00-18709. Bioenergy Program

AGENCY:

Commodity Credit Corporation, USDA.

ACTION:

Proposed rule with request for comments.

SUMMARY:

The Commodity Credit Corporation (CCC) is considering a new initiative to accelerate the development and use of bio-based technologies which would stimulate the industrial use of agricultural commodities into bio-based fuels and products. Accordingly, CCC seeks comments concerning the establishment of a bioenergy program to expand agricultural markets by promoting increased production of bioenergy through ethanol and biodiesel. Using the authority of the CCC Charter Act, which states in part, that CCC is authorized to use its general powers to “increase domestic consumption of agricultural commodities by expanding or aiding in the expansion of domestic markets for agricultural commodities * * *”, CCC proposes to make incentive cash payments to bioenergy producers who increase their purchases of eligible agricultural commodities, as compared to the corresponding period in the prior fiscal year (FY) and convert that commodity into increased bioenergy production.

DATES:

Comments on this rule must be received on or before August 28, 2000 to be assured of consideration. Comments regarding the information collection requirements of the Paperwork Reduction Act must be received on or before September 25, 2000 to be assured of consideration.

ADDRESSES:

Comments should be sent to Alex King, Acting Deputy Administrator, Commodity Operations, FSA, United States Department of Agriculture (USDA), STOP 0550, 1400 Independence Avenue, SW., Washington, DC 20250-0550, telephone [phone] or e-mail address, [e-mail]. Persons with disabilities who require alternative means for communication for regulatory information (braille, large print, audiotape, etc.) should contact USDA's TARGET Center at [phone] (voice and TDD).

FOR FURTHER INFORMATION CONTACT:

Jim Goff, [phone].

SUPPLEMENTARY INFORMATION:

Comments Requested

Public comments (submitted to the address above) are requested generally and specifically on the following topics in this proposed rule:

1. Producers of what forms of bioenergy should be eligible for program payments? Ethanol and biodiesel are proposed in this rule.

2. What agricultural commodities used in bioenergy production should be included in the program? This rule proposes potentially making payments on barley, corn, grain sorghum, oats, rice, wheat, soybeans, sunflower seed, canola, crambe, rapeseed, safflower, flaxseed, and mustard seed used in either ethanol or biodiesel production.

3. At what facility capacity should program payment rates change to account for plant efficiency variances by eligible program commodity? This rule proposes making larger payments to plants with under 30 million gallon per year capacity than to plants with 30 million gallon or more capacity.

4. How should payment rates be established, especially for commodities without CCC announced terminal market prices? This rule only proposes making payments to commodities with established CCC announced terminal prices.

5. When payments are limited by the budget, how should payments be distributed?

(a) Capped at a certain dollar amount or percentage of total payments. For example, no more than $X or X percent of total funds available to any one firm;

(b) Prorate payments to eligible producers over the quarter or FY; or

(c) First come, first paid basis.

This proposed rule uses a combination of all of the above by having a sign-up period before the fiscal year begins to determine a payment factor as defined in § 1424.3 and then using the payment factor on a first come, first paid basis. A payment restriction is proposed in § 1424.10.

6. Should the payment factor be capped as proposed in this rule at 100 percent ? And, if so, should the cap be 100 percent?

7. How should increases in bioenergy production be established for the various commodities receiving program payments?

8. What are the expected impacts of this program on agricultural commodity prices, fossil fuel energy prices, farm income, bioenergy production and prices, and international trade in agricultural and energy products?

Executive Order 12866

This proposed 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 (OMB).

Regulatory Flexibility Act

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

Executive Order 12372

This program is not subject to the provisions of Executive Order 12372, which requires intergovernmental consultation with State and local officials. See the notice related to 7 CFR part 3015 subpart V published at 48 FR 29115 (June 24, 1983).

Environmental Evaluation

An environmental evaluation for this action will be completed before publication of the final rule.

Executive Order 12988

This proposed rule has been reviewed in accordance with Executive Order 12988, Civil Justice Reform. The provisions of this proposed rule do not preempt State laws, are not retroactive, and do not involve administrative appeals.

Executive Order 12612

It has been determined that this proposed rule does not have sufficient Federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in this proposed rule will not have a substantial direct effect on States or their political subdivisions or on the distribution of power and responsibilities among the various levels of government.

Unfunded Mandates Reform Act of 1995

This proposed rule contains no Federal mandates under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of the UMRA regulations.

Background

To encourage bioenergy producers to expand agricultural markets by promoting increased bioenergy (ethanol and biodiesel) production, CCC, in accordance with Executive Order 13134, and the CCC Charter Act, proposes to make incentive cash payments to bioenergy producers who increase their purchases of agricultural commodities over previous FY purchases and convert that commodity into increased ethanol and biodiesel production over previous FY ethanol and biodiesel production. This rule proposes potentially making payments on barley, corn, grain sorghum, oats, rice, wheat, soybeans, sunflower seed, canola, crambe, rapeseed, safflower, flaxseed, and mustard seed used in either ethanol or biodiesel production.

Eligible bioenergy producers will receive incentive cash payments quarterly, based on the producer's total annual bioenergy production increase for the quarter compared to the same quarter in the previous FY. Quarterly payments will be reconciled with the total increase in production for the FY at the end of the fourth quarter. If, at the end of the fourth quarter, overpayments have been made, the bioenergy producer shall repay the overpayment plus interest from the date of the overpayment through the date of repayment to CCC. Eligible bioenergy producers with less than 30 million gallons annual production capacity will receive a higher payment rate than bioenergy producers with 30 million gallons or more annual production capacity to encourage the number of bioenergy producers, increase the incentive for smaller plants, and promote expansion of bioenergy production. A higher incentive is needed for smaller plants because, compared to larger plants, they tend to produce a more limited product range during refining, are less able to capture economies of scale, and may not have access to attractive risk management strategies.

Except for FY 2000, bioenergy producers will enter into annual agreements with CCC establishing their eligibility to receive program payments before October 1. Once an agreement is entered into, eligible bioenergy producers will submit quarterly applications within 30 calendar days after the end of each quarter requesting payments for the prior quarter. For example, during January 2001, producers may request payments for the period beginning October 1, 2000 through December 31, 2000. CCC would make payments to eligible bioenergy producers within 30 calendar days of receiving a complete eligible application.

It is anticipated that CCC would make available up to $100 million in FY 2000, $150 million in FY 2001, and $150 million in FY 2002. CCC expects payment requests to exceed available program funding. Therefore, producers would be required to complete an agreement during a sign-up period to be announced by CCC for each FY of the program. Eligible agreement holders would be able to submit applications for program payments after each FY quarter. Information gathered from agreement holders would be used to establish a payment factor. The payment factor would be used when funding is less than anticipated payment requests for either or both ethanol and biodiesel production by quarter during the applicable FY to fairly distribute available funding. In contrast, when sign up results in fewer requests than funding permits, a payment factor of 100 percent would be used to allocate the applicable FY's funding. Once the payment factors are established, CCC would issue payments under the program on a first application received first paid basis. For example, if funding is limited to $100 million and $250 million in agreements are approved, 70 percent from ethanol producers and 30 percent from biodiesel producers, an individual ethanol producer with an approved agreement requests a payment of $100,000 would receive $28,000 ($100,000 times 40 percent ($100 million budget divided by $250 million agreement requests) times 70 percent (ethanol factor)). Once the payment factor is established, it would be used for the entire FY. If funds are exhausted, payments would stop. Under no circumstances would previous payments be adjusted except as specified in § 1424.8(b).

As provided for in 31 U.S.C. 3720B the proposed rule provides that persons who are delinquent on other Federal debts will be ineligible for payments under this program. Also, bioenergy producers, to be eligible for this program, may have to meet additional requirements specific to the bioenergy fuel being produced. For example, to receive program payments, ethanol producers must also be licensed by the Bureau of Alcohol, Tobacco, and Firearm (BATF) for fuel ethanol production.

Paperwork Reduction Act

Title: 7 CFR 1424, Bioenergy Program.

OMB Control Number: 0560-NEW.

Type of Request: Request for approval of a new information collection.

Abstract: USDA will collect information from bioenergy producers that request payments under the Bioenergy Program as the Secretary may require to ensure the benefits are paid only to eligible bioenergy producers for eligible commodities. Bioenergy producers seeking program payments will have to meet minimum requirements by providing information concerning the production of bioenergy. Applicants must certify that they will abide by the Bioenergy Program Agreement's provisions. Burden calculations have been rounded up to nearest quarter hour.

Estimate of Respondent Burden: Public reporting burden for the collection of information is estimated to average 2 hours per response.

Respondents: U.S. bioenergy producers who use agricultural commodities to make bioenergy are eligible to receive payments.

Estimated Number of Respondents: 50.

Estimated Number of Responses per Respondent: 5 responses per year.

Estimated Total Annual Burden Hours on Respondents: 500 hours.

In addition to commenting on the substance of the regulation, the public is invited to comment on the information collection. Proposed topics include the following: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; or (c) ways to enhance the quality, utility, and clarity of the information technology. Comments may be sent to the Desk Officer for Agriculture, Office of Information and Regulatory Affairs, OMB, Washington, DC 20503, and to Alex King, Acting Deputy Administrator, Commodity Operations, FSA, USDA, STOP 0550, 1400 Independence Avenue, SW., Washington, DC 20250-0550.

Copies of the information collection package may be obtained from Alex King, at the address listed above.

List of Subjects in 7 CFR Part 1424

• Administrative practice and procedure
• Energy—bioenergy
• Reporting and recordkeeping requirements

For the reasons stated in the preamble, the Commodity Credit Corporation proposes to add 7 CFR Part 1424.

PART 1424—BIOENERGY PROGRAM

1424.1

Applicability.

1424.2

Administration.

1424.3

Definitions.

1424.4

General eligibility rules.

1424.5

Application process.

1424.6

Eligibility determinations.

1424.7

[Reserved]

1424.8

Payment amounts.

1424.9

Reports required.

1424.10

Payment restriction.

1424.11

Maintenance and inspection of records.

1424.12

Appeals.

1424.13

Misrepresentation and scheme or device.

1424.14

OMB control numbers.

Authority: Section 5(e) of the Commodity Credit Corporation Charter Act.

§ 1424.1

Applicability.

This part establishes the Bioenergy Program (Program). It sets forth the terms and conditions a bioenergy producer must meet to obtain payments from the Commodity Credit Corporation (CCC) for eligible bioenergy production. A bioenergy producer meeting these terms and conditions may obtain payments under the Program. Additional terms and conditions are set forth in Form CCC-850, Bioenergy Program, Agreement Section.

§ 1424.2

Administration.

(a) On behalf of CCC, the Farm Service Agency (FSA), will administer the provisions of this part under the general direction and supervision of the FSA, Deputy Administrator, Commodity Operations (Deputy Administrator).

(b) The Deputy Administrator or a designee may authorize a waiver or modification of deadlines and other program requirements in cases where lateness or failure to meet such other requirements does not adversely affect the operation of the Program.

§ 1424.3

Definitions.

The definitions set forth in this section shall be applicable for all purposes of program administration under this subpart.

Agreement means the Bioenergy Program Application and Agreement, Agreement Section, Form CCC-850.

Application means the Bioenergy Program Application and Agreement, Application Section, Form CCC-850.

BATF is the Bureau of Alcohol, Tobacco and Firearms of the Department of the Treasury.

Biodiesel is a nontoxic, biodegradable replacement for or additive to petroleum diesel derived from the oils and fats of plants and animals. Chemically, biodiesel is described as a mono alkyl ester.

Biodiesel producer is a producer that produces and sells biodiesel commercially.

Bioenergy means ethanol and biodiesel produced from eligible commodities.

Conversion factor shall be:

(1) 2.5 gallons, unless otherwise determined by CCC, of ethanol produced per bushel of corn used in ethanol production

(2) 1.4 gallons, unless otherwise determined by CCC, of biodiesel per bushel of soybeans used in biodiesel production.

(3) As announced by CCC for other than above.

Eligible Commodity means barley, corn, grain sorghum, oats, rice, wheat, soybeans, sunflower seed, canola, crambe, rapeseed, safflower, flaxseed, and mustard seed or any other commodity or commodity by-product as determined and announced by CCC used in ethanol and biodiesel production which is produced in the United States and its territories.

Eligible producer means a bioenergy producer who has been determined by CCC to be eligible to receive Program payments and has entered into an Agreement with CCC .

Ethanol is anhydrous ethyl alcohol manufactured in the United States and sold:

(1) For fuel use which has been rendered unfit for beverage use in a manner and at a facility approved by the BATF for the production of ethanol for fuel, or

(2) As denatured ethanol used by blenders and refiners which is composed of 95 percent ethanol and 5 percent gasoline.

Ethanol producer is a producer that has authority from the BATF to produce ethanol.

FSA means the Farm Service Agency, USDA.

FY means fiscal year beginning each October 1 and ending September 30 of the following year.

KCCO means Kansas City Commodity Office.

Payment factor is the factor, not to exceed 100 percent, CCC establishes, based on Agreements submitted by eligible producers during the sign-up period, to reflect the percentage of funding that will go to ethanol versus biodiesel producers for the FY further adjusted for available funding. For example, if funding is limited to $100 million and $250 million in agreements are approved, 70 percent from ethanol producers and 30 percent from biodiesel producers, the payment factor for ethanol that FY will be 28 percent ($100 million budget divided by $250 million agreement submissions) times 70 percent (ethanol)). Similarly, the factor for biodiesel for the same FY will be 12 percent ($100 million budget divided by $250 million agreement submissions) times 30 percent (biodiesel factor)).

Payment rate. The payment rate CCC will use in payment calculations, based on the amount of increased eligible commodity used by eligible bioenergy producers for bioenergy production for the application quarter versus the same quarter in the previous FY, for producers that have annual bioenergy production of:

(1) Under 30 million gallons, will be 1 bushel for every 2.5 bushels of corn or soybeans used for production.

(2) 30 million gallons or more, will be 1 bushel for every 3.5 bushels of corn or soybeans used for production.

(3) Other than set forth in paragraphs (1) and (2) of this definition, as announced by CCC.

Per unit value used by CCC to determine the payment amount issued under this Agreement will be for commodities:

(1) With established terminal market prices:

(A) the applicable terminal market price announced daily by the KCCO, FSA, adjusted by the county average differential in the county in which the plant is located and the applicable quality factors. Note: The county average differential used by CCC in determining the monetary amount will be the same as that used for producers under commodity loan programs.

(B) Based on the terminal market price(s) in effect on the last day of the production quarter for which application is made.

(2) Without established terminal market prices, as announced by CCC.

Producer is a producer of bioenergy making application under this Program.

Quarter means the time periods of October 1 through December 31, January 1 through March 31, April 1 through June 30, and July 1 through September 30 each FY.

USDA means the United States Department of Agriculture.

§ 1424.4

General eligibility rules.

To obtain program payments, a producer must do all of the following:

(a) Obtain an Agreement, Form CCC-850, Bioenergy Program Application and Agreement, from the KCCO, Bulk Commodities Division, P.O. Box 419205, Kansas City, Missouri 64141-6205;

(b) Submit a completed Form CCC-850, Agreement Section, to CCC no later than August 31 each year or a later date, if announced by CCC, to the address in paragraph (a) of this section;

(c) Be assigned an Agreement number by KCCO indicating the producer is eligible for Program payments;

(d) Maintain records indicating:

(1) Commodities for which it seeks payment;

(2) The quantity of bioenergy produced from an eligible commodity by location during the quarter compared to the same quarter in the previous FY; and

(3) The quantity of eligible commodity used to produce the bioenergy stated in paragraph (d)(2) of this section during the quarter compared to the same quarter in the previous FY;

(e) Furnish CCC such certification, and access to such records, as CCC considers necessary to verify compliance with program provisions;

(f) Once Program payments are received, continue to make Application submissions in accordance with § 1424.9;

(g) If not purchasing raw commodity input, be able to prove to CCC's satisfaction that both purchases of eligible commodities and production of bioenergy increased. Example: A producer that purchases soy oil from a soybean crushing plant for further refinement into biodiesel must be able to prove to CCC's satisfaction that both soy oil purchases and biodiesel production increased for the applicable quarter;

(h) Certify the accuracy and truthfulness of the information provided in their Agreement on Form CCC-850; and

(i) Allow verification by CCC of all information provided. Refusal to allow CCC or any other agency of USDA to verify any information provided will result in a determination of ineligibility.

§ 1424.5

Application process.

To receive payments under this program during a FY, an eligible producer must:

(a) Have an approved Agreement in accordance with § 1424.4 and an Agreement number assigned by KCCO under § 1424.4(c);

(b) Obtain an Application, Form CCC-850, Bioenergy Program Application and Agreement, Application section from the KCCO, Bulk Commodities Division, P.O. Box 419205, Kansas City, Missouri 64141-6205;

(c) Submit applications within 30 calendar days of the end of the quarter for which payment is requested. Example: Applications for the quarter January 1 through March 31, 2001, must be submitted by April 30, 2001. If the actual deadline is a non workday, the deadline will be the next business day;

(d) Submit other relevant documents as required by CCC for the specific commodity; and

(e) Certify with respect to the accuracy and truthfulness of the information provided.

§ 1424.6

Eligibility determinations.

Applicants will, after either Agreements or Applications are submitted, if:

(a) Determined eligible, receive notification of eligibility or payment, as applicable;

(b) Determined ineligible, be notified in writing of ineligibility for program participation or payment, as applicable, and reason for determination; or

(c) Additional information is needed for CCC to determine eligibility, be contacted for additional supporting documentation.

§ 1424.7

[Reserved]

§ 1424.8

Payment amounts.

(a) The monetary amount paid by CCC to eligible producers on an eligible commodity under the Program will be determined by multiplying the applicable payment rate times conversion factor times per unit value times the payment factor. Whatever the result, once a payment factor is established, it will be used for the entire FY. If funds are exhausted, payments will stop. Similarly, if payments are less than expected, remaining funds at the end of the FY will be carried over into the next FY. Under no circumstances will previous payments be adjusted except as specified in paragraph (b) of this section.

(b) Quarterly payments will be reconciled with the total increase in commodity purchases and bioenergy production for the FY at the end of the fourth quarter. If, at the end of the fourth quarter, overpayments have been made, the bioenergy producer shall repay the overpayment plus interest from the date of the overpayment through the date of repayment to CCC.

§ 1424.9

Reports required.

Once funds have been made available under this program to an eligible producer, that producer shall file Form CCC-850, Application Section, quarterly through the end of the applicable FY.

§ 1424.10

Payment restriction.

No single producer may receive more than ten percent of total FY payments for the applicable bioenergy fuel made under the program in this part for the applicable FY.

§ 1424.11

Maintenance and inspection of records.

(a) For the purpose of verifying compliance with the requirements of this part, each eligible producer shall make available at one place at all reasonable times for examination by representatives of USDA, all books, papers, records, contracts, scale tickets, settlement sheets, invoices, written price quotations, or other documents related to the program that is within the control of such entity.

(b) To facilitate examination and verification of the records and reports required by this part, copies of Form CCC-850, Bioenergy Program Application and Agreement, shall be filed in an orderly manner, and must be made available for inspection by representatives of USDA for not less than 6 years from the payment date.

§ 1424.12

Appeals.

Any person who is subject to an adverse determination made under this part shall have a right to appeal the determination by filing a written request with the Deputy Administrator at the following address:

Deputy Administrator, Commodity Operations, Farm Service Agency, United States Department of Agriculture, STOP 0550, 1400 Independence Avenue, SW., Washington, DC 20250-0550.

§ 1424.13

Misrepresentation and scheme or device.

(a) A producer shall be ineligible to receive payments under this program if CCC determines the producer:

(1) Adopted any scheme or device which tends to defeat the purpose of the program in this part;

(2) Made any fraudulent representation; or

(3) Misrepresented any fact affecting a program determination.

(b) Any funds disbursed pursuant to this part to a producer engaged in a misrepresentation, scheme, or device, or to any other person as a result of the bioenergy producer's actions, shall be refunded with interest together with such other sums as may become due, plus damages as may be determined by CCC.

(c) Interest charged under this part shall at the rate of interest which the United States Treasury charges CCC for funds, as of the date CCC made such funds available. Such interest shall accrue from the date such payments were made available to the date of repayment or the date interest increases as determined in accordance with applicable regulations.

(d) CCC may waive the accrual of interest and or damages if CCC determines that the cause of the erroneous determination was not due to any action of the bioenergy producer.

(e) Any producer or person engaged in an act prohibited by this section and any producer or person receiving payment under this part shall be jointly and severally liable for any refund due under this section and for related charges.

(f) The remedies provided in this part shall be in addition to other civil, criminal, or administrative remedies which may apply.

(g) Late payment interest shall be assessed on all refunds in accordance with the provisions of, and subject to the rates prescribed in, 7 CFR Part 1403.

§ 1424.14

OMB control numbers.

[The information collection requirements for the regulations will be submitted to OMB with the final rule.]

Signed in Washington, DC, on July 19, 2000.

Keith Kelly,

Executive Vice President, Commodity Credit Corporation.