01-15320. Citrus Canker; Payments for Recovery of Lost Production Income

AGENCY:

Animal and Plant Health Inspection Service, USDA.

ACTION:

Final rule.

SUMMARY:

We are amending our citrus canker regulations to establish provisions under which eligible owners of commercial citrus groves may, subject to the availability of appropriated funds, receive payments to recover production income lost as a result of the removal of commercial citrus trees to control citrus canker. These lost production payments are intended to help reduce the economic effects of the citrus canker quarantine on affected commercial citrus growers.

EFFECTIVE DATE:

July 18, 2001.

FOR FURTHER INFORMATION CONTACT:

Mr. Stephen Poe, Operations Officer, Program Support Staff, PPQ, APHIS, 4700 River Road Unit 134, Riverdale, MD 20737-1236; [phone].

SUPPLEMENTARY INFORMATION:

Background

Citrus canker is a plant disease that affects plants and plant parts, including fresh fruit, of citrus and citrus relatives (Family Rutaceae). Citrus canker can cause defoliation and other serious damage to the leaves and twigs of susceptible plants. It can also cause lesions on the fruit of infected plants that render the fruit unmarketable, and can cause infected fruit to drop from the trees before reaching maturity. The aggressive A (Asiatic) strain of citrus canker can infect susceptible plants rapidly and lead to extensive economic losses in commercial citrus-producing areas.

The regulations to prevent the interstate spread of citrus canker are contained in 7 CFR 301.75-1 through 301.75-15 (referred to below as the regulations). The regulations restrict the interstate movement of regulated articles from and through areas quarantined because of citrus canker and provide conditions under which regulated fruit may be moved into, through, and from quarantined areas for packing. The regulations currently list parts of Broward, Collier, Dade, Hendry, Hillsborough, and Manatee Counties, FL, as quarantined areas for citrus canker.

On December 7, 2000, we published in the Federal Register (65 FR 76582-76588, Docket No. 00-037-2) a proposed rule to amend the regulations to establish provisions under which eligible owners of commercial citrus groves could, subject to the availability of appropriated funds, receive payments to recover production income lost as a result of the removal of commercial citrus trees to control citrus canker.

We solicited comments concerning our proposal for 30 days ending on January 8, 2001. We received a total of 30 comments by that date. They were from citrus growers, packers, and shippers, farm credit lenders, a grove care company, a nursery, and growers associations and cooperatives.

Three commenters offered unqualified support for the proposed rule, while six others offered support but requested a specific change in the proposed rule's provisions. One commenter opposed the proposed rule based on the grounds that the proposed payments were calculated incorrectly. The remaining commenters suggested changes to the proposed rule or simply urged us to consider the most up-to-date information available to recalculate the payments presented in the proposed rule. The issues raised by those who opposed the rule or offered suggestions are discussed below, by topic.

Payment Recipients

Several commenters recommended that any payments be made jointly payable to both the grower and lender. Some of these commenters suggested that APHIS conduct a lien search and make any lost production payments jointly payable to the grove owner and any lienholders of record. One commenter added that “condemnation and insurance payments related to government takings or damage to improvements are routinely made payable jointly to the parties in interest.”

Another commenter reported that in July 2000, more than 4,000 containerized citrus trees had been seized from a Miami, FL, nursery by the State citrus canker eradication program. The commenter stated that as of January 2001, he had yet to receive any additional information from State or Federal authorities regarding the status of the seized trees or possibility of compensation being paid for the trees. The commenter urged APHIS to make compensation available to nursery owners who have suffered losses as a result of the State/Federal citrus canker eradication program.

Still another commenter stated that the proposed rule should have provided for additional payments to be made to commercial lime growers who packed their limes in their own packinghouses or in affiliated packinghouses (i.e., “vertically integrated” growers/packers). This commenter stated that the removal of commercial lime trees has not only resulted in the production income losses addressed in the proposed rule, but has also destroyed the economic usefulness of these growers' packinghouse assets, which are specifically designed to handle limes. The commenter suggested, based on packinghouse cash data supplied with his comment, that additional payments of $6,054 per acre be made to commercial lime growers who own or are affiliated with a packinghouse.

The funds we will use to make payments for the recovery of lost production income were made available by Sec. 203(e) of the Agricultural Risk Protection Act of 2000 (Public Law 106-224) and Sec. 810 of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2001 (Public Law 106-387). Public Law 106-224 directs the Secretary of Agriculture to “compensate commercial growers for losses due to Pierce's disease, plum pox, and citrus canker,” and Public Law 106-387 states that “[t]he Secretary of Agriculture shall compensate Florida commercial citrus and lime growers for lost production, as determined by the Secretary of Agriculture, with respect to trees removed to control citrus canker.” As neither of those acts makes reference to including the growers' mortgage- or lienholders, nurseries, or packinghouses in those payments, we believe that we are limited to making payments under this final rule to commercial citrus and lime growers.

Two-Tier Discount Rate

Several commenters opposed the use of a two-tier discount rate in calculating the per-acre payments presented in the proposed rule, arguing that there was insufficient information available to support a two-tier discount rate. These commenters suggested that a single, appropriate discount rate—i.e., the lower of the two offered for each variety in the proposed rule—be applied throughout the model that is used to calculate payments.

We had proposed to use two discount rates to account for the fact that a canker-infected grove would, over time, produce less and lower-valued fruit, and thus would provide a lesser income stream than a canker-free grove. As we explained in the proposed rule, the 1-percent-higher discount rates proposed for canker-infected groves were intended to reflect increased risk, i.e., the decreased revenue stream. In light of the concerns raised by the commenters, we have reevaluated our ability at this time to accurately account for that increased risk through the use of a two-tier discount rate. Given the present unavailability of adequate supporting data, we have eliminated the two-tier discount rate from the payment calculation detailed in the proposed rule and will instead use a single discount rate throughout, i.e., 14 percent for grapefruit; 14.5 percent for tangelos and Valencia and navel oranges; and 13.5 percent for limes. The resulting payment adjustments are reflected in the per-acre payments listed in § 310.75-16(b) at the end of this document. However, we do believe that it is appropriate to account for the reduced revenues from infested groves and will continue to explore methods to consider such reduced revenues in the development of future payment or compensation programs.

The switch to the use of a single discount rate to calculate the per-acre payments provided for by this rule will increase the total estimated payments for commercial citrus trees destroyed or scheduled for destruction by March 9, 2001, by $6.34 million. Given that limited funding is available for the lost production payments in this rule and the tree replacement payments in § 301.75-15, we considered the possibility of initially paying a substantial portion, but not all, of the lost production payment calculated for each eligible grower; once each grower had received that partial payment, we would then distribute the remaining funds among all the eligible growers on a prorated basis (assuming there would be insufficient funds to provide each grower with 100 percent of the amount provided for in this rule). A two-part payment method such as this would ensure that all eligible commercial citrus growers would receive at least a percentage of the payments provided for by this rule. However, after considering the amount of remaining funds available for payments and assessing the situation in Florida with regard to the level of survey activity and the frequency of new citrus canker detections in commercial citrus groves, we have decided to not pursue the idea of partial payments at this time.

One factor that played an important role in our decision is the temporal limitation on eligibility contained in Sec. 810 of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2001 (Public Law 106-387). Specifically, Sec. 810(c) of that act states: “To receive assistance under this section [i.e., tree replacement and lost production payments], a tree referred to in subsection (a) [which refers to tree replacement payments] or (b) [which refers to lost production payments] must have been removed after January 1, 1986, and before September 30, 2001.” This act is the source from which we derive the majority of the funds ($58 million) for the lost production payments provided for by this rule and the tree replacement payments under § 301.75-15.^[1] We expect that sufficient funds will be available to sustain the tree replacement and lost production payment programs until at least the September 30, 2001, close of the eligibility period provided for by Public Law 106-387. At some point after September 30, 2001, we expect that all available funds provided by Congress for these payments will have been depleted. We also recognize that there is the possibility that those funds could be depleted prior to September 30, 2001, should citrus canker be detected in an unexpectedly large number of commercial citrus groves in the coming months. Therefore, because our ability to offer the tree replacement payments provided for by § 301.75-15 and the lost production payments provided for by this rule (§ 301.75-16) is contingent upon the availability of appropriated funds, we must acknowledge that in the absence of additional funding, there is the possibility that we will be unable to continue paying claims filed by commercial citrus growers at some point before the close of this calendar year (2001).

Another factor in our decision to not pursue the idea of partial payments was our determination that doing so would further delay the issuance of the payments provided for by this rule. Given that the issue of partial payments was not raised in our December 2000 proposed rule, we believed the most appropriate and defensible action would have been to provide the public with an opportunity to submit comments on the subject through the publication of another proposed rule. The delay attendant to a new proposal is not, in our view, warranted by the facts of this case. While we are not pursuing the idea of partial payments at this time, we do welcome any thoughts that interested parties may have on the subject. A mailing address for the submission of such correspondence can be found at the beginning of this document under FOR FURTHER INFORMATION CONTACT.

Lime Prices

Several commenters supported the use of more up-to-date price information in the calculation used to arrive at the per-acre payment presented in the proposed rule for limes. Most of these commenters indicated that they believed the proposed per-acre payment for limes was too low and supported the use of data provided by one of the commenters.

In the proposed rule, we explained that we calculated the per-acre net income for each variety of fruit using information obtained from the Florida Agricultural Statistics Service (FASS) and the University of Florida's Institute of Food and Agricultural Services (IFAS). As the data offered by one of the commenters was not reflected in the information we obtained from FASS and IFAS, we were unable to use those data in our calculations. Based on the information provided by that commenter—specifically, a per-box price for limes of $9.68 rather than the price of $9.11 used in the proposed rule—we have recalculated the per-acre payment for limes in this final rule. The adjusted payment is reflected in the per-acre payment for limes listed in § 310.75-16(b) at the end of this document.

Early and Midseason Oranges

On October 16, 2000, we published an interim rule (65 FR 61077-61080, Docket No. 00-037-1) that established § 301.75-15 in the regulations to provide for the payment of tree replacement funds to eligible owners of commercial citrus groves. One of the categories of citrus for which payments were provided in that interim rule was titled “Orange, early/midseason/navel.” In the proposed rule, however, we changed the title of that category to “Orange, navel” and explained that we were doing so to conform with the language used in Sec. 810 of Public Law 106-387 (i.e., the Department's fiscal year 2001 appropriation, which made $58 million available for payments to commercial citrus and lime producers in Florida). One commenter noted the difference in the titles and asked that we make it clear that the early and midseason oranges are still included in the “Orange, navel” category and that the payments discussed in the proposed rule will be made for early and midseason varieties in addition to navel oranges.

We do, as the commenter surmised, intend to include payments for early and midseason orange varieties in the “Orange, navel” category. To make that clear, we have amended the “Orange, navel” entry in the table in § 301.75-16(b)(1) at the end of this document to read “Orange, navel (includes early and midseason oranges).”

Tangerines

Two commenters noted that the proposed rule did not provide for payments for losses in production income associated with the removal of tangerine trees to control citrus canker and urged APHIS to establish a category for tangerines. Both commenters stated that it would be inappropriate to include tangerines in the proposed rule's “other or mixed citrus” category, given that the costs and revenues associated with tangerine production result in a per-acre net present value (NPV) for tangerine groves that exceeds the per-acre NPV calculated for the “other or mixed citrus” category. One of the commenters offered data to support the establishment of a tangerine category and suggested that, if tangerines were not afforded their own category, they should be considered in the Valencia orange category, which would provide for an NPV more reflective of market conditions.

Given that commercial tangerine trees have been removed as part of the citrus canker eradication program, we agree with the commenter that it is appropriate to provide for payments for lost production income to be made to the owners of commercial tangerine groves. Therefore, consistent with the suggestion offered by one of the commenters, we have amended the Valencia orange category in the table in § 301.75-16(b)(1) of this final rule to include tangerines.

Payment Amounts

One commenter disputed the validity of many of the data and assumptions used in the calculations that resulted in the per-acre payments presented in the proposed rule for each citrus variety. This commenter stated that the proposed payments were too high for groves with average or below-average production capacities and too low for other groves with above-average production capacity. This commenter suggested alternative data and methods related to planting densities, age of trees, yield per acre, and value per box for use in the model used to calculate payments, and requested that a measure of flexibility be incorporated into the rule to provide for the consideration of higher payments for growers who could demonstrate above-average returns from their groves.

While we acknowledge that some groves may outproduce others for any of several reasons, we believe that the approach and data we used to calculate per-acre payments in the proposed rule and in this final rule are valid and appropriate. In calculating the per-acre payments, we applied an accepted valuation model for determining NPV and used, as noted above, citrus industry economic and production information supplied by FASS and IFAS in that model. While a more precise valuation of individual groves might be obtained using the approach suggested by the commenter, we believe that it is necessary to retain the transparency and consistency afforded by the methodology we employed to calculate the per-acre payments presented in this final rule.

Late Claims

As noted previously, we published an interim rule on October 16, 2000, that established regulations in Subpart—Citrus Canker to provide for the payment of tree replacement funds to eligible owners of commercial citrus groves. That interim rule required, among other things, that claims for payments for destroyed trees must be received within 60 days after their destruction or, in the case of trees destroyed on or before the effective date of the interim rule, within 60 days after the interim rule's effective date. A similar provision was included in the proposed rule that preceded this final rule. We were subsequently informed by State officials that they had been unable to inform some grove owners in a timely manner of their eligibility to present claims, in most cases due to the fact that the person had sold the property and/or had moved out of State, thus delaying the notification that the State had provided to other grove owners. In order to provide us with the flexibility needed to address this situation, we intend to amend, in a separate document, the regulations in § 310.75-15(c) regarding the submission of tree replacement claims to provide that the Administrator may, on a case-by-case basis, approve the consideration of late claims when the circumstances appear, in the opinion of the Administrator, to warrant such consideration. Because the claim submission procedures established by this final rule are substantively the same as those in § 310.75-15(c), we have also amended § 310.75-16(c) in this final rule to provide for the consideration of late claims for up to 1 year after the effective date of this rule, in the case of trees destroyed on or before that effective date, or up to 1 year after the destruction of the trees in the case of trees destroyed after the effective date of this rule.

Other Comments

Other commenters questioned the efficacy of the approach and methods used by State and Federal officials in conducting the current citrus canker eradication program in Florida. Those comments did not relate to the regulatory provisions discussed in the proposed rule and are, thus, outside of the scope of this rulemaking.

Therefore, for the reasons given in the proposed rule and in this document, we are adopting the proposed rule as a final rule, with the changes discussed in this document.

Executive Order 12866 and Regulatory Flexibility Act

This rule has been reviewed under Executive Order 12866. The rule has been determined to be significant for the purposes of Executive Order 12866 and, therefore, has been reviewed by the Office of Management and Budget.

The following economic analysis provides a cost-benefit analysis as required by Executive Order 12866 and an analysis of the potential economic effects on small entities as required by the Regulatory Flexibility Act.

This rule amends the citrus canker regulations to establish provisions under which eligible owners of commercial citrus groves may, subject to the availability of appropriated funds, receive payments to recover production income lost as a result of the removal of commercial citrus trees to control citrus canker. These lost production payments are intended to help to reduce the economic effects of the citrus canker quarantine on affected commercial citrus growers.

As shown in the table below, the United States produced approximately 12,870 tons of oranges, grapefruit, limes, tangerines, and tangelos worth $2.29 billion in 1999, with Florida producing more than 80 percent of that total.

[1999]

Fruit	U.S. production (tons)	Value of U.S. production (millions)	Florida production (tons)	Value of Florida production (millions)	Florida share of production (%)
Oranges	9,886	$1,807.4	8,113.1	$1,483.3	82.07
Tangerines	327	118.7	218.7	79.4	66.89
Grapefruit	2,520	338.9	1,931.0	259.7	76.63
Limes	22	8.2	22.0	8.2	100.00
Tangelos	115	18.4	115.0	18.4	100.00
Total	12,870	2,291.6	10,399.9	1,849.0
Source: USDA, National Agricultural Statistics Service, Agricultural Statistics 2000.

Removing the infected and exposed trees protects a substantial investment in other citrus groves. While the entire value of citrus produced is not at risk immediately from citrus canker, the disease would, if left unchecked, continue to spread. In time, the entire industry would be at risk.

According to the data provided to APHIS by the State of Florida, approximately 8,550 acres of commercial citrus trees have been destroyed or scheduled to be destroyed to control citrus canker by March 9, 2001. This figure includes an estimated 7,946 acres of commercial citrus that have been destroyed since the current citrus canker outbreak was detected in September 1995, as well as approximately 604 acres of grapefruit trees from 5 groves in Manatee and Highlands Counties that were destroyed between 1986 and 1990 to control citrus canker during a limited outbreak of the disease during that period.

As shown in the following table, which was prepared using the acreage estimates provided by the State of Florida and the per-acre payments contained in this rule, lost production payments for commercial citrus trees destroyed or scheduled for destruction by March 9, 2001, are expected to total about $46.05 million.

Variety	Acreage destroyed by 3/9/01	Per-acre payment	Estimated lost production claims
Grapefruit	2,671	$3,342	$8,926,482
Orange, Valencia, and tangerine	1,503	6,446	9,688,338
Orange, navel (includes early and midseason oranges)	1,874	6,384	11,963,616
Tangelos	56	1,989	111,384
Limes	2,273	6,503	14,781,319
Other or mixed citrus	173	3,342	578,166
Total	8,550		46,049,305

Effects on Small Entities

This rule establishes provisions under which eligible owners of commercial citrus groves may, subject to the availability of appropriated funds, receive payments to recover production income lost as a result of the removal of commercial citrus trees to control citrus canker. Therefore, the entities who will be affected by this rule are citrus growers. The Regulatory Flexibility Act requires that the Agency specifically consider the economic effects of its rules on small entities. The Small Business Administration (SBA) defines a firm engaged in agriculture as “small” if it has less than $500,000 in annual receipts. While the majority of citrus growers in Florida would be considered small entities under those SBA guidelines, those growers who would not be classified as small entities account for the majority of the citrus-growing acreage in the State. Based on available information, it appears that most of the citrus canker-related losses in Florida have been incurred by those larger citrus producers. Regardless of the size of the entities affected, we expect that this rule will benefit those commercial citrus growers who are eligible for lost production payments by helping to defray some of the losses and expenses that they have incurred as a result of the ongoing State and Federal efforts to eradicate citrus canker in Florida.

Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not have a significant economic impact on a substantial number of small entities.

Executive Order 12372

This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.)

Executive Order 12988

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are inconsistent with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the information collection or recordkeeping requirements included in this rule have been approved by the Office of Management and Budget (OMB) under OMB control number 0579-0168.

List of Subjects in 7 CFR Part 301

• Agricultural commodities
• Plant diseases and pests
• Quarantine
• Reporting and recordkeeping requirements
• Transportation

Accordingly, we are amending 7 CFR part 301 as follows:

PART 301—DOMESTIC QUARANTINE NOTICES

1. The authority citation for part 301 is revised to read as follows:

Authority: 7 U.S.C. 166, 7711, 7712, 7714, 7731, 7735, 7751, 7752, 7753, and 7754; 7 CFR 2.22, 2.80, and 371.3.

Section 301.75-15 also issued under Sec. 204, Title II, Pub. L. 106-113, 113 Stat. 1501A-293; sections 301.75-15 and 301.75-16 also issued under Sec. 203, Title II, Pub. L. 106-224, 114 Stat. 400 (7 U.S.C. 1421 note).

2. Section 301.75-1 is amended by adding a definition of ACC coverage to read as follows:

§ 301.75-1

Definitions.

ACC coverage. The crop insurance coverage against Asiatic citrus canker (ACC) provided under the Florida Fruit Tree Pilot Crop Insurance Program authorized by the Federal Crop Insurance Corporation.

* * * * *

3. In Subpart—Citrus Canker, a new § 301.75-16 is added to read as follows:

§ 301.75-16

Payments for the recovery of lost production income.

Subject to the availability of appropriated funds, the owner of a commercial citrus grove may be eligible to receive payments in accordance with the provisions of this section to recover income from production that was lost as the result of the removal of commercial citrus trees to control citrus canker.

(a) Eligibility. The owner of a commercial citrus grove may be eligible to receive payments to recover income from production that was lost as the result of the removal of commercial citrus trees to control citrus canker if the trees were removed pursuant to a public order between 1986 and 1990 or on or after September 28, 1995.

(b) Calculation of payments. (1) The owner of a commercial citrus grove who is eligible under paragraph (a) of this section to receive payments to recover lost production income will, upon approval of an application submitted in accordance with paragraph (c) of this section, receive a payment calculated using the following rates:

Citrus variety	Payment (per acre)
Grapefruit	$3,342
Orange, Valencia, and tangerine	6,446
Orange, navel (includes early and midseason oranges)	6,384
Tangelo	1,989
Lime	6,503
Other or mixed citrus	3,342

(2) Payment adjustments. (i) In cases where the owner of a commercial citrus grove had obtained ACC coverage for trees in his or her grove and received crop insurance payments following the destruction of the insured trees, the payment provided for under paragraph (b)(1) of this section will be reduced by the total amount of the crop insurance payments received by the commercial citrus grove's owner for the insured trees.

(ii) In cases where ACC coverage was available for trees in a commercial citrus grove but the owner of the grove had not obtained ACC coverage for his or her insurable trees, the per-acre payment provided for under paragraph (b)(1) of this section will be reduced by 5 percent.

(c) How to apply for lost production payments. The form necessary to apply for lost production payments may be obtained from any local citrus canker eradication program office in Florida, or from the USDA Citrus Canker Project, 6901 West Sunrise Boulevard, Plantation, FL 33313. The completed application should be accompanied by a copy of the public order directing the destruction of the trees and its accompanying inventory that describes the acreage, number, and the variety of trees removed. Your completed application must be sent to the USDA Citrus Canker Eradication Project, Attn: Lost Production Payments Program, c/o Division of Plant Industry, 3027 Lake Alfred Road, Winter Haven, FL 33881. Claims for losses attributable to the destruction of trees on or before the effective date of this rule must be received on or before August 17, 2001. Claims for losses attributable to the destruction of trees after the effective date of this rule must be received within 60 days after the destruction of the trees. The Administrator may, on a case-by-case basis, approve the consideration of late claims when the circumstances appear, in the opinion of the Administrator, to warrant such consideration. However, any request for consideration of a late claim must be submitted to the Administrator on or before July 18, 2002 for trees destroyed on or before July 18, 2001, and within 1 year after the destruction of the trees for trees destroyed after July 18, 2001.

Done in Washington, DC, this 12th day of June 2001.

Bill Hawks,

Under Secretary for Marketing and Regulatory Programs.

Footnotes

1.  The two other sources of funding are the Consolidated Appropriations Act for FY 2000 [Public Law 106-113], which directs the Secretary of Agriculture to use not more than $9 million of Commodity Credit Corporation funds for a cooperative program with the State of Florida to replace commercial citrus trees removed to control citrus canker until the earlier of December 31, 1999, or the date crop insurance coverage is made available with respect to citrus canker, and Sec. 203(e) of the Agricultural Risk Protection [Public Law 106-224], which provides up to $25 million shall be used by the Secretary to compensate commercial growers for losses due to Pierce's disease, plum pox, and citrus canker.