[Federal Register Volume 63, Number 222 (Wednesday, November 18, 1998)]
[Proposed Rules]
[Pages 64154-64165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30756]
[[Page 64153]]
_______________________________________________________________________
Part III
Department of the Interior
_______________________________________________________________________
Bureau of Reclamation
_______________________________________________________________________
43 CFR Part 428
Information Requirements for Certain Farm Operations In Excess of 960
Acres and the Eligibility of Certain Formerly Excess Land; Proposed
Rule
Federal Register / Vol. 63, No. 222 / Wednesday, November 18, 1998 /
Proposed Rules
[[Page 64154]]
DEPARTMENT OF THE INTERIOR
Bureau of Reclamation
43 CFR Part 428
RIN 1006-AA38
Information Requirements for Certain Farm Operations In Excess of
960 Acres and the Eligibility of Certain Formerly Excess Land
AGENCY: Bureau of Reclamation, Interior.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would add a new part to the Bureau of
Reclamation's (Reclamation) regulations to supplement the Acreage
Limitation Rules and Regulations in 43 CFR part 426 that implement the
Reclamation Reform Act of 1982 (RRA). The proposed rule would require
certain farm operators to submit RRA forms that describe the services
they perform and the land they service. The rule would also address the
eligibility of certain formerly excess land held in trusts or by legal
entities to receive nonfull-cost Reclamation irrigation water.
DATES: Reclamation must receive written comments on this proposed rule
by January 19, 1999. We will not necessarily consider comments received
after the above date during our review of the proposed rule.
ADDRESSES: If you wish to comment, you may submit your comments by any
one of several methods. You may mail comments to: Administrative
Record, Commissioner's Office, Bureau of Reclamation, 1849 C Street
N.W., Washington, D.C. 20240. You may also comment via the Internet to
epetacchi@usbr.gov (see Public Comment Procedures under SUPPLEMENTARY
INFORMATION). In addition, you may hand-deliver comments to
Commissioner's Office, Bureau of Reclamation, 1849 C Street N.W.,
Washington, D.C. 20240.
FOR FURTHER INFORMATION CONTACT: Erica Petacchi, (202) 208-3368, or
Richard Rizzi, (303) 445-2900.
SUPPLEMENTARY INFORMATION: This section provides the following
information:
I. Public Comment Procedures
II. Introduction
III. Summary of Proposed Changes
IV. Background
V. Public Involvement
VI. Public Comments and Responses on Advance Notice of Proposed
Rulemaking
VII. Detailed Analysis of Proposed 43 CFR Part 428
VIII. Procedural Matters
IX. List of Subjects in 43 CFR Part 428
I. Public Comment Procedures
Written comments on the proposed rule should be specific, should be
confined to issues pertinent to the proposed rule, and should explain
the reason for any recommended change. Where possible, comments should
reference the specific section or paragraph of the proposal which the
commenter is addressing. We may not necessarily consider or include in
the Administrative Record for the final rule comments which we receive
after the close of the comment period (see DATES) or comments delivered
to an address other than those listed above (see ADDRESSES). We will
not consider anonymous comments.
If you submit your comments via the Internet, please submit as an
ASCII file avoiding the use of special characters and any form of
encryption. Please include in the subject line ``AA38'' and include
your name and return address in the body of your Internet message. If
you do not receive a confirmation that we have received your Internet
message, contact us directly at (202) 208-3368.
The administrative record and all comments, including names and
home addresses of respondents, will be available for public review at
the address listed above (see ADDRESSES), during the hours of 9:00 a.m.
to 4:00 p.m., Monday through Friday, except holidays. Individual
respondents may request that we withhold their home address from the
rulemaking record, which we will honor to the extent allowable by law.
There also may be circumstances in which we would withhold from the
rulemaking record a respondent's identity, as allowable by law. If you
wish us to withhold your name and/or address, you must state this
prominently at the beginning of your comment. We will make all
submissions from organizations or businesses, and from individuals
identifying themselves as representatives or officials of organizations
or businesses, available for public inspection in their entirety.
II. Introduction
This proposed rule would supplement the Acreage Limitation Rules
and Regulations, 43 CFR part 426, that govern implementation and
administration of the RRA. The proposed rule would create a separate
CFR part, 43 CFR part 428, addressing information requirements for
certain farm operators, and the eligibility of certain formerly excess
land that is operated by a farm operator who was the landowner of that
land when it was ineligible excess land or land placed under recordable
contract.
We are proposing this rule to address comments raised in both the
rulemaking concluded on December 18, 1996 (the Acreage Limitation Rules
and Regulations) and in the Advance Notice of Proposed Rulemaking
(ANPR) published in the Federal Register (61 FR 66827, Dec. 18, 1996).
Among other things, the comments stated that although we collect
information from landholders to verify compliance with the RRA, we do
not collect this information from farm operators. Commenters pointed
out that we, consequently, may not have adequate information to
determine if the provisions of a farm operating arrangement constitute
a ``lease'' under the acreage limitation provisions and thus require
application of the nonfull-cost entitlements of the RRA. Other comments
stated that we should analyze all farm operations in excess of 960
acres to determine compliance with the acreage limitation provisions of
Federal reclamation law. Public comments from the ANPR are addressed
below.
We believe that this rule balances the interests in enforcing the
law with the interests of limiting paperwork burdens on the public. By
limiting the applicability of the proposed rule as described below, we
hope to target our resources to achieve compliance with the acreage
limitation provisions of Federal reclamation law in an efficient
manner. We seek comments on whether this rule will meet that goal.
III. Summary of Proposed Changes
The proposed rule would extend RRA certification and reporting
forms requirements to farm operators who:
(1) Provide services to more than 960 acres held (directly or
indirectly owned or leased) by one trust or legal entity, or
(2) Provide services to the holdings of any combination of trusts
and legal entities that exceed 960 acres.
In addition, this part applies to the eligibility of formerly
excess land held in trusts or by legal entities, that is operated by a
farm operator who was the landowner of that land when it was ineligible
excess land or land placed under recordable contract. The provisions of
43 CFR part 426 not specifically addressed in this rule are unchanged.
This section summarizes the differences between the existing
regulations and the proposed rule. A detailed analysis can be found
later in this preamble.
[[Page 64155]]
Certification and Reporting Requirements
Under 43 CFR part 426, landholders (direct or indirect landowners
or lessees) whose total westwide landholdings exceed the RRA forms
submittal thresholds must submit RRA forms. Farm operators do not now
have to submit RRA forms. The new 43 CFR part 428 would extend
certification and reporting requirements to farm operators who (1)
provide services to more than 960 acres held by one trust or legal
entity, or (2) provide services to the holdings of any combination of
trusts and legal entities that exceed 960 acres. By extending the
certification and reporting requirements to these farm operators, we
can get information that we need to determine the following :
(1) Who has use or possession of the land being farmed under a farm
operating arrangement; and
(2) Who is responsible for payment of operating expenses, and who
is entitled to receive the profits from the farming operation as
indicators of economic risk.
We need this information because the acreage limitation provisions
apply to all owned or leased land. Use or possession of the land and
who has all or a portion of the economic risk associated with the
farming enterprises are the factors we use to determine if a farm
operating arrangement is in fact a lease. If we determine that a farm
operating arrangement is a lease, then the farm operator leasing the
land will be subject to the acreage limitation provisions.
Excess Land Provisions
Part 426 provides that a seller of excess land may not receive
Reclamation irrigation water if he or she again becomes the landholder
of that land either voluntarily or involuntarily, with certain
exceptions. This proposed rule would apply similar restrictions to farm
operators who sold their excess land at an approved price, and provide
services to that land if it is held in trust or by a legal entity. The
only exceptions would be if the formerly excess land became exempt from
application of the acreage limitation provisions or the full-cost rate
was paid for deliveries of Reclamation irrigation water to the formerly
excess land. This provision will not be effective until January 1,
2000, at which time all farm operating arrangements between farm
operators and trusts or legal entities that meet the criteria will be
affected. This includes farm operating arrangements that were in
existence prior to January 1, 2000, as well as any farm operating
arrangement initiated on or after that date. We believe this provision
is consistent with the intent of the RRA excess land provisions, and
that it parallels excess land provisions that apply to landholders.
The following example illustrates the situation this provision
would address: Landowner A, a qualified recipient, owns 5,000 acres
subject to the acreage limitation provisions, which is 4,040 acres more
than his 960-acre ownership entitlement. Landowner A sells his excess
land at a price that Reclamation approved to a trust benefitting 10
individuals who are each subject to the discretionary provisions; none
of the beneficiaries' landholdings exceed their acreage limitation
entitlements. The trustee of the trust then hires Landowner A to
operate the land owned by the trust. Consequently, Landowner A
continues to farm the entire 5,000 acres as a farm operator, and the
land continues to receive Reclamation irrigation water at the nonfull-
cost rate.
We do not believe the intent of the excess land provisions of
Federal reclamation law has been met in the preceding example. As part
of the rulemaking that was completed on December 18, 1996, we included
as Sec. 426.12(g) a provision that addresses this issue with regard to
landholders. It provides that a district may not make Reclamation
irrigation water available at the nonfull-cost rate to excess land
disposed of by a landholder at a price Reclamation approved, whether or
not under recordable contract, if the landholder later becomes a direct
or indirect landholder of that land through either a voluntary or
involuntary action. Section 426.12(g) provides specific exceptions to
this provision.
We believe that, starting on January 1, 2000, this same concept
should apply to farm operators who provide services to land held in
trusts or by legal entities or any combination thereof that the farm
operator formerly owned as excess and sold at an approved price. We are
seeking comments on the following issues related to formerly excess
land and farm operators:
Should we apply this excess land provision more broadly or
should we include other exceptions to the proposed provision?
Should we not include either of the two exceptions
provided in the proposed rule (the land is no longer subject to the
acreage limitation provisions and payment of the full-cost rate for
deliveries of Reclamation irrigation water to the land in question) or
should we otherwise alter them in some manner?
Is the effective date of January 1, 2000, reasonable for
this excess land provision or should we apply some other date?
IV. Background
The RRA modernized Federal reclamation law, while retaining the
principle of limiting the benefits of receiving Federally subsidized
water to farmers with relatively small landholdings. The RRA adjusted
the acreage limitations for farms eligible to receive nonfull-cost
water. This change was intended to facilitate modern farming practices
and to limit nonfull-cost water deliveries generally to landholdings of
960 acres or less, rather than the 160 acres established by the
Reclamation Act of 1902. However, not only does the RRA provide a
number of exceptions to the 960-acre limitation, such as those
associated with certain involuntary acquisitions, it also provides for
much lower entitlement levels for legal entities that benefit more than
25 natural persons. In addition, the RRA and the part 426 regulations
include provisions that exempt trustees acting in a fiduciary capacity
from application of the acreage limitation provisions if certain
criteria are met.
The RRA does not force districts or landholders to conform to the
new acreage limitation provisions; thus, the prior law provisions still
apply to some districts and landholders. Any owned land subject to
acreage limitations that exceeds a landholder's ownership entitlement
is considered excess land, and must be sold to an eligible buyer at a
price that Reclamation approves in order for that excess land to be
eligible to receive Reclamation irrigation water at any price. Any
owned or leased land subject to acreage limitations that exceeds a
landholder's nonfull-cost entitlement is considered full-cost land and
the landholder must pay the full-cost rate for any Reclamation
irrigation water delivered to that land.
The part 426 regulations implement certain provisions of the RRA.
They address the ownership and leasing of land on Federal Reclamation
irrigation projects, the pricing of Reclamation irrigation water, and
certain terms and conditions for delivery of Reclamation irrigation
water. Under part 426, we require all landholders (individuals or legal
entities that directly or indirectly own or lease land that is subject
to acreage limitation provisions of Federal reclamation law) whose
landholdings exceed established RRA forms submittal thresholds to file
RRA forms. Landholders must provide information on RRA forms about the
land they hold, and certify that they are in compliance with the
acreage limitation provisions of Federal reclamation law. The
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regulations also provide that a district may not make available
Reclamation irrigation water to excess land disposed of by a landholder
at a price Reclamation approved, whether or not under recordable
contract, if the landholder subsequently becomes a direct or indirect
landholder of that land through either a voluntary or involuntary
action.
On December 11, 1996, the Natural Resources Defense Council (NRDC)
and the Departments of Interior and Justice entered into an amended
settlement contract in the case of NRDC v. Underwood, No. Civ. S-88-
375-LKK (a full description of this litigation may be found in the
preamble to the final rule for the Acreage Limitation Rules and
Regulations (61 FR 66757, Dec. 18, 1996)). As a result, the Department
of the Interior (Interior) published the ANPR and invited comments and
suggestions on the following:
Whether to limit nonfull-cost water deliveries to large
trusts with landholdings in excess of 960 acres (or other applicable
acreage thresholds under the RRA);
The criteria used to determine whether landholdings in
excess of 960 acres, operated under a trust agreement, should be
eligible to receive nonfull-cost water deliveries;
Whether nonfull-cost water deliveries to such landholdings
are consistent with the principles of Federal reclamation law and sound
public policy and, if not, how to implement a limit on such deliveries;
What procedures might ensure fairness in transition to new
regulations that would limit large trusts to 960 acres for nonfull-cost
water, and what safeguards are necessary to avoid such trusts from
adopting some other, as yet unregulated form, to escape acreage
limitations; and
The extent of Interior's statutory authority to address
these issues, including the extent of Interior's legal authority to
regulate: future trusts, trusts established from 1982 to the present,
and trusts established before 1982.
Need for Applying Excess Land Provisions to Certain Farm Operators
In considering potential abuses of existing rules concerning
trusts, we have focused on trusts that hold more than 960 acres
westwide. In several instances, these large trusts were created by
owners of excess lands who were required by Section 209 of the RRA to
dispose of their interests in excess lands or face the permanent
ineligibility of the lands for receipt of Reclamation irrigation water.
By requiring the disposal of excess lands, the Congress was attempting
to assure that the benefits of Federal irrigation water would be more
widely distributed.
In some instances owners of excess lands sold or transferred their
excess lands to large trusts. Then, some of these trusts, which are
subject to more liberal acreage limitation provisions, entered into
farm operating agreements with the former owners of such land, creating
a situation where substantially the same enterprise continued to farm
the same large acreage.
The foregoing practice has in fact occurred on a limited basis in
the Central Valley Project in California, and we are further concerned
that the practice may occur elsewhere in the future as recordable
contracts under which excess lands have been temporarily made eligible
to receive Reclamation irrigation water expire or other excess lands
are sold.
While the foregoing arrangements are in literal conformance with
existing regulations, we believe that they do not meet the intent of
the law. To address this issue, we are proposing a change in how
Section 209 is administered to attribute to former owners of excess
lands any formerly excess land held in trusts and operated by the
former owner of the excess lands. Essentially, we propose to treat the
contractual relationship between the trust and the former owner of
excess lands as a continuing financial interest in such lands by the
former landowner, an interest that we can regulate in our rulemaking
power granted by the Congress in Section 224 of the RRA. This change
would eliminate any incentive for former owners of excess lands to use
the large trust vehicle to maintain a continuing farming enterprise and
would curb any abuse of congressional intent inherent in such
arrangements.
We propose to apply this concept also to legal entities that hold
formerly excess land and hire the former owner of such land under a
farm operating arrangement. We do not believe there are many instances
where legal entities have bought formerly excess land and then arranged
for the former owner to farm the land as a farm operator. However, we
are concerned that application of this concept only to trusts does not
cover the full scope of possible arrangements and may result in a
transfer of land ownership to various legal entities that will continue
to arrange to have the land farmed in the same manner as the trust. We
want to preclude such actions.
To ensure a transition and public education period, we will not
implement this provision until January 1, 2000. This provides an
opportunity for all trusts and legal entities that would be affected by
the excess land provision (because their landholdings include formerly
excess land and they have hired the former landholder to provide
services to such land as a farm operator) to make other farming
arrangements. In doing so, affected trusts and legal entities can avoid
having to pay the full-cost rate for the delivery of Reclamation
irrigation water to the formerly excess land, or even the ineligibility
of such land, if they take action before January 1, 2000. Of course,
affected trusts and legal entities could limit the consequences of the
excess land provision at any time after January 1, 2000, by making
alternative arrangements in how the formerly excess land is farmed. In
addition, this proposed change will not affect the underlying trust
itself. Trusts are still subject to the requirements of Section 214 of
the RRA, and as such, the acreage limitation entitlements of the
landholder(s) to whom the land held in trust is attributed will
determine if the land is eligible to receive Reclamation irrigation
water in the holdings of the trust.
Need for Certification and Reporting From Certain Farm Operators
In December 1987, the Congress amended the RRA by passing the audit
provisions of the Omnibus Budget Reconciliation Act of 1987 (section
224[g] of the RRA as amended). Section 224[g] directed the Secretary of
the Interior (Secretary), or his designee, to undertake audits of
``those legal entities and individuals whose landholdings or operations
exceed 960 acres. * * *'' To comply with this mandate, we considered
requiring all farm operators to submit RRA forms. However, by the time
a proposed rule was published in the Federal Register (53 FR 21857,
Jun. 10, 1988) we did not include that concept. Instead, we altered the
general information requirements of the Acreage Limitation Rules and
Regulations to make it clear that natural persons or legal entities
operating land were required to provide records and information upon
our request. This decision was confirmed in the final rules, which were
effective on January 17, 1989 (53 FR 50530, Dec. 16, 1988). We then
revised the RRA forms to require landholders to provide additional
information concerning their farm operators.
Since 1989, we have learned that other approaches could be more
effective and that this procedure places a greater burden on both the
districts and us than if certain farm operators
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were required to submit RRA forms. The current approach also greatly
increases the likelihood that all farm operators providing services to
more than 960 acres westwide will not be identified.
In order for the current system to work, information concerning
farm operators must be gathered from all RRA forms landholders submit
annually. That information then must be collated on a westwide basis to
determine if any farm operator is providing services to more than 960
acres. The collation is required because any landholder, other than a
trust, whose landholding exceeds 960 acres is either (a) not receiving
Reclamation irrigation water on such land or (b) paying the full-cost
rate for Reclamation irrigation water received on such land. In the
case of the former, we have little interest in activities farm
operators may have on land that is not receiving Reclamation irrigation
water. In the case of the latter, determining that a farm operator is a
lessee will have little effect on the eligibility of the land in
question or the rate associated with the water deliveries to that land,
since the full-cost rate is already being applied. What we need to
identify are those farm operators providing services to multiple
landholdings, the total of which exceed 960 acres. Then we must
determine if the arrangements under which the services are being
provided are leases for acreage limitation purposes.
We knew in 1988 that if only the name and address of farm operators
were provided by landholders, it would be difficult to collate the
data. This is due to the fact that operators may be providing services
under different entity names and, if the operator is an individual,
landholders may know the operator by different names (e.g., J. Smith,
John Smith, Johnny Smith, Jack Smith, Smith Enterprises, etc.). In
addition, there may be multiple farm operators that have the same name.
If we relied only on addresses, we may be faced with multiple addresses
for one farm operator which we would not be able to easily determine
was the same person or entity (e.g., post office boxes, business
address, residential address, etc.). Thus, we tried to use telephone
numbers as the unique identifier, but this effort depends on the
landholder providing such on their RRA forms. Regardless, we have
determined that the current process does not ensure consistent
application of the regulations and is inefficient. In addition, it is
extremely difficult for us to verify that a landholder has or has not
provided the required farm operator information, since there are few,
if any, independent sources of information concerning farm operators to
cross-check information.
We have considered requiring landholders to provide more
information, such as taxpayer identification numbers, for their farm
operators who are legal entities. But this would require the
landholders to have such knowledge, resulting in a new burden on
landholders. In addition, this approach would still result in the
requirement for districts to gather the data and us to collate it,
thereby increasing the associated burdens to all parties involved.
Conversely, if certain farm operators were required to submit RRA
forms, then many of the difficulties in administration we experience on
this issue would be resolved. For example, an operator would be
required to include all land on which the operator was providing
services westwide; thus, no data gathering by the districts or
collation by us would be required. In fact, the districts would only be
required to complete a new tabulation sheet concerning farm operators
and include that sheet with their annual summary forms submittal. In
addition, with RRA forms being submitted by farm operators, we would
have a source of verification; specifically, the RRA forms submitted by
landholders to whom the farm operator is providing services.
Impacts of the Proposed Rule
We believe that the proposed rule would help to ensure that the
recipients of Reclamation irrigation water comply with the laws and
regulations governing Federal Reclamation irrigation projects. It is
difficult to determine exactly how many entities may be affected by the
proposed changes, but, for the following reasons, we do not believe
that the rules will be burdensome.
If the changes proposed today were adopted as final, it is possible
that certain farm operators would need to submit RRA forms starting on
January 1, 2000, and, after we reviewed the associated farm operating
arrangement, the pricing and availability of Reclamation irrigation
water could be affected for some farms. For landholders that on January
1, 2000, have a farm operator providing services to land the farm
operator formerly owned as ineligible excess land or land placed under
recordable contract, we would require those landholders or farm
operators to pay full cost for any Reclamation irrigation water
received on now eligible land.
We published a report in 1991 (The Reclamation Reform Act of 1982
Annual Report to the Congress, February 1991) that indicated there were
approximately 80 farm operators who were providing services to more
than 960 acres westwide. Also in that 1991 report, we disclosed that
there were 35 trusts as of the end of 1990 that held more than 960
acres. Another large trust was found shortly thereafter for a total of
36. Recently we reviewed RRA forms submitted by districts for the 1997
water year and found 75 trusts that exceed 960 acres; this represents
an 108 percent increase. We have no reason to believe there has been a
larger increase in the number of farm operators providing services to
more than 960 acres. Therefore, starting with the 1991 figure of 80
large operators, there may be approximately 165 such operators today.
When the focus is narrowed to those farm operators who provide services
to more than 960 acres held in trusts or by legal entities, the number
of farm operators who may be affected by the proposed rule should
decline towards 100. Those farm operators providing services to land
they formerly owned as excess and sold at an approved price should be
an even smaller number. But even these farm operators would not be
immediately affected by the proposed excess land provisions and would
only be impacted if they continued, on or after January 1, 2000, to
have an arrangement to provide services to land they formerly owned as
ineligible excess land or land placed under recordable contract.
Without the expanded information requirements in this rule, we
simply do not have data readily available as to exactly how many farm
operators would be affected by these provisions. The only way we will
be sure in the near term about how many farm operators are providing
services to more than 960 acres held in trusts or by legal entities is
through the expansion of the RRA forms submittal requirements to farm
operators.
Once implemented on January 1, 2000, the only impact for all of
these farm operators would be that they would have to submit RRA forms.
If a farm was affected by the excess land provision in the future,
there is no reason the farm has to employ as a farm operator the
individual or legal entity who formerly owned the land in question as
excess. Therefore, an affected farm could hire a different farm
operator and continue to receive Reclamation irrigation water at the
nonfull-cost rate.
Authority for the Proposed Rule
Section 224(c) of the RRA gives the Secretary the authority to
publish regulations to carry out the provisions of
[[Page 64158]]
the RRA and other provisions of Federal reclamation law. Our authority
for the proposed application of the RRA forms requirements to certain
farm operators is also section 224(c), which directs the Secretary to
collect all data necessary to carry out the provisions of the RRA and
other provisions of Federal reclamation law.
Section 224(g) provides that the Secretary must thoroughly audit
compliance with the reclamation law of the United States, including
with the RRA, by legal entities and individuals subject to the law.
This section specifically directs the Secretary to audit legal entities
and individuals whose landholdings or operations exceed 960 acres.
One of the primary purposes of the acreage limitation provisions of
Federal reclamation law is to encourage the creation and preservation
of small family farms, and this is accomplished by limiting the number
of acres that any one landholder may own and receive Reclamation
irrigation water on at any price. Allowing the former owner of
ineligible excess land (ineligible excess land is not eligible to
receive Reclamation irrigation water at any price) or land placed under
recordable contract to receive Reclamation irrigation water as a farm
operator circumvents one of the basic principles of Federal reclamation
law.
V. Public Involvement
As part of the ANPR effort, on March 14, 1997, we held a public
meeting in Sacramento, California concerning the ANPR. We also received
53 letters during the public comment period on the ANPR that was open
from December 18, 1996, through April 17, 1997.
VI. Public Comments and Responses on Advance Notice of Proposed
Rulemaking
The following section presents general public comments on the ANPR.
These include comments on authority, process, relationship with other
documents, relationship with other laws and mandates, water rights and
contracts, westwide action, and other general comments that were not
specifically directed toward the new 43 CFR part 428.
Comment 1. The manager of an irrigation district indicated that
Reclamation should be prioritizing irrevocable trust reviews to speed
up the process of compliance determinations which will assist the
district in its monitoring responsibilities.
Response. We initially had a large backlog of trusts to review as
well as other acreage limitation implementation actions to take. We
have addressed most of this backlog. Regardless, trusts are considered
to be conditionally approved when submitted to us to assist trustees
and districts while a trust is being reviewed.
Comment 2. The same commenter raised concerns about reviewing only
one part of the RRA regulations, without revisiting other parts.
Response. We throughly reviewed all aspects of the RRA during the
rulemaking process that was completed on December 18, 1996. It was
determined at that time the only issues that needed further review were
those relating to trusts holding more than 960 acres westwide and how
such land is farmed. In addition, we recognized that if action was to
be taken with regard to large landholdings held in trust, we needed to
ensure the land in question was not just transferred to some other type
of landholding arrangement and continued to be farmed in the same
manner.
Comment 3. Another commenter indicated that Reclamation must
recognize its obligations to mitigate, conserve, and protect the
interest of the people as well as the purpose and intent of the RRA.
Reclamation must clarify policy with reference to protection of trust
resources, uses, and values to be co-equal with water development and
delivery.
Response. While we recognize our various responsibilities, the
purpose of this rulemaking is specific to collecting information from
farm operators providing services to more than 960 acres westwide held
in trusts or by legal entities to determine if such farming
arrangements are in fact leases for acreage limitation purposes. In
addition, this proposed rule helps ensure the intent of the excess land
provisions of Federal reclamation law will be met.
Comment 4. The same commenter suggests further that the proposed
rule must include 6 concerns: 1. Must continue to focus on family
farms. 2. The 960-acre limit must apply to operations, as well as
farms. 3. Allowing subsidies to more than 960 acres is a violation of
the intent of law. 4. There must be penalties for violation of the
acreage limitation. 5. Limit the water subsidy to forcefully encourage
water conservation measures. 6. The taxpayer should not subsidize any
farming operation or corporation.
Response. We concur that one of the primary purposes of acreage
limitation is to encourage and foster small family farms. The proposed
rule is intended to facilitate the gathering of information to ensure
operators providing services to more than 960 acres held in trusts or
by legal entities are meeting the requirements of the RRA. In addition,
we are proposing that steps be taken to ensure certain farm operators
do not circumvent the intent of the excess land provisions of Federal
reclamation law.
We have been advised in the past by the Office of the Solicitor
that legislative action would be required to assess penalties for
violation of the acreage limitation provisions. In addition, the RRA is
specific as to the number of acres on which legal entities may receive
nonfull-cost Reclamation irrigation water.
Comment 5. A beneficiary of a trust, writing on behalf of the
beneficiaries of the trust, stated that proposed new regulations are
not in accordance with law and are contrary to the legislative history
of RRA.
Response. Since no new regulations were included as part of the
ANPR issued on December 18, 1996, we urge everyone to examine the
proposed regulations published with this Preamble. We believe section
224(c) of the RRA provides the authority necessary to promulgate these
proposed regulations as follows:
The Secretary may prescribe regulations and shall collect all
data necessary to carry out the provisions of this title and other
provisions of Federal reclamation law.
Comment 6. The same commenter stated that the Federal program
benefits were intended to be limited by the concept of beneficial
ownership, not by the concept of farm size. In 1979 the Congress
included a farm size limitation in an earlier version of RRA, but
deleted such limitation in all subsequent reviews of Reclamation
regulations.
Response. We agree that the Congress has not limited farm size.
However, the Congress did address and limit how much land could be
owned or leased by an individual or entity and be eligible to receive
Reclamation irrigation water at the nonfull-cost rate. The collection
of RRA forms from certain farm operators will help ensure this
provision is being enforced by providing us with sufficient information
to determine if a farm operating arrangement is in fact a lease for
acreage limitation purposes. The Congress also has made it clear that
the excess land provisions are to preclude the accrual of speculative
gain in the disposition of excess land, assist in fostering the wide
distribution of benefits associated with the Reclamation program, and
encourage the creation of family farms.
Comment 7. The same commenter stated that the proposed new
regulations are a dangerous misuse of administrative power.
[[Page 64159]]
Response. We disagree. In fact, in 1987 (Public Law 100-203,
section 5302[a]) the Congress directed Interior to use its
administrative tools to ensure compliance with the acreage limitation
provisions of the RRA. Section 224(c) of the RRA requires the Secretary
to collect all data necessary to carry out the acreage limitation
program and to prescribe regulations needed to carry out those
provisions.
Comment 8. Eighteen members of the Congressional Western Water
Caucus expressed concerns about the ANPR stating their belief that a
rulemaking for trusts is unnecessary, because Interior already has the
tools through audits and other investigation techniques to ensure
compliance with the acreage limitation provisions enacted by the
Congress and the existing regulations.
Response. We do not have sufficient information with regard to farm
operators providing services to more than 960 acres held in trusts or
by legal entities to determine if the operating arrangements are in
fact leases for acreage limitation purposes. In addition, we believe
that these proposed regulations will help ensure the intent of the
excess land provisions is not being circumvented by farm operators
farming the land they previously owned as ineligible excess land or
under recordable contract.
Comment 9. The general manager of a California municipal utility
district stated that he and his district were concerned about again
reopening the rules and regulations. They feel that it is not
appropriate or necessary to proceed with rulemaking at this time. If
there is a perceived problem with larger trusts, Reclamation should
step up the enforcement and audit procedures of such trusts to ensure
they are complying with the law, rather than reopening the process once
again.
Response. We agree that it is unnecessary to reopen 43 CFR part 426
to ensure compliance with the RRA by certain farm operators providing
services to more than 960 acres westwide held in trusts or by legal
entities. By creating 43 CFR part 428, we hope to provide certainty to
the vast majority of landholders that receive Reclamation irrigation
water, while taking the necessary steps to ensure compliance with the
RRA by those farm operators.
Comment 10. A representative of a national conservation group urged
Reclamation to adopt policies that would ensure compliance with the
intent of the RRA. Reclamation should limit irrigation subsidies to 960
acres, which will strengthen family farms, reduce the Federal deficit,
and help protect the environment. Commenter urged that the current
loopholes be closed and bring fairness to Federal irrigation programs.
Response. We are proposing these additional regulatory provisions
to ensure compliance with the RRA by farm operators providing services
to more than 960 acres westwide held in trusts or by legal entities.
The proposed rule is intended to better ensure compliance by requiring
certain farm operators to submit RRA forms. In addition, a perceived
loophole associated with the excess land provisions would be closed.
Comment 11. The representative of a national taxpayers group stated
support for strong reforms in the Federal water subsidy program. The
concern is that each farming operation is only entitled to receive
subsidized water on 960 acres, regardless of how many individuals
benefit from the operation. In addition, they are urging encouragement
of efficient use of water.
Response. We cannot change the law, but must enforce the acreage
limitation provisions of the RRA. Part of this effort is to ensure farm
operators providing services to more than 960 acres held in trusts or
by legal entities are not lessees for acreage limitation purposes.
Comment 12. The representative of a brewery in San Francisco,
California stated that he does not see why the taxpayers should
subsidize large corporate farmers. He also has a concern about the
impacts upon the environment in the Delta and the San Francisco Bay.
Reclamation should adopt the concept of transparency to see through
some of the fancy legal stuff that lets folks get around the spirit of
the law.
Response. We cannot change the statute, but can take the proposed
additional actions to obtain information needed to ensure compliance
with the RRA by farm operators providing services to more than 960
acres westwide held in trusts or by legal entities.
Comment 13. A commenter from San Carlos, California stated that
Federal water subsidies should be limited to only farming operations
which meet the 960-acre limit. Rulemaking must correct the trust
arrangements. Reclamation should enforce the acreage limits by
determining when land owned by different parties is actually being
farmed as one operation.
Response. We are taking additional steps to obtain information
needed to ensure compliance with the acreage limitation provisions of
Federal reclamation law by farm operators providing services to more
than 960 acres westwide held in trusts or by legal entities.
Comment 14. The same commenter stated that Reclamation should
penalize those who do not abide by the acreage limits. Improper water
subsidies only aggravate our water shortages and encourage the
inefficient use of resources.
Response. We vigorously enforce the acreage limitation provisions
as defined by the Congress. However, we have been advised in the past
by the Office of the Solicitor that legislative action would be
required to assess penalties for violations of the acreage limitation
provisions.
Comment 15. A commenter representing a water conservation group
urged a strong stand in implementing the acreage limitation provisions
of the RRA. Reclamation should write regulations that minimize the
exceptions to the 960-acre limit on subsidized project water.
Response. We agree and the current Acreage Limitation Rules and
Regulations (43 CFR part 426) only allow those exceptions to the 960-
acre limit provided by statute.
Comment 16. The same commenter stated that Reclamation must take
action to limit corporate welfare and reduce environmental impacts.
Response. Our proposed rule will not change the law, but it should
help to ensure compliance with the RRA by those farm operators who
provide services to more than 960 acres westwide held in trusts or by
legal entities.
Comment 17. A commenter representing two irrigation districts in
central Arizona stated that farmers of both districts thought that all
RRA matters were laid to rest with the issuance of the revised
regulations.
Response. Because of the concern over trusts holding more than 960
acres westwide, we chose to create a new 43 CFR part 428 to gather
information from farm operators providing services to such trusts or
legal entities or combination thereof. We are also concerned about
whether the intent of the excess land provisions is being met in
association with the practices of certain farm operators to provide
services to the land the farm operator formerly owned as ineligible
excess land or under recordable contract. Therefore, we have proposed
in 43 CFR part 428 that action is taken to ensure such farm operators
are in compliance with the intent of the excess land provisions.
Comment 18. The same commenter stated that the key question is
whether Interior has the authority to regulate
[[Page 64160]]
trusts. It would take an act of the Congress to change section 214 of
the RRA. Changing the application to trusts would undermine what
farmers in Arizona have relied upon for more than 10 years. To now
change the law through regulation is not consistent with sound public
policy.
Response. We are seeking to enforce the RRA, including section 214,
by adding a new 43 CFR part 428 to extend the information requirements
to farm operators providing services to more than 960 acres westwide
held in trusts or by legal entities. We also want to ensure the intent
of the excess land provisions is being met. No new provisions directly
regulating trusts are being proposed.
Comment 19. The president of a water district in California stated
that the law should be left alone, as the regulations work well and no
change is necessary. This is important so that those working under the
law can operate with some degree of certainty.
Response. We agree that certainty is important and so we have
chosen to create a new 43 CFR part 428 to extend the information
requirements to certain farm operators and to address an excess land
issue, which will provide greater certainty for all water users.
Comment 20. A member of the Congress from California expressed
concern that Reclamation use all its power to revise regulations so as
to apply the 960-acre limit to all farms, including farms managed or
operated through trusts, leases, creative management agreements,
limited partnerships, or other devices used to evade the subsidy limit.
Response. We agree that the regulations must be equitably applied
and, accordingly, have proposed provisions to obtain information
concerning farm operators providing services to more than 960 acres
westwide held in trusts or by legal entities. In addition, we want to
ensure that the intent of the excess land provisions is met by those
farm operators.
Comment 21. The manager of an irrigation district indicated that he
was concerned about reopening the rules and regulations. Trusts are not
a problem in his district, but he sees Reclamation being able to step
up enforcement and audit procedures regarding trusts to solve any
problems and does not need to issue new regulations.
Response. We agree that enforcement is a key element in ensuring
compliance with the RRA by certain farm operators. We intend the
proposed rule to provide us with additional information needed for our
enforcement activities and to address certain excess land concerns
without disturbing the provisions of 43 CFR part 426.
Comment 22. A commenter representing a community alliance of small
farmers expressed concerns that no farm operation should receive
subsidized water for more than 960 acres.
Response. A key to any application of the acreage limitation
provisions is in how certain terms are defined. The RRA defines
landholding to include directly or indirectly owned or leased land. Any
farm operator that is determined to be a landholder is subject to
application of the acreage limitation provisions.
Comment 23. The same commenter stated that providing Federal water
at less than full cost to large farm operations results in degradation
of the communities and the well-being of farm workers.
Response. The Congress recognized the need to preserve small family
farms when they limited the availability of nonfull-cost water.
Comment 24. Legal counsel for a trust in California commented that
any attempt by Interior to: classify a trust as a ``legal entity''
under RRA; treat trustees as the owner of real property held in trust;
or exempt only trustees from ownership/pricing limitations, would be
inconsistent with common law of trusts and RRA.
Response. The proposed rule does not attempt to: classify a trust
as a ``legal entity'' under RRA; treat trustees as the owner of real
property held in trust; or exempt only trustees from ownership and
pricing limitations.
Comment 25. The same commenter stated that Reclamation should stick
to the following interpretation of RRA: that no one person can receive
nonfull-cost water on more than 960 acres, no matter whether the land
is owned, leased, involved in a trust or other entity.
Response. We have not altered that interpretation of the RRA; with
the understanding that the acreage limitation provisions apply to legal
entities as well as to individuals. Sections 214 of the RRA and 426.7
of the Acreage Limitation Rules and Regulations include provisions that
exempt trustees acting in a fiduciary capacity from application of the
acreage limitation provisions if certain criteria are met. These
proposed rules have no impact on those provisions.
Comment 26. The same commenter stated that Reclamation has adequate
tools to ensure compliance, and should ``follow the money'' to
determine recipient of benefit of the nonfull-cost water.
Response. We generally do have adequate tools to ensure compliance.
However, we believe we need additional information regarding farm
operators involved in farming more than 960 acres westwide held in
trusts or by legal entities. We also need additional information to
determine if farm operators for trusts or legal entities formerly owned
the land they are providing service to as ineligible excess land or
under recordable contract. The new RRA forms requirements for farm
operators are intended to address these issues.
Comment 27. The same commenter stated that nonfull-cost water to
trusts should not be limited in any manner, and that Reclamation has no
statutory authority to restrict the exemption on trusts in RRA section
214.
Response. We are required by statute to limit nonfull-cost water
deliveries to land held in trust if the individuals or entities to whom
the land held in trust is attributed exceed their acreage limitation
entitlements. This requirement is addressed in 43 CFR part 426. The
proposed rule would also limit such deliveries starting on January 1,
2000, if the land held in trust is being farmed by a farm operator and
that farm operator formerly owned the land as ineligible excess or
under recordable contract.
Comment 28. A national conservation group stated that no matter how
many individuals benefit from a farming operation, the operation is
only entitled to receive subsidized water on 960 acres. The limit
applies both to the farm, and to each individual.
Response. The acreage limitation provisions are fully applied to
any farm operation that is determined to be a landholder. The proposed
rule does seek to ensure congressional intent associated with excess
land is met by farm operators providing services to trusts or legal
entities.
Comment 29. The same commenter stated that the proposed rule must
address all large farming operations, not just trusts, because if
Reclamation only regulates trusts, the trusts will find some other way
to escape acreage limits.
Response. We recognize this possibility and included farm operators
providing services to legal entities in both the proposed information
requirements and the excess land provisions.
Comment 30. The same commenter stated that trusts are a ``glaring
loophole'' in RRA's acreage limitations, and Reclamation must ``close
the loophole'' in order to preserve the purpose of RRA. Reclamation
should treat trusts like any other legal entity,
[[Page 64161]]
limiting them to subsidized water on no more than 960 acres for
qualified recipients. The trusts provision of the RRA was intended to
protect banks or other institutions acting in a purely fiduciary
capacity.
Response. We are limiting this proposed rule to extending the
information requirements to farm operators providing services to more
than 960 acres westwide held in trusts or by legal entities. In
addition, an excess land provision involving farm operators is
included.
Comment 31. The same commenter stated that established precedent
requires Reclamation to interpret the RRA trust exception narrowly to
preserve the central purpose of the RRA. The regulations should read:
An individual or corporate trustee holding land in a fiduciary
capacity is not subject to the ownership or pricing limitation
imposed by title II nor any other provisions of Reclamation law.
However, the interest of each beneficiary (qualified or limited
recipients) in trust land in combination with other land he/she may
own shall not exceed the ownership limitation of title II. Moreover,
the quantity of land in a trust receiving irrigation water cannot
exceed the ownership entitlement of title II.
Response. 43 CFR part 426 already addresses attribution of land
held in trust to, generally, beneficiaries, and under certain
circumstances to grantors or trustees. Acreage limitations clearly are
applicable under those attribution requirements. There is no evidence
that there have been any problems associated with those provisions and
further clarification is not needed as part of this rulemaking.
Comment 32. The same commenter urged that the regulations must
specifically address situations where the trustee serves as the farm
operator of the trust property, clearly applying acreage limitations to
the trustee as well as the trust.
Response. By requiring farm operators providing services to more
than 960 acres westwide held in trusts or by legal entities to submit
RRA forms annually, we will be better able to determine if a trustee
who is also acting as a farm operator for the land held in trust is in
fact a lessee of the land.
Comment 33. The same commenter stated that Reclamation should
revise the rules governing ``leases'' to use criteria or indicators to
determine whether a landholding is actually part of a larger farming
operation. The commenter suggests that Reclamation use indicators
similar to those suggested by the General Accounting Office (GAO).
Response. We already use the indicators suggested by the GAO in
their 1989 report as indicators of economic risk, use, or possession,
which are then used to determine if an operating arrangement is in fact
a lease.
Comment 34. The same commenter stated that there are many reasons
why limiting subsidies to large corporate farms is sound public policy,
consistent with Federal reclamation law, including: (1) The purpose of
the subsidy is to assist small family farms, not individual
shareholders in large corporate farms or investors in a large business
trust; (2) Limiting subsidies can benefit the environment, something
Reclamation is required to do under a variety of statutes and treaties;
and (3) Irrigation subsidies create economic inefficiencies and poor
allocation of natural resources.
Response. The Congress was very clear as to how acreage limitations
are to be applied to ``large corporate farms.'' Specifically, under the
discretionary provisions corporations that benefit more than 25 natural
persons are to be limited recipients with a 640-acre ownership
entitlement and a 320-acre nonfull-cost entitlement, if the corporation
received Reclamation irrigation water on or before October 1, 1981. If
the corporation first received such water after that date, they are to
pay the full-cost rate for any Reclamation irrigation water received.
For those ``large corporate farms'' that remain under prior law, they
continue to have 160-acre ownership and nonfull-cost entitlements. We
have no authority to further limit subsidies to such entities.
VII. Detailed Analysis of Proposed 43 CFR Part 428
Section 428.1
This section provides a statement of the purpose of these
regulations.
Section 428.2
This section includes a statement of applicability. Rather than
repeating provisions found in 43 CFR part 426, paragraph (b) of this
section specifies that 43 CFR part 428 supplements part 426.
Section 428.3
This section defines the terms ``Custom operator,'' ``Farm
operator,'' ``we or us,'' and ``you'' for purposes of part 428.
Section 428.4
This section expands the RRA forms requirements to farm operators
who provide services to more than 960 nonexempt acres westwide held by
a single trust or legal entity, or any combination of trusts and legal
entities. These requirements also apply to any indirect owner of a
legal entity that is a farm operator that must submit RRA forms.
Exemptions to this requirement are provided in Sec. 426.18(g)(2) and
(3) of this chapter.
Section 428.5
This section establishes how the information collection will occur.
Paragraph (a) of this section specifies that we will determine what
forms will be used.
Paragraph (b) of this section establishes that information must be
provided by the farm operator for all nonexempt land to which the farm
operator provides services westwide.
This section provides in paragraph (c) the types of information we
would require to be submitted by each farm operator.
Section 428.6
This section specifies that farm operators required to submit forms
must submit them to each district westwide that is subject to the
acreage limitation provisions, and in which the farm operator provides
services.
Section 428.7
This section describes what will happen if a farm operator fails to
meet the RRA forms requirements. Paragraph (a) of this section provides
that the district is not to deliver water to the land in question until
the farm operator submits the required forms for that water year. In
addition, the farm operator, landholder, or trustee of the land in
question must not accept delivery of such water.
Paragraph (b) provides that after the farm operator submits the
forms, we would restore eligibility for the land.
Paragraph (c) specifies that we will assess administrative costs as
described in Sec. 426.20(e) of this chapter if Reclamation irrigation
water is delivered to land that is ineligible because the farm operator
failed to submit required forms.
Section 428.8
This section provides that we could prosecute a farm operator for
submitting false information on the required forms, and suspend the
farm operator's eligibility to receive Reclamation irrigation water.
Section 428.9
This section addresses the eligibility of formerly excess land
being farmed by certain farm operators. Paragraph (a) of this section
provides (1) if a landholder
[[Page 64162]]
disposed of excess land at a price Reclamation approved, (2) the land
is held in trust or by a legal entity, and (3) that former landholder
is the direct or indirect farm operator of that land, then the farm
operator and landholder may not receive water on such land.
Paragraph (b) of this section includes the following exceptions to
the provisions included in paragraph (a) of this section: (1) The land
becomes exempt from the acreage limitation provisions of Federal
reclamation law or (2) the landholder or farm operator pays the full-
cost rate for any Reclamation irrigation water delivered to the land in
question, assuming the formerly excess land is otherwise eligible to
receive Reclamation irrigation water. If a part owner of a legal entity
that is the farm operator is the party that held the land as ineligible
excess or under recordable contract and the full-cost rate is to be
paid, then application of that rate will be based on the proportional
share the part owner has in the legal entity.
Section 428.10
This section specifies that districts must not make water available
to formerly excess land to which the former owner who sold it at an
approved price is now providing services as a farm operator. Reference
is made to the exceptions provided in Sec. 428.9(b).
Section 428.11
This section establishes an effective date of January 1, 2000, for
43 CFR part 428. This section also specifies that on January 1, 2000,
the excess land provisions found in Sec. 428.9 will apply to any farm
operating arrangements between farm operators and trusts or legal
entities then in place and any future farm operating arrangements.
VIII. Procedural Matters
National Environmental Policy Act
We have analyzed this rule in accordance with the criteria of the
National Environmental Policy Act of 1969 (NEPA) and Departmental
Manual 516 DM. This rule does not constitute a major Federal action
significantly affecting the quality of the human environment. A
detailed statement under NEPA is not required. The rule is
categorically excluded from NEPA review under 40 CFR 1508.4,
Departmental Manual 516 DM 2, Appendix 1, paragraph 1.6, and 516 DM 6,
Appendix 9, paragraph 9.4A.1. In addition, the proposed rule does not
meet any of the 10 criteria for exceptions to categorical exclusions
listed in 516 DM 2, Appendix 2.
As provided in 516 DM 2, Appendix 1, paragraph 1.6, an action is
excluded from review if it is a ``Non-destructive data collection,
inventory (including field, aerial and satellite surveying and
mapping), study, research and monitoring activities.'' This rule
requires an information collection, and would not have a significant
effect on the human environment. As provided in 516 DM 6, Appendix 9,
paragraph 9.4A.1, the following is excluded from review: ``Changes in
regulations or policy directives and legislative proposals where the
impacts are limited to economic and/or social effects.'' The only
impacts associated with the excess land provisions would be that
certain farm operators that meet the criteria in the proposed
regulations or the associated landholders would have to pay full cost
for Reclamation irrigation water delivered to land to which the farm
operator is providing services, the landholder would have to hire a
different farm operator to provide the services, or the landholder and
farm operator could not receive Reclamation irrigation water on that
land. This provision will not be effective until January 1, 2000.
Executive Order 12866, Regulatory Planning and Review
Under Executive Order (E.O.) 12866, (58 FR 51735, Oct. 4, 1993), an
agency must determine whether a regulatory action is significant and
therefore subject to Office of Management and Budget (OMB) review and
the requirements of the Executive Order. E.O. 12866 defines a
``significant regulatory action'' as a regulatory action meeting any
one of four criteria specified in the Executive Order. This rulemaking
is considered a significant regulatory action under criterion number 4,
because it raises novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order. We have therefore submitted the proposed rule to
the OMB for review.
Regulatory Flexibility Act
The Department of the Interior certifies that this document will
not have a significant economic effect on a substantial number of small
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
We provide some 140,000 Western farmers with irrigation water. We
estimate that out of this number, fewer than 200 entities, not
necessarily small entities, could be affected by the rule. The effect
on most of these entities starting on January 1, 2000, would be limited
to the annual completion of RRA forms. For some of these entities, the
farm operator was also the owner of the land in question when the land
was ineligible excess or under recordable contract. In cases where such
a farm operating arrangement is still in place on January 1, 2000, or
is implemented on or after that date, the full-cost rate would be
applicable to all deliveries of Reclamation irrigation water to such
land. However, the landholder in question could avoid paying the full-
cost rate by hiring a different farm operator who did not formerly own
the land in question as excess. Therefore, we have determined that the
proposed rule will not have a significant economic effect on a
substantial number of small entities.
Small Business Regulatory Enforcement Fairness Act (SBREFA)
This rule is not a major rule under 5 U.S.C. 804(2), the Small
Business Regulatory Enforcement Fairness Act. This rule:
(1) Will not have an annual effect on the economy of $100 million
or more. The rule could affect up to an estimated 200 farms, but the
effects would not approach $100 million or more.
(2) Will not cause a major increase in costs or prices for
consumers, individual industries, Federal, State, or local government
agencies, or geographic regions. There could be an economic effect on
fewer than an estimated 200 farms, but we do not anticipate that this
will cause any noticeable increase in costs or prices.
(3) Will not have significant adverse effects on competition,
employment, investment, productivity, innovation, or the ability of
U.S.-based enterprises to compete with foreign-based enterprises. The
rule would only affect at most a small sector of the farming industry,
and would not have significant adverse effects on competition,
employment, investment, productivity, innovation, or the ability of
U.S.-based enterprises to compete with foreign-based enterprises.
Paperwork Reduction Act
This regulation requires an information collection from 10 or more
parties and a submission under the Paperwork Reduction Act is required.
This information collection is described below.
Existing Information Collection Under the Acreage Limitation Rules and
Regulations
Sections 206, 224(c), and 228 of the RRA (43 U.S.C. 390ff,
390ww(c), and 390zz) require, among other things, that (1) as a
condition to the receipt of Reclamation irrigation water, each
[[Page 64163]]
landholder must annually certify, in a form suitable to the Secretary,
that they are in compliance with the provisions of the RRA, and (2)
districts must annually submit to us, in a form suitable to the
Secretary, records and information necessary to implement the RRA.
These mandatory requirements are addressed in 43 CFR 426.18. To comply
with these requirements, we provide forms for the landholders' and
districts' use. The landholder forms have been approved by OMB under
control number 1006-0005. The district summary forms have been approved
under control number 1006-0006. Both clearances expire on December 31,
1999.
Information Collection Under the Proposed Rule
The proposed rule contains a change that would increase the
reporting burden by requiring certain farm operators to submit RRA
forms starting on January 1, 2000. We estimate that the reporting
burden would be increased by less than 200 hours as a result of this
change. The primary purpose of requiring those farm operators who
provide services to more than 960 acres westwide held in trusts or by
legal entities to complete and submit RRA forms would be to provide us
with sufficient information to determine if the farm operating
arrangement is a lease as defined in section 426.2 of this chapter.
As with all acreage limitation information collections, we would
require farm operators to provide identifier information; such as name,
address, telephone number, etc., and if the farm operator is an entity,
information concerning the entity's organizational structure and part
owners. In addition, farm operators would be required to provide
information concerning the land to which they are providing services;
such as legal descriptions, number of acres, etc. We would also require
farm operators to provide information concerning the specific services
they are providing, who decides when such services are needed, how the
farm operator is compensated for the services, the control the farm
operator has over the daily operation of the land in question, etc. If
different services are provided to different land parcels, such
distinctions would need to be specified.
In order to effectively administer and enforce the proposed excess
land provisions, we would require farm operators to provide information
as to whether the land to which services are being provided was
formerly owned by the farm operator as ineligible excess land or under
recordable contract.
At this time, we would like comments on the planned RRA forms
requirements for farm operators. Comments are invited on: (a) whether
the proposed collection of information is necessary for the proper
performance of our functions, including whether the information will
have practical utility; (b) the accuracy of our burden estimate for the
proposed collection of information; (c) ways to enhance the quality,
utility, and clarity of the information to be collected; and (d) ways
to minimize the burden of the collection of information on those who
are to respond, including through the use of automated collection
techniques or other forms of information technology. In addition, we
would like comments on specific issues related to the proposed
information collection including:
Should the RRA forms submittal threshold for farm
operators be 960 acres westwide held in trusts or by legal entities as
provided in the proposed rules or some other figure (e.g., 40 acres,
240 acres, etc.)?
Is the proposed definition of ``farm operator'' sufficient
or should it be altered? For example, is there a way to define ``farm
operator'' that reduces how many additional RRA forms would need to be
submitted, other than through application of the forms submittal
threshold.
Is the definition of and exemption for ``custom operator''
included in the proposed rule sufficient?
Should certain specific questions be asked of farm
operators on the RRA forms? Examples of such include: Whether the farm
operator is authorized to use his agreements with a landholder as
collateral in any loan; whether the farm operator can sue or be sued in
the name of the landholding; and whether the farm operator is
authorized to apply for any Federal assistance from the United States
Department of Agriculture in the name of the landholding.
In considering the issues associated with certain farm operators
being required to submit RRA forms, we would also like comments as to
whether current RRA forms should be modified to accommodate the
additional information requirements applicable to farm operators, or if
an entirely new form only to be completed by farm operators providing
services to more than 960 acres westwide held in trusts or by legal
entities should be developed.
Submit comments on the RRA information collection changes to us
along with written comments on the proposed rule, or separately (see
DATES, ADDRESSES, and Public Comment Procedures under SUPPLEMENTARY
INFORMATION, above).
Executive Order 12612, Federalism
In accordance with Executive Order 12612, the rule does not have
sufficient federalism implications to warrant the preparation of a
Federalism Assessment. A Federalism Assessment is not required. This
proposed rule would supplement existing provisions for administering
the RRA. The regulation would not significantly change the relationship
or relative roles of the Federal and State Government. It would not
lead to Federal control over traditional State responsibilities, or
decrease the ability of the States to make policy decisions with
respect to their own functions. This regulation would not affect the
distribution of power and responsibilities among the various levels of
government and does not preempt State law. In summary, this regulation
would not have a significant impact on Federalism as described by E.O.
12612.
Executive Order 12630, Takings
In accordance with Executive Order 12630, the rule does not have
significant takings implications. A takings implication assessment is
not required. This proposed rule would not result in imposition of
undue additional fiscal burdens on the public. The rule would not
result in physical invasion or occupancy of private property or
substantially affect its value or use. Specifically, the rule would not
result in the taking of contractual rights to storage water in
Reclamation reservoirs or water rights established under State law.
Unfunded Mandates Reform Act of 1995
This rule does not impose an unfunded mandate on State, local, or
tribal governments or the private sector of more than $100 million per
year. The rule does not have a significant or unique effect on State,
local, or tribal governments or the private sector. A statement
containing the information required by the Unfunded Mandates Reform Act
(2 U.S.C. 1531 et seq.) is not required. The rule would require certain
farm operators, which are not small governments, to submit RRA forms.
The excess land provision of the rule will not affect small
governments. These potential effects would not amount to costs of more
than $100 million per year.
Executive Order 12988, Civil Justice Reform
In accordance with Executive Order 12988, the Office of the
Solicitor has
[[Page 64164]]
determined that this rule does not unduly burden the judicial system
and meets the requirements of sections 3(a) and 3(b)(2) of the Order.
Clarity of This Regulation
Executive Order 12866 requires each agency to write regulations
that are easy to understand. We invite your comments on how to make
this rule easier to understand, including answers to questions such as
the following:
(1) Are the requirements in the rule clearly stated?
(2) Does the rule contain technical language or jargon that
interferes with its clarity?
(3) Does the format of the rule (grouping and order of sections,
use of headings, paragraphing, etc.) aid or reduce its clarity?
(4) Would the rule be easier to understand if it were divided into
more (but shorter) sections? (A ``section'' appears in bold type and is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 428.4 Who must submit forms under this part.)
(5) Is the description of the rule in the ``Supplementary
Information'' section of the preamble helpful in understanding the
proposed rule? What else could we do to make the rule easier to
understand?
Send a copy of any comments that concern how we could make this
rule easier to understand to: Office of Regulatory Affairs, Department
of the Interior, Room 7229, 1849 C Street NW, Washington, DC 20240. You
may also e-mail the comments to this address: Exsec@ios.doi.gov
IX. List of Subjects in 43 CFR Part 428
Agriculture, Irrigation, Reclamation, Reporting and recordkeeping
requirements, Water resources.
Dated: November 10, 1998.
Patricia J. Beneke,
Assistant Secretary--Water and Science.
For the reasons stated in the preamble, the Bureau of Reclamation
proposes to add a new part 428 to title 43 of the Code of Federal
Regulations as follows:
PART 428--INFORMATION REQUIREMENTS FOR CERTAIN FARM OPERATIONS IN
EXCESS OF 960 ACRES AND THE ELIGIBILITY OF CERTAIN FORMERLY EXCESS
LAND
Sec.
428.1 Purpose of this part.
428.2 Applicability of this part.
428.3 Definitions used in this part.
428.4 Who must submit forms under this part.
428.5 Required information.
428.6 Where to submit required forms and information.
428.7 What happens if a farm operator does not submit required
forms.
428.8 What can happen if a farm operator makes false statements on
the required forms.
428.9 Farm operators who are former owners of excess land.
428.10 Districts' responsibilities concerning certain formerly
excess land.
428.11 Effective date.
Authority: 5 U.S.C. 301; 5 U.S.C. 553; 16 U.S.C. 590z-11; 31
U.S.C. 9701; and 32 Stat. 388 and all acts amendatory thereof or
supplementary thereto including, but not limited to, 43 U.S.C. 390aa
to 390zz-1, 43 U.S.C. 418, 43 U.S.C. 423 to 425b, 43 U.S.C. 431,
434, 440, 43 U.S.C. 451 to 451k, 43 U.S.C. 462, 43 U.S.C. 485 to
485k, 43 U.S.C. 491 to 505, 43 U.S.C. 511 to 513, and 43 U.S.C. 544.
Sec. 428.1 Purpose of this part.
This part addresses Reclamation Reform Act of 1982 (RRA) forms
requirements for certain farm operators and the eligibility of formerly
excess land that is operated by a farm operator who was the landowner
of that land when it was excess.
Sec. 428.2 Applicability of this part.
(a) This part applies to farm operators who provide services to:
(1) More than 960 acres held (directly or indirectly owned or
leased) by one trust or legal entity; or
(2) The holdings of any combination of trusts and legal entities
that exceed 960 acres.
(b) This part also applies to farm operators who provide services
to formerly excess land held in trusts or by legal entities if the farm
operator previously owned that land when the land was ineligible excess
or under recordable contract.
(c) This part supplements the regulations in part 426 of this
chapter.
Sec. 428.3 Definitions used in this part.
Custom operator means an individual or legal entity that provides a
specialized, farm-related service that a farm owner, lessee, sublessee,
or farm operator employs for agreed-upon payments. This includes, for
example, crop dusters, custom harvesters, grain haulers, and any other
such services.
Farm operator means an individual or legal entity other than the
owner, lessee, or sublessee that performs any portion of the farming
operation. This includes farm managers, but does not include spouses,
minor children, employees for whom the employer pays social security
taxes, or custom operators.
We or us means the Bureau of Reclamation.
You means a farm operator.
Sec. 428.4 Who must submit forms under this part.
(a) You must submit RRA forms to us annually if:
(1) You provide services to more than 960 nonexempt acres westwide,
held by a single trust or legal entity or any combination of trusts and
legal entities; and
(2) You are not covered by the exceptions found in
Sec. 426.18(g)(2) and (3).
(b) Anyone who is the indirect owner of a legal entity that is a
farm operator meeting the criteria of paragraph (a) of this section
must submit forms to us annually.
Sec. 428.5 Required information.
(a) We will determine which forms you must use to submit the
information required by this section.
(b) You must declare all nonexempt land to which you provide
services westwide.
(c) You must give us other information about your compliance with
Federal reclamation law, including but not limited to:
(1) Identifier information, such as your name, address, telephone
number;
(2) If you are a legal entity, information concerning your
organizational structure and part owners;
(3) Information about the land to which you provide services, such
as a legal description, and the number of acres;
(4) Information about whether you formerly owned, as ineligible
excess land or under recordable contract, the land to which you are
providing services;
(5) Information about the services you provide, such as what they
are, who decides when they are needed, and how much control you have
over the daily operation of the land;
(6) If you provide different services to different land parcels, a
list of services that you provide to each parcel;
(7) Whether you can use your agreement with a landholder as
collateral in any loan;
(8) Whether you can sue or be sued in the name of the landholding;
and
(9) Whether you are authorized to apply for any Federal assistance
from the United States Department of Agriculture in the name of the
landholding.
Sec. 428.6 Where to submit required forms and information.
You must submit the appropriate completed RRA form(s) to each
district westwide that is subject to the acreage limitation provisions
and in which you provide services.
[[Page 64165]]
Sec. 428.7 What happens if a farm operator does not submit required
forms.
(a) If you do not submit required RRA form(s) in any water year,
then:
(1) The district must not deliver irrigation water before you
submit the required RRA form(s); and
(2) You, the trustee, or the landholder(s) who holds the land
(including to whom the land held in trust is attributed) must not
accept delivery of irrigation water before you submit the required RRA
form(s).
(b) After you submit all required RRA forms to the district, we
will restore eligibility.
(c) If a district delivers irrigation water to land that is
ineligible because you did not submit RRA forms as required by this
part, we will assess administrative costs against the district as
specified in Sec. 426.20(e). We will determine these costs under
Sec. 426.20(a)(1) through (3).
Sec. 428.8 What can happen if a farm operator makes false statements
on the required forms.
If you make a false statement on the required RRA form(s),
Reclamation can prosecute you under the following statement:
Under the provisions of 18 U.S.C. 1001, it is a crime punishable
by 5 years imprisonment or a fine of up to $10,000, or both, for any
person knowingly and willfully to submit or cause to be submitted to
any agency of the United States any false or fraudulent statement(s)
as to any matter within the agency's jurisdiction. False statements
by the farm operator will also result in loss of eligibility.
Eligibility can only be regained upon the approval of the
Commissioner.
Sec. 428.9 Farm operators who are former owners of excess land.
(a) You or a landholder may not receive irrigation water on land
held in trust or by a legal entity if:
(1) You owned the land when the land was excess, whether or not
under recordable contract;
(2) You sold the land at a price approved by Reclamation; and
(3) You are the direct or indirect farm operator of that land.
(b) This section does not apply if:
(1) The formerly excess land becomes exempt from the acreage
limitations of Federal reclamation law; or
(2) You or the landholder pays the full-cost rate for any
irrigation water delivered to your formerly excess land that is
otherwise eligible to receive irrigation water. If you are a part owner
of a legal entity that is the direct or indirect farm operator of the
land in question, then the full-cost rate will apply to the
proportional share of the land that reflects your interest in that
legal entity.
Sec. 428.10 Districts' responsibilities concerning certain formerly
excess land.
Districts must not make irrigation water available to formerly
excess land that meets the criteria under Sec. 428.9(a), unless an
exception provided in Sec. 428.9(b) applies.
Sec. 428.11 Effective date.
This part will be effective beginning on January 1, 2000. On that
date the provisions of Sec. 428.9 will apply to all farm operating
arrangements between farm operators and trusts or legal entities that:
(a) Are then in effect; or
(b) Are initiated on, or after, January 1, 2000.
[FR Doc. 98-30756 Filed 11-17-98; 8:45 am]
BILLING CODE 4310-94-P
