[Federal Register Volume 74, Number 144 (Wednesday, July 29, 2009)]
[Rules and Regulations]
[Pages 37499-37519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17812]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1470

RIN 0578-AA43


Conservation Stewardship Program

AGENCY: Commodity Credit Corporation, Natural Resources Conservation 
Service, United States Department of Agriculture.

ACTION: Interim final rule with request for comment.

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SUMMARY: Section 2301 of the Food, Conservation, and Energy Act of 2008 
(the 2008 Act) amended the Food Security Act of 1985 to establish the 
Conservation Stewardship Program. The purpose of the Conservation 
Stewardship Program is to encourage producers to address resource 
concerns in a comprehensive manner by undertaking additional 
conservation activities, and improving, maintaining and managing 
existing conservation activities. This interim final rule, with request 
for comment, sets forth the policies, procedures, and requirements 
necessary to implement the Conservation Stewardship Program as 
authorized by the 2008 Act amendments.

DATES: Effective Date: This interim final rule is effective July 29, 
2009.
    Comment Date: Submit comments on or before September 28, 2009.

ADDRESSES: You may send comments (identified by Docket Number NRCS-IFR-
09004) using any of the following methods:
     Government-wide rulemaking Web site: Go to http://regulations.gov and follow the instructions for sending comments 
electronically;
     E-mail directly to NRCS: [email protected];
     Mail: Gregory Johnson, Director, Financial Assistance 
Programs Division, U.S. Department of Agriculture, Natural Resources 
Conservation Service, 1400 Independence Avenue, SW., Room 5237-S, 
Washington, DC 20250-2890;
     Fax: (202) 720-4265;
     Hand Delivery Room: USDA South Building, 1400 Independence 
Avenue, SW., Room 5237-S, Washington, DC 20250, between 9 a.m. and 4 
p.m., Monday through Friday, except Federal Holidays. Please ask the 
guard at the entrance to the South Building to call (202) 720-4527 in 
order to be escorted into the building;
     This interim final rule may be accessed via the Internet. 
Users can access the NRCS homepage at http://www.nrcs.usda.gov; select 
the Farm Bill link from the menu; select the Interim final link from 
beneath the Final and Interim Final Rules Index title. Persons with 
disabilities who require alternative means for communication (Braille, 
large print, audio tape, etc.) should contact the USDA TARGET Center 
at: (202) 720-2600 (voice and TDD).

FOR FURTHER INFORMATION CONTACT: Gregory Johnson, Director, Financial 
Assistance Programs Division, U.S. Department of Agriculture, Natural 
Resources Conservation Service, 1400 Independence Avenue, SW., Room 
5237-S, Washington, DC 20250; Phone: (202) 720-1845; Fax: (202) 720-
4265; or e-mail [email protected].

SUPPLEMENTARY INFORMATION:

Regulatory Certifications

Executive Order 12866

    Pursuant to Executive Order 12866 (FR Doc. 93-24523, September 30, 
1993), this interim final rule with request for comment is an 
economically significant regulatory action since it results in an 
annual effect on the economy of $100 million or more. The 
administrative record is available for public inspection in Room 5831 
of the South Building, USDA, 1400 Independence Avenue, SW., Washington, 
DC. Pursuant to Executive Order 12866, NRCS conducted an economic 
analysis of the potential impacts associated with this program. A 
summary of the economic analysis can be found at the end of this 
preamble and a copy of the analysis is available upon request from 
Gregory Johnson, Director, Financial Assistance Programs Division, 
Natural Resources Conservation Service, Room 5237-S, Washington, DC 
20250-2890 or electronically at: http://www.nrcs.usda.gov/programs/csp/ 
under the CSP Rules and Notices with Supporting Documents title.

Regulatory Flexibility Act

    NRCS has determined that the Regulatory Flexibility Act is not 
applicable to this interim final rule because NRCS is not required by 5 
U.S.C. 553, or any other provision of law, to publish a notice of 
proposed rulemaking with respect to the subject matter of this rule.

Environmental Analysis

    Availability of the Environmental Assessment (EA) and Finding of No 
Significant Impact (FONSI). A programmatic environmental assessment has 
been prepared in association with this rulemaking. The analysis has 
determined that there will not be a significant impact to the human 
environment and as a result an Environmental Impact Statement is not 
required to be prepared (40 CFR part 1508.13). The EA and FONSI are 
available for review and comment for 30 days from the date of 
publication of this interim final rule in the Federal Register. A copy 
of the EA and FONSI may be obtained from the following Web site: http://www.nrcs.usda.gov/programs/Env_Assess/. A hard copy may also be 
requested from the following address and contact: Matt Harrington, 
National Environmental Coordinator, Ecological Sciences Division, NRCS, 
1400 Independence Ave., SW., Washington, DC 20250. Comments from the 
public should be specific and reference that comments provided are on 
the EA and FONSI. Public comment may be submitted by any of the 
following means: (1) E-mail comments to [email protected]; (2) e-
mail to e-gov Web site at http://www.regulations.gov; or (3) written 
comments to: Matt Harrington, National Environmental Coordinator, 
Ecological Sciences Division, NRCS, 1400 Independence Ave., SW., 
Washington, DC 20250.

Civil Rights Impact Analysis

    NRCS has determined through a Civil Rights Impact Analysis that the 
interim final rule discloses no disproportionately adverse impacts for 
minorities, women, or persons with disabilities. The data presented 
indicates producers who are members of the protected groups have 
participated in NRCS conservation programs at parity with other 
producers. Extrapolating from historical participation data, it is 
reasonable to conclude that NRCS programs, including CSP, will continue 
to be

[[Page 37500]]

administered in a non-discriminatory manner. Outreach and communication 
strategies are in place to ensure all producers will be provided the 
same information to allow them to make informed compliance decisions 
regarding the use of their lands that will affect their participation 
in USDA programs. CSP applies to all persons equally regardless of 
their race, color, national origin, gender, sex, or disability status. 
Therefore, the CSP rule portends no adverse civil rights implications 
for women, minorities and persons with disabilities.

Paperwork Reduction Act

    Section 2904 of the 2008 Act provides that the promulgation of 
regulations and the administration of Title II of the 2008 Act, which 
contain the amendments that authorize CSP, shall be made without regard 
to chapter 35 of Title 44 of the United States Code, also known as the 
Paperwork Reduction Act. Therefore, NRCS is not reporting recordkeeping 
or estimated paperwork burden associated with this interim final rule.

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 has developed an online application and 
information system for public use.

Executive Order 12988

    This interim final rule 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 interim 
final rule preempt State and local laws to the extent that such laws 
are inconsistent with this interim final rule. Before an action may be 
brought in a Federal court of competent jurisdiction, the 
administrative appeal rights afforded persons at 7 CFR parts 614, 780, 
and 11 must be exhausted.

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

    Section 304 of the Department of Agriculture Reorganization Act of 
1994, Public Law 103-354, requires that a risk assessment be prepared 
in conjunction with any notice of proposed rulemaking for a major 
regulation. Pursuant to Section 2904 of the 2008 Act, NRCS is 
promulgating this interim final rule, and therefore, a risk assessment 
is not required. However, risks associated with the interim final rule 
have been assessed pursuant to the analysis prepared in compliance with 
Executive Order 12866.

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.

Economic Analysis--Executive Summary

    Pursuant to Executive Order 12866, Regulatory Planning and Review, 
the Natural Resources Conservation Service (NRCS) conducted a cost-
effectiveness analysis (CEA) of the Conservation Stewardship Program 
(CSP) as formulated for the interim final rule. This CEA describes how 
financial assistance (FA) and technical assistance (TA) are made 
available through CSP with the program objective being to have 
producers adopt additional conservation activities. The CEA attempts to 
compare the impact of these activities in generating environmental 
benefits with program costs. Many of these improvements can produce 
beneficial impacts concerning on-site resource conditions (such as the 
maintenance of the long-term productivity of their land), and can 
potentially produce significant off-site environmental benefits, such 
as reduced non-point source pollution, improved air quality due to 
lower carbon dioxide emissions, and enhanced wildlife habitat.
    In considering alternatives for implementing CSP, the United States 
Department of Agriculture (USDA) followed the legislative intent to 
establish a clear and transparent method and determine in an open 
participatory process, potential participants' current level of 
conservation stewardship attainment levels in order to gauge their 
environmental impact and compare them. The CSP is a voluntary program, 
and therefore, the program is not expected to impose any obligation or 
burden upon agricultural producers and non-industrial private 
forestland owners who choose not to participate.\1\ Congress authorized 
the enrollment of 12,769,000 acres for each fiscal year (FY) for the 
period beginning October 1, 2008, and ending on September 30, 2017. For 
fiscal years 2009 through 2012, CSP has been authorized 51,076,000 
acres (four years multiplied by a 12,769,000 acre program cap per 
year).
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    \1\ An impact could be expected in cases where CSP funds 
activities that lead to large increases of certain environmental 
services and goods where those markets are beginning to get started.
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    This analysis builds on the former Conservation Security Program 
introduced in 2004 with its foundation set in the Farm Security and 
Rural Investment Act of 2002, Public Law 107-171 (2002 Farm Bill). 
While the spirit of both programs is similar, the main focus of the 
2008 Act CSP is to assist landowners with adopting additional 
conservation enhancements. This focus is characterized by the emphasis 
placed on new enhancement activities selected by participants in the 
application ranking process. However, basic eligibility criteria and 
ranking will also consider the benchmark level of stewardship and 
planned conservation activities to be adopted (if needed in those cases 
where participants do not meet the stewardship threshold requirements). 
The environmental benefits expected to be generated by enhancement and 
maintenance activities are based on extrapolations of the environmental 
benefits generated from many traditional NRCS conservation practices 
(these are described in detail in Appendix B). However, while 
environmental impacts from many traditional NRCS conservation practices 
have been assessed, the impacts generated from enhancement and 
maintenance activities are not well understood. In conducting economic 
analyses where benefits are not well understood or difficult to 
measure, but costs are available, economists often turn to a cost-
effectiveness analysis (CEA) framework over the more traditional 
benefit-cost analysis approach. The environmental impacts from 
enhancement and maintenance activities are not well understood, and 
therefore, NRCS is adopting the CEA approach for this CSP economic 
analysis.

Methodology Employed in This Study

    As stated above, many conservation practices have been extensively 
studied, but similar studies pertaining to enhancement activities have 
not been conducted. As a result, estimation of a true baseline of 
environmental conditions before and after CSP implementation is not 
possible. The methodology employed in this study involves the modeling 
of baseline environmental conditions through Microsoft Access. The 
model is complex

[[Page 37501]]

because it is based on the major decision rules in the Conservation 
Measurement Tool (CMT). The CMT refers to the procedures developed by 
NRCS to estimate the existing and proposed conservation performance to 
be achieved by a producer. This model has a high degree of uncertainty 
because CSP is a new program and it is difficult to project the 
potential pool of applicants without historical enrollment data. This 
study's model distills the basic rules of the CMT and couples it with a 
historical data on producer characteristics. These data include 
internal NRCS program data, past studies on conservation stewardship, 
other USDA data and information as well as expert opinion from agency 
technology and program specialists. This expert opinion was needed in 
making several key assumptions about expected producer response to CSP 
and in turn likely participation as well as resource response to 
conservation activities. The model applies questions, similar to those 
in the CMT, to a representative set of farms constructed with the 
historical data. Using simulated responses for the representative farms 
to the questions in the CMT regarding the applicant's agriculture 
operation, the model predicts expected participation by land-use type 
and farm type along with expected program costs and conservation 
performance points.
    The responses can be grouped by CSP's ranking factors. The first 
ranking factor, RF-1, is the level of conservation treatment on 
priority resource concerns at the time of application. RF-1 is used to 
establish an initial or baseline ``hypothetical'' index of 
environmental conditions for each applicant's operation. The total 
level of conservation performance points reflects the number of 
existing and planned conservation activities multiplied by a range of 
points from -5 to +5 for each activity; producers are assigned a point 
estimate based on their response on the CMT. Individual applicant's 
conservation performance points are aggregated to create a 
``hypothetical'' baseline of environmental conditions for the Nation 
(in this case, the Nation is that sub-set of all farmers and ranchers 
by farm type and land-use type expected to apply for CSP).
    Based on responses to the remaining three ranking factors \2\ in 
the CMT, the model then produces an index of environmental benefits 
reflecting the total level of additional enhancement activities 
selected by participants to be addressed (the ``additionality'' point 
total). Given this basic data on potential participants' stewardship 
benchmarks and willingness to adopt new activities, the model compares 
expected producer activity costs with their expected CSP annual 
payments. The major producer decision to participate in CSP in the 
model is if expected CSP payments offset at least 50 percent of the 
costs of adopting the associated conservation activities.
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    \2\ These remaining three ranking factors are: RF-2 is the 
degree to which treatment on priority resource concerns increases 
conservation performance by the end of the CSP contract; RF-3 is the 
number of priority resource concerns to be treated to meet or exceed 
threshold by the end of the CSP contract; and, RF-4 is the extent to 
which other resource concerns will be addressed to meet or exceed 
the stewardship threshold by the end of the CSP contract. These 
three ranking factors determine the level of ``additionality'' 
created through the new enhancement activities associated with the 
CSP contract, whereas the previous ranking factor establishes the 
benchmark level of conservation stewardship.
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    The baseline in this analysis represents a pre-statute scenario. 
Due to the fact that each policy scenario selects applicants from 
different pools, no ``generic'' baseline scenario could be determined. 
Instead the analysis adjusts the level of benchmark conservation 
performance points in each scenario to account for what would have been 
generated without CSP (pre-statute).
    The model allows USDA to verify if the national CSP average per 
acre annual payment rate has been met under a number of different 
program designs. More importantly, it can also estimate the trade-off 
between different policy designs and expected conservation performance 
outcomes in a cost-effectiveness framework. Such program design choices 
include varying the relative weights across ranking factors used in the 
participant ranking process and the expected results from varying other 
program parameters, such as relative weights on different priority 
resource concerns and stewardship threshold levels. The main policy 
options studied in this analysis involve the first item listed above; 
that is, the impact on acreage, conservation performance points, and 
program costs from associated options varying the relative weights 
across ranking factors used in the participant ranking process.

Conclusions and Recommendations

    Results of alternative policy options suggest that there may be a 
set of general conclusions that policy makers should consider. These 
include:
     The policy constraints on the statutory requirements for 
the program posed serious challenges for the model developers. It is 
obvious that these constraints will pose similar challenges in 
implementing this program. In particular, achieving the national annual 
acreage enrollment goal at the designated average costs per acre 
mandated in legislation will be a challenge given the heterogeneity of 
producers' baseline resource conditions and demand for enhancements.
     When large operations enter into the program and reach 
their annual contract limit ($40,000), CSP gains program acreage, but 
pushes per acre program costs down. By effectively lowering total 
program costs on a per acre basis, the additions of large operations 
enable the program to offer higher payment rates for other farm types 
and sizes, holding all else constant. For example, a 10,000 acre wheat 
farm in Montana that ``hits'' its payment limitation would be recorded 
as having a $4 per acre program cost ($40,000 divided by 10,000 acres).
    Conservation activity costs were adjusted to account for economies 
of scale on the part of large operations. Without such adjustments, 
larger farms tended not to enter into CSP contracts because their per-
acre costs would remain constant as their per-acre payments were 
effectively lowered (as their payment cap was ``hit'' as explained 
above). Thus without such adjustments, their large size increased their 
farm-level costs while at the same time restricted their ability to 
accrue additional CSP payments beyond the payment cap. This finding 
shows the importance that farm size will play in an applicants' 
decision to participate in CSP. It also shows how sensitive actual 
enrollment and program costs are to the types and sizes of farms 
expected to enroll in CSP.
    The ability to place different weights on ranking factors in a 
predictive model provides insights into expected changes in program and 
conservation performance outcomes. Program design is critical in 
satisfying the statutory requirements of this program. In comparing 
several alternative policy options, model results showed that the cost-
based conservation performance point payment levels used in this 
analysis were not capable of achieving the legislated national $18 
average per acre program cost in all options. This is due to the 
changing land-use compositions and conservation performance outcomes 
which resulted under each alternative policy option. They also 
highlight the trade-offs that exist between alternative policy options 
with respect to attaining as close an acreage goal as is mandated; 
program costs; cost-effectiveness; and conservation performance.

[[Page 37502]]

    Comparisons of alternative policy options (see Table 1) indicate 
that enrolled program acreage is maximized by adopting policy option 4 
(PO-4). However, PO-4 violates the national program per acre cost 
constraint. All other alternative policy options produced lower program 
acreage totals as compared with PO-1.
    Comparisons showed that program costs were lowest in PO-2, which 
also showed good cost-effectiveness, but whose program acreage, as 
compared to PO-1 and all other alternative policy options, was the 
lowest. Total program costs were highest with PO-4, which provided 
strong evidence of luring strong participation and production of 
conservation performance points from new enhancements, but violated the 
national program per acre cost constraint.
    Cost-effectiveness estimates suggest that all alternative policy 
options and the baseline produce about the same cost-effectiveness 
(about $0.37 to $0.39 per point on a total point basis). PO-2 and PO-5 
produced the most favorable cost-effectiveness estimates on a total 
point basis, but results are different when benchmark conservation 
performance points are adjusted. Making these adjustments puts PO-3 and 
PO-4 in strong contention for policy consideration.
    Both PO-2 and PO-5 satisfied the national program per acre cost 
constraint. However, both options produced much lower totals of 
conservation performance points than other policy alternatives. In 
addition PO-5 produced a more equitable distribution of program acreage 
across land-use types than any other policy option.
    These comparisons showed that the total conservation performance 
points generated would be maximized in PO-4 and at the least cost-
effectiveness rate on an adjusted point basis. However, PO-4 violates 
the $18 average per acre program cost constraint. In its favor, PO-4 
produces the highest level of conservation performance points emanating 
from new conservation activities. PO-3 attained the next highest 
conservation performance point total, but PO-3 violated the $18 average 
per acre program cost constraint to a greater extent than did PO-4.
    The analysis assumes full participation each year that the program 
is made available. Only Government costs are included in this cost 
estimate given the wide set of possible initial resource conditions and 
enhancement practices likely to be adopted. Because of this diversity 
in initial resource conditions, it was not possible to ascertain 
whether (or to what extent) CSP payments off-set expected costs to 
adopt enhancement and other conservation stewardship activities by 
producers or past costs incurred to attain stewardship thresholds. 
Given this caveat, cumulative program costs for four program sign-ups 
are estimated to be $3.27 billion in constant 2007 dollars, discounted 
at 7 percent. At a 3 percent discount rate, this estimation increases 
to $3.86 billion. These costs assume that the duration of each contract 
is five years and the program duration is offered for four years (FY 
2009 to FY 2012). In the case where program duration is offered for 
nine years (FY 2009 to FY 2017), cumulative program costs for nine 
program sign-ups are estimated to be $6.3 billion using constant 2007 
dollars discounted at 7 percent. At a 3 percent discount rate, this 
estimate increases to $8.1 billion.

             Table 1--Summary of Simulation Results of Program Acreage and Associated Program Costs, by Land-Use Type for CSP Policy Options
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                                                                    Acres funded in program (in millions of       Total program cost (in millions of
                                                                                    acres)                                     dollars)
             Cost per acre                  Policy option \1\    ---------------------------------------------------------------------------------------
                                                                   Cropland   Pasture   Rangeland  Total \2\   Cropland   Pasture   Rangeland    Total
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N/A...................................  No Program \3\..........        0          0          0          0         $0         $0         $0         $0
17.78.................................  PO-1....................        8.3        2.2        1.1       11.6      182.7       18.3        4.5      205.5
15.74.................................  PO-2....................        8.6        1.9        0.9       11.3      160.0       14.6        3.8      178.3
19.25.................................  PO-3....................        9.0        1.6        0.8       11.5      204.2       13.8        3.3      221.3
18.96.................................  PO-4....................        9.0        1.8        0.9       11.8      203.4       15.8        3.7      222.9
16.93.................................  PO-5....................        8.0        2.4        1.2       11.5      170.6       19.5        4.9      195.0
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\1\ PO-1 assumes an equal weight on each ranking factor.
PO-2 assumes a 62.5 percent weight on RF-1 and a 12.5 percent weight on RF-2, RF-3, and RF-4.
PO-3 assumes a 62.5 percent weight on RF-2 and a 12.5 percent weight on RF-1, RF-3, and RF-4.
PO-4 assumes a 62.5 percent weight on RF-3 and a 12.5 percent weight on RF-1, RF-2, and RF-4.
PO-5 assumes a 62.5 percent weight on RF-4 and a 12.5 percent weight on RF-1, RF-2, and RF-3.
\2\ Annual CSP acreage cap is 12.769 million acres with 10 percent allocated to non-industrial private forestland (NIPF) leaving roughly 11.5 million
  acres for cropland, pasture, and rangeland acreage.
\3\ No program scenario assumes that CSP is not available to landowners. As discussed in the text, some level of benchmark conservation performance
  points are assumed to be generated in the absence of CSP. The exact amount is difficult to determine because maintenance of existing conservation
  measures vary due to several factors, such as fluctuations in personal economic conditions and preferences, advancing age, and changing resource
  priorities. In addition, the applicant pool in each alternative policy scenario is made up of different farm types and land-use types. These
  conditions preclude the estimation of a ``generic'' baseline applied to all alternative policy options. As a result, maintenance on existing
  conservation measures is assumed to generate 90 percent of the benchmark conservation performance points estimated in each scenario.


         Table 2--Summary of Simulation Results of the Conservation Performance Points and Cost Effectiveness Indicators for CSP Policy Options
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                                             Benchmark  (in millions of conservation performance points)                         Dollars per point
                                           --------------------------------------------------------------                -------------------------------
             Policy Option \1\                                                                             Total points     Incremental
                                                    Baseline \2\            Incremental     Enhancement                        plus        Total points
                                                                                                                            enhancement
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No Program \2\............................  Indeterminate...............            None             N/A             N/A             N/A             N/A
PO-1......................................  124.47......................           13.83           329.8           468.1           $0.51           $0.38

[[Page 37503]]

 
PO-2......................................  135.36......................           15.04           251.8           402.2            0.56            0.37
PO-3......................................  106.2.......................            11.8           377.2           495.2            0.50            0.39
PO-4......................................  107.46......................           11.94           385.6           505.0            0.49            0.38
PO-5......................................  126.99......................           14.11           309.0           450.0            0.51            0.37
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\1\ PO-1 assumes an equal weight on each ranking factor.
PO-2 assumes a 62.5 percent weight on RF-1 and a 12.5 percent weight on RF-2, RF-3, and RF-4.
PO-3 assumes a 62.5 percent weight on RF-2 and a 12.5 percent weight on RF-1, RF-3, and RF-4.
PO-4 assumes a 62.5 percent weight on RF-3 and a 12.5 percent weight on RF-1, RF-2, and RF-4.
PO-5 assumes a 62.5 percent weight on RF-4 and a 12.5 percent weight on RF-1, RF-2, and RF-3.
\2\ Baseline (pre-statute) assumes that CSP is not offered.
\3\ No program scenario assumes that CSP is not available to landowners. As discussed in the text, some level of benchmark conservation performance
  points are assumed to be generated in the absence of CSP. The exact amount is difficult to determine because maintenance of existing conservation
  measures vary due to several factors, such as fluctuations in personal economic conditions and preferences, advancing age, and changing resource
  priorities. In addition, the applicant pool in each alternative policy scenario is made up of different farm types and land-use types. These
  conditions preclude the estimation of a ``generic'' baseline applied to all alternative policy options. As a result, maintenance on existing
  conservation measures is assumed to generate 90 percent of the benchmark conservation performance points estimated in each scenario.

    NRCS analysis indicates that policy options PO-3 and PO-4 
demonstrated the highest degree of cost-effectiveness and environmental 
performance improvement. As a result, NRCS is giving strong 
consideration to policy options PO-3 and PO-4 for subsequent signup 
periods.
    For the initial signup period, NRCS recommends that the CSP program 
design place equal weight on the considered program ranking factors 
until program performance is established. Given that program 
performance has not been established, NRCS seeks public comment on 
which option best enables NRCS to meet program objectives. In addition, 
NRCS is requesting public comment on the appropriate weighting of the 
five ranking factors to maximize cost-effectively environmental 
benefits while maintaining consistency with the statutory purposes of 
the program. NRCS will consider these public comments when revising the 
weighting of these ranking factors prior to the next subsequent ranking 
period. The CSP rule will be finalized in FY 2010.

Section 2708 of the 2008 Act

    Section 2708, ``Compliance and Performance,'' of the 2008 Act added 
a paragraph to Section 1244(g) of the 1985 Act entitled, 
``Administrative Requirements for Conservation Programs,'' which states 
the following:

    ``(g) Compliance and performance.--For each conservation program 
under Subtitle D, the Secretary shall develop procedures--
    (1) To monitor compliance with program requirements;
    (2) To measure program performance;
    (3) To demonstrate whether long-term conservation benefits of 
the program are being achieved;
    (4) To track participation by crop and livestock type; and
    (5) To coordinate activities described in this subsection with 
the national conservation program authorized under section 5 of the 
Soil and Water Resources Conservation Act of 1977 (16 U.S.C. 
2004).''

    This new provision presents in one place the accountability 
requirements placed on the Agency as it implements conservation 
programs and reports on program results. The requirements apply to all 
programs under Subtitle D, including the Wetlands Reserve program, the 
Conservation Security Program, the Conservation Stewardship Program, 
the Farm and Ranch Lands Protection Program, the Grassland Reserve 
Program, the Environmental Quality Incentives Program (including the 
Agricultural Water Enhancement Program), the Wildlife Habitat Incentive 
Program, and the Chesapeake Bay Watershed initiative. These 
requirements are not directly incorporated into these regulations, 
which set out requirements for program participants. However, certain 
provisions within these regulations relate to elements of Section 
1244(g) of the 1985 Act and the Agency's accountability 
responsibilities regarding program performance. NRCS is taking this 
opportunity to describe existing procedures that relate to meeting the 
requirements of Section 1244(g) of the 1985 Act, and Agency 
expectations for improving its ability to report on each program's 
performance and achievement of long-term conservation benefits. Also 
included is reference to the sections of these regulations that apply 
to program participants and that relate to the Agency accountability 
requirements as outlined in Section 1244(g) of the 1985 Act.
    Monitor compliance with program requirements. NRCS has established 
application procedures to ensure that participants meet eligibility 
requirements, and follow-up procedures to ensure that participants are 
complying with the terms and conditions of their contractual 
arrangement with the government and that the installed conservation 
measures are operating as intended. These and related program 
compliance evaluation policies are set forth in Agency guidance 
(Conservation Programs Manual--440--Part 512 and Conservation Programs 
Manual --440--Part 508) (http://directives.sc.egov.usda.gov/). The 
program requirements applicable to participants that relate to 
compliance are set forth in these regulations in Sec.  1470.6, 
``Eligibility requirements,'' Sec.  1470.21, ``Contract requirements,'' 
Sec.  1470.22 ``Conservation stewardship plan,'' and Sec.  1470.23, 
``Conservation activity operation and maintenance.'' These sections 
make clear the general program eligibility requirements, participant 
obligations for implementing a conservation stewardship plan, contract 
obligations, and requirements for operating and maintaining CSP-funded 
conservation activities.
    Measure program performance. Pursuant to the requirements of the 
Government Performance and Results Act of 1993 (Pub. L. 103-62, Sec. 
1116) and guidance provided by OMB Circular A-11, NRCS has established 
performance measures for its

[[Page 37504]]

conservation programs. Program-funded conservation activity is captured 
through automated field-level business tools and the information is 
made publicly available at: http://ias.sc.egov.usda.gov/PRSHOME/. 
Program performance also is reported annually to Congress and the 
public through the annual performance budget, annual accomplishments 
report, and the USDA Performance Accountability Report. Related 
performance measurement and reporting policies are set forth in Agency 
guidance (GM--340--401 and GM--340--403 (http://directives.sc.egov.usda.gov/)).
    The conservation actions undertaken by participants are the basis 
for measuring program performance--specific actions are tracked and 
reported annually, while the effects of those actions relate to whether 
the long-term benefits of the program are being achieved. The program 
requirements applicable to participants that relate to undertaking 
conservation actions are set forth in these regulations in Sec.  
1470.21, ``Contract requirements,'' Sec.  1470.22 ``Conservation 
stewardship plan,'' and Sec.  1470.23, ``Conservation activity 
operation and maintenance.'' These sections make clear participant 
obligations for implementing, operating, and maintaining conservation 
stewardship activities, which in aggregate result in the program 
performance that is reflected in Agency performance reports.
    Demonstrating the long-term natural resource benefits achieved 
through conservation programs is subject to the availability of needed 
data, the capacity and capability of modeling approaches, and the 
external influences that affect actual natural resource condition. 
While NRCS captures many measures of ``output'' data, such as acres of 
conservation practices, it is still in the process of developing 
methods to quantify the contribution of those outputs to environmental 
outcomes
    NRCS currently uses a mix of approaches to evaluate whether long-
term conservation benefits are being achieved through its programs. 
Since 1982, NRCS has reported on certain natural resource status and 
trends through the National Resources Inventory (NRI), which provides 
statistically reliable, nationally consistent land cover/use and 
related natural resource data. However, lacking has been a connection 
between these data and specific conservation programs.\3\ In the 
future, the interagency Conservation Effects Assessment Project (CEAP), 
which has been underway since 2003, will provide nationally consistent 
estimates of environmental effects resulting from conservation 
practices and systems applied. CEAP results will be used in conjunction 
with performance data gathered through Agency field-level business 
tools to help produce estimates of environmental effects accomplished 
through Agency programs, such as CSP. In 2006 a Blue Ribbon panel 
evaluation of CEAP \4\ strongly endorsed the project's purpose, but 
concluded ``CEAP must change direction'' to achieve its purposes. In 
response, CEAP has focused on priorities identified by the Panel and 
clarified that its purpose is to quantify the effects of conservation 
practices applied on the landscape. Information regarding CEAP, 
including reviews and current status, is available at http://www.nrcs.usda.gov/technical/NRI/ ceap/. Since 2004 and the initial 
establishment of long-term performance measures by program, NRCS has 
been estimating and reporting progress toward long-term program goals. 
Natural resource inventory and assessment, and performance measurement 
and reporting policies are set forth in Agency guidance (GM--290--400; 
GM--340--401; GM--340--403) (http://directives.sc.egov.usda.gov/).
---------------------------------------------------------------------------

    \3\ The exception to this is the Conservation Reserve Program; 
since 1987 the NRI has reported acreage enrolled in CRP.
    \4\ Soil and Water Conservation Society. 2006. Final Report from 
the Blue Ribbon Panel Conducting an External Review of the US 
Department of Agriculture Conservation Effects Assessment Project. 
Ankeny, IA: Soil and Water Conservation Society. This review is 
available at (http://www.nrcs.usda.gov/technical/NRI/ceap/).
---------------------------------------------------------------------------

    Demonstrating the long-term conservation benefits of conservation 
programs is an Agency responsibility. Through CEAP, NRCS is in the 
process of evaluating how these long-term benefits can be achieved 
through the conservation practices and systems applied by participants 
under each of its programs. The CSP program requirements applicable to 
participants that relate to producing long-term conservation benefits 
are located in Sec.  1470.21, ``Contract requirements,'' Sec.  1470.22 
``Conservation stewardship plan,'' and Sec.  1470.23, ``Conservation 
activity operation and maintenance.'' These requirements and related 
program management procedures supporting program implementation are set 
forth in Agency guidance (Conservation Programs Manual 440--Part 512 
and Conservation Programs Manual --440--Part 508).
    Coordinate these actions with the national conservation program 
authorized under the Soil and Water Resources Conservation Act (RCA). 
The 2008 Act reauthorized and expanded on a number of elements of the 
RCA related to evaluating program performance and conservation 
benefits. Specifically, the 2008 Act added a provision stating,

    Appraisal and inventory of resources, assessment and inventory 
of conservation needs, evaluation of the effects of conservation 
practices, and analyses of alternative approaches to existing 
conservation programs are basic to effective soil, water, and 
related natural resources conservation.

    The program, performance, and natural resource and effects data 
described previously will serve as a foundation for the next RCA, which 
will also identify and fill, to the extent possible, data and 
information gaps. Policy and procedures related to the RCA are set 
forth in Agency guidance (GM--290--400 and GM--130--402) (http://directives.sc.egov.usda.gov/).
    The coordination of the previously described components with the 
RCA is an Agency responsibility and is not reflected in these 
regulations. However, it is likely that results from the RCA process 
will result in modifications to the program and performance data 
collected, to the systems used to acquire data and information, and 
potentially to the program itself. Thus, as the Secretary proceeds to 
implement the RCA in accordance with the statute, the approaches and 
processes developed will improve existing program performance 
measurement and outcome reporting capability and provide the foundation 
for improved implementation of the program performance requirements of 
Section 1244(g) of the 1985 Act.

Discussion of Program

    The Food, Conservation, and Energy Act of 2008 (2008 Act) amended 
the Food Security Act of 1985 (1985 Act) to establish the Conservation 
Stewardship Program (CSP) and authorize the program in fiscal years 
2009 through 2012. The purpose of CSP is to encourage producers to 
address resource concerns in a comprehensive manner by: (1) Undertaking 
additional conservation activities; and (2) improving, maintaining, and 
managing existing conservation activities. The Secretary of the United 
States Department of Agriculture (USDA) has delegated authority to the 
Natural Resources Conservation Service (NRCS) to administer CSP.
    Through CSP, NRCS will provide financial and technical assistance 
to eligible producers to conserve and enhance soil, water, air, and 
related natural resources on their land. Eligible lands include 
cropland, grassland,

[[Page 37505]]

prairie land, improved pastureland, rangeland, nonindustrial private 
forest lands, agricultural land under the jurisdiction of an Indian 
tribe, and other private agricultural land (including cropped woodland, 
marshes, and agricultural land used for the production of livestock) on 
which resource concerns related to agricultural production could be 
addressed. Participation in the program is voluntary.
    CSP encourages land stewards to improve their conservation 
performance by installing and adopting additional activities, and 
improving, maintaining, and managing existing activities on 
agricultural land and nonindustrial private forest land. NRCS will make 
funding for CSP available nationwide on a continuous application basis.
    The State Conservationist, in consultation with the State Technical 
Committee and local work groups, will focus program impacts on natural 
resources that are of specific concern for a State, or the specific 
geographic areas within a State. Applications will be evaluated 
relative to other applications addressing similar priority resource 
concerns to facilitate a competitive ranking process among applicants 
who face similar resource challenges.
    The 2008 Act requires NRCS to manage CSP to achieve a national 
average rate of $18 per acre, which includes the costs of all financial 
and technical assistance, and any other expenses associated with 
program enrollment and participation. NRCS will use a producer self-
screening checklist to help potential applicants decide for themselves 
whether CSP is the right program for them and their operation. The 
process focuses on basic information about CSP eligibility requirements 
and contract obligations.
    When examining applicant eligibility, CSP bases determinations on 
how applicants delineate their operation for other USDA programs. 
Specifically, any potential participant must be the operator in the 
Farm Service Agency (FSA) farm records management system. This 
requirement is needed because the FSA record system provides applicant 
eligibility information for Adjusted Gross Income and highly erodible 
land and wetland conservation provisions. Potential applicants who are 
not in the FSA farm records management system, or whose records are not 
current, must establish or update their records prior to making a CSP 
application. The 2008 Act also requires that the agricultural operation 
must include all agricultural land under the effective control of the 
applicant for the term of the proposed contract that is operated 
substantially separate from other operations.
    The 2008 Act directed the development of the conservation 
measurement tool (CMT) to estimate the level of environmental benefit 
to be achieved by a producer in implementing conservation activities. 
The term ``environmental benefit'' used in the context of the CMT is 
misleading. The CMT considers the relative physical effects of existing 
and proposed conservation activities to estimate improvements in 
conservation performance. It does not measure true environmental 
benefits, e.g., tons of carbon sequestered, or tons of soil saved.
    The CMT combines functions of existing NRCS tools for soil and 
water, grazing lands, and wildlife habitat; considers the physical 
effects of conservation activities, such as establishing permanent 
vegetative cover, across natural resource concerns and energy; and 
integrates and supports the processes of inventorying resources, 
determining eligibility, and ranking applications.
    NRCS will assist applicants with completing the inventory of 
resource conditions in the CMT. The inventory will enable the CMT to 
calculate a conservation performance score that will assist in ranking 
applications within State-identified geographic area ranking pools. For 
approved applicants, NRCS will request records of the applicants' 
conservation activity and production system information and conduct on-
site field verification to substantiate, prior to contract approval, 
that the resource inventory information provided for the CMT was 
accurate.
    CSP provides participants with two possible types of payments:
    (1) Annual payment for installing and adopting additional 
activities, and improving, maintaining, and managing existing 
activities. Compensation for on-farm research and demonstration 
activities, or pilot testing will be made through the annual payment.
    (2) Supplemental payment for the adoption of resource-conserving 
crop rotations.
    Setting the annual payment rates will be a significant challenge 
for NRCS. In addition to managing the program within the national 
average rate of $18 per acre, the 2008 Act also provides an acreage 
enrollment limit of 12,769,000 acres for each fiscal year. To address 
these constraints, NRCS intends to use the first ranking period as a 
payment discovery period to arrive at a uniform payment rate per 
conservation performance point by eligible land use type. NRCS requests 
public comment on ways to address program acreage and payment 
constraints, refine their payment approach, and make annual payments 
more consistent and predictable.
    Additionally NRCS seeks public comment on the proper distribution 
of CSP annual payment between payment for additional activities and 
payment for existing activities.
    Section 1470.26 of this interim final rule provides that NRCS will 
permit contract renewals to foster participant commitment to increased 
conservation performance. NRCS seeks public comment on the contract 
renewal criteria in the interim final rule.
    NRCS can broaden CSP's impact by offering participants the 
opportunity to install innovative conservation activities that appeal 
to all levels of land stewards, and increase conservation performance 
across all land uses, operation sizes and types, and production 
systems, including specialty crops and organic production. NRCS 
specifically requests through the comment process information on 
innovative enhancements NRCS should offer under CSP to improve 
participant's conservation performance.
    A step-by-step explanation of how CSP works from sign-up to 
fulfillment of the conservation stewardship contract is as follows:
    (1) CSP is available nationwide and sign-up will be continuous with 
announced ranking period cutoff dates.
    (2) A producer self-screening checklist will be available at local 
NRCS field offices and on the NRCS Web site. Producers will complete 
the checklist independently to help them decide if they meet CSP 
eligibility requirements.
    (3) Potential applicants who decide to apply for CSP complete a 
Contract Program Application Form, NRCS-CPA-1200, and submit 
information on their operation. The extent of an applicant's 
agricultural operation will be based on how the applicant represents 
their operation for other USDA programs.
    (4) Once applicant and land eligibility are determined, the NRCS 
field office will assist the producer with completing the CMT resource 
inventory.
    (5) CMT will estimate the level of environmental benefit to be 
achieved by the applicant. The CMT conservation performance scoring 
will enable NRCS to determine if the stewardship threshold requirement 
is met, rank applications, and establish payments.
    (6) Applicants will be ranked relative to other applicants who face 
similar resource challenges in State-established ranking pools using 
conservation performance ranking scores.

[[Page 37506]]

    (7) For approved applicants, NRCS will conduct on-site field 
verification to substantiate that conservation activity and production 
system information represented by the applicant was accurate.
    (8) After the conservation system information is verified, NRCS and 
the applicant proceed to develop the conservation stewardship plan and 
contract.
    (9) Upon approval, the contract will obligate the participant to 
achieve a higher level of conservation performance by installing 
additional activities scheduled in their conservation stewardship plan 
and to maintain the level of existing conservation performance 
identified at the time of application. For the initial sign-up, NRCS 
will consider a participant ``enrolled'' based on the fiscal year the 
application is submitted, once NRCS approves an applicant's contract. 
For subsequent ranking cut-off periods, NRCS will consider a 
participant enrolled in CSP based on the fiscal year the contract is 
approved.
    (10) NRCS will make payments as soon as practical after October 1 
of each fiscal year for activities carried out in the previous fiscal 
year. A participant's annual payment is determined using the 
conservation performance estimated by the CMT, and computed by land-use 
type for enrolled eligible land. A supplemental payment is also 
available to a participant receiving annual payments who also agrees to 
adopt a resource-conserving crop rotation.

Summary of Provisions

    The regulation is organized into three subparts: Subpart A--General 
Provisions; Subpart B--Contracts; and Subpart C--General 
Administration. Below is a summary of each section.

Subpart A--General Provisions

Section 1470.1 Applicability
    Section 1470.1, ``Applicability,'' sets forth the purpose, 
procedures, and requirements of CSP. In paragraph (b), NRCS defines 
that the program's purpose is to encourage producers to address 
resource concerns in a comprehensive manner by undertaking additional 
conservation activities; and improving, maintaining, and managing 
existing conservation activities.
    NRCS included paragraph (c) to specify where CSP assistance is 
available. CSP is available to eligible persons, legal entities, or 
Indian tribes in all 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 Mariana 
Islands.
    Paragraph (d) identifies that NRCS will provide CSP participants 
financial and technical assistance for the conservation, protection, 
and improvement of soil, water, and other related natural resources.
Section 1470.2 Administration
    Section 1470.2, ``Administration,'' describes the roles of NRCS at 
the National and State levels. NRCS will make CSP available nationwide 
on a continuous application basis. NRCS will operate the program to 
achieve a national average rate of $18 per acre, which includes the 
costs of all financial and technical assistance, and any other expenses 
associated with program enrollment and participation. As directed by 
the 2008 Act, NRCS will establish a national target to set aside five 
percent of CSP acres for socially disadvantaged farmers or ranchers and 
an additional five percent of CSP acres for beginning farmers or 
ranchers. State conservationists will obtain advice from State 
Technical Committees and local working groups on State program 
technical policies, outreach efforts, and program issues.
Section 1470.3 Definitions
    Section 1470.3, ``Definitions,'' sets forth definitions for terms 
used throughout this regulation. These definitions include: 
``agricultural land,'' ``animal waste storage or treatment facility,'' 
``applicant,'' ``beginning farmer or rancher,'' ``Chief,'' 
``conservation district,'' ``conservation practice,'' ``Designated 
Conservationist,'' ``enrollment,'' ``field office technical guide,'' 
``Indian tribe,'' ``Indian lands,'' ``joint operation,'' ``legal 
entity,'' ``liquidated damages,'' ``local working group,'' ``National 
Organic Program,'' ``Natural Resources Conservation Service,'' 
``nonindustrial private forest land,'' ``operation and maintenance,'' 
``participant,'' ``person,'' ``producer,'' ``Secretary,'' ``socially 
disadvantaged farmer or rancher,'' ``State Conservationist,'' ``State 
Technical Committee,'' ``technical assistance,'' and ``Technical 
Service Provider (TSP).'' Other definitions, such as: ``agricultural 
operation,'' ``conservation activities,'' ``conservation measurement 
tool,'' ``conservation stewardship plan,'' ``contract,'' 
``enhancement,'' ``management measure,'' ``payment,'' ``priority 
resource concern,'' ``resource concern,'' ``resource-conserving crop 
rotation,'' and ``stewardship threshold'' are definitions established 
to implement CSP's authorizing legislation.
    A number of these definitions are shared with other conservation 
programs administered by NRCS. The following definitions are unique or 
have special relevance to CSP implementation, or have been modified 
from how the term is defined in other NRCS conservation program rules:
    The definition of ``agricultural land'' describes those areas 
identified by CSP's authorizing legislation--working agricultural land 
being actively managed for agricultural production purposes upon which 
CSP will be focused, including cropland, grassland, improved 
prairieland, and land used for agro-forestry. NRCS does not intend to 
exclude working lands such as cropped woodlands and marshes, but will 
consider those as cropland.
    NRCS includes the definition of ``agricultural operation'' to 
specify an agricultural operation's parameters. An ``agricultural 
operation'' is defined as ``all agricultural land and other land as 
determined by NRCS, whether contiguous or noncontiguous: (1) Which is 
under the effective control of the applicant for the term of the 
proposed contract; and (2) which is operated by the applicant with 
equipment, labor, management, and production or cultivation practices 
that are substantially separate from other operations.'' The term 
``other land'' in this definition includes ineligible land identified 
in Sec.  1470.6, incidental areas that are not in agricultural 
production, and developed areas on the farm or ranch such as farm 
headquarters, ranch sites, barnyards, feedlots, manure storage 
facilities, machinery storage areas, and material handling facilities.
    The term ``applicant'' is defined as ``a person, legal entity, 
joint operation, or Indian tribe that has an interest in an 
agricultural operation, as defined in 7 CFR part 1400, who has 
requested in writing to participate in CSP.'' All applicants must 
establish records in the Farm Service Agency (FSA) farm records 
management system prior to submitting an application.
    The term, ``beginning farmer and rancher,'' is the same as the 
definition used by other NRCS conservation programs, which adopt the 
definition established by 7 U.S.C. 1991(a), except that the definition 
incorporates the term nonindustrial private forest land to ensure 
policies pertaining to beginning farmers and ranchers include those 
producers having nonindustrial private forest land.
    A definition for ``conservation activity'' is included to describe 
in a more comprehensive fashion the conservation systems, practices, or 
management measures needed to

[[Page 37507]]

address a resource concern or improve conservation performance.
    A definition for ``conservation measurement tool'' refers to the 
procedures that NRCS will use to estimate the level of environmental 
benefit to be achieved by a producer using the proxy of conservation 
performance improvement.
    The term ``conservation stewardship plan'' is defined as a record 
of the participant's decisions that describes the schedule of 
conservation activities to be implemented, managed, or improved by the 
participant. The definition clarifies that associated supporting 
information inventories the agricultural operation's resource concerns 
and existing conservation activities, establishes benchmark data, and 
identifies the participant's conservation objectives and will be 
maintained with the plan.
    The term ``enhancement'' means a type of activity installed and 
adopted to treat natural resources and improve conservation 
performance. Enhancements are installed at a level of management 
intensity that exceeds the sustainable level for a given resource 
concern, and those directly related to a practice standard are applied 
in a manner that exceeds the minimum treatment requirements of the 
standard. An example of an enhancement includes a grass-type cover crop 
used to scavenge nitrogen left in the soil after the harvest of a 
previous crop.
    The term ``enrollment'' means for the initial sign-up for FY 2009, 
NRCS will consider a participant ``enrolled'' in CSP based on the 
fiscal year the application is submitted, once NRCS approves the 
participant's contract. For subsequent ranking cut-off periods, NRCS 
will consider a participant enrolled in CSP based on the fiscal year 
the contract is approved. The acres enrolled for each fiscal year count 
against each year's annual 12.8 million acre enrollment limit.
    The terms, ``Indian Tribe'' and ``Indian lands'' reflect the terms 
used by other NRCS conservation programs. An Indian Tribe is any 
``Indian Tribe, band, nation, pueblo, or other organized group or 
community, including any Alaska Native village or regional corporation 
as defined in or established pursuant to the Alaska Native Claims 
Settlement Act (43 U.S.C. 1601 et seq.), which is recognized as 
eligible for the special programs and services provided by the United 
States to Indians because of their status as Indians.'' NRCS adopts 
terminology ``Indian lands'' in an effort to be more inclusive of all 
lands held in trust by the United States for individual Indians or 
Indian Tribes, all land, the title to which is held by an individual 
Indian, Indian family, or Indian Tribe.
    The term, ``management measure,'' is defined as one or more 
specific actions that is not a conservation practice, but has the 
effect of alleviating problems or the treatment of natural resources.
    The term ``National Organic Program'' has been inserted to refer to 
a program administered by the Agricultural Marketing Service. The rule 
contains provisions related to conservation activities associated with 
organic production. The National Organic Program is a national program 
which regulates the standards for any farm, wild crop harvesting, or 
handling operation that wants to sell an agricultural product as 
organically grown.
    The term, ``nonindustrial private forest land'' is based on the 
definition in the 2008 Act. Nonindustrial private forest land is rural 
land that has existing tree cover or is suitable for growing trees; and 
is owned by an individual, group, association, corporation, Indian 
Tribe, or other private legal entity that has definitive decision-
making authority over the land.
    NRCS includes the definition of ``operation and maintenance'' to 
identify that participants are expected to maintain existing 
conservation activities and additional conservation activities 
installed and adopted over the contract period.
    The definition of ``participant'' reflects the 2008 Act's 
definition of ``person'' and ``legal entity'' and the definition used 
by other NRCS conservation programs. A participant is a ``person, legal 
entity, joint operation, or Indian Tribe that is receiving payment or 
is responsible for implementing the terms and conditions of a CSP 
contract.''
    NRCS defines the term ``payment'' to mean the financial assistance 
provided under the terms of the CSP contract.
    NRCS includes the term, ``person'' to reflect the requirements of 7 
CFR part 1400, the regulation which details CCC's payment limitation 
policies.
    NRCS includes the term ``priority resource concern,'' which 
reflects the definition in the 2008 Act. A priority resource concern is 
a resource concern that is identified by the State Conservationist, in 
consultation with the State Technical Committee and local work groups, 
as a priority for a State, or the specific geographic areas within a 
State.
    The term ``producer'' means a person or legal entity or joint 
operation who has an interest in the agricultural operation, according 
to part 1400 of this chapter, or is engaged in agricultural production 
or forest management.
    The term ``resource concern,'' reflects the 2008 Act's ``resource 
concern'' definition. A resource concern ``means a specific natural 
resource problem that is likely to be addressed successfully through 
the implementation of conservation activities by producers.''
    The term, ``resource-conserving crop rotation'' means a crop 
rotation that includes at least one resource-conserving crop that 
reduces soil erosion, improves soil fertility and tilth, interrupts 
pest cycles, retains soil moisture, and reduces the need for irrigation 
in applicable areas.
    NRCS includes the term ``socially disadvantaged farmer or rancher'' 
that is based on the definition used by other NRCS conservation 
programs.
    The term ``stewardship threshold'' means the level of natural 
resource conservation and environmental management required, as 
determined by NRCS using conservation measurement tools, to conserve 
and improve the quality and condition of a natural resource. The 
stewardship threshold is used to determine if an applicant meets the 
minimum treatment requirements to be eligible for CSP. NRCS guided its 
efforts to set stewardship thresholds by sustainable levels of natural 
resource treatment. For example, for the soil erosion resource concern, 
this criterion is met when the erosion rate from wind and water does 
not exceed the Soil Loss Tolerance (T).
    NRCS includes the definition, ``technical service provider (TSP),'' 
to clarify that TSPs are used to provide technical services to program 
participants, in lieu of or on behalf of NRCS. A TSP is ``an 
individual, private-sector entity, or public agency certified by NRCS 
to provide technical services to program participants, in lieu of or on 
behalf of NRCS.'' The regulations governing TSPs are found in 7 CFR 
part 652.
Section 1470.4 Allocation and Management
    Section 1470.4, ``Allocation and management,'' addresses national 
allocations and how the proportion of eligible land will be used as the 
primary means to distribute CSP acres and associated funds among 
States. The Chief will also consider the extent and magnitude of 
conservation needs associated with agricultural production in each 
State, the degree to which CSP can help producers address these needs; 
and other considerations determined by the Chief to achieve equitable 
geographic distribution of program participation. NRCS is in the 
process of

[[Page 37508]]

developing State allocations according to the provisions in this 
section. After allocations are finalized NRCS will make information 
related to the allocation decisions available to the public. NRCS also 
seeks public comment on the use of these factors to distribute 
allocations among States.
Section 1470.5 Outreach Activities
    Section 1470.5, ``Outreach activities,'' describes how NRCS will 
establish special program outreach activities at the National, State, 
and local levels. NRCS will undertake special outreach effort to the 
historically underserved producers which includes socially 
disadvantaged, beginning and limited resource farmers or ranchers. In 
addition, NRCS will continue to ensure that producers are not 
disadvantaged based on the size or type of their operation or 
production system. Special outreach efforts will be made to small-scale 
farms, specialty crop operations, and organic farms.
Section 1470.6 Eligibility Requirements
    Section 1470.6, ``Eligibility requirements,'' sets forth the 
criteria for determining applicant and land eligibility.
    Paragraph (a) details applicant eligibility criteria. To be 
eligible, at the time of application, an applicant must: Be the 
operator in the FSA farm records management system for the agricultural 
operation; have documented control of the land for the term of the 
proposed contract; and be in compliance with highly erodible land and 
wetland conservation provisions, and the Adjusted Gross Income 
provisions. It is the applicant's responsibility to supply needed 
information to assist NRCS in determining program eligibility and in 
ranking the application. NRCS may request from the applicant: 
conservation and production system records, tax documentation, evidence 
documenting control of the land, and information to verify an 
applicant's status as a beginning farmer or rancher or socially 
disadvantaged farmer or rancher, if applicable.
    Paragraphs (b) and (c) set forth land eligibility criteria. Under 
CSP, a participant must enroll their entire agricultural operation. 
Eligible land for CSP includes private agricultural land, and 
agricultural Indian lands.
    Nonindustrial private forest land is also eligible by special rule, 
but no more than 10 percent of the annual acres enrolled may be 
nonindustrial private forest land. An applicant designates by 
submitting a separate application if they want to offer the 
nonindustrial private forest land for funding consideration.
    Land enrolled in the Conservation Reserve Program (7 CFR part 
1410), Wetlands Reserve Program (7 CFR part 1467), Grasslands Reserve 
Program (7 CFR part 1415), and Conservation Security Program (7 CFR 
part 1469) are ineligible for CSP. The 2008 Act limits eligibility to 
``private'' agricultural land; as such, land that is owned by a 
Federal, State, or local unit of government, with the exception of 
agricultural land under the jurisdiction of an Indian Tribe, is 
ineligible, regardless of the status of the operator. Additionally, a 
participant may not receive payment for land used for crop production 
after June 18, 2008, that had not been planted, considered to be 
planted, or devoted to crop production for at least four of the six 
years preceding that date, unless the land was: previously enrolled in 
the Conservation Reserve Program; maintained using long-term rotations, 
such as hayland in rotation; or incidental to the operation but needed 
for the efficient management of the operation. An example of land 
considered ``incidental to the operation'' that may be eligible for 
payment is land that had once been used for buildings and is now being 
used for crop production to square up a cropland field.
Section 1470.7 Enhancements and Conservation Practices
    Section 1470.7, ``Enhancements and conservation practices,'' 
identifies that a participant's decisions describing the additional 
enhancements and conservation practices to be implemented under the CSP 
contract will be recorded in the conservation stewardship plan. NRCS 
will make public the enhancements and conservation practices that may 
be installed, adopted, maintained, and managed through CSP.
Section 1470.8 Technical Assistance
    Section 1470.8, ``Technical assistance,'' explains that NRCS or 
other technical service providers (TSP) not directly affiliated with 
NRCS could provide the technical consultation for installing 
conservation activities under CSP. NRCS will ensure that technical 
assistance is available and program specifications are appropriate so 
as not to limit producer participation because of size or type of 
operation, or production system, including specialty crop and organic 
production. NRCS will assist potential applicants dealing with the 
requirements of certification under the National Organic Program and 
CSP requirements concerning how to coordinate and simultaneously meet 
eligibility standards under each program.

Subpart B--Contracts and Payments

Section 1470.20 Application for Contracts and Selecting Offers From 
Applicants
    Section 1470.20, ``Application for contracts and selecting offers 
from applicants,'' identifies procedures associated with application 
acceptance, contract application requirements, and the application 
evaluation process. Paragraph (a) clarifies that CSP applications will 
be accepted throughout the year, while paragraph (c) identifies that 
the State Conservationist or Designated Conservationist will rank 
applications at selected times of the year, as described more fully 
below.
    Paragraph (b) defines contract application requirements. To be 
considered for funding, a contract application must meet the 
stewardship threshold for at least one resource concern and would, at a 
minimum, achieve or exceed the stewardship threshold for at least one 
priority resource concern by the end of the contract. The conservation 
measurement tool (CMT) is used to determine if the stewardship 
threshold has been met for one or more resource concerns. NRCS seeks 
public comment on whether meeting the stewardship threshold on one 
resource concern and one priority resource concern is adequate, or if 
that number should be greater than one. The contract application must 
also include a map, aerial photograph, or overlay that identifies the 
applicant's agricultural operation and delineates the eligible land 
offered for payment and associated acreage amounts.
    The 2008 Act was prescriptive about application ranking factors and 
paragraph (c) identifies how contract applications will be evaluated. 
NRCS will conduct one or more ranking periods per year. It is intended 
that, to the extent practicable, at least one ranking period will occur 
in the first quarter of the fiscal year.
    In evaluating CSP applications, the State Conservationist or 
Designated Conservationist will use the CMT to estimate existing and 
proposed conservation performance and rank accordingly. Applications 
will be ranked based on: The level of conservation treatment proposed 
on all priority resource concerns; the degree to which the proposed 
conservation treatment on all applicable priority resource concerns 
effectively increases conservation performance based to the maximum 
extent practicable on the

[[Page 37509]]

CMT; the number of applicable priority resource concerns proposed to be 
treated to meet or exceed the stewardship threshold level by the end of 
the contract; the extent to which other resource concerns in addition 
to priority resource concerns may will be addressed to meet or exceed 
the stewardship threshold by the end of the contract period; and the 
extent to which the actual and anticipated environmental benefits from 
the contract are provided at the least cost relative to other similarly 
beneficial contract offers. NRCS requests public comment on the 
appropriate weighting of these five ranking factors that will maximize 
environmental benefits while maintaining consistency with the statutory 
purposes of the program. NRCS will consider these public comments when 
revising the weighting of these ranking factors when the CSP rule is 
finalized.
    Paragraph (d) provides the Chief may develop additional criteria 
for evaluating applications to ensure National, State, and local 
conservation priorities are addressed. Additional criteria have not 
been developed but may be considered in the future.
    Paragraph (e) specifies that the State Conservationist, with advice 
from the State Technical Committee and local work groups, will identify 
not less than three nor more than five priority resource concerns for a 
State, or the specific geographic areas within a State. Examples of 
priority resource concerns include: soil quality, soil erosion, water 
quality, water quantity, air, plants, animals, and energy. Public 
comment is requested on whether or not at least one of the priority 
resource concerns should be identified specifically to address wildlife 
habitat issues.
    Paragraph (f) has been added to describe how State or geographic 
area boundaries, used by State Conservationists to identify priority 
resource concerns, will also be used to establish ranking pool 
boundaries so that applicants will be ranked relative to other 
applicants who share similar resource challenges. For example, a State 
with diverse natural resource conditions and environmental factors may 
have multiple geographic areas established based on the distinct sets 
of priority resource concerns identified within each of these areas. 
The boundaries of these geographic areas will serve as the boundaries 
of ranking pools, within which applicants' operations would compete for 
funding approval. Nonindustrial forest land will compete in separate 
ranking pools from agricultural land. Paragraph (f)(3) enables State 
Conservationists to set up pools for conservation access for socially 
disadvantaged farmers or ranchers and beginning farmers or ranchers. 
Paragraph (f) also specifies that in any fiscal year, acres allocated 
to a funding pool that are not enrolled by a date determined by the 
State Conservationist may be reallocated, with associated funds, for 
use in that fiscal year under CSP.
    Paragraph (g) specifies that the State Conservationist or 
Designated Conservationist will make application approval 
determinations during established ranking periods based on eligibility 
and ranking score.
Section 1470.21 Contract Requirements
    Section 1470.21, ``Contract requirements,'' identifies elements 
contained within a contract and the responsibilities of a CSP contract 
participant. A participant must enter into a CSP contract, including a 
conservation stewardship plan, to enroll their eligible land and to 
receive payment. The CSP contract will: Provide for payments over a 
period of five years; incorporate by reference the conservation 
stewardship plan; state the payment to be issued by NRCS; and 
incorporate all provisions as required by law or statute. In order to 
receive payment and be in compliance with the CSP contract, the 
participant will agree to implement the conservation stewardship plan, 
operate and maintain the conservation activities, maintain and make 
available appropriate records documenting applied conservation 
activities and production system information, not engage in any action 
on the enrolled land that would interfere with the purposes of the 
conservation stewardship contract, and comply with terms and documents 
incorporated by reference in the contract.
Section 1470.22 Conservation Stewardship Plan
    Section 1470.22, ``Conservation stewardship plan,'' describes that 
NRCS will use the conservation planning process to encourage producers 
to address resource concerns in a comprehensive manner. The 
conservation stewardship plan contains a record of the participant's 
decisions on the schedule of conservation activities to be implemented, 
managed, and improved under CSP.
    Associated information maintained with the participant's 
conservation stewardship plan includes: An inventory of resource 
concerns; benchmark data on the condition of the existing conservation 
activities; the participant's conservation objectives; a plan map; and 
other information determined appropriate by NRCS. Where a participant 
wishes to pursue organic certification, their conservation stewardship 
plan information will document the participant's transition to or 
participation in the National Organic Program. If a participant is 
approved for the on-farm research and demonstration or pilot testing 
option, a research, demonstration or pilot testing job sheet consistent 
with design protocols and application procedures established by NRCS 
will be included in the associated information.
Section 1470.23 Conservation System Operation and Maintenance
    Section 1470.23, ``Conservation system operation and maintenance,'' 
addresses the participant's responsibility for operating and 
maintaining existing conservation activities on the agricultural 
operation to at least the level of conservation performance identified 
at the time of application for the conservation stewardship contract 
period. Additional activities installed and adopted over the term of 
the conservation stewardship contract also need to be maintained.
Section 1470.24 Payments
    Section 1470.24, ``Payments,'' describes the types of payments 
issued under CSP, how payments will be derived, and payment 
limitations. NRCS will provide annual payments for installing and 
adopting additional conservation activities, and improving, 
maintaining, and managing existing activities. A participant's annual 
payment will be determined based on expected environmental benefits, 
determined by estimating conservation performance improvement using the 
CMT, and computed by land-use type for enrolled eligible land.
    If operational adjustments are needed during the contract, the 
participant may replace enhancements with similar enhancements, 
provided the resulting conservation performance improvement is equal to 
or better than the participant's additional enhancements agreed upon at 
enrollment. A replacement that results in a decline below the original 
conservation performance level will not be allowed. A participant may 
be compensated through their annual payment for on-farm research and 
demonstration activities, or pilot testing of new technologies or 
innovative conservation activities.
    In establishing annual payment rates, NRCS will consider: estimated 
costs incurred by the participant associated with planning, design, 
materials,

[[Page 37510]]

installation, labor, management, maintenance, and training; estimated 
income foregone by the participant; and expected conservation 
performance increase as determined using the CMT. Consideration of 
these factors in CSP payment levels is intended to make them compliant 
with World Trade Organization green box requirements, which in brief 
call for payments to be based on producer cost incurred and income 
foregone.
    A participant may receive supplemental payments when he or she 
adopts a resource-conserving crop rotation. To be eligible for a 
supplemental payment, the participant must agree to adopt and maintain 
a beneficial resource-conserving crop rotation for the term of the 
contract. An example of a resource-conserving crop rotation would be 
adding alfalfa to a small grain, row crop rotation.
    NRCS will make CSP payments as soon as practicable after October 1 
for the previous fiscal year's activities. This retrospective payment 
approach will allow NRCS to field-verify applied conservation 
activities prior to contract obligation and payment.
    A CSP payment to a participant shall not be provided for 
conservation practices or enhancements applied with financial 
assistance through other USDA conservation programs, the installation 
or maintenance of animal waste storage or treatment facilities or 
associated waste transport or transfer devices for animal feeding 
operations, or conservation activities for which there is no cost 
incurred or income forgone by the participant.
    The 2008 Act requires that a person or legal entity may not 
receive, directly or indirectly, payments that, in the aggregate, 
exceed $200,000 for all contracts entered into during any 5-year 
period. The regulation includes an annual payment limit of $40,000 
during any fiscal year to a person or legal entity. This annual limit 
was added to reduce the chance that participants of large contracts 
would reach their $200,000 five-year limit early in their contract term 
and have reduced incentive to meet their obligations over the five year 
life of the contract. NRCS will monitor person or legal entity payment 
limitations through direct attribution to real persons.
    The absence of a contract payment limitation in the 2008 Act caused 
concern because of the potential for excessively large contracts. Since 
each member of a joint operation is treated as a separate person or 
legal entity with payments directly attributed to them, contracts with 
a joint operation could be very large. For example, a contract with a 
joint operation with five members who each reach their $200,000 per 
person or legal entity limit could have contract payments of $1 
million. To prevent large contracts of this nature, the rule includes a 
contract limit of $200,000 over the term of the initial contract 
period.
    With regard to the payment limitation as it applies to contracts 
with Indians represented by the Bureau of Indian Affairs (BIA) or an 
Indian Tribe, payments exceeding the payment limitation may be made to 
the Tribal participant if the BIA or Tribal official certifies in 
writing that no one individual will receive more than the payment 
limitation. The BIA or Tribe must also provide, annually, a listing of 
individuals and payments made, by tax identification number or other 
unique identification number, during the previous year for calculation 
of overall payment limitations. The BIA or Indian Tribe must also 
produce, at the request of NRCS, proof of payments made to the person 
or legal entity that incurred costs or sacrificed income related to 
conservation practice implementation.
Section 1470.25 Contract Modifications and Transfers of Land
    Section 1470.25, ``Contract modifications and transfers of land,'' 
provides that NRCS will not modify a contract to increase the contract 
obligation beyond the amount of the initial contract, with exception 
for contracts approved for renewal. The section further clarifies the 
participant's contract responsibilities as they relate to loss of 
control of land and the obligations of the transferee. In particular, 
paragraph (c) identifies that it is the participant's responsibility to 
notify NRCS of any voluntary or involuntary land transfer. If all or 
part of the land under contract is transferred, the contract terminates 
with respect to the transferred acres unless the transferee is eligible 
for CSP payments and agrees to accept all contractual obligations.
Section 1470.26 Contract Renewal
    From Section 1470.26, ``Contract renewal,'' NRCS will allow a 
participant to renew the contract for one additional five-year period 
if they meet specific criteria. Paragraph (b) contains the criteria, 
which include that the participant must, as determined by NRCS:
     Be in compliance with the terms of their initial contract;
     Add any newly-acquired eligible land that is part of their 
operation and meets minimum treatment criteria;
     Meet stewardship thresholds for additional priority 
resource concerns; and
     Agree to adopt conservation activities.
Section 1470.27 Contract Violations and Termination
    Section 1470.27, ``Contract violations and termination,'' addresses 
the procedures that NRCS will take when a violation has occurred or a 
contract termination is needed. Specifically, paragraph (a) provides 
that the State Conservationist, individually or by mutual consent, may 
terminate a contract when it is in the public interest or where the 
participants are unable to comply with the terms of the contract as a 
result of conditions beyond their control.
    Paragraph (b) states that the State Conservationist may allow the 
participant to retain a portion of any payments received in the case of 
hardship or, as appropriate, to the effort the participant has made to 
comply with the contract. When a participant claims that the reason for 
the violation is a form of hardship, the claim must be documented and 
have occurred after the participant entered into the contract.
    When a participant makes a hardship claim, the participant will 
provide documentation that details the hardship, when the hardship 
began, and why the hardship has prevented fulfilling requirements of 
the contract. Examples of hardship include: natural disasters, major 
illness, bankruptcy, and matters of public interest (e.g., military 
service, public utilities' easement or condemnation of land, or 
environmental and archeological concerns).
    Paragraph (c) specifies that if NRCS determines that a participant 
is in violation, the participant will be given a period of time to 
correct the violation. If a participant continues to violate the 
contract, NRCS may terminate the contract.
    NRCS may terminate a contract immediately if, in accordance with 
paragraph (d) of this section, the participant has filed a false claim, 
engaged in a scheme or device, or engaged in actions that are 
sufficiently purposeful or negligent to warrant a termination without 
delay.
    Paragraph (e) specifies that if NRCS terminates a contract, the 
participant forfeits all rights to future payments. Paragraph (e) 
provides notice to the public that NRCS has the ability to collect 
liquidated damages, along with payments received, plus interest. 
Additionally, participants who violate CSP contracts may be determined 
ineligible for future CSP funding or

[[Page 37511]]

funding in other programs administered by NRCS.

Subpart C--General Administration

Section 1470.30 Fair Treatment of Tenants and Sharecroppers
    Section 1470.30, ``Fair treatment of tenants and sharecroppers,'' 
specifies that any CSP payments received must be divided in the manner 
specified in the contract. Where conflicts arise between an operator 
and landowner, NRCS may refuse to enter into a CSP contract.
Section 1470.31 Appeals
    Section 1470.31, ``Appeals,'' notifies NRCS applicants and 
participants that they have the right to appeal in accordance with the 
processes and procedures outlined in 7 CFR 11 and 614. Matters of 
general applicability, such as payment rates and limits, and eligible 
conservation activities, are not subject to appeal.
Section 1470.32 Compliance With Regulatory Measures
    Section 1470.32, ``Compliance with regulatory measures,'' is added 
to notify participants that they are responsible for obtaining 
necessary authorities, rights, easements, permits, and other approvals 
necessary to implement, operate, and maintain items specified in the 
conservation stewardship plan. Additionally, participants are 
responsible for compliance with all laws and for all effects or actions 
resulting from the implementation of the CSP contract.
Section 1470.33 Access to Operating Unit
    Section 1470.33, ``Access to operating unit,'' is added to notify 
potential CSP applicants and CSP participants that an authorized NRCS 
representative may enter an operating unit for the purpose of 
determining eligibility, ascertaining accuracy of any representations, 
and confirming compliance with program requirements during the term of 
the contract. NRCS will attempt to contact the participant prior to 
entering the property.
Section 1470.34 Equitable Relief
    Section 1470.34, ``Equitable relief,'' notifies a participant that 
he or she may be eligible for equitable relief in accordance with 7 CFR 
part 635, if the participant relied upon the advice or action of NRCS 
and did not know or have reason to know that the action or advice was 
erroneous. This section also clarifies that liability for any action or 
advice taken on behalf of the TSP will be assumed by the TSP.
Section 1470.35 Offsets and Assignments
    Section 1470.35, ``Offsets and assignments,'' specifies any payment 
or portion of a payment will be issued without regard to any claim or 
lien by a creditor, except for agencies of the United States 
Government. A participant may assign any payment in accordance with the 
provisions of 7 CFR part 1404.
Section 1470.36 Misrepresentation and Scheme or Device
    Section 1470.36, ``Misrepresentation and scheme or device,'' 
outlines the remedies available to NRCS should NRCS determine that an 
applicant or participant misrepresented any fact affecting a CSP 
determination, adopted any scheme or device that tends to defeat the 
purpose of the program, deprives any tenant or sharecropper of payments 
to which they otherwise would be entitled, or made any fraudulent 
representation. Among the remedies available, NRCS may have their 
interest in all CSP contracts terminated, and determine them ineligible 
for future NRCS-administered conservation program funding.
Section 1470.37 Environmental Credits for Conservation Improvements
    Section 1470.37, ``Environmental credits for conservation 
improvements,'' provides NRCS' policy on environmental credits. NRCS 
believes that environmental benefits can be achieved by implementing 
conservation activities funded through CSP. These environmental 
benefits may result in opportunities for the program participant to 
sell environmental credits. These environmental credits must be 
compatible with the purposes of the CSP contract. NRCS asserts no 
direct or indirect interest in these credits. However, NRCS retains the 
authority to ensure that operation and maintenance requirements for 
CSP-funded improvements are met, consistent with Sec.  1470.21 and 
Sec.  1470.23. Where actions may impact the land and conservation 
activities under a CSP contract, NRCS will at the request of the 
participants, assist with the development of an O&M compatibility 
assessment.

List of Subjects in 7 CFR Part 1470

    Agricultural operation, Conservation activities, Conservation 
measurement tool, Natural resources, Priority resource concern, 
Stewardship threshold, Resource-conserving crop rotation, Soil and 
water conservation, Soil quality, Water quality and water conservation, 
Wildlife and forestry management.


0
For the reasons stated above, the Commodity Credit Corporation adds 
Part 1470 of Title 7 of the Code of Federal Regulations to read as 
follows:

PART 1470--CONSERVATION STEWARDSHIP PROGRAM

Subpart A--General Provisions
Sec.
1470.1 Applicability.
1470.2 Administration.
1470.3 Definitions.
1470.4 Allocation and management.
1470.5 Outreach activities.
1470.6 Eligibility requirements.
1470.7 Enhancements and conservation practices.
1470.8 Technical and other assistance.
Subpart B--Contracts and Payments
1470.20 Application for contracts and selecting offers from 
applicants.
1470.21 Contract requirements.
1470.22 Conservation stewardship plan.
1470.23 Conservation activity operation and maintenance.
1470.24 Payments.
1470.25 Contract modifications and transfers of land.
1470.26 Contract renewal.
1470.27 Contract violations and termination.
Subpart C--General Administration
1470.30 Fair treatment of tenants and sharecroppers.
1470.31 Appeals.
1470.32 Compliance with regulatory measures.
1470.33 Access to agricultural operation.
1470.34 Equitable relief.
1470.35 Offsets and assignments.
1470.36 Misrepresentation and scheme or device.
1466.37 Environmental credits for conservation improvements.

    Authority: 16 U.S.C. 3838d-3838g.

Subpart A--General Provisions


Sec.  1470.1   Applicability.

    (a) This part sets forth the policies, procedures, and requirements 
for the Conservation Stewardship Program (CSP) as administered by the 
Natural Resources Conservation Service (NRCS), for enrollment during 
fiscal year 2009 and thereafter.
    (b) The purpose of CSP is to encourage producers to address 
resource concerns in a comprehensive manner by:
    (1) Undertaking additional conservation activities; and
    (2) Improving, maintaining, and managing existing conservation 
activities.
    (c) CSP is applicable 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

[[Page 37512]]

Commonwealth of the Northern Mariana Islands.
    (d) NRCS provides financial assistance and technical assistance to 
participants for the conservation, protection, and improvement of soil, 
water, and other related natural resources, and for any similar 
conservation purpose as determined by NRCS.


Sec.  1470.2   Administration.

    (a) The regulations in this part will be administered under the 
general supervision and direction of the Chief, NRCS, who is a Vice 
President of the Commodity Credit Corporation (CCC).
    (b) The Chief is authorized to modify or waive a provision of this 
part if the Chief deems the application of that provision to a 
particular limited situation to be inappropriate and inconsistent with 
the purposes of the program. This authority cannot be further 
delegated. The Chief may not modify or waive any provision of this part 
which is required by applicable law.
    (c) To achieve the conservation goals of CSP, NRCS will:
    (1) Make the program available nationwide to eligible applicants on 
a continuous application basis with one or more ranking periods to 
determine enrollments, one of the ranking periods shall occur in the 
first quarter of each fiscal year, to the extent practicable; and
    (2) Develop conservation measurement tools for the purpose of 
carrying out the program.
    (d) NRCS will, to the maximum extent practicable, manage CSP to 
achieve a national average rate of $18 per acre, which includes the 
costs of all financial and technical assistance, and any other expenses 
associated with program enrollment and participation.
    (e) NRCS will establish a national target to set aside five percent 
of CSP acres for socially disadvantaged farmers or ranchers, and an 
additional five percent of CSP acres for beginning farmers or ranchers.
    (f) The State Conservationist will:
    (1) Obtain advice from the State Technical Committee and local 
working groups on the development of State-level technical, outreach, 
and program issues, including the identification of priority resource 
concerns for a State, or the specific geographic areas within a State;
    (2) Assign NRCS employees as Designated Conservationists to be 
responsible for CSP at the local level; and
    (3) Be responsible for the program in their assigned State.
    (g) NRCS may enter into agreements with Federal agencies, State and 
local agencies, conservation districts, Indian Tribes, private 
entities, and individuals to assist NRCS with program implementation.


Sec.  1470. 3   Definitions.

    The following definitions will apply to this part and all documents 
issued in accordance with this part, unless specified otherwise:
    Agricultural land means cropland, rangeland, and pastureland on 
which agricultural products, or livestock are produced and resource 
concerns may be addressed. Agricultural lands may also include other 
land and incidental areas included in the agricultural operation as 
determined by NRCS.
    Agricultural operation means all agricultural land and other land, 
as determined by NRCS, whether contiguous or noncontiguous:
    (1) Which is under the effective control of the applicant for the 
term of the proposed contract; and
    (2) Which is operated by the applicant with equipment, labor, 
management, and production or cultivation practices that are 
substantially separate from other operations.
    Animal waste storage or treatment facility means a structural 
conservation practice used for storing or treating animal waste.
    Applicant means a person, legal entity, joint operation, or Indian 
Tribe that has an interest in an agricultural operation, as defined in 
7 CFR part 1400, who has requested in writing to participate in CSP.
    Beginning farmer or rancher means:
    (1) An individual or legal entity who:
    (i) Has not operated a farm, ranch, or nonindustrial private forest 
land, or who has operated a farm, ranch, or nonindustrial private 
forest land for not more than 10 consecutive years (this requirement 
applies to all members of a legal entity); and
    (ii) Will materially and substantially participate in the operation 
of the farm or ranch.
    (2) In the case of a contract with an individual, individually or 
with the immediate family, material and substantial participation 
requires that the individual provide substantial day-to-day labor and 
management of the farm or ranch, consistent with the practices in the 
county or State where the farm is located.
    (3) In the case of a contract with a legal entity or joint 
operation, all members must materially and substantially participate in 
the operation of the farm or ranch. Material and substantial 
participation requires that each of the members provide some amount of 
the management, or labor and management necessary for day-to-day 
activities, such that if each of the members did not provide these 
inputs, operation of the farm or ranch would be seriously impaired.
    Chief means the Chief of NRCS, United States Department of 
Agriculture (USDA), or designee.
    Conservation activities means conservation systems, practices, or 
management measures needed to address a resource concern or improve 
environmental quality through the treatment of natural resources, and 
includes structural, vegetative, and management activities, as 
determined by NRCS.
    Conservation district means any district or unit of State, Tribal, 
or local government formed under State, Tribal, or territorial law for 
the express purpose of developing and carrying out a local soil and 
water conservation program. Such district or unit of government may be 
referred to as a ``conservation district,'' ``soil conservation 
district,'' ``soil and water conservation district,'' ``resource 
conservation district,'' ``land conservation committee,'' ``natural 
resource district,'' or similar name.
    Conservation measurement tool means procedures developed by NRCS, 
to estimate the level of environmental benefit to be achieved by a 
producer using the proxy of conservation performance improvement.
    Conservation planning means using the planning process outlined in 
the applicable National Planning Procedures Handbook of the United 
States Department of Agriculture.
    Conservation practice means a specified treatment, such as a 
structural or vegetative practice or management technique, commonly 
used to meet a specific need in planning and carrying out soil and 
water conservation programs for which standards and specifications, 
including interim standards and specifications, have been developed. 
Conservation practices are in the NRCS Field Office Technical Guide 
(FOTG), Section IV, which is based on the National Handbook of 
Conservation Practices (NHCP).
    Conservation stewardship plan means a record of the participant's 
decisions that describes the schedule of conservation activities to be 
implemented, managed, or improved. Associated supporting information 
that identifies and inventories resource concerns and existing 
conservation activities, establishes benchmark data, and documents the 
participant's conservation objectives will be maintained with the plan.
    Conservation system means a combination of conservation practices,

[[Page 37513]]

management measures, and enhancements used to address natural resource 
and environmental concerns in a comprehensive, holistic, and integrated 
manner.
    Contract means a legal document that specifies the rights and 
obligations of any participant who has been accepted into the program. 
A CSP contract is an agreement for the transfer of assistance from NRCS 
to the participant for installing, adopting, improving, managing, and 
maintaining conservation activities.
    Designated Conservationist means an NRCS employee whom the State 
Conservationist has designated as responsible for CSP at the local 
level.
    Enhancement means a type of conservation activity used to treat 
natural resources and improve conservation performance. Enhancements 
are installed at a level of management intensity that exceeds the 
sustainable level for a given resource concern, and those directly 
related to a practice standard are applied in a manner that exceeds the 
minimum treatment requirements of the standard.
    Enrollment means for the initial signup for FY2009, NRCS will 
consider a participant ``enrolled'' in CSP based on the fiscal year the 
application is submitted, once NRCS approves the participant's 
contract. For subsequent ranking cut-off periods, NRCS will consider a 
participant enrolled in CSP based on the fiscal year the contract is 
approved.
    Field office technical guide (FOTG) means the official local NRCS 
source of resource information and interpretations of guidelines, 
criteria, and standards for planning and applying conservation 
practices 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.
    Indian lands means all lands held in trust by the United States for 
individual Indians or Indian Tribes, or all land titles held by 
individual Indians or Tribes, subject to Federal restrictions against 
alienation or encumbrance, or lands subject to the rights of use, 
occupancy and/or benefit of certain Indian Tribes. This term also 
includes lands for which the title is held in fee status by Indian 
Tribes, and the U.S. Government-owned land under the Bureau of Indian 
Affairs jurisdiction.
    Indian Tribe means any Indian Tribe, band, nation, pueblo, or other 
organized group or community, including any Alaska Native village or 
regional corporation as defined in or established pursuant to the 
Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.), which is 
recognized as eligible for the special programs and services provided 
by the United States to Indians because of their status as Indians.
    Joint operation means, as defined in part 1400 of this chapter, a 
general partnership, joint venture, or other similar business 
arrangement in which the members are jointly and severally liable for 
the obligations of the organization.
    Legal entity means, as defined in part 1400 of this chapter, an 
entity created under Federal or State law.
    Liquidated damages means a sum of money stipulated in the CSP 
contract that the participant agrees to pay NRCS if the participant 
fails to fulfill the terms of the contract. The sum represents an 
estimate of the technical assistance expenses incurred to service the 
contract, and reflects the difficulties of proof of loss and the 
inconvenience or non-feasibility of otherwise obtaining an adequate 
remedy.
    Local working group means the advisory body as described in 7 CFR 
part 610.
    Management 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 natural resources.
    National Organic Program means the program, administered by the 
Agricultural Marketing Service, USDA, which regulates the standards for 
any farm, wild crop harvesting, or handling operation that wants to 
market an agricultural product as organically produced.
    Natural Resources Conservation Service means an agency of the USDA, 
which has responsibility for administering CSP using the funds, 
facilities, and authorities of the Commodity Credit Corporation.
    Nonindustrial private forest land means rural land that has 
existing tree cover or is suitable for growing trees, and is owned by 
an individual, group, association, corporation, Indian Tribe, or other 
private legal entity that has definitive decision-making authority over 
the land.
    Operation and maintenance means work performed by the participant 
to maintain existing conservation activities to at least the level of 
conservation performance identified at the time of application, and 
maintain additional conservation activities installed and adopted over 
the contract period.
    Participant means a person, legal entity, joint operation, or 
Indian Tribe that is receiving payment or is responsible for 
implementing the terms and conditions of a CSP contract.
    Payment means financial assistance provided to the participant 
under the terms of the CSP contract.
    Person means, as defined in part 1400 of this chapter, an 
individual, natural person and does not include a legal entity.
    Priority resource concern means a resource concern that is 
identified by the State Conservationist, in consultation with the State 
Technical Committee and local working groups, as a priority for a 
State, or the specific geographic areas within a State.
    Producer means a person, legal entity, or joint operation who has 
an interest in the agricultural operation, according to part 1400 of 
this chapter, or who is engaged in agricultural production or forest 
management.
    Resource concern means a specific natural resource problem that is 
likely to be addressed successfully through the implementation of 
conservation activities by producers.
    Resource-conserving crop means a crop that is one of the following:
    (1) A perennial grass, legume, or grass/legume grown for use as 
forage, seed for planting, or green manure;
    (2) A high residue producing crop; or
    (3) A cover crop following an annual crop.
    Resource-conserving crop rotation means a crop rotation that:
    (1) Includes at least one resource conserving crop as determined by 
the State Conservationist;
    (2) Reduces erosion;
    (3) Improves soil fertility and tilth;
    (4) Interrupts pest cycles; and
    (5) Reduces depletion of soil moisture or otherwise reduces the 
need for irrigation in applicable areas.
    Secretary means the Secretary of the USDA.
    Socially disadvantaged farmer or rancher means a producer who has 
been subjected to racial or ethnic prejudices because of their identity 
as a member of a group without regard to their individual qualities. A 
socially disadvantaged group is a group whose members have been subject 
to racial or ethnic prejudice because of their identity as members of a 
group, without regard to their individual qualities. These groups 
consist of American Indians or Alaskan Natives, Asians, Blacks or 
African Americans, Native Hawaiians or other Pacific Islanders, and 
Hispanics. Gender alone is not a covered group for the purposes of NRCS 
conservation programs. A socially disadvantaged applicant is an 
individual or entity who is a member of a socially disadvantaged group. 
For an entity, at least 50 percent ownership in the farm business must 
be held by socially disadvantaged individuals.

[[Page 37514]]

    State Conservationist means the NRCS employee authorized to 
implement CSP and direct and supervise NRCS activities in a State, the 
Caribbean Area, or the Pacific Islands Area.
    State Technical Committee means a committee established by the 
Secretary in a State pursuant to 16 U.S.C. 3861.
    Stewardship threshold means the level of natural resource 
conservation and environmental management required, as determined by 
NRCS using conservation measurement tools, to conserve and improve the 
quality and condition of a natural resource.
    Technical assistance means technical expertise, information, and 
tools necessary for the conservation of natural resources on land 
active in agricultural, forestry, or related uses. The term includes 
the following:
    (1) Technical services provided directly to farmers, ranchers, and 
other eligible entities, such as conservation planning, technical 
consultation, and assistance with design and implementation of 
conservation activities; and
    (2) Technical infrastructure, including processes, tools and agency 
functions needed to support delivery of technical services, such as 
technical standards, resource inventories, training, data, technology, 
monitoring, and effects analyses.
    Technical Service Provider (TSP) means an individual, private-
sector entity, or public agency certified by NRCS to provide technical 
services to program participants, in lieu of or on behalf of NRCS as 
referenced in 7 CFR part 652.


Sec.  1470.4  Allocation and management.

    (a) The Chief will allocate acres and associated funds to State 
Conservationists, based:
    (1) Primarily on each State's proportion of eligible land to the 
total amount of eligible land in all States; and
    (2) On consideration of--
    (i) The extent and magnitude of the conservation needs associated 
with agricultural production in each State,
    (ii) The degree to which implementation of the program in the State 
is, or will be, effective in helping producers address those needs, and
    (iii) Other considerations determined by the Chief, to achieve 
equitable geographic distribution of program participation.
    (b) In any fiscal year, acres allocated to a State that are not 
enrolled by a date determined by the Chief, may be reallocated with 
associated funds to another State for use in that fiscal year under 
CSP.


Sec.  1470.5  Outreach activities.

    (a) NRCS will establish program outreach activities at the 
national, State, and local levels to ensure that potential applicants 
who control eligible land are aware and informed that they may be 
eligible to apply for program assistance.
    (b) Special outreach will be made to eligible producers with 
historically low participation rates, including but not restricted to, 
beginning farmers or ranchers, limited resource producers, and socially 
disadvantaged farmers or ranchers, Indian Tribes, Alaska Natives, and 
Pacific Islanders.
    (c) NRCS will ensure that outreach is provided so as not to limit 
producer participation because of size or type or operation, or 
production system, including specialty crop and organic production.


Sec.  1470.6  Eligibility requirements.

    (a) Eligible applicant. To be eligible to participate in CSP, at 
the time of application, an applicant must meet all the following 
requirements:
    (1) Be the operator in the Farm Service Agency (FSA) farm records 
management system for the agricultural operation being offered for 
enrollment in the program. Potential applicants that are not in the FSA 
farm records management system must establish records with FSA prior to 
application. Potential applicants whose records are not current in the 
FSA farm records management system must update those records with FSA 
prior to application;
    (2) Have documented control of the land for the term of the 
proposed contract unless an exception is made by the Chief in the case 
of land allotted by the Bureau of Indian Affairs (BIA), Indian lands, 
or other instances in which the Chief determines that there is 
sufficient assurance of control;
    (3) Be in compliance with the highly erodible land and wetland 
conservation provisions found at 7 CFR part 12;
    (4) Be in compliance with Adjusted Gross Income provisions found at 
7 CFR part 1400;
    (5) Supply information, as required by NRCS, to determine 
eligibility for the program, including but not limited to, information 
related to eligibility requirements and ranking factors; conservation 
activity and production system records; information to verify the 
applicant's status as a beginning farmer and rancher or socially 
disadvantaged farmer or rancher, if applicable; and payment eligibility 
as established by 7 CFR part 1400; and
    (6) Provide a list of all members of the legal entity and embedded 
entities along with members' tax identification numbers and percentage 
interest in the entity. Where applicable, American Indians, Alaska 
Natives, and Pacific Islanders may use another unique identification 
number for each individual eligible for payment.
    (b) Eligible land. A contract application must include the eligible 
land on an applicant's entire agricultural operation, except as 
identified in paragraph (b)(3) of this section. The land as described 
below is part of the agricultural operation, and eligible for 
enrollment and payment under CSP:
    (1) Private agricultural land;
    (2) Agricultural Indian lands; and
    (3) Nonindustrial private forest land (NIPF).
    (i) By special rule in the statute, NIPF is eligible land.
    (ii) No more than 10 percent of the acres enrolled nationally in 
any fiscal year may be NIPF.
    (iii) The applicant will designate by submitting a separate 
application if they want to offer NIPF for funding consideration.
    (iv) If designated for funding consideration, then the NIPF 
component of the operation will include all the applicant's NIPF. If 
not designated for funding consideration, then the applicant's NIPF 
will not be part of the agricultural operation.
    (c) Ineligible land. The following ineligible lands are part of the 
agricultural operation, but ineligible for inclusion in the contract or 
for payment in CSP:
    (1) Land enrolled in the Conservation Reserve Program, 7 CFR part 
1410;
    (2) Land enrolled in the Wetlands Reserve Program, 7 CFR part 1467;
    (3) Land enrolled in the Grassland Reserve Program, 7 CFR part 
1415;
    (4) Land enrolled in the Conservation Security Program, 7 CFR part 
1469;
    (5) Public land including land owned by a Federal, State, or local 
unit of government; and
    (6) Land used for crop production after June 18, 2008, that had not 
been planted, considered to be planted, or devoted to crop production 
for at least 4 of the 6 years preceding that date, unless that land--
    (i) Had previously been enrolled in the Conservation Reserve 
Program,
    (ii) Has been maintained using long-term crop rotation practices as 
determined by the Designated Conservationist, or
    (iii) Is incidental land needed for efficient operation of the farm 
or ranch as determined by the Designated Conservationist.

[[Page 37515]]

Sec.  1470.7  Enhancements and conservation practices.

    (a) Participant decisions describing the additional enhancements 
and conservation practices to be implemented under the conservation 
stewardship contract will be recorded in the conservation stewardship 
plan.
    (b) NRCS will make available to the public the list of enhancements 
and conservation practices available to be installed, adopted, 
maintained, and managed through CSP.


Sec.  1470.8  Technical and other assistance.

    (a) NRCS may provide technical assistance to an eligible applicant 
or participant either directly or through a technical service provider 
as set forth in 7 CFR part 652.
    (b) NRCS retains approval authority over certification of work done 
by non-NRCS personnel for the purpose of approving CSP payments.
    (c) NRCS will ensure that technical assistance is available and 
program specifications are appropriate so as not to limit producer 
participation because of size or type or operation, or production 
system, including specialty crop and organic production. In providing 
technical assistance to specialty crop and organic producers, NRCS will 
provide appropriate training to field staff to enable them to work with 
these producers and to utilize cooperative agreements and contracts 
with nongovernmental organizations with expertise in delivering 
technical assistance to these producers.
    (d) NRCS will assist potential applicants dealing with the 
requirements of certification under the National Organic Program and 
CSP requirements concerning how to coordinate and simultaneously meet 
eligibility standards under each program.

Subpart B--Contracts and Payments


Sec.  1470.20  Application for contracts and selecting offers from 
applicants.

    (a) Submission of contract applications. Eligible applicants may 
submit an application to enroll eligible land into CSP on a continuous 
basis.
    (b) Eligibility. To be eligible to participate in CSP, an applicant 
must submit to the Designated Conservationist for approval, a contract 
application that:
    (1) Indicates the applicant's conservation activities, at the time 
of application, are meeting the stewardship threshold for at least one 
resource concern;
    (2) Would, at a minimum, meet or exceed the stewardship threshold 
for at least one priority resource concern by the end of the 
conservation stewardship contract by--
    (i) Installing and adopting additional conservation activities, and
    (ii) Improving, maintaining, and managing conservation activities 
present on the agricultural operation at the time the contract 
application is accepted by NRCS;
    (3) Provides a map, aerial photograph, or overlay that--
    (i) Identifies the applicant's agricultural operation and/or NIPF 
component of the operation, and
    (ii) Delineates eligible land offered for payment with associated 
acreage amounts; and
    (4) If the applicant is applying for on-farm research and 
demonstration activities or for pilot testing, describes the nature of 
the research, demonstration or pilot testing in a manner consistent 
with design protocols and application procedures established by NRCS.
    (c) Evaluation of contract applications. NRCS will conduct one or 
more ranking periods each fiscal year.
    (1) To the extent practicable, one ranking period will occur in the 
first quarter of the fiscal year.
    (2) In evaluating CSP applications, the State Conservationist or 
Designated Conservationist will rank applications based on the 
following factors, using the conservation measurement tool, to the 
maximum extent practicable--
    (i) Level of conservation treatment on all applicable priority 
resource concerns at the time of application;
    (ii) Degree to which the proposed conservation treatment on 
applicable priority resource concerns effectively increases 
conservation performance;
    (iii) Number of applicable priority resource concerns proposed to 
be treated to meet or exceed the stewardship threshold by the end of 
the contract; and
    (iv) Extent to which other resource concerns, in addition to 
priority resource concerns, will be addressed to meet or exceed the 
stewardship threshold by the end of the contract period.
    (3) In the event that application ranking scores from (2) above are 
similar, the application that represents the least cost to the program 
will be given higher priority.
    (4) The State Conservationist or Designated Conservationist may not 
assign a higher priority to any application because the applicant is 
willing to accept a lower payment than the applicant would otherwise be 
eligible to receive.
    (d) State and local priorities. The Chief may develop and use 
additional criteria for evaluating applications that are determined 
necessary to ensure that national, State, and local conservation 
priorities are effectively addressed.
    (e) Application. The State Conservationist will take the following 
actions to facilitate the evaluation and ranking of applications:
    (1) Implement the use of the conservation measurement tool to 
estimate existing and proposed conservation performance;
    (2) Identify not less than 3 nor more than 5 priority resource 
concerns for a State, or the specific geographic areas within a State, 
with advice from the State Technical Committee and local working 
groups; and
    (3) Establish ranking pools for application evaluation purposes.
    (f) Ranking pools. Ranking pools will be established based on the 
same State or geographic area boundaries used to identify priority 
resource concerns so applicants will be ranked relative to other 
applicants who share similar resource challenges.
    (1) NIPF will compete in ranking pools separate from agricultural 
land. An applicant with both NIPF and agricultural land will have the 
options to submit:
    (i) One application for NIPF;
    (ii) One application for agricultural land; or
    (iii) Two applications, one for each land type.
    (2) An applicant with an agricultural operation or NIPF component 
of the operation that crosses ranking pool boundaries will make 
application and be ranked in the ranking pool where the largest acreage 
portion of their operation occurs.
    (3) Within each established geographic area, the State 
Conservationist will set up special pools for conservation access for 
certain farmers or ranchers, including:
    (i) One pool for socially disadvantaged farmers or ranchers; and
    (ii) One pool for beginning farmers or ranchers.
    (4) Applicants who want their application considered in the pool 
for socially disadvantaged farmers or ranchers or beginning farmers or 
ranchers will designate that intent on their application and provide 
the required information.
    (5) In any fiscal year, acres and associated funds allocated to a 
ranking pool or pool that are not enrolled by a date determined by the 
State Conservationist, may be reallocated within the State for use in 
that fiscal year under CSP.
    (g) Application approval. The State Conservationist or Designated

[[Page 37516]]

Conservationist will make application approval determinations during 
established ranking periods based on eligibility and ranking score. An 
eligible application may be approved for funding after a determination 
of the application's ranking priority.


Sec.  1470.21  Contract requirements.

    (a) After a determination that the application will be approved and 
a conservation stewardship plan will be developed in accordance with 
Sec.  1470.22, the State Conservationist or designee shall enter into a 
conservation stewardship contract with the participant to enroll the 
eligible land to receive payment.
    (b) The conservation stewardship contract shall:
    (1) Provide for payments over a period of 5 years;
    (2) Incorporate by reference the conservation stewardship plan;
    (3) State the payment amount NRCS agrees to make to the participant 
annually, subject to the availability of funds;
    (4) Incorporate all provisions as required by law or statute, 
including requirements that the participant will--
    (i) Implement the conservation stewardship plan approved by NRCS 
during the term of the contract,
    (ii) Operate and maintain conservation activities on the 
agricultural operation consistent with Sec.  1470.23,
    (iii) Comply with the terms of the contract, or documents 
incorporated by reference into the contract,
    (iv) Refund as determined by NRCS, any program payments received 
with interest, and forfeit any future payments under the program, upon 
the violation of a term or condition of the contract, consistent with 
Sec.  1470.27,
    (v) Refund as determined by NRCS, all program payments received 
with interest, upon the transfer of the right and interest of the 
participant, in land subject to the contract, unless the transferee of 
the right and interest agrees to assume all obligations of the 
contract, consistent with Sec.  1470.25,
    (vi) Maintain, and make available to NRCS upon request, appropriate 
records documenting applied conservation activity and production system 
information, and providing evidence of the effective and timely 
implementation of the conservation stewardship plan and contract, and
    (vii) Not engage in any action during the term of the conservation 
stewardship contract on the eligible land covered by the contract that 
would interfere with the purposes of the conservation stewardship 
contract;
    (5) Permit all economic uses of the land that:
    (i) Maintain the agricultural or forestry nature of the land, and
    (ii) Are consistent with the conservation purposes of the contract;
    (6) Include a provision to ensure that a participant shall not be 
considered in violation of the contract for failure to comply with the 
contract due to circumstances beyond the control of the participant, 
including a disaster or related condition, as determined by the State 
Conservationist; and
    (7) Include such other provisions as NRCS determines necessary to 
ensure the purposes of the program are achieved.


Sec.  1470.22  Conservation stewardship plan.

    (a) NRCS will use the conservation planning process as outlined in 
the National Planning Procedures Handbook to encourage participants to 
address resource concerns in a comprehensive manner.
    (b) The conservation stewardship plan will contain a record of the 
participant's decisions that describes the schedule of conservation 
activities to be implemented, managed, or improved under the 
conservation stewardship contract.
    (c) Associated supporting information maintained with the 
participant's plan will:
    (1) Identify and inventory resource concerns;
    (2) Establish benchmark data on the condition of existing 
conservation activities;
    (3) Document the participant's conservation objectives to reach and 
exceed stewardship thresholds;
    (4) Include a plan map delineating enrolled land with associated 
acreage amounts receiving program payments;
    (5) Include in the case where a participant wishes to initiate or 
retain organic certification, documentation that will support the 
participant's transition to or participation in the National Organic 
Program;
    (6) Include in the case where a participant is approved for the on-
farm research and demonstration or pilot testing option, a research, 
demonstration or pilot testing plan consistent with design protocols 
and application procedures established by NRCS; and
    (7) Contain other information as determined appropriate by NRCS.


Sec.  1470.23  Conservation activity operation and maintenance.

    The participant will operate and maintain existing conservation 
activities on the agricultural operation to at least the level of 
conservation performance identified at the time of application for the 
conservation stewardship contract period and additional activities 
installed and adopted over the term of the conservation stewardship 
contract.


Sec.  1470.24  Payments.

    (a) Annual payments. Subject to the availability of funds, NRCS 
will provide an annual payment under the program to compensate a 
participant for installing and adopting additional conservation 
activities, and improving, maintaining, and managing existing 
activities.
    (1) To receive an annual payment, a participant must:
    (i) Install and adopt additional conservation activities as 
scheduled in the conservation stewardship plan. At least one 
enhancement must be scheduled, installed, and adopted in the first year 
of the contract. All enhancements must be scheduled, installed, and 
adopted by the end of the third year of the contract; and
    (ii) Maintain at least the level of existing conservation 
performance identified at the time of application for the conservation 
stewardship contract period.
    (2) A participant's annual payment will be determined using the 
conservation performance estimated by the conservation measurement 
tool, and computed by land-use type for enrolled eligible land.
    (3) The annual payment rates will be based to the maximum extent 
practicable, on the following factors:
    (i) Costs incurred by the participant associated with planning, 
design, materials, installation, labor, management, maintenance, or 
training;
    (ii) Income foregone by the participant; and
    (iii) Expected environmental benefits, determined by estimating 
conservation performance improvement using the conservation measurement 
tool.
    (4) The annual payment method will accommodate some participant 
operational adjustments without the need for contract modification.
    (i) Enhancements may be replaced with similar enhancements as long 
as the conservation performance estimated by the conservation 
measurement tool is equal to or better than the conservation 
performance of the additional enhancements offered at enrollment. An 
enhancement replacement that results in a decline below that 
conservation performance level will not be allowed.
    (ii) Adjustments to existing activities may occur consistent with 
conservation performance requirements from Sec.  1470.23(a).

[[Page 37517]]

    (5) Enhancements may be applied on other land included in an 
agricultural operation, as determined by NRCS.
    (b) Supplemental payments. Subject to the availability of funds, 
NRCS will provide a supplemental payment to a participant receiving 
annual payments, who also agrees to adopt a resource-conserving crop 
rotation.
    (1) The State Conservationist will determine whether a resource-
conserving crop rotation is eligible for supplemental payments based on 
whether the resource-conserving crop rotation is designed to provide 
natural resource conservation and production benefits.
    (2) A participant must agree to adopt and maintain a beneficial 
resource-conserving crop rotation for the term of the contract to be 
eligible to receive a supplemental payment. A resource-conserving crop 
rotation is considered adopted when the resource-conserving crop is 
planted on at least one-third of the rotation acres. The resource-
conserving crop must be adopted by the third year of the contract and 
planted on all rotation acres by the fifth year of the contract.
    (3) The supplemental payment rate will be based, to the maximum 
extent practicable, on costs incurred and income foregone by the 
participant and expected environmental benefits, determined by 
estimating conservation performance improvement using the conservation 
measurement tool.
    (c) On-farm research and demonstration or pilot testing. A 
participant may be compensated through their annual payment for:
    (1) On-farm research and demonstration activities; or
    (2) Pilot testing of new technologies or innovative conservation 
activities.
    (d) Timing of payments. NRCS will make payments as soon as 
practicable after October 1 of each fiscal year for activities carried 
out in the previous fiscal year.
    (e) Noncompensatory matters. A CSP payment to a participant shall 
not be provided for:
    (1) Conservation practices or enhancements applied with financial 
assistance through other USDA conservation programs;
    (2) The design, construction, or maintenance of animal waste 
storage or treatment facilities or associated waste transport or 
transfer devices for animal feeding operations; or
    (3) Conservation activities for which there is no cost incurred or 
income foregone by the participant.
    (f) Payment limits. A person or legal entity may not receive, 
directly or indirectly, payments that, in the aggregate, exceed $40,000 
during any fiscal year for all CSP contracts entered into, and $200,000 
for all CSP contracts entered into during any 5-year period, excluding 
funding arrangements with federally recognized Indian tribes or Alaska 
Native corporations, regardless of the number of contracts entered into 
under the CSP by the person or legal entity.
    (g) Contract limit. Each conservation stewardship contract will be 
limited to $200,000 over the term of the initial contract period.
    (h) Payment limitation provisions for Indians for Indians 
represented by the BIA. With regard to contracts with individual 
Indians or Indians represented by BIA, payments exceeding the payment 
limitation may be made to the Tribal participant if a BIA or Tribal 
official certifies in writing that no one individual, directly or 
indirectly, will receive more than the payment limitation. The Tribal 
entity must also provide, annually, a listing of individuals and 
payments made, by social security or tax identification number or other 
unique identification number, during the previous year for calculation 
of overall payment limitations. The Tribal entity must also produce, at 
the request of NRCS, proof of payments made to the person or legal 
entity that incurred costs or sacrificed income related to conservation 
activity implementation.
    (i) Requirements for payment. To be eligible to receive a CSP 
payment, all legal entities or persons applying, either alone or as 
part of a joint operation, must provide a tax identification number and 
percentage interest in the legal entity. In accordance with 7 CFR part 
1400, an applicant applying as a joint operation or legal entity must 
provide a list of all members of the legal entity and joint operation 
and associated embedded entities, along with the members' social 
security numbers and percentage interest in the joint operation or 
legal entity. Where applicable, American Indians, Alaska Natives, and 
Pacific Islanders may use another unique identification number for each 
individual eligible for payment.
    (j) Unique tax identification numbers. Any participant that 
utilizes a unique identification number as an alternative to a tax 
identification number will utilize only that identifier for any and all 
other CSP contracts to which the participant is a party. Violators will 
be considered to have provided fraudulent representation and be subject 
to full penalties of Sec.  1470.36.
    (k) Payment data. NRCS will maintain detailed and segmented data on 
CSP contracts and payments to allow for quantification of the amount of 
payments made for:
    (1) Installing and adopting additional activities;
    (2) Improving, maintaining, and managing existing activities;
    (3) Participation in research and demonstration, or pilot projects; 
and
    (4) Development and periodic assessment and evaluation of 
conservation stewardship plans developed under this rule.


Sec.  1470.25  Contract modifications and transfers of land.

    (a) NRCS may allow a participant to modify a conservation 
stewardship contract if NRCS determines that the modification is 
consistent with achieving the purposes of the program.
    (b) NRCS will not allow a participant to modify a conservation 
stewardship contract to increase the contract obligation beyond the 
amount of the initial contract, with exception for contracts approved 
by NRCS for renewal.
    (c) Land under contract will be considered transferred if the 
participant loses control of the acreage for any reason.
    (1) The participant is responsible to notify NRCS prior to any 
voluntary or involuntary transfer of land under contract.
    (2) If all or part of the land under contract is transferred, the 
contract terminates with respect to the transferred land unless:
    (i) The transferee of the land provides written notice within 60 
days to NRCS that all duties and rights under the contract have been 
transferred to, and assumed by, the transferee; and
    (ii) The transferee meets the eligibility requirements of the 
program.


Sec.  1470.26  Contract renewal.

    (a) At the end of an initial conservation stewardship contract, 
NRCS will allow a participant to renew the contract to receive payments 
for one additional five-year period, subject to the availability of 
funds, if they meet criteria from paragraph (b) of this section.
    (b) To be considered for contract renewal, the participant must:
    (1) Be in compliance with the terms of their initial contract as 
determined by NRCS;
    (2) Add any newly acquired eligible land that is part of the 
agricultural operation and meets minimum treatment criteria as 
established and determined by NRCS;
    (3) Meet stewardship thresholds for additional priority resource 
concerns as determined by NRCS; and

[[Page 37518]]

    (4) Agree to adopt conservation activities as determined by NRCS.


Sec.  1470.27  Contract violations and termination.

    (a) The State Conservationist may terminate, or by mutual consent 
with the participants, terminate a contract where:
    (1) The participants are unable to comply with the terms of the 
contract as the result of conditions beyond their control; or
    (2) Contract termination, as determined by the State 
Conservationist, is in the public interest.
    (b) If a contract is terminated in accordance with the provisions 
of paragraph (a) of this section, the State Conservationist may allow 
the participant to retain a portion of any payments received 
appropriate to the effort the participant has made to comply with the 
contract, or, in cases of hardship, where forces beyond the 
participant's control prevented compliance with the contract. If a 
participant claims hardship, such claims must be clearly documented and 
cannot have existed when the applicant applied for participation in the 
program.
    (c) If NRCS determines that a participant is in violation of the 
contract terms or documents incorporated therein, NRCS shall give the 
participant a period of time, as determined by NRCS, to correct the 
violation and comply with the contract terms and attachments thereto. 
If a participant continues in violation, NRCS may terminate the CSP 
contract in accordance with paragraph (e) of this section.
    (d) Notwithstanding the provisions of paragraph (c) of this 
section, a contract termination shall be effective immediately upon a 
determination by NRCS that the participant:
    (1) Has submitted false information or filed a false claim;
    (2) Engaged in any act, scheme, or device for which a finding of 
ineligibility for payments is permitted under the provisions of Sec.  
1470.36; or
    (3) Engaged in actions that are deemed to be sufficiently 
purposeful or negligent to warrant a termination without delay.
    (e) If NRCS terminates a contract, the participant will forfeit all 
rights to future payments under the contract, pay liquidated damages, 
and refund all or part of the payments received, plus interest. 
Participants violating CSP contracts may be determined ineligible for 
future NRCS-administered conservation program funding.
    (1) NRCS may require a participant to provide only a partial refund 
of the payments received if a previously installed conservation 
activity has achieved the expected conservation performance 
improvement, is not adversely affected by the violation or the absence 
of other conservation activities that would have been installed under 
the contract, and the associated operation and maintenance requirement 
of the activity had been met.
    (2) NRCS will have the option to reduce or waive the liquidated 
damages, depending upon the circumstances of the case.
    (i) When terminating a contract, NRCS may reduce the amount of 
money owed by the participant by a proportion that reflects the good 
faith effort of the participant to comply with the contract or the 
existence of hardships beyond the participant's control that have 
prevented compliance with the contract. If a participant claims 
hardship, that claim must be well documented and cannot have existed 
when the applicant applied for participation in the program.
    (ii) In carrying out its role in this section, NRCS may consult 
with the local conservation district.

Subpart C--General Administration


Sec.  1470.30  Fair treatment of tenants and sharecroppers.

    Payments received under this part must be divided in the manner 
specified in the applicable contract. NRCS will ensure that tenants and 
sharecroppers 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 joint applicants seeking enrollment as to an 
applicant's eligibility to participate in the contract as a tenant.


Sec.  1470.31  Appeals.

    A participant may obtain administrative review of an adverse 
decision under this part in accordance with 7 CFR parts 11 and 614. 
Determinations in matters of general applicability, such as payment 
rates, payment limits, the designation of identified priority resource 
concerns, and eligible conservation activities are not subject to 
appeal.


Sec.  1470.32  Compliance with regulatory measures.

    Participants shall be responsible for obtaining the authorities, 
rights, easements, permits, or other approvals or legal compliance 
necessary for the implementation, operation, and maintenance associated 
with the conservation stewardship plan. Participants shall be 
responsible for compliance with all laws and for all effects or actions 
resulting from the implementation of the contract.


Sec.  1470.33  Access to agricultural operation.

    NRCS will have the right to enter an agricultural operation for the 
purposes of determining eligibility and for ascertaining the accuracy 
of any representations, including natural resource information provided 
by an applicant for the purpose of evaluating a contract application. 
Access shall include the right to provide technical assistance, 
determine eligibility, assess natural resource conditions, inspect any 
work undertaken under the contract, and collect information necessary 
to evaluate the implementation of conservation activities in the 
contract. NRCS shall make an effort to contact the participant prior to 
the exercise of this provision.


Sec.  1470.34  Equitable relief.

    (a) If a participant relied upon the advice or action of NRCS and 
did not know, or have reason to know, that the action or advice was 
improper or erroneous, the participant may be eligible for equitable 
relief under 7 CFR part 635. The financial or technical liability for 
any action by a participant that was taken based on the advice of a 
Technical Service Provider will remain with the Technical Service 
Provider and will not be assumed by NRCS.
    (b) If a participant has been found in violation of a provision of 
the conservation stewardship contract or any document incorporated by 
reference through failure to comply fully with that provision, the 
participant may be eligible for equitable relief under 7 CFR part 635.


Sec.  1470.35  Offsets and assignments.

    (a) Any payment or portion thereof due any participant under this 
part shall be allowed without regard to any claim or lien in favor of 
any creditor, except agencies of the United States Government. The 
regulations governing offsets and withholdings found at 7 CFR part 1403 
shall be applicable to contract payments.
    (b) Any participant entitled to any payment may assign any payments 
in accordance with regulations governing assignment of payment found at 
7 CFR part 1404.


Sec.  1470.36  Misrepresentation and scheme or device.

    (a) If NRCS determines that an applicant intentionally 
misrepresented any fact affecting a CSP determination, the application 
will be cancelled immediately.

[[Page 37519]]

    (b) A participant who is determined to have erroneously represented 
any fact affecting a program determination made in accordance with this 
part shall not be entitled to contract payments and must refund to NRCS 
all payments, plus interest determined in accordance with 7 CFR part 
1403.
    (c) A participant shall refund to NRCS all payments, plus interest 
determined in accordance with 7 CFR part 1403, received by such 
participant with respect to all CSP contracts if they are determined to 
have:
    (1) Adopted any scheme or device that tends to defeat the purpose 
of the program;
    (2) Made any fraudulent representation;
    (3) Adopted any scheme or device for the purpose of depriving any 
tenant or sharecropper of the payments to which such person would 
otherwise be entitled under the program; or
    (4) Misrepresented any fact affecting a program determination.
    (d) Participants determined to have committed actions identified in 
paragraph (c) of this section shall:
    (1) Have their interest in all CSP contracts terminated; and
    (2) In accordance with Sec.  1470.27(e), may be determined by NRCS 
to be ineligible for future NRCS-administered conservation program 
funding.


Sec.  1470.37  Environmental credits for conservation improvements.

    NRCS believes that environmental benefits will be achieved by 
implementing conservation activities funded through CSP. These 
environmental benefits may result in opportunities for the program 
participant to sell environmental credits. These environmental credits 
must be compatible with the purposes of the contract. NRCS asserts no 
direct or indirect interest on these credits. However, NRCS retains the 
authority to ensure that operation and maintenance (O&M) requirements 
for CSP-funded improvements are met, consistent with Sec. Sec.  1470.21 
and 1470.23. Where actions may impact the land and conservation 
activities under a CSP contract, NRCS will at the request of the 
participant, assist with the development of an O&M compatibility 
assessment prior to the participant entering into any credit agreement.

    Signed this 21st day of July 2009, in Washington, DC.
Dave White,
Vice President, Commodity Credit Corporation and Chief, Natural 
Resources Conservation Service.
[FR Doc. E9-17812 Filed 7-28-09; 8:45 am]
BILLING CODE 3410-16-P