Federal Register: RULES Loan and purchase programs: [7 CFR Part 1415]

DEPARTMENT OF AGRICULTURE

CFR Citation: 7 CFR Part 1415

RIN ID: RIN 0578-AA38

NOTICE: RULES

ACTION: Loan and purchase programs:

DOCUMENT ACTION: Interim final rule with request for comments.

SUBJECT CATEGORY: Grassland Reserve Program

DATES: The rule is effective May 21, 2004. Comments must be received by July 20, 2004.

DOCUMENT SUMMARY: The Farm Security and Rural Investment Act of 2002 (2002 Farm Bill) amended the Food Security Act of 1985, to add the Grassland Reserve Program (GRP). The purpose of this program is to assist landowners and others in restoring and protecting eligible grassland and certain other lands through rental agreements and easements. This interim final rule sets forth how the Secretary of Agriculture (the Secretary), using the funds, facilities, and authorities of the Commodity Credit Corporation (CCC), will implement GRP to meet the statutory objectives of the program.

USDA made a determination to issue an Interim Final Rule with request for comments rather than a proposed rule in order to implement the program in fiscal year 2004 pursuant to this rule. USDA believes it is critical to put into place a rule that will guide the Department in implementing the program while at the same time provide the public with notice regarding how the program will be implemented. USDA also gave consideration to the fact that GRP implementation will be modeled after other established conservation programs. USDA is using its experiences from implementing other similar programs to develop operating procedures. USDA will consider all comments received when promulgating a final GRP rule.

SUMMARY: Grassland Reserve Program,

SUPPLEMENTAL INFORMATION

Regulatory Certifications

Executive Order 12866

The Office of Management and Budget (OMB) determined that this interim final rule is significant and must be reviewed by the Office of Management and Budget under Executive Order 12866. USDA conducted a costbenefit analysis of the potential impacts associated with this Interim Final Rule.

Five options for determining State funding levels and their impacts on enrollment are examined. The first two examine alternatives for balancing GRP objectives. These options include: The Selected Option, which balances the amount of grassland, number of livestock operations, biodiversity, and landowner demand, and a continuation of FY2003 procedures, which is like the Selected Option, except for not giving consideration to landowner demand. The three additional options examine the consequences of concentrating on only a single objective, e.g., native grasslands.

The Selected Option allocates State funding as a function of State number of grazing operations, acres of grassland under the threat of conversion, biodiversity considerations, and State demand for funds, as measured by the number of offers for the GRP. This process is the same used in FY2003, except it includes consideration of interest within a State for demand for funds. This last component addresses high FY2003 participation demand.

Although the Selected Option enrolls fewer grasslands than some other options, the Selected Option distributes funds to States based on the number of grazing operations, the threat of grassland conversion to other uses, and a biodiversity index, recognizing the implicit equality given the three program objectives by the statute. The demand component was used to capture producer willingness to participate and the quality of offers. Because this option balances the three statutory objectives, no single objective is maximized.

Copies of the analysis may be obtained from Richard Swenson, Director, Easement Division, NRCS, P.O. Box 2890, Washington, DC 20013 2890; telephone: (202) 7201845; fax (202) 7204265; email:
richard.swenson@usda.gov, Attention: Grassland Reserve Program and electronically at http://www.nrcs.usda.gov/programs/GRP/. Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994

Pursuant to section 304 of the Federal Crop Insurance Reform Act of 1994 (Pub. L. 103354), USDA classified this rule as nonmajor. Therefore, a risk analysis was not conducted.

Regulatory Flexibility Act

The Regulatory Flexibility Act is not applicable to this Interim Final Rule because the Commodity Credit Corporation (CCC) is not required by 5 U.S.C. 553, or by any other provision of law, to publish a notice of proposed rulemaking with respect to the subject matter of this rule.

Small Business Regulatory Enforcement Fairness Act of 1996

This Interim Final Rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This Interim Final Rule will not result in annual effect on the economy of $100 million or more, a major increase in costs or prices, or significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.based companies to compete in domestic and export markets.

Environmental Analysis

An Environmental Assessment (EA) has been prepared to assist in determining whether this Interim Final Rule would have a significant impact on the quality of the human environment such that an Environmental Impact Statement (EIS) should be prepared. Based on the results of the EA, USDA proposes issuing a Finding of No Significant Impact (FONSI) before a final rule is published. Copies of the EA and FONSI may be obtained from Andree DuVarney, National Environmental Specialist, Ecological Sciences Division, Natural Resources Conservation Service, P.O. Box 2890, Washington, DC 200132890. The GRP EA and FONSI will also be available at the following Internet address: http://www.nrcs.usda.gov/programs/GRP. Written comments on the EA and FONSI should be sent to Andree DuVarney, National Environmental Specialist, Ecological Sciences Division, Natural Resources Conservation Service, P.O. Box 2890, Washington, DC 200132890, or submit them via the Internet to andree.duvarney@usda.gov. [[Page 29175]]

Paperwork Reduction Act

Section 2702 of the Farm Security and Rural Investment Act of 2002 requires that the implementation of this provision be carried out without regard to the Paperwork Reduction Act, Chapter 35 of title 44, United States Code. Therefore, USDA is not reporting recordkeeping or estimated paperwork burden associated with this Interim Final Rule. Government Paperwork Elimination Act

NRCS is committed to compliance with the Government Paperwork Elimination Act (GPEA) and the Freedom to EFile Act, which require government agencies in general, and NRCS in particular, to provide the public the option of submitting information or transacting business electronically to the maximum extent possible.

Civil Rights Impact Analysis

USDA has determined through a Civil Rights Impact Analysis that the issuance of this rule discloses no disproportionately adverse impacts for minorities, women, or persons with disabilities. Copies of the Civil Rights Impact Analysis is available, and may be obtained from Richard Swenson, Director, Easement Division, Natural Resources Conservation Service, P.O. Box 2890, Washington, DC 200132890, and electronically at http://www.nrcs.usda.gov/programs/GRP. Executive Order 12988, Civil Justice Reform

This Interim Final Rule has been reviewed in accordance with Executive Order 12988, Civil Justice Reform. The rule is not retroactive and preempts State and local laws to the extent that such laws are inconsistent with this rule. Before an action may be brought in a Federal court of competent jurisdiction, the administrative appeal rights afforded persons at 7 CFR parts 614, 780, and 11 must be exhausted.

Executive Order 13132, Federalism

This Interim Final Rule has been reviewed in accordance with the requirements of Executive Order 13132, Federalism. USDA has determined that the rule conforms to the federalism principles set forth in the Executive Order; would not impose any compliance cost on the States; and would not have substantial direct effects on the States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities on the various levels of government.

Unfunded Mandates Reform Act of 1995

Pursuant to Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 15311538, USDA assessed the effects of this rulemaking action of State, local, and tribal governments, and the public. This action does not compel the expenditure of $100 million or more by any State, local, or tribal government, or anyone in the private sector; therefore, a statement under section 202 of the Act is not required. Background

Historically, grassland and shrublands occupied approximately one billion acres, about half the landmass of the 48 contiguous United States (Richard Conner, Texas A&M, June 2001). Roughly 50 percent of these lands have been converted to cropland, urban land, and other land uses. Privately owned grasslands (pastureland and rangeland) cover approximately 526 million acres in this country (1997 National Resource Inventory (NRI)). Grasslands provide both ecological and economic benefits to local residents and society in general. Grassland importance lies not only in the immense area covered, but also in the diversity of benefits they produce. These lands provide water for urban and rural uses, livestock products, flood protection, wildlife habitat, and carbon sequestration. These lands also provide aesthetic value in the form of open space and are vital links in the enhancement of rural social stability and economic vigor, as well as being part of the Nation's history.

Grassland loss through conversion to other land uses such as cropland, parcels for home sites, invasion of woody or nonnative species, and urban development threatens grassland resources. About 24 million acres of grasslands and shrublands were converted to cropland or nonagriculture uses between 1992 through 1997 (1997 National Resource Inventory).

In Fiscal Year (FY) 2003, GRP was implemented through a notice of funds availability published in the Federal Register on June 13, 2003 (See Federal Register Vol. 68, No. 114). The document explained that in FY 2003, CCC intended to use GRP to protect grazing lands from conversion, and support efforts to maintain or enhance biodiversity.

The Secretary has delegated authority to implement GRP jointly to the Administrator, Farm Service Agency (FSA), and the Chief, Natural Resources Conservation Service (NRCS). In addition, limited responsibilities associated with easement management and general program development have been delegated to the Forest Service (FS). Activities identified in this interim rule as being conducted by the USDA or the CCC will be performed by representatives of these three agencies, as appropriate.

The GRP rental agreements and easements are designed for working agricultural lands. Therefore, the program provides incentives to protect grassland resources while enabling agricultural producers to use the forage in their agricultural operation. There are multiple enrollment duration options for both the rental agreements and easements.

In the 2002 Farm Bill Managers' Report, Congress recommended that the GRP enrollment process be modeled after the Conservation Reserve Program (CRP), 16 U.S.C.3835a and the Wetlands Reserve Program (WRP), 16 U.S.C.3837 et seq. Like the CRP Continuous Signup and the WRP, applications for program enrollment in GRP can be filed at any time throughout the year. Application selection is based on ranking and selection criteria developed at the State level, following broad National guidelines. Although the GRP rental agreements are for working lands, the rental agreements are modeled after the CRP longterm rental contracts. Likewise, the easement acquisition process is similar to that used in the WRP. With both GRP easements and rental agreements, participants will have the opportunity to utilize common management practices to maintain the viability of the grassland acreage.

The Secretary evaluated whether the GRP could be administered by partnering with third parties to acquire easements, similar to the Farm and Ranch Lands Protection Program, 16 U.S.C. 3838h and 3838i, and concluded that the GRP statute does not provide authority to do so.

The GRP statute provides broad land eligibility criteria regarding the type of grasslands that can be enrolled in the program. USDA proposes in this regulation to emphasize program implementation to preserve the Nation's most critical grassland resources, both native and natural grasslands, and shrublands.

Discussion of the Program

The Grassland Reserve Program (GRP) is a voluntary program to assist landowners and agriculture operators in restoring and protecting grassland and land that contains forbs and shrublands. The Secretary of Agriculture delegated the authority to administer GRP on behalf of the Commodity Credit Corporation, to the Chief, Natural
[[Page 29176]]
Resources Conservation Service (NRCS) and the Administrator, Farm Service Agency (FSA). These agency leaders are Vice Presidents of the CCC. NRCS has the lead responsibility on technical issues and easement administration, and FSA has the lead responsibility for rental agreement administration and financial activities. The Secretary also delegated authority to the Forest Service to hold easements at the option of the landowner, on properties adjacent to USDA Forest Service properties. At the State level, the NRCS State Conservationist and the FSA State Executive Director will determine how best to utilize the human resources of both agencies to deliver the program and implement National policies in an efficient manner.

The program has a statutory enrollment cap of two million acres of restored or improved grasslands. USDA may enroll an excess of two million acres in the program, providing the additional acreage does not require restoration, and the program has sufficient funding. The statute also requires that 40 percent of the program funds be used for 10year, 15year, and 20year rental agreements, and 60 percent of the funds be used for 30year rental agreements and easements.

As defined in this rule, the term ``restoration'' not only includes restoring grassland from cropland and other uses, but it also refers to improving lands with existing stands of grasses, forbs, and shrubs. USDA has defined ``restoration'' as the implementation of any conservation practice (vegetative, management, or structural) that improves the values and functions of grasslands (native and natural plant communities). The term ``improves'' in this context means taking an existing grassland and moving it toward a higher functioning grassland condition. The definition of restoration is found in section 1415.3 of this rule. This regulation does not define the required restored condition in order to allow for flexibility in making such determinations at the local level in accordance with local conditions and desired outcomes. USDA recognizes that restoration includes the process of establishing practices and managing the land to reach a desired grassland condition. Enrolled lands will require periodic manipulation to maximize wildlife habitat and preserve grassland functions and values over time. The ``restored'' grassland condition will be determined by the NRCS State Conservationist, with input from the State Technical Committee.

GRP enrollment options include easements with various durations, including 30 years, permanent, or for the maximum duration allowed under State law; or rental agreements with a duration of 10, 15, 20, or 30years. Participants can enter into a restoration agreement in conjunction with either an easement or rental agreement, at the discretion of the USDA and if desired by the participant, to restore the ecological functions and values of these lands. The GRP statute does not authorize USDA to use restoration agreements as a standalone enrollment option.

As set forth in section 1415.5, land is eligible if it is privately owned land, including tribal land, and it is: (1) Grassland, land that contains forbs, or shrubs (including rangeland and pastureland); or (2) located in an area that has been historically dominated by grassland, forbs, and shrubs and has potential to provide habitat for animal or plant populations of significant ecological value if the land is retained in the current use of the land or restored to a natural condition. Lands incidental to the above described eligible lands may also be enrolled if the Secretary determines enrollment of such land is necessary for the efficient administration of a rental agreement or easement. Privately owned land does not include land owned by the Federal, State, or local government.

USDA, at the State level, based on national guidance, shall establish criteria to evaluate and rank applications for easements and rental agreements as outlined in this regulation at section 1415.8. As required by statute, emphasis will be placed on supporting grazing operations, plant and animal biodiversity, and grassland and land containing shrubs or forbs under the greatest threat of conversion.

USDA evaluated the following two approaches for allocating funds to projects. One approach is to allocate funds to States using a formula that incorporates factors associated with the program's areas of emphasis. Under this approach, each NRCS State Conservationist and the FSA State Executive Director would be given the responsibility to develop, within broad national guidelines and with input from State Technical Committees, ranking criteria against which to evaluate and select applications for funding.

Another approach is to develop national criteria and have all applications evaluated and selected nationally. Allocations would not be provided to States. USDA has used both approaches when implementing other conservation programs. Based on its experience with implementing GRP in fiscal year 2003, USDA is adopting the approach of allocating funds to States for selection of projects at the State level. This approach allows USDA to enhance its ability to address State grassland concerns, as well as enable States to use all conservation programs in a coordinated effort to address grassland concerns, giving consideration to the entire ecosystem. USDA recognizes that this approach results in some differences between State ranking criteria, and that it may be more challenging to address specific national priorities. USDA welcomes comments on this decision. State ranking criteria will be available to the public through local USDA service centers or on the NRCS Grassland Reserve Program web site. See http://www.nrcs.usda.gov. Select ``Programs'' from the menu, then ``Grassland
Reserve Program.'' Anyone having comments on the 2003 State ranking criteria should refer the comments to the respective NRCS State Conservationist or FSA State Executive Director located in the USDA State Office. Addresses for the State offices are available at http://www.fsa.usda.gov/pas/default.asp. Select ``Your State Office'' from the

menu bar.

USDA seeks public comment on the criteria and weighting factors that should be used to allocate funds to States, and the national guidance from which States develop their individual ranking criteria. In particular, USDA asks that respondents provide information on credible data that is national in scope related to grassland plant and animal biodiversity. The current allocation formula, developed by USDA at the national level, includes data from the NRI regarding pasture and rangeland conversion, prime farmland used as range or pasture, and total range and pastureland acreage. From agriculture statistics USDA uses data regarding agriculture operations. USDA also includes information from the U.S. Fish and Wildlife Service about threatened and endangered plant and animal species. The data was categorized as either being a biodiversity, conversion, or grazing operation factor. In addition, now that USDA has collected program demand data from the 2003 signup, there will be a demand factor included in the State allocation formula. Program demand data is expressed in terms of total applications received, total acres offered for enrollment, and total estimated cost of applications received. For fiscal year 2004 and beyond, demand may be reflected in terms of applications received, acreage associated with such applications, funding needs associated with unfunded applications, or a
[[Page 29177]]
combination of all three. USDA intends to provide equal weight to each area of emphasis (grazing operations, threat of conversion, and biodiversity of plants and animals) and the demand category in the allocation formula.

Once USDA State offices receive their allocation, FSA and NRCS, at the State level, will determine the distribution of funds within the State, with input from the State Technical Committee. FSA and NRCS may allocate funds to regions based on natural resource priority, distribute funds for easements and rental agreements based on landowner interest in the various enrollment options, or establish funding pools. If a State office lacks funds to enroll an entire project, the applicant will be provided the opportunity to reduce the amount of land offered, or change the duration of the enrollment option, providing the ranking score is not lowered below the score of the next application on the ranking list. If the applicant declines adjusting the offered acreage level, the USDA at the State level can accept the next eligible application on the list of unfunded applicants.

Easements

Section 1415.4 provides that for participation in an easement option, the applicant must be the owner of the eligible land. To grant an easement to the United States, the landowner must possess clear title to the land or be able to provide subordination agreements from third parties with interest in the land, and provide access to the property from a public road. The landowner must comply with the terms of the easement and associated restoration agreement, if one is required.

Easement payments are based on the current market value of the land less the grazing value of the land encumbered by the easement. Under the terms of the easement, in addition to the use of the forage, the landowner retains the right to grassland uses so long as such use is compatible with maintaining the viability of the grassland resources. In addition to grazing, haying, mowing, and seed production, other uses may include hunting, fishing, hiking, camping, bird watching, and other nonmotorized recreational activities. Since landowners retain certain rights to grassland resources, for appraisal purposes, grazing value has been defined as grassland value. Land values will be determined through a sitespecific appraisal. For 30year easements, or an easement for the maximum duration allowed under State or tribal law, a landowner receives 30 percent of the appraised value for a permanent easement. Easement payments may be provided in one lump sum payment at the time of closing or participants may elect to receive installment payments. Participants who elect to receive installment payments can receive no more than 10 annual payments of equal or unequal amount, as agreed to by the USDA and the landowner.

USDA has developed a standard conservation deed that the United States will use for all easements purchased under GRP. A copy of the deed may be viewed at http://www.nrcs.usda.gov. Subsurface Resource Concerns

In promulgating this rule, USDA considered whether the exploration and development of subsurface resources was compatible with the purpose of GRP. The GRP statute provides that the conduct of any activity that would disturb the surface of the land covered by the GRP easement or rental agreement is prohibited, except for restoration, fire rehabilitation, and construction of fire breaks. Therefore, the extraction of subsurface resources is prohibited on all lands participating in GRP. However, subsurface resource exploration and extraction is permissible when it is accomplished remotely, that is from adjacent land not covered by a GRP easement, and when it does not result in subsidence or any other adverse effects to the surface estate. USDA finds the extraction of certain materials, such as gravel, to be inconsistent with the purposes of the program. USDA contemplated appraising land based on surface rights alone, but determined that this appraisal method prohibits USDA from restricting the disturbance of the surface when such rights are owned by the GRP participation landowner. Therefore, the easement appraisal will consider full market value rather than surface value, in those instances where the applicant owns the rights to the surface and subsurface estate.

For rental agreements, USDA is adopting subsurface resource policy similar to that of the Conservation Reserve Program. If the subsurface resources are severed and the owner of such rights decides to extract the resources, the affected land will be terminated from the rental agreement with no penalty to the participant. If the rights are not severed and the landowner participant exercises such rights, the participant will have to refund to the USDA payments received on the affected acres.

Rental Agreements

Section 1415.4 provides that landowners and other people who have general control of property may apply for enrollment in rental agreements through GRP. Applicants who are not landowners need to provide evidence of control of the property for the length of the agreement. If rental agreement payments are to be divided between the landowner and other participants or multiple landowners, the rental agreement will need to be signed by all parties, indicating their respective share of the payments.

As required by statute, rental payment amounts will not exceed 75 percent of the grazing value for the length of the agreement. Rental payments will be paid annually after the anniversary date of the agreement. Local grazing values are determined based on a methodology developed for the CRP using estimated forage production by soil type and knowledge of local rental rates. USDA will make administrative adjustments to local rates in areas where there is a dramatic difference between county rates. County rental rates will be posted in USDA Service Centers after being evaluated locally by USDA representatives to determine whether the rates generally reflect local prevailing rental rates. There may be some significant differences within a State due to elevation changes and precipitation variability.

Persons who participate in a rental agreement may offer the land for an easement, providing the duration of the easement exceeds the duration of the rental agreement, the application ranks high enough to be funded, all other eligibility criteria are met, and funds are available to acquire an easement. The easement application will be considered a new offer that will be evaluated with all other new offers. The rental agreement will be terminated upon easement closing. This policy allows USDA to obtain longer term protection on lands considered valuable for enrollment. This policy will apply to those individuals who signed up for a rental agreement in FY2003 and subsequent years.
Provisions That Apply to Both Easements and Rental Agreements

Program participants are subject to the Adjusted Gross Income Limitation set forth at 7 CFR part 1400. In summary, this limitation provides that individuals or entities that have an average adjusted gross income exceeding $2.5 million for the three tax years immediately preceding the year the contract is approved are not eligible to receive [[Page 29178]]
program benefits or payments, unless 75 percent of the adjusted gross income is derived from farming, ranching, or forestry operations. Easement or rental agreement payments received by a participant shall be in addition to any payments that the participant is otherwise eligible to receive under other Federal laws.

As required by statute, easements and rental agreements will: (1) Permit grazing on the land in a manner that is consistent with maintaining the viability of the grassland, shrubs, forbs, and habitat for wildlife species adapted to the locality.
(2) Permit haying, mowing, or harvesting for seed production, except during the nesting season for birds in the local area that are in significant decline. When bird species are identified by USDA as needing protection during the nesting season, mowing, haying, and harvesting of grass seed will be permitted as determined by the NRCS State Conservationist in accordance with Federal and State law. In making this determination, NRCS will consult with the State Technical Committee, which includes representation from appropriate State and Federal agencies.
(3) Allow for fire rehabilitation and construction of firebreaks, fences, watering facilities, and practices that protect and restore the grasslands functions and values.
(4) Prohibit the production of row crops, fruit trees, vineyards, or any other agricultural commodities or activity that requires disturbance of the soil surface, except for those activities permitted above. Grassland and wildlife management practices and restoration activities that require disturbing the soil surface, such as light discing, will be permitted at the discretion of USDA.

Both GRP easements and rental agreements will require that the land is managed to maintain the vitality of the plant community as described in the conservation plan. The plan will take into account management practices necessary for the control of invasive species. At the discretion of USDA and subject to funding availability, landowners may include a restoration agreement with both enrollment options that will provide for: maintaining the viability of the grassland; sufficient ground cover to protect the soil from wind and water erosion; forage production for grazing animals, and wildlife habitat. The grassland restoration plan will be implemented according to the schedule developed by USDA. Restoration agreements will provide costshare assistance for installing practices that will restore or protect the functions and values of the grassland and shrubland. In addition to reestablishing desirable grass cover, restoration practices may include practices associated with grazing management, or other management activities designed to preserve grassland acreage, such as controlled burns. The GRP statute provides that payments may be made to the participant of not more than 90 percent for the cost of carrying out restoration measures and practices on grassland and shrubland that has never been cultivated, and not more than 75 percent on restored grassland and shrubland that at one time was cultivated. Costshared practices shall be maintained by the participant for the life of the practice. The life of the practice is determined by the NRCS State Conservationist, and shall be consistent with other USDA conservation programs. All conservation practices will be implemented in accordance with the NRCS Field Office Technical Guide.

Summary of Provisions and Request for Comment

USDA welcomes comments on all aspects of this Interim Final Rule. The following describes the specific requirements in each section of the regulation. Activities identified in this regulation as being conducted by USDA or the CCC, will be performed by representatives of either the Farm Service Agency, the Natural Resources Conservation Service, or the U.S. Forest Service. Additionally, USDA fully intends to use the services of third party providers identified in 7 CFR part 652.

Section 1415.1 Purpose

This section sets forth the purpose and objectives of the program. In carrying out this program, the Secretary will focus GRP resources on the following:

1. Preserving native and natural grasslands and shrublands;

2. Protecting grassland and shrubland from the threat of conversion; conversion refers to all threats, including conversion to non agriculture uses, conversion to cropland, and vegetation changes to nongrassland covers;

3. Supporting grazing operations; and

4. Maintaining and improving plant and animal biodiversity.

The Secretary has determined that it makes sense to focus the program on those grasslands and shrublands that are at greatest risk of being lost. Therefore, the overall program emphasis will be on preserving native and natural species.

After completing the FY 2003 signup, USDA received feedback from conservation organizations and Congressional representatives that GRP should focus on restoring and protecting native and natural grasses, shrubs, and forbs. The statute identifies eligible land as grassland, land that contains forbs, or shrubland. It does not identify whether the program should emphasize native species, nor does it exclude certain types of grassland or shrublands from being enrolled in the program. However, USDA recognizes that grassland and shrublands that are native support an abundant diversity of plant and animal species along with other attributes. Once native grassland or shrubland is converted, it is often impractical, and sometimes impossible, to restore the land with its many attributes back to its original state. In many areas of the country where it is impractical to restore native plant species, other nonnative species have been used to serve similar purposes. Consequently, USDA proposes to emphasize protecting those eligible lands that consist of native and natural species.

Conservation organizations and Congressional representatives also expressed that USDA should use the Farm and Ranch Lands Protection Program (FRPP) to protect land subject to urban conversion pressures, and that GRP should focus on lower cost land subject to other conversion pressures outside of developing urban areas. These concerns primarily result from the high cost of easements in urban areas. The Secretary has the authority through FRPP, not GRP, to leverage Federal funds with nonFederal funds. The GRP statute does not provide the Secretary the flexibility to offer easement applicants amounts lower than the fair market value less the grazing value, nor does the USDA have the authority to share with other third parties the cost of acquiring easements. Therefore, the Secretary has been contemplating how the implementation of these two easement programs should fit together. When considering the scope of eligible lands, the amount of interest expressed by people to participate in GRP (approximately 13,000 applications offering 8.9 million acres received in FY 2003), and the limited GRP funding, the Secretary determined that USDA can preserve far greater grassland resources if GRP focuses on nonurban lands. The Secretary recognizes that in some States the primary threat to grassland is urban development, and that GRP rental agreement payment rates will provide little incentive to keep the acreage in grass cover. Since easement costs in areas with intense urban pressures tends to be quite high on a per acre basis, and
[[Page 29179]]
FRPP is able to leverage a large percentage of funds with nonFederal sources while GRP cannot, the Secretary may utilize FRPP easements to the extent practical on lands under extreme threat of conversion to nonagricultural uses. However, the focus of FRPP will remain protecting lands for broad agricultural use, including cropland. The Secretary intends to take a common sense approach to implementing both programs, and where it is more appropriate or strategically advantageous to protect important grassland in urbanizing areas, the USDA may use GRP to purchase easements in those areas. USDA State offices will be provided the flexibility to minimize the enrollment of high cost projects by considering cost in the State ranking criteria. Section 1415.2 Administration

This section includes language on general program administration and policy that sets forth the role of the State Technical Committee in the development of criteria for ranking and selecting applications and addressing related technical and policy matters in the implementation of the program.

Section 1415.3 Definitions

This section defines terms used throughout the proposed rule. Some of the terms in this section such as Administrator, Chief, Commodity Credit Corporation, Costshare, Department, etc., are not unique to GRP, and the definitions are consistent with definitions in other program regulations. For other terms, such as grassland value, grazing value, restored grassland, restoration etc. this section defines how these terms will be utilized for GRP.

Section 1415.4 Program Requirements

In this section, USDA identifies the requirements for participation in GRP. Earlier in the preamble Sec. 1415.4(a) was referenced regarding ownership requirements. Section 1415.4(c) requires that participants follow a conservation plan that maintains the viability of the grassland regardless of the grassland use. The Secretary has determined that such a requirement is needed to carryout the purposes of GRP (see 16 U.S.C. 3830o). The level of restoration or management required in a conservation plan is established by the NRCS State Conservationist in each State, with input from the State Technical Committee.

USDA is seeking input regarding GRP project management. Under this rule, USDA is requiring participants to manage the GRP acreage to move toward a certain natural resource condition without requiring that certain species of grasses, shrubs, or forbs be planted. This policy makes sense considering the general purpose of the authorizing statute on land eligibility and the high cost of reestablishing native grasses in some settings. Management requirements may change over the life of the easement or rental agreement based on the natural resource response to such activities. Since the GRP statute is not specific about the types of land that should be enrolled in the program, once land has been accepted into the program USDA seeks input on whether a participant should be able to maintain the current cover even if it contains a monoculture of a less desirable species, or whether a participant should be required to manage the property to move toward a certain natural resource condition. USDA is reluctant to require participants to fully restore project acreage to native species because of the extreme cost, and in some localities, it is impractical to do so. However, in instances where a grassland cover does not exist, participants will be required to establish a grassland cover with either native or natural species to the extent it is practical, as determined by the NRCS State Conservationist.

Section 1415.5 Land Eligibility

The language in this section identifies eligible land as defined in the GRP statute. The GRP statute does not restrict the amount of acreage a landowner can offer for the program or the maximum payment a person can receive over the life of the contract or otherwise. The statute does provide for a minimum acreage enrollment level.

Section 1415.5(d) provides that 40 contiguous acres is the minimum acreage offer that will be accepted in the program, however, less than 40 acres may be accepted if USDA grants a waiver. USDA recognizes that some grassland habitat is considered irreplaceable and thus has determined to provide States the discretion to determine when the 40 acre minimum requirement will be waived. Decisions associated with this waiver should be granted based on input from the State Technical Committee and local natural resource concerns. USDA policy is to ensure that NRCS State Conservationists make this determination based on all the purposes of GRP as provided for in Sec. 1415.1. State Conservationists may consider establishing separate funding pools based on offer size.

USDA considered providing States greater flexibility to set minimum acreage levels in States where there is a strong interest in preserving very large blocks of grassland and offers below a certain level have virtually no chance of being accepted into the program due to intense competition. However, the statute directs which lands are eligible for consideration under GRP. Accordingly, rather than establish policy that impacts eligibility, USDA determined to address this issue through the ranking criteria at the State level. Allowances shall be made to ensure the ranking criteria does not discriminate against small or limited resource producers. USDA will periodically review the types of projects being enrolled and compare those projects with the applications being submitted for participation to evaluate whether small or limited resource producers are being routinely prohibited from participating in the program.

Section 1415.5(f) makes land ineligible if it is already protected by an easement or contract that requires the GRP applicant to maintain the grassland resources. If the existing easement or agreement is with USDA or with a program funded through USDA, USDA will look to the program rules of the existing contract or the terms of the easement to determine whether such agreement can be canceled in order to enroll the land in GRP. This policy was determined because it is not fiscally responsible to pay someone twice for the same natural resource protection. USDA welcomes comment on this policy, especially as it relates to the relationship between GRP and the Conservation Reserve Program, Environmental Quality Incentives Program and the Wildlife Habitat Incentives Program.

Section 1415(g) of the Interim Final Rule addresses the issue of third party ownership of subsurface mineral rights on land proposed for enrollment under a rental agreement or an easement. Specifically, this rule provides that such lands may be enrolled in GRP. If the third party exercises such rights during the agreement period, the agreement will be terminated without penalty on the affected land. The land may be reoffered for the program at a later date if the grassland resources are restored, subject to eligibility rules and funding at that time. For easement enrollment, such lands may only be offered if the third party subordinates its rights to the resources or if USDA determines that the risk to the grassland resources is minimal if such rights are exercised (i.e., would not undermine the conservation purposes of the easement).

Section 1415.6 Participant Eligibility

This section sets forth the eligibility for participation in GRP. Only landowners may participate in the
[[Page 29180]]
easement option, because only landowners have the ability to convey property rights. Both landowners and tenants can participate in the rental agreement enrollment options. However, if a tenant wishes to participate without a landowner, the tenant must provide evidence of control for the duration of the agreement period.

Since the GRP is a Title XII program, all participants are subject to the conservation compliance requirements found in 7 CFR, part 12. Section 1415.7 Application Procedures

This section provides general information about the application process. Interested applicants can file an application at any time with their local USDA Service Center.
Section 1415.8 Establishing Priority for Enrollment of Properties

This section sets forth policy for developing the ranking and evaluation criteria. The GRP statute directs the Secretary to emphasize support for grazing operations, plant and animal biodiversity, and the threat of conversion in project selection. It does not give guidance about whether any of these factors should be given greater consideration than the others.

As discussed earlier in the preamble, USDA is placing a priority on protecting native or natural grassland and shrubland in the ranking process to the extent practical, and it is providing States the flexibility to develop ranking criteria that may encourage participants to restore their land back to a natural or native plant community. Land not currently in grass or shrubs that needs to be reseeded back to a grassland or shrubland may be eligible for the program if the applicant agrees to reseed the land back to its historically dominated grassland, shrubland, or forb plant community. However, if it can be demonstrated that reseeding to appropriate introduced plant species has potential to serve as habitat for animal or plant populations of significant ecological value, such land may be enrolled in the program and reseeding can take place through a GRP restoration agreement. Lower enrollment priority may be given to smaller parcels, especially in States where protecting larger grassland parcels is more desirable from an administrative and environmental standpoint. By prioritizing the types of eligible land for funding, USDA seeks to secure maximum conservation benefits for the Federal dollar expended. USDA is seeking specific comments on this decision.

USDA does provide its offices at the State level, the flexibility to establish one or more ranking pools. Although each pool will use the State established ranking criteria, the projects within one pool will only compete with similar projects. USDA, at the State level, may determine the portion of its funds to direct to each established ranking pool. Ranking pools will be established prior to conducting a signup.
Section 1415.9 Enrollment of Easements and Rental Agreements

This section describes the process for enrollment in GRP which is similar to that used for the Conservation Reserve Program for rental agreements and the Wetlands Reserve Program for easements. This approach was suggested by Congress in the Managers Report to the authorizing statute. For rental agreement projects, land is considered enrolled when the rental agreement is approved by USDA. For easement projects, land is considered enrolled when a landowner accepts a letter of tentative acceptance by signing documentation that indicates the landowner's intent to continue with the project.
Section 1415.10 Compensation for Easements and Rental Agreements

This section sets forth the methodology for determining compensation for both easements and rental agreements. For rental agreements, the statute at 16 U.S.C. 3838p requires that USDA pay participants not more than 75 percent of the grazing values. For the FY 2003, signup period grazing values for rental agreements were determined administratively based on compensation rates for the Conservation Reserve Program. Rates were established for each county, rather than on a site specific basis. This process enabled USDA to post compensation rates for public information and minimized the administrative burden at the field level for USDA employees.

The statute provides at 16 U.S.C. 3838p that easement compensation rates be determined based on the fair market value of the land, less the grazing value of the land encumbered by the easement. USDA will use certified land appraisers to develop easement compensation rates on a site specific basis. USDA recognizes that in certain parts of the country, the cost of acquiring easements may be considerable. Therefore, the Secretary evaluated alternatives to minimize the per acre cost of enrolling projects in the program, such as establishing maximum payment rates or contract limits. However, the Secretary determined the statute, by requiring a fair market valuation, does not permit a nonappraisal approach to valuing conservation easements. Section 1415.11 Restoration Agreements

This section sets forth the terms and conditions under which USDA will enter into a restoration agreement. GRP does not have the authority to enroll land in restoration agreements as a separate, standalone enrollment option. Consequently, USDA will only enter into restoration agreements in conjunction with easements and rental agreements at the discretion of USDA, subject to available funding, and when it is supported by the participant.

Eligible practices include land management, vegetative, and structural practices and measures that will improve the grassland and shrubland ecological functions. Specific practices eligible for payment will be determined by the USDA at the State level with advice from the State Technical Committee. Limitations on costshare rates set forth in this rule are those provided for in the GRP statute at 16 U.S.C. 3838p. Section 1415.12 Modifications

This section describes when easements and rental agreements may be modified. For both easements and rental agreements, modifications may be made to the conservation plan by mutual agreement between the USDA and the participant as changes occur in the participant's operation and land management strategy. However, any modification must continue to ensure the viability of the grassland, and meet the other objectives of the GRP.

Section 1415.13 Transfer of Land

This section discusses the impact of transferring ownership or control of land enrolled in GRP.
Section 1415.17 Easement Administrative Delegations to Third Parties

The GRP statute at 16 U.S.C. 3838q provides that the Secretary may permit a private conservation or land trust organization, or a State agency to hold and enforce an easement, in lieu of the Secretary, subject to the right of the Secretary to conduct periodic inspections and enforce the easement. The Secretary has interpreted the word ``hold'' in this context to mean ``administer.'' Prior to permitting an approved third party to hold and enforce an easement, USDA must determine that granting such permission
[[Page 29181]]
will result in the protection of grassland, land that contains forbs, and shrubland; the owner authorizes the third party to hold and enforce the easement; and the third party agrees to assume the costs incurred in administering and enforcing the easement, including the costs of restoration or rehabilitation of the land as required by the landowner and the third party. The intent is not to have the third party cover the costs of natural resource practices required through GRP. However, the third party must cover costs of practices that it requires above what is required by GRP. The third party must submit its intent to impose these additional requirements to USDA to determine whether they are consistent with the conservation purposes of the easement.

In GRP, the Secretary administers the easement on behalf of the United States, and may delegate the easement administrative responsibilities to a private organization or State agency under certain conditions. However, the GRP statute does not provide authority for the Secretary to convey property rights acquired under the authority of the GRP statute.

This section provides that certain private organizations, as set forth in the statute, and State agencies interested in managing and enforcing GRP easements, may apply for GRP administration. The criteria and approval process required for participation are set forth below. The application packages must include:
(1) Certification that the conservation organization or land trust is an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 that is exempt from taxation under section 501(a) of that Code; or is described in section 509(a)(3), and is controlled by an organization described in section 509(a)(2), of that Code. (2) Certification that the applicant has the human and financial resources necessary to administer and enforce the easements, and that the applicant has relevant experience with easement enforcement activities.
(3) Certification that the applicant's charter expresses a commitment to conserving agriculture land, grassland, or rangeland. The application will require a summary of such commitment.
(4) Estimates in terms of acreage, number of easements, and funding requirements that the third party is willing to assume on behalf of the Secretary.
(5) Description of the human resources available to perform tasks associated with easement management and enforcement, including information about range and grassland management for livestock and wildlife, and realty management expertise.
(6) Budgetary information that demonstrates the organization is prepared to assume the Secretary's duties.

State agencies do not have to submit information related to items (1) or (3) above. All other requested information must be included with State agency applications. Application packages will be reviewed by both the Chief, NRCS, and the Administrator, Farm Service Agency, or their designees, for suitability of the party to administer the GRP easement. This authority may be delegated to NRCS State
Conservationists and FSA State Executive Directors. Multiple third party applications may be approved for each State.

Application approval means the private organization or State agency meets the Secretary's requirements for managing and enforcing easements. Since landowners must authorize a third party easement administrator, Secretarial approval does not guarantee that the approved applicant will receive GRP easements to administer. Those agencies and organizations selected to manage easements will be required to submit an annual report to the Secretary.
Sections 1415.14 Through 1415.16 and 1415.18 Through 1415.20

These sections are consistent with other conservation programs and contain standard administrative policy associated with contract violations and remedies, payments not subject to claims, assignment of payments, appeals, etc. Nonetheless, USDA welcomes comments regarding this section on land enrolled in GRP.

Other

There has been much discussion within USDA regarding the development of industrial windmills on grassland acreage. USDA is prohibiting industrial windmills on GRP acreage because the structure is unrelated to protecting the viability of the grassland acreage, it requires disturbing the soil surface in a manner that is not permitted in the GRP statute, and it would encourage people wanting to establish other types of towers on GRP acreage. The public is free to comment on this policy decision as well.

List of Subjects in 7 CFR Part 1415

Administrative practice and procedure, Agriculture, Soil conservation, Grassland, Grassland protection, Grazing land protection. For the reason stated in the preamble, chapter XIV of 7 CFR is amended by adding a new part 1415 as set forth below:
PART 1415GRASSLAND RESERVE PROGRAM
Sec.
1415.1 Purpose.
1415.2 Administration.
1415.3 Definitions.
1415.4 Program requirements.
1415.5 Land eligibility.
1415.6 Participant eligibility.
1415.7 Application procedures.
1415.8 Establishing priority for enrollment of properties.
1415.9 Enrollment of easements and rental agreements.
1415.10 Compensation for easements and rental agreements.
1415.11 Restoration agreements.
1415.12 Modifications to easements and rental agreements.
1415.13 Transfer of land.
1415.14 Misrepresentations and violations.
1415.15 Payments not subject to claims.
1415.16 Assignments.
1415.17 Delegation to third parties.
1415.18 Appeals.
1415.19 Scheme or device.
1415.20 Confidentiality.

Authority: 16.U.S.C. 3838n3838q.
Sec. 1415.1 Purpose.
(a) The purpose of the Grassland Reserve Program (GRP) is to assist landowners in protecting, conserving, and restoring grassland resources on private lands through short and longterm rental agreements and easements.
(b) The objectives of GRP are to:
(1) Emphasize preservation of native and natural grasslands and shrublands, first and foremost;
(2) Protect grasslands and shrublands from the threat of conversion;
(3) Support grazing operations; and
(4) Maintain and improve plant and animal biodiversity. Sec. 1415.2 Administration.
(a) The regulations in this part set forth policies, procedures, and requirements for program implementation of the GRP as administered by the Natural Resources Conservation Service (NRCS) and the Farm Service Agency (FSA). The regulations in this part will be administered under the general supervision and direction of the NRCS Chief and the FSA Administrator. These two agency leaders will:
(1) Concur in the establishment of program policy and direction; development of the State allocation formula, and development of broad national ranking criteria;
(2) Use a national allocation formula to provide GRP funds to USDA State
[[Page 29182]]
offices that emphasizes support for biodiversity of plants and animals, grasslands under the greatest threat of conversion, and grazing operations. The allocation formula will also include a factor representing program demand. The demand factor could be expressed in terms of applications received, acres offered, funding needs for such applications, or a combination of these elements. The allocation formula may be modified periodically to change the emphasis of any factor to reflect information about natural resource concerns. The data in the allocation formula will be updated periodically as new information becomes available.
(3) Ensure the National, State and local level information regarding program implementation is made available to the public; (4) Consult with USDA leaders at the State level and other Federal agencies with the appropriate expertise and information when evaluating program policies and direction; and
(5) Authorize NRCS State Conservationists and FSA State Executive Directors to determine how funds will be used and how the program will be implemented at the State level.
(b) At the State level, the NRCS State Conservationist and the FSA State Executive Director are jointly responsible to:
(1) Identify State priorities for project selection, based on input from the State Technical Committee;
(2) Identify, as appropriate, USDA employees at the field level responsible for implementing the program, and the implementation process considering the nature and extent of natural resource concerns throughout the State and the availability of human resources to assist with activities related to program enrollment;
(3) Develop program outreach materials at the State and local level to ensure landowners, operators, and tenants of eligible land are aware and informed that they may be eligible for the program;
(4) Develop conservation practice costshare rates;
(5) Administer and enforce the terms of easements and rental agreements unless this responsibility is delegated to a third party as provided in Sec. 1415.17; and
(6) With advice from the State Technical Committee, develop criteria for ranking eligible land, consistent with national criteria and program objectives and address related policy matters regarding program direction for GRP in the applicable State. USDA, at the State level, has the authority to accept or reject the State Technical Committee recommendations; however, USDA will give consideration to the State Technical Committee's recommendations.
(c) The funds, facilities, and authorities of the Commodity Credit Corporation are available to NRCS and FSA to implement GRP. (d) Subject to funding availability, the program may be implemented in any of the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United States, American Samoa, and the Commonwealth of the Northern Mariana Islands. (e) The Secretary may modify or waive a provision of this part if he or she deems the application of that provision to a particular limited situation to be inappropriate and inconsistent with the environmental and costefficiency goals of GRP. This authority cannot be further delegated. No provision of this part which is required by applicable law may be waived.
(f) No delegation in this part to lower organizational levels shall preclude the Chief, NRCS, or the Administrator, FSA, from determining any issue arising under this part or from reversing or modifying any determination arising from this part.
(g) The Chief, NRCS, may delegate at any time Federal easement administration and enforcement responsibilities to approved State Agencies, or approved private conservation or land trust organizations with the consent or at the request of the participating landowner. The USDA Forest Service may hold easements on properties adjacent to USDA Forest Service land, with the consent of the landowner.
(h) Program participation is voluntary.
(i) Applications for participation will be accepted on a continual basis at local USDA Service Centers. NRCS and FSA at the State level will establish cutoff periods to rank and select applications. These cutoff periods will be available in program outreach material provided by the local USDA Service Center. Once funding levels have been exhausted, eligible applications will remain on file until additional funding becomes available or the applicant chooses to be removed from consideration.
(j) The services of other third parties as provided for in 7 CFR part 652 may be used to provide technical services to participants. Sec. 1415.3 Definitions.

Administrator means the Administrator of the Farm Service Agency (FSA) or the person delegated authority to act for the Administrator.

Chief means the Chief of the Natural Resources Conservation Service (NRCS) or the person delegated authority to act for the Chief.

Commodity Credit Corporation (CCC) is a Governmentowned and operated entity that was created to stabilize, support, and protect farm income and prices. CCC is managed by a Board of Directors, subject to the general supervision and direction of the Secretary of Agriculture, who is an exofficio director and chairperson of the Board. The Chief and Administrator are Vice Presidents of CCC. CCC provides the funding for GRP, and FSA and NRCS administer the GRP on its behalf.

Conservation District means any district or unit of State, tribal, or local government formed under State, tribal, or territorial law for the express purpose of developing and carrying out a local soil and water conservation program. Such district or unit of government may be referred to as a ``conservation district,'' ``soil conservation district,'' ``resource conservation district,'' ``land conservation committee,'' or similar name.

Conservation plan means a record of the client's decisions and supporting information, for treatment of a land unit or water as a result of the planning process, that meets NRCS Field Office Technical Guide quality criteria for each natural resource (soil, water, air, plants, and animals) and takes into account economic and social considerations. The plan describes the schedule of operations and activities needed to solve identified natural resource problems and take advantage of opportunities at a conservation management system level. The needs of the client, the resources, Federal, State, and local requirements will be met by carrying out the plan.

Conservation practice means a specified treatment, such as a structural or land management practice, that is planned and applied according to NRCS standards and specifications.

Costshare agreement means the document that specifies the obligations and the rights of any person who has been accepted for participation in the program.

Department means United States Department of Agriculture.

Easement means a conservation easement, which is an interest in land defined and delineated in a deed whereby the landowner conveys certain rights, title, and interests in a property to the United States for the purpose of protecting the grassland and other conservation values of the property.
[[Page 29183]]
Under GRP, the property rights are conveyed in a ``conservation easement deed.''

Easement area means the land encumbered by an easement.

Easement payment means the consideration paid to a landowner for an easement conveyed to the United States under the Grassland Reserve Program.

Field office technical guide means the official local NRCS source of resource information and interpretations of guidelines, criteria, and standards for planning and applying conservation treatments and conservation management systems. It contains detailed information for the conservation of soil, water, air, plant, and animal resources applicable to the local area for which it is prepared.

Forb means any herbaceous plant other than those in the grass family.

Grantor is the term used for the landowner that is transferring land rights to the United States through an easement.

Grassland means land on which the vegetation is dominated by grasses, grasslike plants, shrubs, and forbs. The definition of grassland as used in the context of this part includes shrubland, land that contains forbs, pastureland, and rangeland.

Grazing value means the value assigned to the grassland cover by USDA.

Improved pasture means grazing land permanently producing natural forage species that receives varying degrees of periodic cultural treatment to enhance forage quality and yields and is primarily harvested by grazing animals.

Landowner means a person or persons holding fee title to the land.

Native means a species t

FOR FURTHER INFORMATION CONTACT Richard Swenson, Director, Easement Division, NRCS, P.O. Box 2890, Washington, DC 200132890; telephone: (202) 7201845; fax: (202) 7204265; email: richard.swenson@usda.gov, Attention: Grassland Reserve Program. Persons with disabilities who require alternative means for communication (Braille, large print, audiotape, etc.) should contact the USDA Target Center at (202) 720 2600 (voice and TDD).