[Federal Register Volume 70, Number 122 (Monday, June 27, 2005)]
[Proposed Rules]
[Pages 36859-36862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-12618]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / 
Proposed Rules  

[[Page 36859]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1131

[Docket No. AO-271-A37; DA-03-04-A]


Milk in the Arizona-Las Vegas Marketing Area; Partial Decision on 
Proposed Amendments to Marketing Agreement and to Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This document proposes to adopt as a final rule, order 
language contained in the interim final rule published in the Federal 
Register on March 1, 2005, concerning pooling provisions of the 
Arizona-Las Vegas Federal milk order. This document also sets forth the 
final decision of the Department and is subject to approval by 
producers. Specifically, the final decision adopts an amendment that 
would continue to amend the Producer milk provision which will 
eliminate the ability to simultaneously pool the same milk on the 
Arizona-Las Vegas milk order and any State-operated milk order that has 
marketwide pooling. Other proposals considered at the hearing regarding 
producer-handlers were addressed in a separate partial recommended 
decision issued on April 7, 2005.

FOR FURTHER INFORMATION CONTACT: Jack Rower, Marketing Specialist, 
Order Formulation and Enforcement Branch, USDA/AMS/Dairy Programs, Room 
2971-STOP 0231, 1400 Independence Avenue, SW., Washington, DC 20250-
0231, (202) 720-2357, e-mail address: [email protected].

SUPPLEMENTARY INFORMATION: This administrative action is governed by 
the provisions of Sections 556 and 557 of Title 5 of the United States 
Code and, therefore, is excluded from the requirements of Executive 
Order 12866.
    The proposed amendment to the rules proposed herein has been 
reviewed under Executive Order 12988, Civil Justice Reform. It is not 
intended to have a retroactive effect. If adopted, the proposed rule 
would not preempt any state or local laws, regulations, or policies, 
unless they present an irreconcilable conflict with this rule.
    The Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674), provides that administrative proceedings must be 
exhausted before parties may file suit in court. Under Section 
608c(15)(A) of the Act, any handler subject to an order may request 
modification or exemption from such order by filing with the Department 
of Agriculture (Department) a petition stating that the order, any 
provision of the order, or any obligation imposed in connection with 
the order is not in accordance with the law. A handler is afforded the 
opportunity for a hearing on the petition. After a hearing, the 
Department would rule on the petition. The Act provides that the 
district court of the United States in any district in which the 
handler is an inhabitant, or has its principal place of business, has 
jurisdiction in equity to review the Department's ruling on the 
petition, provided a bill in equity is filed not later than 20 days 
after the date of the entry of the ruling.

Regulatory Flexibility Act and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), the Agricultural Marketing Service has considered the economic 
impact of this action on small entities and has certified that this 
proposed rule will not have a significant economic impact on a 
substantial number of small entities. For the purpose of the Regulatory 
Flexibility Act, a dairy farm is considered a ``small business'' if it 
has an annual gross revenue of less than $750,000, and a dairy products 
manufacturer is a ``small business'' if it has fewer than 500 
employees. For the purposes of determining which dairy farms are 
``small businesses,'' the $750,000 per year criterion was used to 
establish a milk marketing guideline of 500,000 pounds per month. 
Although this guideline does not factor in additional monies that may 
be received by dairy producers, it should be an inclusive standard for 
most ``small'' dairy farmers. For purposes of determining a handler's 
size, if the plant is part of a larger company operating multiple 
plants that collectively exceed the 500 employee limit, the plant will 
be considered a large business even if the local plant has fewer than 
500 employees.
    During September 2003, the month in which the hearing began, the 
milk of 106 dairy producers was pooled on, and 22 handlers were 
regulated by, the Arizona-Las Vegas order. Approximately 18 producers, 
or 17 percent, were small businesses based on the above criteria. On 
the handler side, 7 handlers, or 32 percent were ``small businesses''.
    The adoption of the proposed producer milk provision, a part of the 
order's pooling standards, serves to revise established criteria that 
determine the producer milk that has a reasonable association with the 
Arizona-Las Vegas milk marketing area and is not associated with other 
marketwide pools concerning the same milk. Criteria for pooling milk 
are also established on the basis of performance standards that are 
considered adequate to meet the Class I fluid needs of the market and 
determine those that are eligible to share in the revenue arising from 
the classified pricing of milk. Criteria for pooling are established 
without regard to the size of any dairy industry organization or 
entity. The criteria established are applied in an equal fashion to 
both large and small businesses and do not have any different economic 
impact on small entities as opposed to large entities. Therefore, the 
proposed amendment will not have a significant economic impact on a 
substantial number of small entities.
    A review of reporting requirements was completed under the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). It was 
determined that the proposed amendment would have no impact on 
reporting, record keeping, or other compliance requirements because 
they would remain identical to the current requirements. No new forms 
are proposed and no additional reporting requirements would be 
necessary.
    This notice does not require additional information collection that 
requires clearance by the Office of Management and Budget (OMB) beyond 
currently approved information collection. The primary sources of data 
used to complete the forms are routinely used in most business 
transactions.

[[Page 36860]]

Forms require only a minimal amount of information, which can be 
supplied without data processing equipment or a trained statistical 
staff. Thus, the information collection and reporting burden is 
relatively small. Requiring the same reports from all handlers does not 
significantly disadvantage any handler that is smaller than the 
industry average.
    Prior documents in this proceeding:
    Notice of Hearing: Issued July 31, 2003; published
    August 6, 2003 (68 FR 46505).
    Correction to Notice of Hearing: August 20, 2003; published August 
26, 2003 (68 FR 51202).
    Notice of Reconvened Hearing: Issued October 27, 2003; published 
October 31, 2003 (68 FR 62027).
    Notice of Reconvened Hearing: Issued December 18, 2003; published 
December 29, 2003 (68 FR 74874).
    Tentative Final Decision: Issued December 23, 2004; published 
December 30, 2004 (69 FR 78355).
    Interim Final Rule: Issued February 23, 2005; published March 1, 
2005 (70 FR 9846).
    Partial Recommended Decision: Issued April 7, 2005; published April 
13, 2005 (70 FR 19636).

Preliminary Statement

    The proposed amendment set forth below is based on the record of a 
public hearing held at Tempe, Arizona, on September 23-25, 2003, 
pursuant to a notice of hearing issued July 31, 2003, and published 
August 6, 2003, (68 FR 46505); reconvened at Seattle, Washington, on 
November 17-21, 2003, pursuant to a notice of reconvened hearing issued 
October 27, 2003 and published October 31, 2003 (68 FR 62027); and 
reconvened at Alexandria, Virginia, on January 20-22, 2004, pursuant to 
a notice of reconvened hearing issued December 18, 2003, and published 
December 29, 2003 (68 FR 74874).
    Upon the basis of the evidence introduced at the hearing and the 
recorded thereof, the Administrator, on December 23, 2004, issued a 
Tentative Final Decision containing notice of the opportunity to file 
written exceptions thereto.
    The material issues on the record of the hearing relate to:
    1. Simultaneous pooling of milk on the Arizona-Las Vegas order and 
a State-operated milk order providing for marketwide pooling.
    2. Determination as to whether emergency marketing conditions exist 
that would warrant the omission of a recommended decision and the 
opportunity to file written exceptions.

Finding and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof:

1. Simultaneous Pooling on a Federal and State-Operated Milk Order

    A proposal, published in the hearing notice as Proposal 4, seeking 
to exclude the same milk from being simultaneously pooled on the 
Arizona-Las Vegas order and any State-operated order which provides for 
marketwide pooling, should be adopted immediately. The practice of 
pooling milk on a Federal order and simultaneously pooling the same 
milk on a State-operated order has come to be referred to as double-
dipping. The Arizona-Las Vegas order does not currently prohibit milk 
from being simultaneously pooled on the order and a State-operated 
order that provides for marketwide pooling. Proposal 4 was offered by 
United Dairymen of Arizona, a cooperative association that markets the 
milk of their members in the Arizona-Las Vegas marketing area.
    A witness appearing on behalf of the Alliance of Western Milk 
Producers, testified in support of Proposal 4. The witness testified 
that double-dipping creates a competitive advantage in both procuring 
milk and competing for markets for milk.
    A witness appearing on behalf of Northwest Dairy Association (NDA), 
testified in support of Proposal 4, saying that double-dipping not only 
creates disorderly conditions in California, it also results in 
competitive inequities in Federal milk order areas. The NDA witness 
explained that once minimal pool qualification standards are met, milk 
pooled in this manner rarely is delivered to a Federal order marketing 
area. The witness noted that the implementation of similar provisions 
in Orders 30, 32, and 124, which effectively prevents the simultaneous 
pooling of milk in the California State-wide pool and in the Federal 
order, should also be adopted for the Arizona-Las Vegas order.
    A witness testifying on behalf of Dairy Farmers of America (DFA), a 
dairy farmer cooperative that markets the milk of their members in 
Arizona-Las Vegas and in most of the other Federal milk orders, 
supported adoption of Proposal 4. The witness indicated that the 
regulatory language for this proposal is identical to what has been 
adopted for Orders 30, 32, 33, and 124. A witness representing Sarah 
Farms, a producer-handler located in Arizona, testified in opposition 
to adopting Proposal 4. The witness was of the opinion that the 
adoption of Proposal 4 would be a trade restriction and that Sarah 
Farms preferred freer trade rather than more restricted trade. The 
witness concluded by hypothesizing that Proposal 4 was proposed to hurt 
Sarah Farms.
    A witness representing Edaleen Dairy, a producer-handler located in 
Lynden, Washington, also testified in opposition to adopting Proposal 
4. The witness indicated that since Sarah Farms was opposed to Proposal 
4, they would also be opposed to it.
    The witness explained that California operates a quota and overbase 
payment system. Under this system, all producers receive a uniform 
blend price in the form of the overbase. Other producers are entitled 
to an additional payment of $1.70 per hundredweight for their ``quota'' 
milk. The witness noted that producers who have moved California milk 
into the Arizona market have lost their quota and if they were to 
participate in California again they would only be entitled to the 
overbase price. The witness indicated that the California Department of 
Food and Agriculture had issued a decision that required a producer 
participating in the state order to do so for a period of twelve months 
at a time, preventing participation in the Federal order program 
because California does not permit dual participation. As a result, the 
witness noted that benefits can not be obtained by double-dipping.
    In post hearing briefs, Edaleen Dairy, Mallorie's Dairy, Smith 
Brothers Farm, and Sarah Farms concurred that a producer located in 
California, pooling milk in Arizona, would not be considered double-
dipping.
    For nearly 70 years, the Federal government has operated the milk 
marketing order program. The law authorizing the use of milk marketing 
orders, the Agricultural Marketing Agreement Act of 1937 (AMAA), as 
amended, provides authority for milk marketing orders as an instrument 
which dairy farmers may voluntarily use to achieve objectives 
consistent with the AMAA and that are in the public interest. An 
objective of the AMAA, as it relates to milk, was the stabilization of 
market conditions in the dairy industry. The declaration of the AMAA is 
specific: ``the disruption of the orderly exchange of commodities in 
interstate commerce impairs the purchasing power of farmers and 
destroys the value of agricultural assets which support the national 
credit structure and that these conditions affect transactions in 
agricultural commodities with a national public interest, and burden 
and obstruct the

[[Page 36861]]

normal channels of interstate commerce.''
    The AMAA provides authority for employing several methods to 
achieve more stable marketing conditions. Among these is classified 
pricing, which entails pricing milk according to its use by charging 
processors differing prices on the basis of form and use. In addition, 
the AMAA provides for specifying when and how processors are to account 
for and make payments to dairy farmers. Plus, the AMAA requires that 
milk prices established by an order be uniform to all processors and 
that the price charged can be adjusted by, among other things, the 
location at which milk is delivered by producers (Section 608c(5)).
    As these features and constraints provided for in the AMAA were 
employed in establishing prices under Federal milk orders, some 
important market stabilization goals were achieved. The most often 
recognized goal was the near elimination of ruinous pricing practices 
of handlers competing with each other on the basis of the price they 
paid dairy farmers for milk and in price concessions made by dairy 
farmers. The need for processors to compete with each other on the 
price they paid for milk was significantly reduced because all 
processors are charged the same minimum amount for milk, and processors 
had assurance that their competitors were paying the same value-
adjusted minimum price.
    The AMAA also authorizes the establishment of uniform prices to 
producers as a method to achieve stable marketing conditions. 
Marketwide pooling has been adopted in all Federal orders because it 
provides equity to both processors and producers, thereby helping to 
prevent disorderly marketing conditions. A marketwide pool, using the 
mechanism of a producer settlement fund to equalize the use-value of 
milk pooled on an order, meets that objective of the AMAA, ensuring 
uniform prices to producers supplying a market.
    As discussed in the tentative partial decision, since the 1960's, 
the Federal milk order program has recognized the harm and disorder 
that resulted to both producers and handlers when the same milk of a 
producer is simultaneously pooled on more than one Federal order. When 
this occurs, producers do not receive uniform minimum prices, and 
handlers receive unfair competitive advantages. The need to prevent 
``double pooling'' became critically important as distribution areas 
expanded and orders merged. Milk already pooled under a State-operated 
program and able to simultaneously be pooled under a Federal order has 
essentially the same undesirable outcomes that Federal orders once 
experienced and subsequently corrected.
    There are other State-operated milk order programs that provide for 
marketwide pooling. For example, New York operates a milk order program 
for the western region of that State. A key feature explaining why this 
State-operated program has operated for years alongside the Federal 
milk order program is the exclusion of milk from the State pool when 
the same milk is already pooled under a Federal order. Because of the 
impossibility of the same milk being pooled simultaneously, the Federal 
order program has had no reason to specifically address double 
dipping'' or ``double pooling'' issues, the disorderly marketing 
conditions that arise from such practice, or the primacy of one 
regulatory program over another. The other States with marketwide 
pooling similarly do not allow double-pooling of Federal order milk.
    The record supports that the Arizona-Las Vegas order should be 
permanently amended to preclude the ability to simultaneously pool the 
same milk on the order if the same milk is already pooled on a State-
operated order that provides for marketwide pooling.
    The tentative partial decision and this final decision finds that 
proposal 4 offers a reasonable solution for prohibiting the same milk 
to draw pool funds from Federal and State marketwide pools 
simultaneously. It is consistent with the current prohibition against 
allowing the same milk to participate simultaneously in more than one 
Federal order pool. Adoption of Proposal 4 will not establish any 
barrier to the pooling of milk from any source that actually 
demonstrates performance in supplying the Arizona-Las Vegas market's 
Class I needs.

2. Determination of Emergency Marketing Conditions

    Evidence presented at the hearing establishes that California milk 
that can be pooled simultaneously on a State-operated order and a 
Federal order, a practice commonly referred to as double-dipping, would 
render the Arizona-Las Vegas milk order unable to establish prices that 
are uniform to producers and to handlers. This shortcoming of the 
pooling provisions could allow milk not providing a reasonable or 
consistent service to meeting the needs of the Class I market to be 
pooled on the Arizona-Las Vegas order.
    In view of these findings, an interim final rule amending the order 
was issued. The amended order was approved by dairy producers and 
implemented on an interim basis. Consequently, it is determined that 
emergency marketing conditions exist and the issuance of a recommended 
decision was therefore omitted. The record clearly establishes a basis 
as noted above for amending the order on a permanent basis.

Rulings on Proposed Findings and Conclusions

    Briefs, proposed findings and conclusions were filed on behalf of 
certain interested parties. These briefs, proposed findings and 
conclusions, and the evidence in the record were considered in making 
the findings and conclusions set forth above. To the extent that the 
suggested findings and conclusions filed by interested parties are 
inconsistent with the findings and conclusions set forth herein, the 
requests to make such findings or reach such conclusions are denied for 
the reasons previously stated in this decision.

General Findings

    The findings and determinations hereinafter set forth supplement 
those that were made when the Arizona-Las Vegas order was first issued 
and when it was amended. The previous findings and determinations are 
hereby ratified and confirmed, except where they may conflict with 
those set forth herein.
    (a) The tentative marketing agreement and the order, as hereby 
proposed to be amended, and all of the terms and conditions thereof, 
will tend to effectuate the declared policy of the Act;
    (b) The parity prices of milk as determined pursuant to section 2 
of the Act are not reasonable with respect to the price of feeds, 
available supplies of feeds, and other economic conditions which affect 
market supply and demand for milk in the marketing area, and the 
minimum prices specified in the tentative marketing agreement and the 
order, as hereby proposed to be amended, are such prices as will 
reflect the aforesaid factors, insure a sufficient quantity of pure and 
wholesome milk, and be in the public interest; and
    (c) The tentative marketing agreement and the order, as hereby 
proposed to be amended, will regulate the handling of milk in the same 
manner as, and will be applicable only to persons in the respective 
classes of industrial and commercial activity specified in, the 
marketing agreement upon which a hearing has been held.

Ruling on Exceptions

    No exceptions to the tentative final decision were received.

[[Page 36862]]

Marketing Agreement and Interim Order Amending the Order

    Annexed hereto and made a part hereof is a Marketing Agreement 
regulating the handling of milk. The Order amending the order 
regulating the handling of milk in the Arizona-Las Vegas marketing area 
was approved by producers and published in the Federal Register on 
March 1, 2005 (70 FR 9846), as an Interim Final Rule. Both of these 
documents have been decided upon as the detailed and appropriate means 
of effectuating the foregoing conclusions.
    It is hereby ordered, that this entire partial final decision and 
the Marketing Agreement annexed hereto be published in the Federal 
Register.

Determination of Producer Approval and Representative Period

    The month of July 2004 is hereby determined to be the 
representative period for the purpose of ascertaining whether the 
issuance of the order, as amended in the Interim Final Rule published 
in the Federal Register on March 1, 2005 (70 FR 9846), regulating the 
handling of milk in the Arizona-Las Vegas marketing area is approved or 
favored by producers, as defined under the terms of the order (as 
amended and as hereby proposed to be amended), who during such 
representative period were engaged in the production of milk for sale 
within the aforesaid marketing area.

List of Subjects in 7 CFR Part 1131

    Milk Marketing order.

    Dated: June 20, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.

Order Amending the Order Regulating the Handling of Milk in the 
Arizona-Las Vegas Marketing Area

    This order shall not become effective unless and until the 
requirements of Sec.  900.14 of the rules of practice and procedure 
governing proceedings to formulate marketing agreements and marketing 
orders have been met.

Findings and Determinations

    The findings and determinations hereinafter set forth supplement 
those that were made when the order was first issued and when it was 
amended. The previous findings and determinations are hereby ratified 
and confirmed, except where they may conflict with those set forth 
herein.
    (a) Findings. A public hearing was held upon certain proposed 
amendments to the tentative marketing agreement and to the order 
regulating the handling of milk in the Arizona-Las Vegas marketing 
area. The hearing was held pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), and the applicable rules of practice and procedure (7 CFR part 
900).
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is found that:
    (1) The said order as hereby amended, and all of the terms and 
conditions thereof, will tend to effectuate the declared policy of the 
Act;
    (2) The parity prices of milk, as determined pursuant to section 2 
of the Act, are not reasonable in view of the price of feeds, available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk in the aforesaid marketing area. The minimum 
prices specified in the order as hereby amended are such prices as will 
reflect the aforesaid factors, insure a sufficient quantity of pure and 
wholesome milk, and be in the public interest; and
    (3) The said order as hereby amended regulates the handling of milk 
in the same manner as, and is applicable only to persons in the 
respective classes of industrial or commercial activity specified in, a 
marketing agreement upon which a hearing has been held.

Order Relative To Handling

    It is therefore ordered, that on and after the effective date 
hereof, the handling of milk in the Arizona-Las Vegas marketing area 
shall be in conformity to and in compliance with the terms and 
conditions of the order, as amended, and as hereby amended, as follows:
    The provision of the order amending the orders contained in the 
interim amendment of the orders issued by the Administrator, 
Agricultural Marketing Service, on April 19, 2004, and published in the 
Federal Register on April 23, 2004 (69 FR 21950), are adopted without 
change and, shall be the terms and provisions of this order.

[This marketing agreement will not appear in the Code of Federal 
Regulations]

Marketing Agreement Regulating the Handling of Milk in Certain 
Marketing Areas

    The parties hereto, in order to effectuate the declared policy of 
the Act, and in accordance with the rules of practice and procedure 
effective thereunder (7 CFR Part 900), desire to enter into this 
marketing agreement and do hereby agree that the provisions referred to 
in paragraph I hereof as augmented by the provisions specified in 
paragraph II hereof, shall be and are the provisions of this marketing 
agreement as if set out in full herein.
    I. The findings and determinations, order relative to handling, and 
the provisions of Sec. Sec.  1131.1 to 1131.86 all inclusive, of the 
order regulating the handling of milk in the Arizona-Las Vegas 
marketing area (7 CFR Part 1131) which is annexed hereto; and
    II. The following provisions: Record of milk handled and 
authorization to correct typographical errors.
    (a) Record of milk handled. The undersigned certifies that he/she 
handled during the month of ---- 2005, hundredweight of milk covered by 
this marketing agreement.
    (b) Authorization to correct typographical errors. The undersigned 
hereby authorizes the Deputy Administrator, or Acting Deputy 
Administrator, Dairy Programs, Agricultural Marketing Service, to 
correct any typographical errors which may have been made in this 
marketing agreement.
    Effective date. This marketing agreement shall become effective 
upon the execution of a counterpart hereof by the Department in 
accordance with Section 900.14(a) of the aforesaid rules of practice 
and procedure.
    In Witness Whereof, The contracting handlers, acting under the 
provisions of the Act, for the purposes and subject to the limitations 
herein contained and not otherwise, have hereunto set their respective 
hands and seals.

Signature

 By (Name)-------------------------------------------------------------

 (Title)---------------------------------------------------------------

 (Address)-------------------------------------------------------------

(Seal)

Attest
[FR Doc. 05-12618 Filed 6-24-05; 8:45 am]
BILLING CODE 3410-02-P