels, as determined by NRCS, which may 
include, but are not limited to, land within the bounds of working 
agricultural land or small adjacent areas (such as center pivot 
corners, field borders, linear practices, turn rows, intermingled small 
wet areas or riparian areas); or
    (v) Other land on which NRCS determines that conservation treatment 
will contribute to an improvement in an identified natural resource 
concern, including areas outside the boundary of the agricultural land 
such as farmsteads, ranch sites, barnyards, feedlots, equipment storage 
areas, material handling facilities, and other such developed areas. 
Other land must be treated in Tier III contracts; and
    (vi) A majority of the agricultural operation must be within a 
watershed selected for sign-up.
    (2) The following land is not eligible for enrollment in CSP:
    (i) Land enrolled in the Conservation Reserve Program;
    (ii) Land enrolled in the Wetlands Reserve Program;
    (iii) Land enrolled in the Grassland Reserve Program;
    (iv) Public land including land owned by a Federal, State or local 
unit of government;
    (v) Land referred to in paragraphs (d)(2)(i), (ii) (iii) and (iv) 
of this section may not receive CSP payments, but the conservation work 
on this land may be used to determine if an applicant meets the minimum 
level of treatment on the eligible land and may be described in the 
conservation stewardship plan.
    (3) The following land is not eligible for any payment component in 
CSP: Land that is used for crop production after May 13, 2002, that had 
not been planted, considered to be planted, or devoted to crop 
production, as determined by NRCS, for at least 4 of the 6 years 
preceding May 13, 2002.
    (4) Delineation of the agricultural operation.
    (i) The applicant will delineate the agricultural operation to 
include all agricultural lands, other incidental parcels identified in 
paragraph (d)(1)(iv) of this section, and other lands, identified in 
paragraph (d)(1)(v) of this section under the control of the applicant 
and constituting a cohesive management unit, and is operated with 
equipment, labor, accounting system, and management that is 
substantially separate from any other land.
    (ii) In delineating the agricultural operation, USDA farm 
boundaries may be used. If farm boundaries are used in the application, 
the entire farm area must be included within the delineation. An 
applicant may offer one farm or aggregate farms into one agricultural 
operation and any other additional eligible land not within a farm 
boundary.
    (e) Conservation standards.
    (1) Minimum tier eligibility requirements:
    (i) An applicant is eligible to participate in CSP Tier I only if 
the benchmark condition inventory demonstrates to the satisfaction of 
NRCS that the applicant has addressed the nationally significant 
resource concerns of Water Quality and Soil Quality to the minimum 
level of treatment as specified in paragraphs (e)(2) and (3) of this 
section on part of the eligible land uses within the agricultural 
operation. Only the acreage meeting such requirements is eligible for 
stewardship and existing practice payments in CSP.
    (ii) An applicant is eligible to participate in CSP Tier II only if 
the benchmark condition inventory demonstrates to the satisfaction of 
NRCS that the applicant has addressed the nationally significant 
resource concerns of water quality and soil quality to the minimum 
level of treatment as specified in paragraphs (e)(2) and (3) of this 
section for all eligible land uses on the entire agricultural 
operation. Under Tier II, the entire agricultural operation must be 
enrolled in CSP.
    (iii) An applicant is eligible to participate in CSP Tier III only 
if the benchmark condition inventory demonstrates to the satisfaction 
of NRCS that the applicant has addressed all of the applicable resource 
concerns to the minimum level of treatment as specified in paragraph 
(e)(4) of this section for all eligible land uses on the entire 
agricultural operation. Practices or activities shall not be required 
for

[[Page 15217]]

participation in the program unless they would have an ultimate 
conservation benefit as demonstrated by the Conservation Practice 
Physical Effects matrix in the FOTG. Under Tier III, the entire 
agricultural operation is enrolled in CSP including other land as 
defined in Sec.  1469.5(d)(1)(v).
    (2) The minimum level of treatment on cropland for Tier I and Tier 
II:
    (i) The minimum level of treatment for soil quality on cropland is 
considered achieved when the Soil Conditioning Index value is positive.
    (ii) The minimum level of treatment for water quality on cropland 
is considered achieved if the benchmark inventory indicates that the 
current level of treatment addresses the risks that nutrients, 
pesticides, sediment, and salinity present to water quality by meeting 
or exceeding the quality criteria for the specific resource concerns of 
nutrients, pesticides, sediment and salinity for surface water and 
nutrients, pesticides and salinity for ground water.
    (iii) The Chief may make minor exceptions to criteria for areas, 
such as tropical and tundra regions, where technology tools are being 
refined or testing is needed to review performance data.
    (3) The minimum level of treatment on pastureland and rangelands 
for Tier I and Tier II is vegetation and animal management accomplished 
by following a grazing management plan that provides for:
    (i) A forage-animal balance;
    (ii) Proper livestock distribution;
    (iii) Timing of use; and
    (iv) Managing livestock access to water courses.
    (4) The minimum level of treatment for Tier III:
    (i) The minimum level of treatment for Tier III is having a fully 
implemented resource management system that meets the quality criteria 
for the local NRCS FOTG for all applicable resource concerns and 
considerations with the following exceptions:
    (A) The minimum requirement for soil quality on cropland is 
considered achieved when the Soil Conditioning Index value is positive;
    (B) The minimum requirement for water quantity--irrigation water 
management on cropland or pastureland is considered achieved when the 
current level of treatment and management for the system results in a 
water use index value of at least 50; and
    (C) The minimum requirement for wildlife is considered achieved 
when the current level of treatment and management for the system 
results in an index value of at least 0.5 using a general or species 
specific habitat assessment guide; and
    (ii) All riparian corridors, including streams and natural 
drainages, within the agricultural operation are buffered to restore, 
protect, or enhance riparian resources. Riparian corridors, as 
appropriate, will be managed or designed to intercept sediment, 
nutrients, pesticides, and other materials in surface runoff; reduce 
nutrients and other pollutants in shallow subsurface water flow; lower 
water temperature; and provide litter fall or structural components for 
habitat complexity or to slow out-of-bank floods.
    (5) In the instance of a significant natural event, such as 
drought, wildfire, pestilence, or flooding which would prevent the 
participant or applicant from achieving the minimum requirements, those 
requirements will be considered met so long as the participant or 
applicant can provide documentation of their stewardship prior to such 
an event.


Sec.  1469.6  Enrollment criteria and selection process.

    (a) Selection and funding of priority watersheds.
    (1) NRCS will prioritize watersheds based on a nationally 
consistent process using existing natural resource, environmental 
quality, and agricultural activity data along with other information 
that may be necessary to efficiently operate the program. The watershed 
prioritization and identification process will consider several 
factors, including but not limited to:
    (i) Potential of surface and ground water quality to degradation;
    (ii) Potential of soil to degradation;
    (iii) Potential of grazing land to degradation;
    (iv) State or national conservation and environmental issues e.g. 
location of air non-attainment zones or important wildlife/fisheries 
habitat; and
    (v) Local availability of management tools needed to more 
efficiently operate the program, such as digital soils information.
    (2) Priority watersheds selected, in which producers would be 
potentially eligible for enrollment, will be announced in the sign-up 
notice.
    (b) Enrollment categories. The Chief may limit new program 
enrollments in any fiscal year to enrollment categories designed to 
focus on priority conservation concerns and enhancement measures. NRCS 
will utilize enrollment categories to determine which contracts will be 
funded in a given sign-up.
    (1) Enrollment categories may be defined by criteria related to 
resource concerns and levels of historic conservation treatment, 
including the producer's willingness to achieve additional 
environmental performance or conduct enhancement activities.
    (2) All applications which meet the sign-up criteria within the 
priority watersheds will be placed in an enrollment category regardless 
of available funding.
    (3) NRCS will develop subcategories within each enrollment category 
and include them in the sign-up notice. The development of 
subcategories may consider several factors, including:
    (i) Willingness of the applicant to participate in local 
conservation enhancement activities;
    (ii) Targeting program participation for Limited Resource 
Producers;
    (iii) Targeting program participation to water quality priority 
areas for nutrient or pest management;
    (iv) Targeting program participation for locally important 
wildlife/fisheries habitat creation and protection; and
    (v) Other priorities as determined by the Secretary.
    (4) At the beginning of each sign-up, the Chief will announce the 
order in which categories and subcategories are eligible to be funded.
    (5) All eligible applications will be placed in the highest 
priority enrollment category and sub-category for which the application 
qualifies.
    (6) Enrollment categories and subcategories will be funded in 
priority order until the available funds specified in the CSP sign-up 
notice are exhausted.
    (c) Sign-up process.
    (1) NRCS will publish a CSP sign-up notice with sufficient time for 
producers to consider the benefits of participation prior to the 
opening of the sign-up period. In the public sign-up notice, the Chief 
will announce and explain the rationale for decisions for the following 
information:
    (i) Any additional program eligibility criteria that are not listed 
in Sec.  1469.5;
    (ii) Any additional nationally significant resource concerns that 
are not listed in Sec.  1469.4(a) that will apply;
    (iii) Any additional requirements that participants must include in 
their CSP applications and contracts that are not listed in Sec.  
1469.21;
    (iv) Information on the priority order of enrollment categories and 
subcategories for funding contracts;
    (v) Specific information on the level of funding that NRCS 
estimates will go toward stewardship, existing practice, and 
enhancement payments;
    (vi) An estimate of the total funds NRCS expects to obligate under 
new

[[Page 15218]]

contracts during a given sign-up, and an estimate for the number of 
enrollment categories and contracts NRCS expects to be able to fund; 
and
    (vii) The schedule for the sign-up process, including the 
deadline(s) for applying.
    (2) NRCS will accept applications according to the timeframes 
specified in the sign-up notice.
    (d) Selection of contracts. (1) NRCS will determine whether the 
application meets the eligibility criteria, and will place applications 
into an enrollment category and subcategory based on the criteria 
specified in the sign-up notice and into a Tier based on the criteria 
in 1469.5(e). Enrollment categories will be funded in the order 
designated in the sign-up notice until the available funding is 
exhausted. NRCS will determine the number of categories that can be 
funded in accordance with the sign-up notice, and will inform the 
applicant of its determinations.
    (2) NRCS will develop a conservation stewardship contract for the 
selected applications. If the contract falls within the enrollment 
categories and subcategories funded in the given sign-up, NRCS will 
make payments as described in the contract in return for the 
implementation and/or maintenance of a specified level of conservation 
treatment on all or part of the agricultural operation.


Sec.  1469.7  Benchmark condition inventory and conservation 
stewardship plan.

    (a) The benchmark condition inventory and associated case file 
information must include:
    (1) A map, aerial photograph, or overlay that delineates the entire 
agricultural operation, including land use and acreage;
    (2) A description of the applicant's production system(s) on the 
agricultural operation to be enrolled;
    (3) The existing conservation practices and resource concerns, 
problems, and opportunities on the operation;
    (4) Other information needed to document existing conservation 
treatment and activities, such as, grazing management, nutrient 
management, pest management, and irrigation water management plans;
    (5) A description of the significant resource concerns and other 
resource concerns that the applicant is willing to address in their 
contract through the adoption of new conservation practices and 
measures; and,
    (6) A list of enhancements that the applicant may be willing to 
undertake as part of their contract.
    (b) Conservation stewardship plan. (1) The conservation stewardship 
plan and associated case file information must include:
    (i) To the extent practicable, a quantitative and qualitative 
description of the conservation and environmental benefits that the 
conservation stewardship contract will achieve;
    (ii) A plan map showing the acreage to be enrolled in CSP;
    (iii) A verified benchmark condition inventory as described in 
Sec.  1469.7(a);
    (iv) A description of the significant resource concerns and other 
resource concerns to be addressed in the contract through the adoption 
of new conservation measures;
    (v) A description and implementation schedule of--
    (A) Individual conservation practices and measures to be maintained 
during the contract, consistent with the requirements for the tier(s) 
of participation and the relevant resource concerns and with the 
requirements of the sign-up,
    (B) Individual conservation practices and measures to be installed 
during the contract, consistent with the requirements for the tier(s) 
of participation and the relevant resource concerns,
    (C) Eligible enhancement activities as selected by the applicant 
and approved by NRCS, and
    (D) A schedule for transitioning to higher tier(s) of 
participation, if applicable;
    (vi) A description of the conservation activities that is required 
for a contract to include a transition to a higher tier of 
participation;
    (vii) Information that will enable evaluation of the effectiveness 
of the plan in achieving its environmental objectives; and
    (viii) Other information determined appropriate by NRCS and 
described to the applicant.
    (2) The conservation stewardship plan may be developed with 
assistance from NRCS or NRCS-certified Technical Service Providers.
    (3) All additional conservation practices in the conservation 
stewardship plan for which new practice payments will be provided must 
be carried out in accordance with the applicable NRCS FOTG.


Sec.  1469.8  Conservation practices and activities.

    (a) Conservation practice and activity selection. (1) The Chief 
will provide a list of structural and land management practices and 
activities eligible for each CSP payment component. If the Chief's 
designee provides the list, it will be approved by the Director of the 
Financial Assistance Programs Division of NRCS. When determining the 
lists of practices and activities and their associated rates, the Chief 
will consider:
    (i) The cost and potential conservation benefits;
    (ii) The degree of treatment of significant resource concerns;
    (iii) The number of resource concerns the practice or activity will 
address;
    (iv) Locally available technology;
    (v) New and emerging conservation technology;
    (vi) Ability to address the resource concern based on site specific 
conditions; and,
    (vii) The need for cost-share assistance for specific practices and 
activities to help producers achieve higher management intensity levels 
or to advance in tiers of eligibility.
    (2) To address unique resource conditions in a State or region, the 
Chief may make additional conservation practices, measures, and 
enhancement activities eligible that are not included in the national 
list of eligible CSP practices.
    (3) NRCS will make the list of eligible practices and activities 
and their individual payment rates available to the public.
    (b) NRCS will consider the qualified practices and activities in 
its computation of CSP payments except as provided for in paragraph (d) 
of this section.
    (c) NRCS will not make new practice payments for a conservation 
practice the producer has applied prior to application to the program.
    (d) New practice 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 the Designated Conservationist prior to the 
installation of the practice.
    (e) Where new technologies or conservation practices that show high 
potential for optimizing environmental benefits are available, 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.
    (f) NRCS will set the minimum level of treatment within land 
management practices at the national level; however, the State 
Conservationist may supplement specific criteria to meet localized 
conditions within the State or areas.


Sec.  1469.9  Technical assistance.

    (a) NRCS may use the services of NRCS-approved or certified 
Technical

[[Page 15219]]

Service Providers in performing its responsibilities for technical 
assistance.
    (b) Technical assistance may include, but is not limited to: 
Assisting applicants during sign-up, processing and assessing 
applications, assisting the participant in developing the conservation 
stewardship plan; conservation practice survey, layout, design, 
installation, and certification; information, education, and training 
for producers; and quality assurance activities.
    (c) NRCS retains approval authority over the certification of 
technical assistance done by non-NRCS personnel.
    (d) NRCS retains approval authority of the conservation stewardship 
contracts and contract payments.
    (e) Conservation stewardship plans will be developed by NRCS 
certified conservation planners.

Subpart B--Contracts and Payments


Sec.  1469.20  Application for contracts.

    (a) Applications must include:
    (1) A completed self-assessment workbook;
    (2) Benchmark condition inventory and conservation stewardship plan 
in accordance with Sec.  1469.7 for the eligible land uses on the 
entire operation or, if Tier I, for the portion being enrolled;
    (3) Any other requirements specified in the sign-up notice;
    (4) For Tier I, clear indication of which acres the applicant 
wishes to enroll in the CSP; and,
    (5) A certification that the applicant will agree to meet the 
relevant contract requirements outlined in the sign-up notice.
    (b) Producers who are members of a joint operation, trust, estate, 
association, partnership or similar organization must file a single 
application for the joint operation or organization.
    (c) Producers can submit only one application per sign-up.
    (d) Participants can only have one active contract at any one time.


Sec.  1469.21  Contract requirements.

    (a) To receive payments, each participant must enter into a 
conservation stewardship contract and comply with its provisions. Among 
other provisions, the participant agrees to maintain at least the level 
of stewardship identified in the benchmark inventory for the portion of 
land being enrolled for the entire contract period, as appropriate, and 
implement and maintain any new practices or activities required in the 
contract.
    (b) Program participants will only receive payments from one 
conservation stewardship contract.
    (c) CSP participants must address the following requirements or 
additional resource concerns to the minimum level of treatment by the 
end of their conservation stewardship contract:
    (1) Tier I contract requirement: additional practices and 
activities as included by the applicant in the conservation stewardship 
plan and approved by NRCS, over the part of the agricultural operation 
enrolled in CSP.
    (2) Tier II contract requirements:
    (i) Address an additional locally significant resource concern, as 
described in section III of the NRCS FOTG over the entire agricultural 
operation. Applicants may satisfy this requirement by demonstrating 
that the locally significant resource concern is not applicable to 
their operation or that they have already addressed it in accordance 
with NRCS'; quality criteria; and
    (ii) Additional practices and activities as included by the 
applicant in the conservation stewardship plan and approved by NRCS, 
over the entire agricultural operation, where applicable.
    (3) Tier III contract requirement: additional practices and 
activities as included by the applicant in the conservation stewardship 
plan and approved by NRCS, over the entire agricultural operation, 
where applicable.
    (d) Transition to a higher tier of participation. (1) Upon 
agreement by NRCS and the participant, a conservation stewardship 
contract may include provisions that lead to a higher tier of 
participation during the contract period. Such a transition does not 
require a contract modification if that transition is laid out in the 
schedule of contract activities. In the event that such a transition 
begins with Tier I, only the land area in the agricultural operation 
that meets the requirements for enrollment in Tier I can be enrolled in 
the contract until the transition occurs. Upon transition from Tier I 
to a higher tier of participation, the entire agricultural operation 
must be incorporated into the contract. All requirements applicable to 
the higher tier of participation would then apply. NRCS will calculate 
all stewardship, existing practice, new practice payments, and 
enhancement payments using the applicable enrolled acreage at the time 
of the payment.
    (2) A contract which transitions to higher tier(s) of participation 
must include:
    (i) A schedule for the activities associated with the 
transition(s);
    (ii) A date certain by which time the transition(s) must occur; 
and,
    (iii) A specification that the CSP payment will be based on the 
current Tier of participation, which may change over the life of the 
contract.
    (3) A contract which transitions to a higher tier will be modified 
to receive the higher payments once the required level of treatment has 
been achieved and field verified by NRCS.
    (4) A contract which includes a transition from Tier I to Tier II 
or III may be adjusted in length up to 10 years beginning from the 
original contract date.
    (e) A conservation stewardship contract must:
    (1) Incorporate by reference the conservation stewardship plan;
    (2) Be for 5 years for Tier I, and 5 to 10 years for Tier II or 
Tier III;
    (3) Incorporate all provisions as required by law or statute, 
including participant requirements to--
    (i) Implement and maintain the practices as identified and 
scheduled in the conservation stewardship plan, including those needed 
to be eligible for the specified tier of participation and comply with 
any additional sign-up requirements,
    (ii) Not conduct any practices on the farm or ranch that tend to 
defeat the purposes of the contract,
    (iii) Comply with the terms of the contract, or documents 
incorporated by reference into the contract. NRCS will give the 
participant a reasonable time, as determined by the State 
Conservationist, to correct any violation and comply with the terms of 
the contract and attachments thereto. If a violation continues, the 
State Conservationist may terminate the conservation stewardship 
contract, and
    (iv) Supply records and information as required by CCC to determine 
compliance with the contract and requirements of CSP;
    (4) Specify the requirements for operation and maintenance of the 
applied conservation practices;
    (5) Specify the schedule of payments under the life of the 
contract, including how those payments--
    (i) Relate to the schedule for implementing additional conservation 
measures as described in the conservation stewardship plan,
    (ii) Relate to the actual implementation of additional conservation 
measures as described in the conservation stewardship plan, and
    (iii) May be adjusted by NRCS if the participant's management 
decisions change the appropriate set or schedule

[[Page 15220]]

of conservation measures on the operation; and,
    (6) Incorporate any other provisions determined necessary or 
appropriate by NRCS, or included as a requirement for the sign-up.
    (f) Practices scheduled in contracts must be applied and maintained 
within the timelines specified in the contract.
    (g) Contracts expire on September 30 in the last year of the 
contract.
    (h) Participants must:
    (1) Implement the conservation stewardship contract approved by 
NRCS;
    (2) Make available to NRCS, appropriate records showing the timely 
implementation of the contract;
    (3) Comply with the regulations of this part; and
    (4) Not engage in any activity that interferes with the purposes of 
the program, as determined by NRCS.
    (i) NRCS will determine the payments under the contract as 
described in Sec.  1469.23.
    (j) For contracts encompassing the entire agricultural operation, 
the geographic boundaries of the acreage enrolled in the contract must 
include all fields and facilities under the participant's direct 
control, as determined by NRCS.


Sec.  1469.22  Conservation practice operation and maintenance.

    (a) The contract will incorporate the operation and maintenance of 
the conservation practice(s) applied under the contract.
    (b) The participant must operate and maintain any new conservation 
practice(s) for which a payment was received to ensure that the new 
practice or enhancement achieves its intended purpose for the life span 
of the conservation treatment, as identified in the contract or 
conservation stewardship plan, as determined by NRCS.
    (c) Conservation practices that are installed before the execution 
of a contract, but are needed in the contract to obtain the intended 
environmental benefits, must be operated and maintained as specified in 
the contract whether or not an existing practice payment is made.
    (d) NRCS may periodically inspect the conservation practices during 
the practice lifespan as specified in the contract to ensure that 
operation and maintenance are being carried out, and that the practice 
is fulfilling its intended objectives. When NRCS finds that a 
participant is not operating and maintaining practices installed 
through the CSP in an appropriate manner, NRCS will initiate contract 
violation procedures as specified in Sec.  1469.25. If an existing 
practice is part of a system that meets the quality criteria, but does 
not technically meet NRCS minimum practice standards, the practice must 
be modified or updated to meet the standard according the FOTG as 
specified in Sec.  1469.25(a) of this part.


Sec.  1469.23  Program payments.

    (a) Stewardship component of CSP payments. (1) The conservation 
stewardship plan, as applicable, divides the land area to be enrolled 
in the CSP into land use categories, such as irrigated and non-
irrigated cropland, irrigated and non-irrigated pasture, pastured 
cropland and range land, among other categories.
    (2) NRCS will determine an appropriate stewardship payment rate for 
each land use category using the following methodology:
    (i) NRCS will initially calculate the average 2001 rates using the 
Agriculture Foreign Investment Disclosure Act (AFIDA) Land Value 
Survey, the National Agriculture Statistics Service (NASS) land rental 
data, and Conservation Reserve Program (CRP) rental rates.
    (ii) Where typical rental rates for a given land use vary widely 
within a State or between adjacent States, NRCS will adjust the county-
level rates to ensure local and regional consistency and equity.
    (iii) The State Conservationists can also contribute additional 
local data, with advice from the State Technical Committee.
    (iv) The final stewardship payment rate will be the adjusted 
regional rates described in paragraph (a)(2)(i) through (iii) of this 
section multiplied by a reduction factor of 0.25 for Tier I, 0.50 for 
Tier II, and 0.75 for Tier III.
    (v) Pastured cropland will receive the same stewardship payment as 
cropland.
    (3) NRCS will compute the stewardship component of the CSP payment 
as the product of: the number of acres in each land use category (not 
including ``other'' or land not in the applicant's control); the 
corresponding stewardship payment rate for the applicable acreage; and 
a tier-specific percentage. The tier-specific percentage is 5 percent 
for Tier I payments, 10 percent for Tier II payments, and 15 percent 
for Tier III payments.
    (4) Other incidental parcels as defined in Sec.  1469.5(d)(1)(iv) 
may be given a stewardship rate as though they were the land use to 
which they are contiguous if they are serving a conservation purpose, 
such as wildlife habitat. Payment is limited to not more than ten 
percent of the contract acres. Minimum treatment requirements for the 
contract tier apply.
    (5) Other land, as defined in Sec.  1469.5(d)(1)(v), is not 
included in the stewardship payment computation.
    (6) NRCS will publish the stewardship payment rates at the 
announcement of each program sign-up.
    (b) Existing practice component of CSP payments. (1) The Chief will 
determine and announce which practices will be eligible for existing 
practice payments in accordance with Sec.  1469.8(a).
    (2) With exceptions including, but not limited to, paragraph (b)(3) 
and (4) of this section, NRCS may pay the participant a percentage of 
the average 2001 county cost of maintaining a land management, and 
structural practice that is documented in the benchmark condition 
inventory as existing upon enrollment in CSP. The Chief may offer 
alternative payment methods such as paying a percentage of the 
stewardship payment as long as the payment will not exceed 75 percent 
(or, in the case of a beginning farmer or rancher, 90 percent) of the 
average 2001 county costs of installing the practice in the 2001 crop 
year. NRCS will post the rates for payment at the time of the sign-up 
notices on the NRCS website and in USDA Service Centers.
    (3) NRCS will not pay for maintenance of equipment.
    (4) NRCS will not pay an existing practice component of CSP 
payments for any practice that is required to meet conservation 
compliance requirements found in 7 CFR Part 12.
    (5) Existing practice payments are not intended to pay for routine 
maintenance activities related to production practices or practices 
considered typical in farm and ranch operations for a specific 
location.
    (6) Existing practice payments will be made only on practices that 
meet or exceed the practice standards described in the FOTG.
    (7) The Chief may reduce the rates in any given sign-up notice.
    (c) New practice payments. (1) The Chief will determine and 
announce which practices will be eligible for new practice payments in 
accordance with Sec.  1469.8(a).
    (2) If the conservation stewardship contract requires the 
implementation of a new structural or land management practice, NRCS 
may pay a percentage of the cost of installing the new practice. NRCS 
will provide the list of approved practices and the percentage cost-
share rate for each practice at the time of each CSP sign-up notice.
    (3) Participants may contribute to their share of the cost of 
installing a new

[[Page 15221]]

practice through in-kind sources, such as personal labor, use of 
personal equipment, or donated materials. Contributions for a 
participant's share of the practice may also be provided from non-
Federal sources, as determined by the Chief.
    (4) Cost-share payments may be provided by other programs; except 
that payments may not be provided through CSP and another program for 
the same practice on the same land area.
    (5) If additional practices are installed or implemented to advance 
a contract from one tier of participation to a higher tier, the 
practice must be certified as meeting FOTG practice standards by NRCS.
    (6) In no instance will the total financial contributions for 
installing a practice from all public and private entity sources exceed 
100 percent of the actual cost of installing the practice.
    (7) NRCS will not pay a new practice payment for any practice that 
is required to meet the conservation compliance plan requirements found 
in 7 CFR Part 12.
    (8) The Chief may reduce the rates in any given sign-up notice.
    (d) Enhancement component of CSP payments. (1) The Chief will 
establish a list of conservation practices and activities that are 
eligible for enhancement payments for a given sign-up. State 
Conservationists, with advice from the State Technical Committees, will 
tailor the list to meet the needs of the selected watersheds and submit 
to the Chief for concurrence.
    (2) NRCS may pay an enhancement component of a CSP payment if a 
conservation stewardship plan demonstrates to the satisfaction of NRCS 
that the plan's activities will increase conservation performance 
including activities related to energy management as a result of 
additional effort by the participant and result in:
    (i) The improvement of a resource concern by implementing or 
maintaining multiple conservation practices or measures that exceed the 
minimum eligibility requirements for the contract's Tier of 
participation as outlined in the sign-up notice and as described in 
Sec.  1469.5(e) and the contract requirements in Sec.  1469.21; or
    (ii) An improvement in a local resource concern based on local 
priorities and in addition to the national significant resource 
concerns, as determined by NRCS.
    (3) NRCS may also pay an enhancement component of a CSP payment if 
a participant:
    (i) Participates in an on-farm conservation research, 
demonstration, or pilot project as outlined in the sign-up notice; or
    (ii) Cooperates with other producers to implement watershed or 
regional resource conservation plans that involve at least 75 percent 
of the producers in the targeted area; or
    (iii) Carries out assessment and evaluation activities relating to 
practices included in the conservation stewardship plan as outlined in 
the sign-up notice.
    (4) NRCS will not pay the enhancement component of a CSP payment 
for any practice that is required to meet the conservation compliance 
plan requirements found in 7 CFR Part 12.
    (5) Eligible enhancement payments. (i) State Conservationists, with 
advice from the State Technical Committees, will develop proposed 
enhancement payment amounts for each practice and activity.
    (ii) An enhancement payment will be made to encourage a producer to 
perform or continue a management practice or activity, resource 
assessment and evaluation project, or field-test a research, 
demonstration, or pilot project that produces enhanced environmental 
performance and benefits or produces information and data to improve a 
resource concern or update the NRCS technical guides. Enhancement 
payments will be:
    (A) For activities where NRCS can demonstrate the economic value of 
the environmental benefits, based on a given activity's expected 
environmental benefit value. The payment may not exceed the activity's 
expected economic value; or
    (B) For activities where NRCS cannot demonstrate the economic value 
of the environmental benefits, a rate that will not exceed a producer's 
cost to implement a given activity.
    (iii) NRCS will post the list of approved enhancement activities 
and payment amounts for each activity concurrent with the CSP sign-up 
notice.
    (6) The Chief may set a not-to-exceed limit or variable payment 
rate for the enhancement payment in any given sign-up notice.
    (7) Enhancements above the minimum criteria for the resource 
concern that are included in the benchmark inventory may be included in 
the first CSP payment.
    (e) Contracts will be limited as follows:
    (1) $20,000 per year for a Tier I conservation stewardship 
contract,
    (2) $35,000 per year for a Tier II conservation stewardship 
contract, or
    (3) $45,000 per year for a Tier III conservation stewardship 
contract.
    (4) Stewardship components of CSP payments cannot exceed $5,000 per 
year for Tier I, $10,500 per year for Tier II, or $13,500 per year for 
Tier III.
    (5) The new practice payment will not exceed 50 percent of the 
average county costs of installing the practice (or a similar practice, 
if new) in the 2001 crop year with the exception of beginning and 
limited resource producers, in which case the new practice payment may 
be up to 65 percent.
    (f) The new practice and enhancement components of the conservation 
stewardship contract payment may increase once the participant applies 
and agrees to maintain additional conservation practices and activities 
as described in the conservation stewardship plan.
    (g) The Chief of NRCS may limit the stewardship, practice, and 
enhancement components of CSP payments in order to focus funding toward 
targeted activities and conservation benefits the Chief identifies in 
the sign-up notice and any subsequent addenda.
    (h) In the event that annual funding is insufficient to fund 
existing contract commitments, the existing contracts will be pro-rated 
in that contract year.
    (i) NRCS may not make any payments to participants for:
    (1) Practices within their conservation stewardship plan that are 
required to meet conservation compliance requirements found in 7 CFR 
Part 12;
    (2) Practices that are included in maintenance agreements (with 
financial reimbursements for maintenance) that existed prior to the 
conservation stewardship contract approval;
    (3) Construction or maintenance of animal waste storage or 
treatment facilities or associated waste transport or transfer devices 
for animal feeding operations;
    (4) The purchase or maintenance of equipment;
    (5) A non-land based structure that is not integral to a land based 
practice, as determined by the Chief; or
    (6) New practices that were applied with cost-share assistance 
through other USDA cost-share programs.


Sec.  1469.24  Contract modifications and transfers of land.

    (a) Contracts may be modified:
    (1) At the request of the participant, if the modification is 
consistent with the purposes of the conservation security program, or;
    (2) As required by the State Conservationist due to changes to the 
type, size, management, or other aspect of the agricultural operation 
that would interfere with achieving the purposes of the program.

[[Page 15222]]

    (b) Participants may request a modification to their contract to 
change their tier of participation under a conservation stewardship 
contract once the measures determined necessary by NRCS to meet the 
next tier level have been established.
    (c) Contract transfers are permitted when there is agreement among 
all parties to the contract and the contract area remains intact.
    (1) NRCS must be notified within 60 days of the transfer of 
interest and the transferee's acceptance of the contract terms and 
conditions, or the contract will be terminated.
    (2) The transferee must be determined by NRCS to be eligible and 
must assume full responsibility under the contract, including operation 
and maintenance of those conservation practices and activities already 
undertaken and to be undertaken as a condition of the contract.


Sec.  1469.25  Contract violations and termination.

    (a) If the NRCS determines that a participant is in violation of 
the terms of a contract, or documents incorporated by reference into 
the contract, NRCS will give the participant a reasonable time, as 
determined by the State Conservationist, to correct the violation and 
comply with the terms of the contract and attachments thereto. If the 
violation continues, the State Conservationist may terminate the 
conservation stewardship contract.
    (b) Notwithstanding the provisions of paragraph (a) of this 
section, a contract termination is effective immediately upon a 
determination by the State Conservationist that the participant has: 
submitted false information; filed a false claim; engaged in any act 
for which a finding of ineligibility for payments is permitted under 
this part; or taken actions NRCS deems to be sufficiently purposeful or 
negligent to warrant a termination without delay.
    (c) If NRCS terminates a contract due to breach of contract, the 
participant will forfeit all rights for future payments under the 
contract, and must refund all or part of the payments received, plus 
interest, and liquidated damages as determined in accordance with part 
1403 of this chapter. The State Conservationist may require only 
partial refund of the payments received if a previously installed 
conservation practice can function independently, is not affected by 
the violation or 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 life span of the 
practice.
    (d) If NRCS terminates a contract due to breach of contract, or the 
participant voluntarily terminates the contract before any contractual 
payments have been made, the participant will forfeit all rights for 
further payments under the contract, and must pay such liquidated 
damages as are prescribed in the contract. The State Conservationist 
has the option to waive the liquidated damages, depending upon the 
circumstances of the case.
    (e) When making any contract termination decisions, the State 
Conservationist may reduce the amount of money owed by the participant 
by a proportion which 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 including 
natural disasters or events.
    (f) The participant may voluntarily terminate a contract, without 
penalty or repayment, if the State Conservationist determines that the 
contract terms and conditions have been fully complied with before 
termination of the contract.
    (g) In carrying out this section, the State Conservationist may 
consult with the local conservation district.

Subpart C--General Administration


Sec.  1469.30  Fair treatment of tenants and sharecroppers.

    Payments received under this part must be divided in the manner 
specified in the applicable contract or agreement, and NRCS will ensure 
that potential participants who would have an interest in acreage being 
offered receive treatment which NRCS deems to be equitable, as 
determined by the Chief. NRCS may refuse to enter into a contract when 
there is a disagreement among multiple applicants seeking enrollment as 
to an applicant's eligibility to participate in the contract as a 
tenant.


Sec.  1469.31  Appeals.

    (a) An applicant or a participant may obtain administrative review 
of an adverse decision under CSP in accordance with parts 11 and 614, 
Subparts A and C, of this title, except as provided in paragraph (b) of 
this section.
    (b) Participants cannot appeal the following decisions:
    (1) Payment rates, payment limits, and cost-share percentages;
    (2) Eligible conservation practices; and,
    (3) Other matters of general applicability.
    (c) Before a participant can seek judicial review of any action 
taken under this part, the participant must exhaust all administrative 
appeal procedures set forth in paragraph (a) of this section, and for 
purposes of judicial review, no decision will be a final agency action 
except a decision of the Chief under these procedures.


Sec.  1469.32  Compliance with regulatory measures.

    Participants who carry out conservation practices are responsible 
for obtaining the authorities, permits, easements, or other approvals 
necessary for the implementation, operation, and maintenance of the 
conservation practices in keeping with applicable laws and regulations. 
Participants must comply with all laws and are responsible for all 
effects or actions resulting from their performance under the contract.


Sec.  1469.33  Access to agricultural operation.

    Any authorized NRCS representative has the right to enter an 
agricultural operation 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 includes 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 will make a reasonable effort to 
contact the participant prior to the exercise of this provision.


Sec.  1469.34  Performance based on advice or action of representatives 
of NRCS.

    If a participant relied upon the advice or action of any authorized 
representative of CCC, and did not know or have reason to know that the 
action or advice was improper or erroneous, the State Conservationist 
may accept the advice or action as meeting the requirements of CSP. In 
addition, the State Conservationist may grant relief, to the extent it 
is deemed desirable by CCC, to provide a fair and equitable treatment 
because of the good faith reliance on the part of the participant.


Sec.  1469.35  Offsets and assignments.

    (a) Except as provided in paragraph (b) of this section, NRCS will 
make any payment or portion thereof to any participant 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 
are applicable to contract payments.

[[Page 15223]]

    (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.  1469.36  Misrepresentation and scheme or device.

    (a) If the Department determines that a participant erroneously 
represented any fact affecting a CSP determination made in accordance 
with this part, the participant's conservation stewardship contract 
will be terminated immediately in accordance with Sec.  1469.25(b). The 
participant will forfeit all rights for future contract payments, and 
must refund payments received, plus interest, and liquidated damages as 
described in Sec.  1469.25.
    (b) A producer who is determined to have knowingly:
    (1) Adopted any scheme or device that tends to defeat the purpose 
of CSP;
    (2) Made any fraudulent representation; or
    (3) Misrepresented any fact affecting a CSP determination, must 
refund to NRCS all payments, plus interest, and liquidated damages as 
determined in accordance with Sec.  1469.25 received by such 
participant with respect to all contracts. In addition, NRCS will 
terminate the participant's interest in all conservation stewardship 
contracts.
    (c) If the producer acquires land subsequent to enrollment in CSP, 
that land is not considered part of the agricultural operation; 
however, if the land was previously owned or controlled by them before 
the date of enrollment and after May 13, 2002, then NRCS will conduct 
an investigation into the activity to see if there was a scheme or 
device.

    Signed in Washington, DC, on March 18, 2005.
Bruce I. Knight,
Vice President, Commodity Credit Corporation, Chief, Natural Resources 
Conservation Service.
[FR Doc. 05-5894 Filed 3-24-05; 8:45 am]
BILLING CODE 3410-16-P