Catastrophic Risk Protection Endorsement; Group Risk Plan of Insurance Regulations; and the Common Crop Insurance Regulations, Basic Provisions, 45537-45544 [E9-21233]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 74, Number 170 (Thursday, September 3, 2009)]
[Rules and Regulations]
[Pages 45537-45544]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21233]



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Federal Register / Vol. 74, No. 170 / Thursday, September 3, 2009 / 
Rules and Regulations

[[Page 45537]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 402, 407, and 457

RIN 0563-AC19


Catastrophic Risk Protection Endorsement; Group Risk Plan of 
Insurance Regulations; and the Common Crop Insurance Regulations, Basic 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
Catastrophic Risk Protection Endorsement, the Group Risk Plan of 
Insurance Regulations, and the Common Crop Insurance Regulations, Basic 
Provisions to revise those provisions as mandated by the Food, 
Conservation, and Energy Act of 2008 (2008 Farm Bill). The changes will 
apply for the 2010 and succeeding crop years for all crops with a 2010 
crop year contract change date on or after the effective date of this 
rule and for the 2011 and succeeding crop years for all crops with a 
2010 crop year contract change date prior to the effective date of this 
rule.

DATES: Effective Date: This rule is effective October 5, 2009.

FOR FURTHER INFORMATION CONTACT: Erin Albright, Risk Management 
Specialist, Product Management, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, Beacon Facility--Mail Stop 0812, PO Box 419205, Kansas 
City, MO 64141-6205, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule is non-significant for the purposes of Executive Order 12866 and, 
therefore, it has not been reviewed by OMB.

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), the collections of information in this rule 
have been approved by OMB under control number 0563-0053 through March 
31, 2012.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
to promote the use of the Internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. This rule contains no Federal mandates (under the 
regulatory provisions of title II of the 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 UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees and compute 
premium amounts, and all producers are required to submit a notice of 
loss and production information to determine the amount of an indemnity 
payment in the event of an insured cause of crop loss. Whether a 
producer has 10 acres or 1,000 acres, there is no difference in the 
kind of information collected. To ensure crop insurance is available to 
small entities, the Federal Crop Insurance Act authorizes FCIC to waive 
collection of administrative fees from limited resource farmers. FCIC 
believes this waiver helps to ensure that small entities are given the 
same opportunities as large entities to manage their risks through the 
use of crop insurance. A Regulatory Flexibility Analysis has not been 
prepared since this regulation does not have an impact on small 
entities, and, therefore, this regulation is exempt from the provisions 
of the Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require 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.

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988 on civil justice reform. The provisions of this rule will 
not have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. With respect to any direct action taken by FCIC 
or to require the insurance provider to take specific action under the 
terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 must be exhausted before any 
action against FCIC for judicial review may be brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, or safety. Therefore, 
neither an

[[Page 45538]]

Environmental Assessment nor an Environmental Impact Statement is 
needed.

Background

    This rule finalizes changes to the Catastrophic Risk Protection 
Endorsement, the Group Risk Plan of Insurance Regulations, and the 
Common Crop Insurance Regulations, Basic Provisions, mandated by the 
2008 Farm Bill, that were published by FCIC on November 24, 2008, as a 
notice of interim rulemaking in the Federal Register at 73 FR 70861-
70865. The public was afforded 60 days to submit written comments and 
opinions.
    A total of 52 comments were received from 14 commenters. The 
commenters were reinsured companies, conservation organizations, a 
state agricultural association, an insurance service organization, a 
grower association, a government agency, and other interested parties. 
The public comments received are organized below by the issues 
identified in this rule and the specific public comments received. The 
comments received and FCIC's responses are as follows:

General

    Comment: A commenter asked how the changes in the interim rule will 
be conveyed to the insureds. The commenter asked whether the changes 
will be added to the Basic Provisions as an endorsement or whether the 
insurance providers will be required to issue a completely new set of 
Basic Provisions.
    Response: The changes will be issued in a revised Farm Bill 
Amendment. Therefore, the insurance providers will only have to issue 
the revised endorsement rather than reissue the entire Basic 
Provisions.
    Comment: A few commenters stated the language in this interim rule 
has already been sent, or is in the process of being sent, to all 
affected policyholders. If RMA makes any changes to what is in the 
interim rule, the commenters would recommend that any such changes to 
the Farm Bill Amendment necessitated by the final rule be issued in 
conjunction with the Administrative Remedies for Non-Compliance Final 
Rule language (7 CFR Part 400, 407, and 457; RIN 0563-AB73 published on 
December 18, 2008) instead of having another separate revised Farm Bill 
Amendment.
    Response: FCIC has already issued the Administrative Remedies for 
Non-Compliance final rule language in the Sanctions Amendment. 
Therefore, any changes made in this final rule will result in the 
revision of the Farm Bill Amendment.
    Comment: A few commenters stated the Supplementary Information for 
Executive Order 12866 in item number (3) indicates that this will not 
impact a large number of insured producers. There are a large number of 
current policyholders who have their own structures for farm-stored 
harvested production, and if a substantial percentage of these 
producers elect to extend the settlement of their claims, this could 
result in a large number of producers being impacted by this rule.
    Response: The provisions only provide a producer the option to 
postpone settlement of their claim if they have farm-stored production. 
FCIC does not anticipate a large number of producers will elect this 
option. Further, the provisions only allow a short delay for 
calculating a claim and only when there is farm-stored production. 
Therefore, FCIC does not anticipate the changes within this provision 
will significantly impact a large number of producers.

Linkage Requirements

    Comment: A few commenters stated FCIC has proposed removing all 
references to other United States Department of Agriculture (USDA) 
program benefits (linkage requirements). A commenter stated even though 
the question of eligibility is for other agencies to determine, their 
recommendation would be to maintain this language in the provisions so 
producers are aware of these requirements. A commenter stated while 
this makes sense since the question of eligibility and the requirements 
are dependent on those other programs as they become available, and 
such details should be provided by those other agencies, it would seem 
that there should be at least some mention of these potential 
requirements in the crop insurance policy language so policyholders are 
aware of them. Both commenters stated if FCIC chooses to continue with 
removing all language regarding linkage requirements from the policies, 
it would be beneficial if insurance providers were provided with some 
kind of notification when those linkage requirements are imposed or 
changed.
    Response: Producers are generally aware of other USDA program 
benefits, so FCIC does not believe the addition of a general provision 
would be of any assistance to them. Further, these requirements have 
changed over the years. As stated in the interim rule, any program 
eligibility requirements for a particular program are best provided by 
the agency administering such program.

Delay of Claims for Farm-Stored Production

    Comment: A few commenters stated section 12014 of the Farm Bill 
allows producers with farm-stored production to elect to extend the 
settlement of their claim for up to four additional months beyond the 
60 days allowed in the current policy provisions. The commenters stated 
this language needs to clarify that it is applicable only to grain 
crops and also recommended the word ``harvested'' be inserted after the 
word ``Have'' and in front of the words ``farm-stored production'' to 
preclude any arguments from policyholders who maintain they are storing 
such production in the field (since there was not a definition of 
``farm-stored production'' being added to the provisions).
    Response: These provisions were intended to only apply to harvested 
farm-stored grain and FCIC has revised the provisions accordingly.
    Comment: A few commenters stated the new farm-stored production 
provisions could potentially present some additional problems of 
extending the final determination of production for actual production 
history (APH) purposes beyond the applicable production reporting date. 
Policyholders may also feel this provides them with additional time to 
pay their premium beyond the termination date. There could also be APH 
reviews or other quality control reviews that are delayed beyond the 
April 30 deadline for reporting such information to the RMA because of 
this language. The additional time also allows for more things to 
happen to the grain before a final determination of production is made.
    Response: FCIC is statutorily mandated to allow producers to delay 
their claims. However, FCIC does not anticipate many producers will opt 
to wait the full 180 days to determine the amount of farm-stored 
production. FCIC has added provisions notifying producers they will be 
assigned their prior year's approved yield in accordance with the 
temporary yield procedure contained in the Crop Insurance Handbook when 
extensions go beyond the date production reports are due. FCIC has also 
added provisions notifying producers that no additional time is 
provided for payment of premium nor can damage that occurs after grain 
is stored be covered. When quality control reviews cannot be completed 
before reports are due because production amounts are not yet

[[Page 45539]]

available, it should be noted in the report remarks that the review is 
not yet complete because of the delayed measurement.
    Comment: A few commenters questioned what happens if the producer 
elects to delay measurement of the grain for an additional four months 
but subsequently removes and sells the grain during the four month 
period. The commenters asked whether the production from the settlement 
sheets with the buyer would be used in lieu of any measurements in this 
situation. The commenters also asked what happens if the grain is lost 
due to tornado or fire during this four month period. The added policy 
language does not address these issues.
    Response: When production is sold, the sales records will be used 
to determine the amount of production provided the records are 
verifiable. Since harvest ends the insurance period, no coverage is 
provided for any subsequent damage. Provisions have been added to make 
this clear. When production is lost after the end of the insurance 
period and no records of production are available, no claim can be paid 
because there is no way to accurately adjust the claim.

Native Sod Acreage Located in the Prairie Pothole National Priority 
Area

    Comment: A commenter stated placing the Farm Service Agency (FSA) 
in the position of determining if the soil has been tilled in the past, 
without an appeals process for the producer, is unacceptable. FSA 
records are available for only the last 30 to 40 years while the land 
has been operated for at least 100 years. With the current definition 
of native sod and no appeals rights, any grass area that does not have 
a farm number and a field number will be native sod. This goes far 
beyond the intent of the conference committee and the managers.
    A few commenters stated there is acreage that was farmed over a 
decade ago and now appears to be native sod. This acreage was not 
farmed again until after May 22, 2008. Therefore, they believe this 
acreage will not be classified as native sod as defined in the Farm 
Bill Amendment. RMA must specify the acceptable documentation necessary 
to prove acreage last farmed over a decade ago is not native sod. This 
will allow the producer to avoid the 5-year moratorium on coverage if 
the Governor of a State enacts section 508(o) of the Federal Crop 
Insurance Act (Act). Because ``no record of being tilled'' is based on 
FSA records and FSA records exist for a limited number of years, as are 
the producer's records, the commenters asked if acreage that was 
previously farmed but for which no records exist to prove such farming, 
is returned to a ``native sod'' status by fact of ``no record of being 
tilled.'' If some documentation exists to prove old tillage, the 
commenters asked how the insurance providers will know if such 
documentation is considered acceptable (e.g., Fish and Wildlife Refuge 
rental agreements). RMA must specify a list of documents or document 
criteria that is acceptable to prove prior tillage of a piece of ground 
that appears to be native sod but the land owner/producer claims is 
not. The commenter suggests RMA simply indicate that any available 
documentation, when outside the retention period, must contain an 
acceptable legal description (e.g., 578's, CRP contracts).
    Another commenter recommended the rule specify these records must 
consist of some type of official, written record tied to the specific 
piece of property under evaluation or consideration which indicates the 
property had been tilled at some point in the past; producers should 
not be allowed to self-certify any tillage records.
    Another commenter stated FSA records are not infallible. The 
commenter recommended allowing a landowner to present the FSA with hard 
evidence that the land has been tilled and cropped in the past. If that 
evidence is persuasive, the FSA should be allowed to determine that the 
land had been previously tilled and is thus outside the operation of 
the rule and thus eligible for crop insurance.
    A few commenters were concerned about the definition of native sod. 
The legislative definition of native sod differs from the definition in 
the regulation. The legislation defines native sod as land ``that has 
never been tilled for the production of an annual crop as of the date 
of enactment.'' The regulation defines native sod as land ``that has no 
record date of being tilled (determined in accordance with Farm Service 
Agency (FSA) records) as of the date of enactment.'' The definition in 
the regulation is significantly more restrictive. In most cases, FSA 
records are only available for the past 30 or 40 years while the land 
may have been in production as long as a century ago. It appears that 
the burden is on the grower to dispute the FSA records even though 
there is no appeals process available.
    The commenters stated Congress did not limit the evidence or 
information a landowner could use to show that the land had been used 
for the production of an annual crop at some point in the past. Instead 
of relying on FSA records producers should be permitted to provide 
photos, personal records and affidavits as evidence that the land in 
question has been tilled in the past.
    Response: FCIC agrees records other than those from FSA may be used 
to determine whether land has been tilled in the past. The provisions 
have been revised to allow the use of written verifiable records from 
other sources that are acceptable to the insurance provider. Since the 
kinds of records that could be used to verify prior tillage may vary 
considerably, FCIC does not intend to provide a specific list of 
documents, because doing so may eliminate the use of some acceptable 
records that would clearly indicate prior tillage. Acceptable records 
of tillage must be verifiable and identify the location of the acreage. 
Self-certification of past tillage is not acceptable. However, past 
farm records provided by a producer may be acceptable.
    Comment: A commenter recommended considering the phrase ``tilled'' 
in its broadest meaning, which they believe agrees with the intent of 
Congress. That is, if land is converted to cropland using plowing, 
disking, chemicals like glyphosate, or other methods, the effect is the 
same and the conversion should fall under the ``native sod'' rules.
    Another commenter wanted to ensure the term ``tilled'' is 
understood to broadly encapsulate the various means by which acreage 
may be prepared for an annual crop, including the understanding that 
the act of seeding an annual crop constitutes tilling. Acreage may be 
converted with many methods, including chemical treatment and no-till 
drilling, but the determinative factor is the acreage has no previous 
record of any means of conversion for an annual crop.
    Response: Plowing, disking, no-till drilling following the 
termination of existing plants, and chemical tillage would all be 
considered tillage for the purpose of these provisions, provided it was 
done for the production of an annual crop. FCIC has added a definition 
to so specify.
    Comment: A commenter stated it is not clear what constitutes native 
sod. The regulation merely transposes the legislative language--this is 
unacceptable. As there is with other conservation programs, there 
should be a specific list of criteria for what generally constitutes 
native sod (tall grass, mixed grasses and/or short prairie grasses), 
specific varieties of sod grasses covered by this provision, and how it 
will be identified and applied.
    A commenter stated there should be an opt-out clause in periods of 
low or

[[Page 45540]]

projected low grain stocks, such as because of drought or increased 
grain demand.
    The economic implications of this provision and the likelihood it 
could discourage much needed economic activity on the state level must 
be considered. There needs to be economic factors to allow a state to 
opt into or out of the program.
    Response: There are no limitations on what factors a Governor may 
use to determine whether they will elect to implement the provisions. 
The choice is for the Governor to make. Further, the 2008 Farm Bill 
does not provide any authority that would allow an opt-out clause. Once 
the Governor makes the election, the only exception is for the five 
acre de minimis. FCIC does not believe specifying tall grass or short 
prairie grass, etc., provides any additional clarification. The term 
``native grasses'' in the definition is clearly inclusive of these 
grass types. It is up to agricultural experts to determine what 
constitutes native grasses, grass-like plants, forbs, or shrubs 
suitable for grazing and browsing for a particular area. Therefore, no 
changes have been made in response to this comment.
    Comment: A commenter stated the definition of ``native sod'' would 
allow brome grass or other grass-like plants to be declared native sod. 
The intent is to protect tall-, mixed-, and short-grass prairie. The 
definition should identify the grasses in those prairies such as big 
bluestem, Indian grass, green needle grass, blue gamma grass, buffalo 
grass, little blue stem, etc. A specific list of criteria must be 
developed for native sod including grass types, soils, and erosion 
factors before this program is put into effect.
    Another commenter stated it is clear the definition specifies 
native grasses but also specifies other plants (grass-like, or forbs, 
or shrubs) all of which are suitable for grazing and browsing. They 
emphasized this for the fact the ``native'' designation of existing 
grasses is just one of multiple possible plants that meet the 
definition. In using ``or'' the definition emphasizes, in effect, the 
native or non-native status of the plants present is not the compelling 
criteria. Rather, it is the broadly referenced native grass, grass-like 
plants, forbs, or shrubs which are of a type suitable for grazing and 
browsing.
    Secondly, and of ultimately higher determinative value, the 
definition requires the suitable plants are present on ``land'' 
(section 12020 of the 2008 Farm Bill) or ``acreage'' (interim rule) 
that has never been tilled for the production of an annual crop. The 
commenter emphasized this second criteria is of higher determinative 
value because the broad definition of suitable plants ultimately 
depends upon the plants simply being suitable for grazing and browsing. 
Additionally, as determined by the ``and'' in the interim rules 
definition which reads ``* * * and that has no record of being tilled * 
* *,'' the prevailing factor is that the acreage (``determined in 
accordance with FSA records'') has not previously been in annual crop 
production.
    The commenter emphasized these points to clarify appropriate 
establishment and subsequent adherence to the rule should never be 
dependent on the native status or specific species of grass or plants. 
Beyond simply consisting of various plants being suitable for grazing 
and browsing, the final determining factor is that the acreage has not 
previously been converted for an annual crop.
    Another commenter recommended reordering the definition of native 
sod to read as follows: ``Acreages on which no records exist indicating 
tillage (determined in accordance with FSA records) for the production 
of an annual crop on or before May 22, 2008, and the plant cover is 
composed principally of grasses, grass-like plants, forbs, or shrubs 
suitable for grazing and browsing.''
    While the interim rule does not suggest there is a priority in the 
criteria, the commenter believed the lack of tillage history is a more 
important indicator of native sod than the plant community description 
provided. Native sod may also contain nonnative species that have 
invaded from adjacent habitat and may encounter changes in vegetation 
composition associated with natural succession and wildfire. 
Furthermore, the vegetation composition may be difficult to discern by 
FCIC or FSA staff who are not trained botanists or biologists because 
plant communities may also vary depending on intensity and frequency of 
drought, fire and grazing. For these reasons, the commenter recommended 
the word ``native'' be stricken from the definition. They believe that 
doing so, in combination with the suggested reorganization of the 
definition, will facilitate implementation of the rule and fulfill 
Congressional intent.
    Another commenter stated under the law, the definition of ``Native 
Sod'' includes land ``* * * on which the plant cover is composed 
principally of native grasses, grasslike plants, forbs, or shrubs 
suitable for grazing and browsing * * *'' Given the clear Congressional 
intent of the language, USDA need not consider arguments about which 
plants should be included as ``native grasses, grasslike plants'' etc. 
The real test is whether the producer is converting land to cropland 
that has not been converted before, and upon which there is therefore 
no prior crop insurance history. USDA properly relied on statutory 
language in defining ``Native Sod.'' The commenter would oppose USDA 
adopting a substantially different definition of Native Sod. One 
practice USDA should be wary of is a landowner drilling non-native 
plant species into a native prairie, and then claiming what they are 
breaking is not `native sod' and thus outside the operation of the 
rule. The status of the land as of May 22, 2008, should determine 
program eligibility under this provision.
    Response: The primary consideration is whether the acreage has been 
tilled in the past and FCIC has reordered the definition accordingly. 
The term ``native'' cannot be removed from the definition because it is 
specified in the 2008 Farm Bill. Acreage that has never been tilled is 
very likely to contain the broad categories of plant types listed in 
the definition. The intent is to protect acreage with native plants 
that has never been tilled. Acreage that has been tilled and planted 
with non-native species, such as Smooth Brome Grass, would not be 
included under the definition of ``native sod.'' The native sod 
provisions are applicable in a wide geographic area and FCIC cannot 
list all the native plants that may be found in these areas. In 
questionable cases, agricultural experts in the area may be consulted 
to determine the native plants for a specific area. FCIC has added a 
definition of ``tilled'' to make it clear that simply drilling non-
native plant species into native sod without terminating the native 
plants would not be considered tilling. Whether there is a prior crop 
insurance history is not material. The paramount question is whether 
the acreage has previously been tilled.
    Comment: Several comments were received regarding the Governor's 
authority to determine whether section 508(o) of the Act will be 
effective in their State. A commenter stated RMA must impose a specific 
deadline that limits the amount of time the Governor has to make this 
election. If RMA does not establish a deadline to limit the decision-
making window, there is the potential a producer may suffer unwarranted 
penalties. A fixed number of days following the applicable acreage 
reporting date is acceptable. In addition, RMA must clarify what crop 
year this will apply to if the election is imposed after said deadline. 
(i.e., if section 508(o) of the Act becomes effective more than

[[Page 45541]]

60 days past the applicable acreage reporting deadline specified in the 
Special Provisions for the crop year, the election will be effective 
for the following crop year and succeeding crop years).
    A few commenters stated as the rule notes, the Governor of each of 
the five states has the sole authority to determine whether the 
provision will be operative in his or her state. The commenters 
appreciated and supported USDA's suggestion that the Governors make 
their designation by February 15, 2009, to put everyone on notice and 
allow crop insurance to be purchased where available. The commenters 
also recognized this as a helpful suggestion with practical advantages 
for avoiding the complexities of required benefit repayments and 
premium refunds in the first crop year in which the election may be 
made. However, the statute does not set a deadline for Governors to 
make this determination.
    A few commenters questioned whether the Governor's election to 
participate or not participate in the provision is a one-time permanent 
election or if there is some other time period during which the 
election applies. The rule should clarify whether the Governors can 
elect to participate at any time in the future or can change their 
decision at a later time. A commenter questioned if the Governor of a 
respective state can change their election, does the election start at 
the date of the election, is the election for one year, or is it a 
permanent decision. If the election can be changed, the commenter asked 
whether FCIC would be obligated to ``look-back'' to the May 22, 2008 
enactment date of the Farm Bill. A few commenters stated it is not 
clear whether a future Governor can change the election made by a 
predecessor.
    A few commenters recommended the decisions made by the Governor 
during the 2009 crop year should be final, and language should be 
inserted into the provisions to clarify the finality of these 
decisions. The commenters also recommended any decision made by the 
Governor should be maintained for the duration of the 2008 Farm Bill 
regardless of whether the Governor who made the decision remains in 
office during this period. The commenters believed that would ensure 
consistency for the duration of the 2008 Farm Bill, in fairness to 
farmers within the affected region who might otherwise be impacted by 
fines or insurance repayment should a decision be changed after 2009. 
Another commenter stated section 12020 of the 2008 Farm Bill and the 
interim rule clearly do not and should not place any limit upon when a 
current or future Governor within the Prairie Pothole National Priority 
Area may elect to make section 508(o) of the Act effective, and section 
12020 of the 2008 Farm Bill and the interim rule clearly do not and 
should not enable a current or future Governor to nullify section 
508(o) of the Act if an election has been made previously. However, 
with respect to the complexities of future required benefit repayments 
and premium refunds on any acreage in the first five years after 
section 508(o) of the Act is made effective--on native sod acreage 
converted anytime after May 22, 2008--the commenter recommended that 
future elections should become effective only prior to February 15 of a 
given year. Or stated alternatively, elections made after February 15 
will become effective for the next crop year.
    A few commenters stated it is not clear what constitutes 
application of a Governor's approval and how the FCIC will notify 
individual farmers of the election (e.g., a phone call, a document 
transmitted in writing or by electronic e-mail). To avoid any 
confusion, it would seem prudent for the FCIC to require a Governor's 
election in writing. Also, an application should only apply from the 
date of a Governor's approval. The commenter opposed retroactive 
``look-backs'' of any indemnities or other payments.
    A few commenters had concerns growers will be subject to 
retroactive penalty as a result of indemnities or disaster assistance 
payments in the event a Governor decides to enroll in the program at 
some future date. A producer should only forfeit indemnities and 
disaster payments that would be received after a Governor elects to 
make section 508(o) of the Act effective in the state since prior to 
that time the statute is not applicable. Similarly, the interim rule 
does not explain whether a Governor has the authority later to withdraw 
their state from the program once the decision has been made to enroll.
    Response: The 2008 Farm Bill does not contain any deadlines for the 
Governors to decide whether to implement section 508(o) of the Act. 
Therefore, FCIC lacks the authority to impose a deadline. However, in 
correspondence to the Governors and in the interim rule, FCIC explained 
the potential negative impacts of a delayed decision. Any time a 
Governor makes the election, the provision becomes effective for any 
acreage newly tilled after May 22, 2008, and insurance is not available 
for the first five years of planting. Producers who received an 
indemnity for acreage tilled after this date will be required to repay 
it and any premiums paid must be refunded. If the election could be 
changed, it would effectively negate the provision. If a Governor 
elects to implement section 508(o) of the Act, it will be announced by 
RMA via a Manager's Bulletin and posted on the RMA Web site at https://www.rma.usda.gov/. Insurance providers will be directed to notify 
individual producers when such announcement is made.
    Comment: Several commenters stated the interim rule specifies the 
counties in the Prairie Pothole National Priority Area by referencing 
the RMA Web site. The commenters recommended the rule identify the 
specific counties within the States of Iowa, Minnesota, Montana, North 
Dakota, and South Dakota that are included in the RMA Web site map of 
the Prairie Pothole National Priority Area to make it clearer, and to 
avoid inadvertently changing the operation of the rule should the Web 
site be changed, updated, or become temporarily unavailable. The Web 
site map should be cited as a reference tool.
    Response: The counties identified on the RMA Web site are 
consistent with the counties identified by the FSA, Agricultural 
Resource Conservation Program 2-CRP (Revision 4) dated April 28, 2008. 
The Web site would only be changed or updated if the designated 
counties change. However, FCIC will include the FSA reference in case 
the Web site is unavailable.
    Comment: A few comments were received regarding how the native sod 
provisions are only applicable in the Prairie Pothole National Priority 
Area. A commenter questioned why the area in the Prairie Pothole 
National Priority Area is of more concern than other areas in the 
state. The arbitrary decision makes it impossible to explain to 
producers that native sod in the Prairie Pothole National Priority Area 
is a higher priority than native sod in other parts of the state. A 
commenter believed the native sod provisions of the 2008 Farm Bill 
resulted from a clear problem that applies well beyond the Prairie 
Pothole National Priority Area. Throughout the Great Plains, and in 
other parts of the country, native prairie, virgin forest, and other 
types of native habitat are being tilled, cleared and converted to 
cropland. Much of this land is marginal and would not be farmed if the 
risk in doing so were not underwritten by taxpayer-subsidized crop 
insurance and disaster assistance programs, along with commodity 
payments and other USDA programs.
    The commenter stated in sagebrush grasslands, the rapid pace of 
conversion

[[Page 45542]]

represents a long-term threat to the health and viability of sage-
grouse populations and other sagebrush obligate species. Portions of 
the Prairie Pothole National Priority Area within Montana include 
important sage-grouse habitat as well as native grasslands important to 
migratory birds of concern. Unfortunately, the current focus on the 
Prairie Pothole National Priority Area excludes significant blocks of 
native grasslands within the Great Plains in Montana and other states. 
Putting the native sod provisions in effect in the Prairie Pothole 
National Priority Area would be a good first step, but the job is 
nowhere near complete if we seek to maintain functional working 
landscapes throughout our nation.
    The commenter urged USDA to examine this issue carefully, and to 
undertake monitoring and research on how much native prairie and other 
native habitat is being converted to cropland and the influence of USDA 
insurance, commodity, and other programs in those decisions. Should one 
or more Governors choose to have the provision apply in their state, it 
would provide an invaluable opportunity to study side-by-side 
comparisons of conversion rates with and without the availability of 
Federal crop insurance.
    Another commenter stated USDA data shows the loss of rangeland and 
pastureland is not limited to the states of the Prairie Pothole 
National Priority Area. In fact, data cited in a Government 
Accountability Office (GAO) report shows states like Colorado, New 
Mexico and Texas are experiencing losses as bad as or worse than those 
in the Prairie Pothole National Priority Area. Landowners throughout 
the country who are maintaining grasslands receive none of the Federal 
farm program supports that studies show are an important factor in 
converting grasslands to annual crop production. Again, the GAO 
detailed that even among annual crop producers, the landowners that are 
converting the most native sod are receiving far larger insurance 
benefits than their neighbors who are not. Further, the Federal farm 
program is paying landowners to re-establish perennial grass and plants 
on previously converted sod at the very same time crop insurance and 
other Federal benefits are prodding the conversion of perennial 
grasslands.
    The commenter recommended the ``added land'' provision of crop 
insurance rules be amended to require land without production crop 
history prior to May 22, 2008, that is subsequently planted to a crop, 
must establish a full four to ten year actual production history prior 
to becoming eligible for insurance.
    A commenter strongly recommended an incentive-based program to help 
preserve tall-, mixed-, and short-grass prairies in the entire state of 
South Dakota, as opposed to the current sod saver program for the 
Prairie Pothole National Priority Area.
    Another commenter noted in their explanatory language on the new 
Farm Bill, the Managers Report cites a GAO report and recommendation 
that USDA should ``(1) track annual conversion and provide current data 
to policymakers, and (2) conduct a study of the relationship between 
farm program payments and land conversion and report findings to 
Congress * * * The Managers intend for the Secretary to undertake a 
study on the influence of the crop insurance program on the conversion 
of native sod to crop production * * *'' and to provide recommendations 
to Congress.
    The commenter echoed this call for careful study and 
recommendations. They also asked USDA to look for other opportunities 
within the existing structure of Federal crop insurance and non-insured 
disaster assistance payments to reduce or eliminate the taxpayer-paid 
incentives that are now in place that encourage landowners to break out 
native prairie and other native habitats, and to work to combat abuses 
of the current system that waste taxpayer money.
    Response: Congress created an exception to the rule regarding the 
eligibility of acreage for insurance. Because it is an exception to the 
rule, it should not be read more broadly than it is written. The 2008 
Farm Bill specifically provided the authority to implement these 
provisions in the Prairie Pothole National Priority Area. The 2008 Farm 
Bill also specified the 5-year period in which insurance cannot be 
offered after native sod acreage has been tilled. In addition, the crop 
insurance policy already contains provisions that limit insurance on 
certain acreage on which a crop was not previously planted or harvested 
in the previous three years. As conversion data is gathered and 
included in required reports to policymakers, policy changes may be 
vetted to determine the best land management practices that meet the 
needs of all land users.
    Comment: A commenter stated the interim rule makes native sod 
tilled after May 22, 2008, ineligible for crop insurance for the first 
five years an annual crop is planted. It appears this will also make 
the crop ineligible for any disaster payments because crop insurance is 
a requirement for disaster assistance. This reduces a risk management 
tool for the producer in the Prairie Pothole National Priority Area. 
The commenters asked for the justification for eliminating these tools 
for the producer in the Prairie Pothole National Priority Area and not 
for the producer across the road in another county that is not in the 
Prairie Pothole National Priority Area. The commenter recommended an 
incentive to not break the native sod with a pilot program or a CREP-
like program of some sort. Producers who have gone out of the livestock 
business are limited in the use of the land under Sod Saver. The 
producer should make decisions based on his or her operation needs, not 
disincentives for change because he or she lives in the Prairie Pothole 
National Priority Area.
    Another commenter stated if a producer falls under the sod saver 
provisions in the interim rule, they are not eligible for disaster 
assistance. This would place these farmers at an economic disadvantage 
relative to other farmers. The commenter was opposed to that outcome.
    Response: FCIC is required to implement the provisions of the 2008 
Farm Bill. Further, its provisions limit crop insurance and noninsured 
crop disaster assistance program benefits. It does not expressly 
exclude the payment of disaster benefits. FSA provides disaster 
assistance and any program requirements for insurance are detailed in 
materials developed and issued by FSA. Producers should contact their 
local FSA office to verify disaster assistance program requirements.
    Comment: A commenter stated the interim rule adds a new subsection 
in section 3 of 7 CFR 407.9 and a new subsection in section 9 of 7 CFR 
457.8 to specify when native sod is ineligible for crop insurance. The 
language is virtually identical in the two sections and is consistent 
with section 12020 of the 2008 Farm Bill, except in the final sentence 
of the sections: ``If the Governor makes this election after you have 
received an indemnity or other payment for native sod acreage, you may 
be required to repay the amount received and any premium for such 
acreage may be refunded to you.''
    Section 12020 of the 2008 Farm Bill states that, ``* * * native sod 
acreage that has been tilled for the production of an annual crop after 
the date of enactment of this subsection shall be ineligible during the 
first 5 crop years of planting * * *''
    Both section 12020 of the 2008 Farm Bill and the interim rule 
affirm acreage tilled for production after May 22, 2008 is not 
insurable, so the commenter

[[Page 45543]]

believed it will be necessary to specify that a payment received shall 
be repaid and a premium paid shall be refunded.
    Further to this point, paragraph d. of the ``Background'' section 
of the interim rule contains the same usage of ``may'' that the 
commenter asserts should be ``shall.'' As stated in paragraph d. in 
adherence to section 12020 of the 2008 Farm Bill, ``The 2008 Farm Bill 
is specific in that, at the election of the Governors of these states, 
any acreage of native sod that is tilled for production of an annual 
crop after the date of enactment will be ineligible for insurance for 
the first 5 crops years of planting.'' The commenter agreed the 2008 
Farm Bill is specific and that the ineligibility shall apply whenever a 
Governor elects to make section 508(o) of the Act effective.
    Response: The commenter is correct that if the election is made by 
the Governor, acreage first tilled after May 22, 2008, is ineligible 
for insurance so the provisions should indicate prior payments will 
have to be repaid. FCIC has revised the provisions accordingly.
    Comment: A commenter stated the statutory language says ``The 
Secretary shall exempt areas of 5 acres or less'' from the clause, 
which is designed to provide a `de minimum' exemption. The commenter 
believed the rule's language is clear that ``any native sod acreage 
greater than 5 acres'' is not insurable. The commenter recommended the 
Secretary, in providing direction to USDA employees, ensures landowners 
do not skirt the rule by trying to claim an exemption for five acres of 
an area one year, five more acres the following year, another five 
acres the third year, etc.
    Another commenter stated section 12020 of the 2008 Farm Bill 
specifies a ``De Minimis Acreage Exemption'' that requires areas of 5 
acres or less to be exempt from the ineligibility designation. The 
commenter wanted to emphasize it would contradict the intent and spirit 
of the law to allow incremental conversion of contiguous parcels of 5 
acres or less. They emphasized this point to clarify appropriate 
establishment and subsequent adherence to the rule must ensure multiple 
tracts of 5 acres or less that become contiguous tracts totaling more 
than 5 acres should be regarded as a single tract larger than 5 acres 
and therefore ineligible for crop insurance.
    Response: The intent is to provide an exception for acreage that is 
legitimately five acres or less. The intent is not to allow incremental 
increases in the amount of converted acreage. FCIC has added provisions 
specifying that adding to the acreage so more than 5 acres have been 
converted would subject all the converted acreage to the provisions 
beginning the year the producer cumulatively converted more than the 5 
acre threshold.
    Comment: A commenter stated they live in a wildlife paradise in 
Central North Dakota adjacent to U.S. Fish & Wildlife land and the 
wildlife is every bit as plentiful and cared for on their land as on 
the government-owned land. They have watched all of these projects and 
land acquisitions over the years and the amount of tax-payer money that 
has been spent could surely help eliminate the deficit. The commenter 
asked USDA to use its influence to deter another costly program.
    Response: Since the program changes contained in this rule were 
mandated by the 2008 Farm Bill, FCIC is required by law to implement 
the changes.

List of Subjects in 7 CFR Parts 402, 407 and 457

    Crop insurance, Reporting and recordkeeping requirements.

Final Rule

0
Accordingly, as set forth in the preamble and under the authority of 7 
U.S.C. 1506(l), 1506(o), the interim rule amending 7 CFR parts 402, 407 
and 457 which was published at 73 FR 70861-70865 on November 24, 2008, 
is adopted as final with the following changes. The amendments listed 
below are effective for the 2010 and succeeding crop years for all 
crops with a 2010 crop year contract change date on or after the 
effective date of this rule and for the 2011 and succeeding crop years 
for all crops with a 2010 crop year contract change date prior to the 
effective date of this rule as follows:

PART 407--GROUP RISK PLAN OF INSURANCE REGULATIONS

0
1. The authority citation for 7 CFR Part 407 continues to read as 
follows:


    Authority: 7 U.S.C. 1506(l), 1506(o).


0
2. Amend Sec.  407.9 as follows:
0
a. Amend section 1 by adding the definition of ``tilled'' and revising 
the definitions of ``native sod'' and ``Prairie Pothole National 
Priority Area;'' '' and
0
b. Amend section 3 by revising paragraph (d).
    The revised and added text reads as follows:


Sec.  407.9  Group risk plan common policy.

* * * * *
    1. Definitions.
* * * * *
    Native sod. Acreage that has no record of being tilled (determined 
in accordance with FSA or other verifiable records acceptable to us) 
for the production of an annual crop on or before May 22, 2008, and on 
which the plant cover is composed principally of native grasses, grass-
like plants, forbs, or shrubs suitable for grazing and browsing.
* * * * *
    Prairie Pothole National Priority Area. Consists of specific 
counties within the States of Iowa, Minnesota, Montana, North Dakota or 
South Dakota as specified on the RMA Web site at 
http:[sol][sol]www.rma.usda.gov/, or a successor Web site, or the Farm 
Service Agency, Agricultural Resource Conservation Program 2-CRP 
(Revision 4), dated April 28, 2008, or a subsequent publication.
* * * * *
    Tilled. The termination of existing plants by plowing, disking, 
burning, application of chemicals, or by other means to prepare acreage 
for the production of an annual crop.
* * * * *
    3. Insured and Insurable Acreage.
* * * * *
    (d) If the Governor of a State designated within the Prairie 
Pothole National Priority Area elects to make section 508(o) of the Act 
effective for the State, any native sod acreage greater than five acres 
located in a county contained within the Prairie Pothole National 
Priority Area that has been tilled after May 22, 2008, is not insurable 
for the first five crop years of planting following the date the native 
sod acreage is tilled.
    (1) If the Governor makes this election after you have received an 
indemnity or other payment for native sod acreage, you will be required 
to repay the amount received and any premium for such acreage will be 
refunded to you.
    (2) If we determine you have tilled less than five acres of native 
sod a year for more than one crop year, we will add all the native sod 
acreage tilled after May 22, 2008, and all such acreage will be 
ineligible for insurance for the first five crop years of planting 
following the date the cumulative native sod acreage tilled exceeds 
five acres.
* * * * *

PART 457--COMMON CROP INSURANCE REGULATIONS

0
3. The authority citation for 7 CFR part 457 continues to read as 
follows:

    Authority: 7 U.S.C. 1506(1), 1506(o).


0
4. Amend Sec.  457.8 as follows:
0
a. Amend section 1 by adding the definition of ``tilled'' and revising 
the

[[Page 45544]]

definitions of ``native sod'' and ``Prairie Pothole National Priority 
Area;''
0
b. Amend section 9 by revising paragraph (e); and
0
c. Revise section 14(c) (Your Duties).
    The revised and added text reads as follows:


Sec.  457.8  The application and policy.

    1. Definitions.
* * * * *
    Native sod. Acreage that has no record of being tilled (determined 
in accordance with FSA or other verifiable records acceptable to us) 
for the production of an annual crop on or before May 22, 2008, and on 
which the plant cover is composed principally of native grasses, grass-
like plants, forbs, or shrubs suitable for grazing and browsing.
* * * * *
    Prairie Pothole National Priority Area. Consists of specific 
counties within the States of Iowa, Minnesota, Montana, North Dakota or 
South Dakota as specified on the RMA Web site at 
http:[sol][sol]www.rma.usda.gov/, or a successor Web site, or the Farm 
Service Agency, Agricultural Resource Conservation Program 2-CRP 
(Revision 4), dated April 28, 2008, or a subsequent publication.
* * * * *
    Tilled. The termination of existing plants by plowing, disking, 
burning, application of chemicals, or by other means to prepare acreage 
for the production of an annual crop.
* * * * *
    9. Insurable Acreage.
* * * * *
    (e) Notwithstanding the provisions in section 9(a)(1), if the 
Governor of a State designated within the Prairie Pothole National 
Priority Area elects to make section 508(o) of the Act effective for 
the State, any native sod acreage greater than five acres located in a 
county contained within the Prairie Pothole National Priority Area that 
has been tilled after May 22, 2008, is not insurable for the first five 
crop years of planting following the date the native sod acreage is 
tilled.
    (1) If the Governor makes this election after you have received an 
indemnity or other payment for native sod acreage, you will be required 
to repay the amount received and any premium for such acreage will be 
refunded to you.
    (2) If we determine you have tilled less than five acres of native 
sod a year for more than one crop year, we will add all the native sod 
acreage tilled after May 22, 2008, and all such acreage will be 
ineligible for insurance for the first five crop years of planting 
following the date the cumulative native sod acreage tilled exceeds 
five acres.
* * * * *
    14. Duties in the Event of Damage, Loss, Abandonment, Destruction, 
or Alternative Use of Crop or Acreage.
    Your Duties--
* * * * *
    (c) In addition to complying with the notice requirements, you must 
submit a claim for indemnity declaring the amount of your loss:
    (1) Not later than 60 days after the end of the insurance period 
unless, prior to the end of the 60 day period, you:
    (i) Request an extension in writing and we agree to such request 
(Extensions will only be granted if the amount of loss cannot be 
determined within such time period because the information needed to 
determine the amount of the loss is not available); or
    (ii) Have harvested farm-stored grain production and elect, in 
writing, to delay measurement of your farm-stored production and 
settlement of any potential associated claim for indemnity (Extensions 
will be granted for this purpose up to 180 days after the end of the 
insurance period).
    (A) For policies that require APH, if such extension continues 
beyond the date you are required to submit your production report, you 
will be assigned the previous year's approved yield as a temporary 
yield in accordance with applicable procedures.
    (B) Any extension does not extend any date specified in the policy 
by which premiums, administrative fees, or other debts owed must be 
paid.
    (C) Damage that occurs after the end of the insurance period (for 
example, while the harvested crop production is in storage) is not 
covered; and
    (2) That includes all information we require to settle the claim. 
Failure to submit a claim or provide the required information will 
result in no indemnity, prevented planting payment or replant payment 
(even though no indemnity or other payment is due, you will still be 
required to pay the premium due under the policy for the unit).
* * * * *

    Signed in Washington, DC, on August 28, 2009.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. E9-21233 Filed 9-2-09; 8:45 am]
BILLING CODE 3410-08-P