Sugar Program; Feedstock Flexibility Program for Bioenergy Producers, 64839-64844 [2011-26974]

Download as PDF 64839 Proposed Rules Federal Register Vol. 76, No. 202 Wednesday, October 19, 2011 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. Background CCC proposes to establish new regulations for the sugar inventory disposition program and FFP for bioenergy producers mandated by Title IX of the 2008 Farm Bill (Pub. L. 110– 246). DEPARTMENT OF AGRICULTURE Commodity Credit Corporation 7 CFR Part 1435 RIN 0560–AH86 Sugar Program; Feedstock Flexibility Program for Bioenergy Producers Commodity Credit Corporation, USDA. ACTION: Proposed rule. AGENCY: The Commodity Credit Corporation (CCC) proposes regulations with respect to general sugar inventory disposition and the establishment of a new Feedstock Flexibility Program (FFP) that requires the Secretary to purchase sugar to produce bioenergy as a means to avoid forfeitures of sugar loan collateral under the sugar loan program. These regulations are as required by the Food Security and Rural Investment Act of 2002 (the 2002 Farm Bill), as amended by the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill). DATES: We will consider comments that we receive by December 19, 2011. ADDRESSES: Interested persons are invited to submit comments on this proposed rule. In your comment, include the volume, date, and page number of this issue of the Federal Register. You may submit comments by any of the following methods: • Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting comments. • Fax: (202) 690–1480. • Mail: Barbara Fecso, Dairy and Sweeteners Analysis Group, Economic Policy and Analysis Staff, USDA, FSA, Stop 0516, 1400 Independence Ave., SW., Washington, DC 20250–0516. • Hand Delivery or Courier: USDA FSA Economic Policy and Analysis Staff, Stop 0516, 1400 Independence Ave., SW., Washington, DC 20250–0516. FOR FURTHER INFORMATION CONTACT: Barbara Fecso, phone: (202) 720–4146; srobinson on DSK4SPTVN1PROD with PROPOSALS SUMMARY: VerDate Mar<15>2010 16:22 Oct 18, 2011 Jkt 226001 fax: (202) 690–1480. 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). SUPPLEMENTARY INFORMATION: Sugar Program The sugar program is designed to support the price of sugar above a legislatively specified threshold that has been established by successive Farm Bills. In adding FFP as a new element of the sugar program, it is helpful to understand certain aspects of the existing program and how certain components would relate to FFP. In the sugar program, the level of price support is determined by the sugar loan program. Sugar loans from CCC can be satisfied by repaying the loan or by giving CCC title to the loan collateral, also known as a ‘‘forfeiture’’ of collateral. The sugar program is required, to the maximum extent possible, to operate at no cost to the Federal government by avoiding forfeitures to CCC. To avoid forfeitures, the sugar program limits the domestic sugar supply through a program of marketing allocations and tariff-rate quotas, thereby usually resulting in higher domestic sugar prices than the floor created by the sugar loan program. Sugar Inventory Disposition CCC proposes new general sugar inventory disposition regulations that are required by the 2008 amendments to 7 U.S.C. 8110. The 2008 amendments restrict the methods CCC may use to dispose of its sugar inventory in nonemergency situations. The purpose of the restrictions is to ensure that disposed inventory only goes to nonfood uses (for example, bioenergy production) and does not disrupt the market for sugar for human consumption. If there is an emergency shortage of sugar for human consumption, the Secretary can dispose of the inventory to fill that shortage. CCC proposes to add a new subpart E on General Disposition of CCC PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 Inventory to 7 CFR 1435 to implement the 2008 amendments. Subpart E would apply to sugar in inventory that CCC acquired by means other than FFP, such as sugar obtained from forfeited loan collateral. General Disposition of CCC Inventory (Proposed New Subpart E) Section 9001 of the 2008 Farm Bill amends section 9010 of the 2002 Farm Bill establishing the methods CCC may use to manage inventory acquired by forfeiture or other authorities. Unless CCC has determined that there is an emergency shortage of sugar in the domestic market caused by war, flood, hurricane, other natural disaster, or similar event, CCC can only dispose of its sugar inventory using outlets that do not increase the net supply of sugar available for human consumption in the United States. The 2008 amendments specifically list methods of disposition as sales under FFP (proposed new Subpart G), the Processor Payment-In-Kind Program (Subpart F in the current regulations), and buybacks of Certificates of Quota Eligibility (identified in the 2008 amendments as certificates of quota entry) issued by the Office of the U.S. Trade Representative, as set forth in 15 CFR part 2011. The 2008 amendments do not limit CCC’s ability to dispose of its sugar for nonfood use (or uses that do not increase the supply of sugar for human consumption) under any authority. This is a change from the 2002 Farm Bill (Pub. L. 107–171) as originally enacted and the regulations implementing the 2002 Farm Bill, which allowed CCC to dispose of surplus sugar into the domestic market, including the market for human consumption. Therefore, we are proposing new regulations to specify how CCC would dispose of sugar inventory. The existing Payment in Kind program, specified in subpart F, is one authority CCC uses to dispose of inventory. This proposed rule would not change subpart F. New subpart E would include general provisions for disposition of inventory that is not acquired through FFP. For example, subpart E would apply to disposition of sugar acquired through forfeiture of sugar loan collateral. Subpart E would specify the options CCC would use to dispose of inventory E:\FR\FM\19OCP1.SGM 19OCP1 srobinson on DSK4SPTVN1PROD with PROPOSALS 64840 Federal Register / Vol. 76, No. 202 / Wednesday, October 19, 2011 / Proposed Rules in both normal and emergency shortage situations. The 2008 amendments to section 9010 of the 2002 Farm Bill also specify the methods CCC may use to manage inventory acquired by forfeiture under the sugar loan program or other authorities. Unless, as specified in the 2008 Farm Bill, CCC has determined that ‘‘there is an emergency shortage of sugar for human consumption in the United States market that is caused by a war, flood, hurricane, or other natural disaster, or other similar event,’’ CCC can only dispose of its sugar inventory by methods that do not increase the net supply of sugar available for human consumption in the United States. There should not be much inventory subject to this provision because the main sugar surplus management strategy in the recently amended statute is the removal of sugar surpluses through CCC sugar purchases and disposal through conversion to bioenergy. CCC can sell sugar for human consumption if an emergency shortage condition exists, and the event is caused by a war, flood, hurricane, or other natural disaster, or other similar event. By including the universe of causes— manmade, natural, and ‘‘other similar event,’’ CCC has great discretion in determining the cause triggering an emergency shortage. Therefore, the only practical limitation on CCC’s ability to sell sugar for human consumption depends on what constitutes the ‘‘existence of an emergency shortage.’’ This concept is important because CCC is required under the sugar marketing allotment program and Harmonized Tariff Schedule to ensure an adequate supply of sugar for domestic consumption. Additionally, the sugar tariff-rate quota management provisions of the 2008 amendments require USDA to increase sugar supplies if an emergency shortage exists. CCC is requesting comment from the public on establishing a definition of an emergency shortage. Webster’s Dictionary defines an emergency as a sudden or unexpected occurrence demanding prompt action. Some recent examples of unexpected manmade or natural occurrences that reduced domestic refined sugar supplies are the late sugar beet crop of 2005, Hurricane Katrina, and the Imperial refinery explosion in Savannah, Georgia in February 2008. CCC determined that the delayed beet crop and Katrina resulted in sudden shortages that could not be resolved by redistributing available domestic supplies and took immediate action to increase supply. However, with respect to the February 2008 refinery explosion, CCC delayed action VerDate Mar<15>2010 16:22 Oct 18, 2011 Jkt 226001 until the following August when it contemplated the threat of a refined shortage, in recognition that shortages are most likely to occur in the August– September period when domestic sugar stocks are at their yearly lowest point. The law directs USDA to take action to increase supplies when an emergency shortage ‘‘exists,’’ not when it is ‘‘contemplated.’’ CCC could define an emergency shortage as a supply failure affecting sugar deliveries and disrupting the ongoing operations of sugar product manufacturers, i.e., defaults or force majeure on contracts affecting 10 percent of average monthly deliveries. Alternatively, CCC could determine an emergency shortage exists when sugar prices spike a certain percentage, i.e., 50 percent above the loan level, or 10 cents above the loan level. Alternatively, CCC could also leave the term undefined so as to maintain maximum flexibility in meeting the needs of the domestic sugar market. Feedstock Flexibility Program (Proposed New Subpart G) Section 9001 of the 2008 Farm Bill amends section 9010 of the 2002 Farm Bill to require CCC to implement FFP to control the domestic sugar supply and avoid forfeitures. Under this program, CCC is required to buy surplus sugar as needed to avoid forfeitures of sugar loan collateral and sell that surplus sugar to bioenergy producers. Bioenergy, as defined by section 9001 of the 2008 amendments, means fuel grade ethanol and other biofuel. The 2008 amendments require the Secretary to annually notify eligible bioenergy sugar sellers and producers of the quantity of sugar to be made available for purchase and sale in the crop year following the date of that notification. The 2008 amendments also require quarterly revised estimates and notification. CCC proposes to add a new subpart G to establish general provisions for operating FFP. Through FFP, CCC would buy and sell sugar for bioenergy production, based on predictions of sugar surplus conditions months into the future, a process that involves unavoidable uncertainty and risk. CCC proposes general provisions that are intended to provide flexibility in program administration. CCC requests comments on alternative methods to administer the program while meeting the requirements of the 2008 amendments. FFP will be administered through contracts for the purchase and sale of sugar, and products that yield sugar, when CCC determines that sugar loan collateral is likely to be forfeited under the sugar loan program. The contracts PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 will include the specific terms and conditions associated with each purchase and sale. CCC expects to amend its contract terms through time as it learns how to most effectively facilitate the diversion of sugar to ethanol and other bioenergy production. Surplus Determination As required by the 2008 amendments, each year CCC will estimate the likelihood of sugar forfeitures by September 1, for the following fiscal year, and announce the quantity of sugar to be purchased and sold for bioenergy production. In addition, CCC will make quarterly announcements of revised estimates. Quarterly revised estimates will be important because the USDA annual estimate reported on September 1 for the following fiscal year’s sugar market will potentially be subject to significant error due to uncertainties in making the estimate. The sugarcane and sugar beet harvest for making sugar in the following fiscal year does not normally begin until after September 1 of the prior year. Very little is known about the condition of the crop on September 1, when USDA is required by the 2008 amendments to make its annual estimate of sugar surplus. The harvest for sugar in Mexico begins in December; therefore, the uncertainties are aggravated by the effect of Mexican imports on the U.S. sugar market. Another major source of potential error is the fact that the current fiscal year is not over by September 1. Any changes to the current year automatically alter the current year’s ending stocks, and the next year’s beginning stocks and supply. CCC’s purchase and sale plans would be affected by the large degree of uncertainty in USDA’s sugar market projections on September 1. CCC requests comments on how CCC should calculate a sugar market surplus, particularly for the estimate by September 1, when uncertainties are greatest. For example, CCC could calculate the surplus by comparing the World Agricultural Supply and Demand Estimate (WASDE) ending stocks to the ending stocks for an adequately supplied market. In the past, an ending stock of 14.5 percent of expected annual use was considered to predict adequate supply for the following year. Alternatively, CCC could compare WASDE stocks to the stock level expected to result in forfeitures and declare any projected stocks above these amounts to be surplus. However, this method is inadequate for determining surplus by type of sugar, raw versus refined, because the WASDE is an amalgamation of both sugars. Certainly, E:\FR\FM\19OCP1.SGM 19OCP1 Federal Register / Vol. 76, No. 202 / Wednesday, October 19, 2011 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS current WASDE tight ending stocks-touse ratios do not reflect the current raw sugar surplus. There are two possible types of errors with surplus determination: (1) Overestimating the surplus and buying and selling sugar for bioenergy that results in market shortages later in the year or (2) under-estimating the surplus resulting in excess supply later in the year. The consequences of these two types of errors are different. Sugar used to make bioenergy cannot be recovered to be marketed for human consumption if needed later; however, sugar not sold early in the year can later be sold for bioenergy production. The first type of risk, that of over-estimating the surplus, has more serious consequences and costs than the second type. CCC proposes to reduce the over-estimation risk by staggering purchases of sugar for bioenergy purchases, rather than making one purchase for the entire year. CCC plans to be more conservative in purchasing sugar for bioenergy early in the year than later in the year, when market factors are better known. CCC would calculate the surplus for the whole year as required by the 2008 amendments, but then only tender a percentage of the estimated surplus for bid immediately. The percentage could change with each quarterly revised estimate. CCC would not retract accepted bids. CCC requests comments on appropriate methods to estimate the likelihood of forfeitures and to determine the quantity of sugar to be purchased in each quarter. How should CCC calculate the annual sugar market surplus and update that estimate? Should a minimum percentage of the expected surplus be tendered for bid each quarter, and should that minimum be set in the regulations? Eligible Sugar CCC is required to purchase raw, refined, or in-process sugar for FFP that would otherwise have been marketed for human consumption in the United States or could otherwise have been used for the extraction of sugar marketed for human consumption. The 2008 amendments define all these forms of sugar as eligible commodities for FFP. For example, in-process sugar products such as beet thick juice or cane syrup are eligible. Since the program objective is to reduce forfeitures of CCC sugar loan collateral, CCC proposes that the in-process sugar products would be evaluated in terms of refined crystalline sugar yield in determining CCC’s unit purchase price. For example, if processing the thick juice would yield 70 percent sugar for human VerDate Mar<15>2010 16:22 Oct 18, 2011 Jkt 226001 consumption, then CCC would only consider 70 percent of the sugar in the thick juice in evaluating the per unit price. Likewise, raw sugar would be evaluated in terms of its refined equivalent to determine a sales price per unit. This reduction in price is not required by the 2008 amendments, but it is consistent with the 2008 amendments’ goal of buying sugar for FFP to manage the market for sugar for human consumption. CCC requests comments on and proposed alternatives to this provision. CCC proposes that for FFP, it will only purchase sugar products that are eligible to be placed under loan with the federal sugar loan program. Sugar eligible to be placed under loan must be processed in the United States from domestically-grown sugarcane, sugar beets, in-process sugars, or molasses. As an alternative, CCC could allow FFP to purchase sugar products from all sources, including imported sugar and sugar products from eligible domestic sellers. Forfeitures are expected to occur when the total sugar supply for human consumption is greater than the level that can support domestic sugar prices above the price support loan proceeds. That surplus could be caused in part by Mexican imports or by sugar made domestically from non-domestic sources. CCC requests comments on whether eligible sugar for FFP should be limited to sugar located within the United States and derived from domestically produced sugarcane or sugar beets. Eligible Sugar Sellers and Buyers The 2008 amendments require that the entity selling sugar to CCC be located in the United States and that eligible buyers be bioenergy producers. The 2008 amendments define eligible sellers as entities located in the United States, but do not require that eligible buyers be located in the United States. CCC proposes to limit eligible buyers to those bioenergy producers who will use the purchased sugar to produce bioenergy in their facilities in United States. This restriction is intended to ensure that the increase in energy supplies from the program will benefit the American public paying for FFP. CCC requests comments on whether to include bioenergy producers located outside the United States as eligible buyers. Competitive Procedures CCC proposes to announce offers (also referred to as tenders) to the public outlining the terms and conditions of the sugar purchase and sale contracts. CCC also proposes to negotiate contracts PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 64841 directly with sellers or buyers if CCC determines that such negotiation will result in either reduced likelihood of forfeited sugar compared to alternative means or reduced costs of removing sugar from the market, which will reduce the likelihood of sugar forfeited to CCC. CCC proposes to try several contracting strategies to discover the most efficient and cost-effective strategy to subsidize the production of bioenergy with surplus sugar, given the restrictions specified in the 2002 Farm Bill. CCC requests comments on alternative contracting strategies and on whether those strategies should be specified in the regulation. CCC is required by the 2008 amendments to store the sugar for no more than 30 days after CCC purchases the sugar. Realistically, this means that the purchasing bioenergy producer must be identified before CCC purchases surplus sugar. CCC does not propose specifically how it would do that, although CCC proposes to specify that the buyer must take delivery of the sugar within 30 days of purchase. CCC could identify (pre-qualify) bioenergy producers willing to take sugar or sugar products under specific terms (price, amount, type of sugar, etc.). Alternatively, CCC could require the sugar seller to identify the purchasing bioenergy producer and incorporate a contract of sale between CCC and the bioenergy producer specifying terms, including price, in their offer to sell sugar to CCC. CCC proposes to use both these strategies and evaluate which is more effective. CCC requests comments on alternative strategies. The 2008 amendments prohibit, to the maximum extent possible, CCC from paying storage fees under FFP. Therefore, as a condition of bid acceptance into FFP, CCC would not pay any storage fees. Sugar To Be Used for Bioenergy Production CCC expects that the selling price for sugar, with the restriction that it only be used for making bioenergy, will be considerably below the market price for sugar that can be used for human consumption. This price differential could create an incentive for FFP sugar to leak into the domestic human consumption market. Therefore, CCC will monitor the contracts to ensure that the FFP sugar is only being used for bioenergy production. CCC proposes to include an audit clause in the contracts to purchase sugar for bioenergy production. The auditors would view the records upon request, as specified in the contract, to verify that sugar E:\FR\FM\19OCP1.SGM 19OCP1 64842 Federal Register / Vol. 76, No. 202 / Wednesday, October 19, 2011 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS purchased for bioenergy production was only used for bioenergy production. In addition to auditing records, CCC would send an auditor to the bioenergy factory purchasing surplus sugar under FFP to verify that the quantity purchased is physically entering the factory as an input in accordance with the contract. Examination could be performed for every event or by random checks. In any case, substantial liquidated damages, to be determined, could be imposed for willfully furnishing false information to CCC. CCC requests comment on the auditing or monitoring methods that should be used. For example: • Are there alternative processes that CCC should use to ensure that the FFP sugar is not sold for human consumption? • What kinds of documentation, audits, and monitoring would be appropriate? • Should the methods of proof be specified in the rule, or in the contract between CCC and the bioenergy producer? Executive Orders 12866 and 13563 Executive Order 12866, ‘‘Regulatory Planning and Review,’’ and Executive Order 13563, ‘‘Improving Regulation and Regulatory Review,’’ direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasized the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. The Office of Management and Budget (OMB) initially designated this proposed rule as economically significant under Executive Order 12866 and, therefore, OMB reviewed this proposed rule. Due to increases in sugar prices since the initial designation the current cost benefit analysis shows the annual regulatory impact to be less than the threshold of $100 million, therefore the rule is a significant regulatory action, but is no longer considered an economically significant regulatory action. A summary of the cost-benefit analysis of this rule is provided below and is available at http:// www.regulations.gov and from the contact listed above. Clarity of the Regulation Executive Order 12866, as supplemented by Executive Order 13563, requires each agency to write all VerDate Mar<15>2010 16:22 Oct 18, 2011 Jkt 226001 rules in plain language. In addition to your substantive comments on these proposed rules, we invite your comments on how to make them easier to understand. For example: • Are the requirements in the rule clearly stated? Are the scope and intent of the rule clear? • Does the rule contain technical language or jargon that is not clear? • Is the material logically organized? • Would changing the grouping or order of sections or adding headings make the rule easier to understand? • Could we improve clarity by adding tables, lists, or diagrams? • Would more, but shorter, sections be better? Are there specific sections that are too long or confusing? • What else could we do to make the rule easier to understand? Summary of Costs and Benefits FFP, along with the impact of higher sugar loan rates than in the 2002 Farm Bill, is expected to cost an average of $8.7 million per year for the next 10 years. Because of uncertainty about future sugar markets and trade flows, the $8.7 million average annual cost of FFP is the composite of two scenarios which differ in their assumptions about the Mexican sugar market. The first scenario (with a 75 percent probability) assumes that Mexican sugarcane acreage does not increase and that high fructose corn syrup (HFCS) use in Mexico continues to be strong (but not as strong as in the second scenario), resulting in no FFP costs. The second scenario (with a 25 percent likelihood) assumes larger Mexican sugarcane acreage (partly due to higher U.S. sugar loan rates under the 2008 Farm Bill) and lower Mexican sugar demand compared to the first scenario. With the resulting larger sugar shipments to the U.S., and lower U.S. sugar prices, this second scenario results in FFP activation and FFP costs. These additional costs are due to two factors. First, the higher U.S. sugar loan rates under the 2008 Farm Bill may encourage increased Mexican sugarcane acreage, as described in the second scenario above, and also mean that if surplus sugar is purchased to prevent forfeitures, the price at which it must be purchased is higher than previously. Second, the returns to the CCC associated with selling sugar for ethanol, if FFP is activated, are significantly lower than if sales could be made for human consumption (a prior mechanism for disposal of sugar inventory that was used but is no longer authorized). Increased sugar program loan rates account for $35.4 million and restricted CCC disposal options for surplus sugar account for $26.1 million PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 of the total $61.5 million increase in over what disposal of excess sugar inventory would cost if the 2002 Farm Bill were still in effect. Regulatory Flexibility Act In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601, the Agency has determined that there will not be a significant economic impact on a substantial number of small entities. The entities that would be affected by this rule are sugar producers and sugar bioenergy producers. The sugar producers are not small businesses according to the North American Industry Classification System and the U.S. Small Business Administration. There are currently no commercial bioenergy producers in the United States who use sugar as a feedstock. The bioenergy producers in the United States who use other commodities as a feedstock and might be expected to purchase sugar as a feedstock in the future are not small businesses. Environmental Review The environmental impacts of this rule have been considered in a manner consistent with the provisions of the National Environmental Policy Act (NEPA) (42 U.S.C. 4321–4347), the regulations of the Council on Environmental Quality (40 CFR parts 1500–1508), and Farm Service Agency (FSA) regulations for compliance with NEPA (7 CFR part 799). The changes to the sugar program required by Title IX of the 2008 amendments identified in this proposed rule are considered nondiscretionary. Therefore, FSA has determined that NEPA does not apply to this proposed rule and no environmental assessment or environmental impact statement will be prepared. Executive Order 12372 This program is not subject to Executive Order 12372, ‘‘Intergovernmental Review of Federal Programs,’’ which requires consultation with State and local officials. See the notice related to 7 CFR part 3015, subpart V, published in the Federal Register on June 24, 1983 (48 FR 29115). Executive Order 12988 This rule has been reviewed under Executive Order 12988, ‘‘Civil Justice Reform.’’ The provisions of this proposed rule will not have preemptive effect with respect to any State or local laws, regulations, or policies that conflict with such provision or which otherwise impede their full implementation. The rule will not have retroactive effect. Before any judicial E:\FR\FM\19OCP1.SGM 19OCP1 Federal Register / Vol. 76, No. 202 / Wednesday, October 19, 2011 / Proposed Rules E-Government Act Compliance action may be brought regarding the provisions of this rule, the administrative appeal provisions of 7 CFR parts 11 and 780 must be exhausted. Executive Order 13132 This rule has been reviewed under Executive Order 13132, ‘‘Federalism.’’ The policies contained in this rule will not have any substantial direct effect on States, the relationship between the Federal government and the States, or the distribution of power and responsibilities among the various levels of government. Nor would this proposed rule impose substantial direct compliance costs on State and local governments. Therefore, consultation with the States is not required. Executive Order 13175 This proposed rule has been reviewed for compliance with Executive Order 13175, ‘‘Consultation and Coordination with Indian Tribal Governments.’’ The policies in this rule do not have Tribal implications that preempt Tribal law. Unfunded Mandates Title II of the Unfunded Mandate Reform Act of 1995 (UMRA, Pub. L. 104–4) requires Federal agencies to assess the effects of their regulatory actions on State, local, or Tribal governments or the private sector. Agencies generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with Federal mandates that may result in expenditures of $100 million or more in any 1 year for State, local, or Tribal governments, in the aggregate, or to the private sector. UMRA generally requires agencies to consider alternatives and adopt the more cost effective or least burdensome alternative that achieves the objectives of the rule. This rule contains no Federal mandates under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 104–4) for State, local, and Tribal government or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA. srobinson on DSK4SPTVN1PROD with PROPOSALS Paperwork Reduction Act The information collection for FFP is currently approved under OMB control number 0560–0177. We anticipate that fewer than 10 sugar producers will participate in the bioenergy program in the next three years. Therefore, there are no changes to the current information collection as approved by OMB. VerDate Mar<15>2010 16:22 Oct 18, 2011 Jkt 226001 CCC is committed to complying with the E-Government Act, 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. List of Subjects in 7 CFR Part 1435 Loan programs—agriculture, Penalties, Price support programs, Reporting and recordkeeping requirements, Sugar. For the reasons discussed above, FSA proposes to amend 7 CFR part 1435 as follows: PART 1435—SUGAR PROGRAM 1. Revise the authority citation for part 1435 to read as follows: Authority: 7 U.S.C. 1359aa–1359jj, 7272, and 8110; 15 U.S.C. 714b and 714c. 2. Add subpart E to read as follows: Subpart E—Disposition of CCC Inventory Sec. 1435.400 General statement. 1435.401 CCC sugar inventory disposition. Subpart E—Disposition of CCC Inventory § 1435.400 General statement. (a) This subpart will be applicable in the event that an eligible commodity is owned and held in CCC inventory and not acquired through the Feedstock Flexibility Program as set forth in subpart G of this part. (b) An eligible commodity is raw, refined, or in-process sugar that is eligible to be marketed in the United States for human consumption or to be used for the extraction of sugar for human consumption. § 1435.401 CCC sugar inventory disposition. (a) CCC will dispose of inventory in the following manner, if CCC has not determined there is an emergency shortage of sugar for human consumption in the domestic market: (1) By sale to bioenergy producers under the Feedstock Flexibility Program as set forth in subpart G of this part, (2) By transfer to sugarcane and sugar beet processors under the Processor Sugar Payment-In-Kind Program as set forth in subpart F of this part, (3) Buyback of certificates of quota eligibility, or (4) Using any other authority for the disposition of CCC-owned sugar that does not increase the net quantity of sugar available for human consumption in the United States. PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 64843 (b) CCC may use any authority for the disposition of CCC-owned sugar, if CCC has determined there is an emergency shortage of sugar for human consumption in the domestic market caused by war, flood, hurricane, or other natural disaster, or similar event, as determined by CCC. 3. Add subpart G to read as follows: Subpart G—Feedstock Flexibility Program Sec. 1435.600 General statement. 1435.601 Sugar surplus determination and public announcement. 1435.602 Eligible commodity to be purchased by CCC. 1435.603 Eligible sugar seller. 1435.604 Eligible sugar buyer. 1435.605 Competitive procedures. 1435.606 Miscellaneous. 1435.607 Appeals. Subpart G—Feedstock Flexibility Program § 1435.600 General statement. (a) This subpart will be applicable to any sugar seller located in the United States and any bioenergy producer located in the United States who contracts with CCC to sell or purchase surplus sugar, which may be sold in the United States for the production of bioenergy as set forth in this subpart or other purposes as set forth in subpart E of this part, when CCC determines that such action will reduce forfeitures of sugar pledged as collateral for CCC sugar loans. (b) [Reserved] § 1435.601 Sugar surplus determination and public announcement. (a) The Secretary will estimate the quantity of sugar likely to be forfeited to CCC in the following fiscal year by September 1. (b) Not later than the January 1, April 1, and July 1 of the fiscal year, the Secretary will re-estimate the quantity of sugar likely to be forfeited to CCC in the fiscal year. (c) The Secretary will announce by press release for the above dates a purchase and sale strategy, which includes the quantity and timing of the sugar to be purchased and sold to bioenergy producers, and that reflects the estimate of sugar likely to be forfeited to CCC and the uncertainty surrounding the estimate. § 1435.602 Eligible commodity to be purchased by CCC. (a) CCC will only purchase raw sugar, refined sugar, or in-process sugar that is eligible to be used as collateral in the federal Sugar Loan Program. (1) Sugar may not have been processed from imported sugarcane, E:\FR\FM\19OCP1.SGM 19OCP1 64844 Federal Register / Vol. 76, No. 202 / Wednesday, October 19, 2011 / Proposed Rules sugar beets, in-process sugars, or molasses; and (2) Sugar must have been processed in the United States. (b) Sugar or in-process sugar purchased directly from any domestic sugar beet and sugarcane processor that made the sugar or in-process sugar must be credited against its sugar marketing allocation to be eligible for purchase under this program. (c) CCC will purchase sugar located in the United States. (d) CCC will only purchase an eligible commodity if the purchased commodity would reduce the likelihood of forfeitures of CCC sugar loans, as determined by CCC. (e) CCC will evaluate an offer to sell an eligible commodity to CCC based upon CCC’s estimate of the reduction in refined sugar supply available for human consumption due to the purchase. For example, if processing the thick juice would yield 70 percent sugar for human consumption, then CCC will only consider 70 percent of the sugar in the thick juice in evaluating the per unit sales price. § 1435.603 Eligible sugar seller. Eligible sugar buyer. (a) To be considered an eligible sugar buyer, the bioenergy producer must produce bioenergy products, including fuel grade ethanol or other biofuels. (b) The bioenergy producer and its production facilities that use CCC sugar or in-process sugar must be located in the United States. § 1435.605 Competitive procedures. srobinson on DSK4SPTVN1PROD with PROPOSALS (a) CCC will generally submit tenders for bids, before entering into contracts with any eligible sugar seller and buyer that minimize CCC net outlays. (b) CCC may, at times, negotiate contracts directly with sellers or buyers, if CCC determines that such negotiation will result in either reduced likelihood of forfeited sugar under the CCC sugar loan program or reduced costs of removing sugar from the market, which will reduce the likelihood of sugar forfeited to CCC. § 1435.606 Miscellaneous. (a) As a sugar buyer, the bioenergy producer must take possession of the sugar or in-process sugar no more than 30 days from the date of CCC’s purchase. (b) CCC, to the maximum extent practicable, will not pay storage fees for VerDate Mar<15>2010 16:22 Oct 18, 2011 Jkt 226001 14 CFR Part 39 Examining the AD Docket § 1435.607 Appeals. (a) The administrative appeal regulations of parts 11 and 780 of this title apply to this part. (b) [Reserved] Signed at Washington, DC, on October 13, 2011. Bruce Nelson, Executive Vice President, Commodity Credit Corporation. [FR Doc. 2011–26974 Filed 10–18–11; 8:45 am] BILLING CODE 3410–05–P DEPARTMENT OF TRANSPORTATION [Docket No. FAA–2010–0068; Directorate Identifier 2010–NE–05–AD] RIN 2120–AA64 (a) To be considered an eligible sugar seller, the sugar seller must be located in the United States. (b) [Reserved] § 1435.604 Federal Aviation Administration • Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments. • Fax: 202–493–2251. • Mail: U.S. Department of Transportation, Docket Operations, M–30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue, SE., Washington, DC 20590. • Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this AD, contact General Electric Company, GE-Aviation, Room 285, 1 Neumann Way, Cincinnati, OH 45215, phone: 513–552–3272; e-mail: geae.aoc@ge.com. You may review copies of the referenced service information at the FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA. For information on the availability of this material at the FAA, call 781–238–7125. sugar or in-process sugar purchased under this program. (c) Each bioenergy producer that purchases sugar through FFP must provide proof to CCC that the sugar has been used in the bioenergy factory for the production of bioenergy. Airworthiness Directives; General Electric Company Turbofan Engines Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). AGENCY: We propose to supersede two existing airworthiness directives (ADs) that apply to General Electric Company (GE) CF6–45 and CF6–50 series turbofan engines with certain low-pressure turbine (LPT) rotor stage 3 disks installed. The existing ADs currently require inspections of high pressure turbine (HPT) and LPT rotors, engine checks, and surveys. Since we issued those ADs, GE has determined that the low-cycle fatigue (LCF) lives of the LPT rotor stage 3 disks affected by those ADs are below the current published engine manual life limits and has introduced a new LPT rotor stage 3 disk part number. This proposed AD would establish a new lower life limit for the LPT rotor stage 3 disks. We are proposing this AD to prevent critical life-limited rotating engine part failure, which could result in an uncontained engine failure and damage to the airplane. DATES: We must receive comments on this proposed AD by December 5, 2011. ADDRESSES: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: SUMMARY: PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 You may examine the AD docket on the Internet at http:// www.regulations.gov; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (phone: 800–647–5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Tomasz Rakowski, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; phone: 781–238–7735; fax: 781–238– 7199; e-mail: tomasz.rakowski@faa.gov. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include ‘‘Docket No. FAA–2010–0068; Directorate Identifier 2010–NE–05–AD’’ at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments. We will post all comments we receive, without change, to http:// E:\FR\FM\19OCP1.SGM 19OCP1

Agencies

[Federal Register Volume 76, Number 202 (Wednesday, October 19, 2011)]
[Proposed Rules]
[Pages 64839-64844]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26974]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 76, No. 202 / Wednesday, October 19, 2011 / 
Proposed Rules

[[Page 64839]]


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

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1435

RIN 0560-AH86


Sugar Program; Feedstock Flexibility Program for Bioenergy 
Producers

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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

SUMMARY: The Commodity Credit Corporation (CCC) proposes regulations 
with respect to general sugar inventory disposition and the 
establishment of a new Feedstock Flexibility Program (FFP) that 
requires the Secretary to purchase sugar to produce bioenergy as a 
means to avoid forfeitures of sugar loan collateral under the sugar 
loan program. These regulations are as required by the Food Security 
and Rural Investment Act of 2002 (the 2002 Farm Bill), as amended by 
the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill).

DATES: We will consider comments that we receive by December 19, 2011.

ADDRESSES: Interested persons are invited to submit comments on this 
proposed rule. In your comment, include the volume, date, and page 
number of this issue of the Federal Register. You may submit comments 
by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
     Fax: (202) 690-1480.
     Mail: Barbara Fecso, Dairy and Sweeteners Analysis Group, 
Economic Policy and Analysis Staff, USDA, FSA, Stop 0516, 1400 
Independence Ave., SW., Washington, DC 20250-0516.
     Hand Delivery or Courier: USDA FSA Economic Policy and 
Analysis Staff, Stop 0516, 1400 Independence Ave., SW., Washington, DC 
20250-0516.

FOR FURTHER INFORMATION CONTACT: Barbara Fecso, phone: (202) 720-4146; 
fax: (202) 690-1480. 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).

SUPPLEMENTARY INFORMATION:

Background

    CCC proposes to establish new regulations for the sugar inventory 
disposition program and FFP for bioenergy producers mandated by Title 
IX of the 2008 Farm Bill (Pub. L. 110-246).

Sugar Program

    The sugar program is designed to support the price of sugar above a 
legislatively specified threshold that has been established by 
successive Farm Bills. In adding FFP as a new element of the sugar 
program, it is helpful to understand certain aspects of the existing 
program and how certain components would relate to FFP. In the sugar 
program, the level of price support is determined by the sugar loan 
program. Sugar loans from CCC can be satisfied by repaying the loan or 
by giving CCC title to the loan collateral, also known as a 
``forfeiture'' of collateral. The sugar program is required, to the 
maximum extent possible, to operate at no cost to the Federal 
government by avoiding forfeitures to CCC. To avoid forfeitures, the 
sugar program limits the domestic sugar supply through a program of 
marketing allocations and tariff-rate quotas, thereby usually resulting 
in higher domestic sugar prices than the floor created by the sugar 
loan program.

Sugar Inventory Disposition

    CCC proposes new general sugar inventory disposition regulations 
that are required by the 2008 amendments to 7 U.S.C. 8110. The 2008 
amendments restrict the methods CCC may use to dispose of its sugar 
inventory in non-emergency situations. The purpose of the restrictions 
is to ensure that disposed inventory only goes to non-food uses (for 
example, bioenergy production) and does not disrupt the market for 
sugar for human consumption. If there is an emergency shortage of sugar 
for human consumption, the Secretary can dispose of the inventory to 
fill that shortage.
    CCC proposes to add a new subpart E on General Disposition of CCC 
Inventory to 7 CFR 1435 to implement the 2008 amendments. Subpart E 
would apply to sugar in inventory that CCC acquired by means other than 
FFP, such as sugar obtained from forfeited loan collateral.

General Disposition of CCC Inventory (Proposed New Subpart E)

    Section 9001 of the 2008 Farm Bill amends section 9010 of the 2002 
Farm Bill establishing the methods CCC may use to manage inventory 
acquired by forfeiture or other authorities. Unless CCC has determined 
that there is an emergency shortage of sugar in the domestic market 
caused by war, flood, hurricane, other natural disaster, or similar 
event, CCC can only dispose of its sugar inventory using outlets that 
do not increase the net supply of sugar available for human consumption 
in the United States.
    The 2008 amendments specifically list methods of disposition as 
sales under FFP (proposed new Subpart G), the Processor Payment-In-Kind 
Program (Subpart F in the current regulations), and buybacks of 
Certificates of Quota Eligibility (identified in the 2008 amendments as 
certificates of quota entry) issued by the Office of the U.S. Trade 
Representative, as set forth in 15 CFR part 2011. The 2008 amendments 
do not limit CCC's ability to dispose of its sugar for nonfood use (or 
uses that do not increase the supply of sugar for human consumption) 
under any authority. This is a change from the 2002 Farm Bill (Pub. L. 
107-171) as originally enacted and the regulations implementing the 
2002 Farm Bill, which allowed CCC to dispose of surplus sugar into the 
domestic market, including the market for human consumption. Therefore, 
we are proposing new regulations to specify how CCC would dispose of 
sugar inventory. The existing Payment in Kind program, specified in 
subpart F, is one authority CCC uses to dispose of inventory. This 
proposed rule would not change subpart F.
    New subpart E would include general provisions for disposition of 
inventory that is not acquired through FFP. For example, subpart E 
would apply to disposition of sugar acquired through forfeiture of 
sugar loan collateral. Subpart E would specify the options CCC would 
use to dispose of inventory

[[Page 64840]]

in both normal and emergency shortage situations.
    The 2008 amendments to section 9010 of the 2002 Farm Bill also 
specify the methods CCC may use to manage inventory acquired by 
forfeiture under the sugar loan program or other authorities. Unless, 
as specified in the 2008 Farm Bill, CCC has determined that ``there is 
an emergency shortage of sugar for human consumption in the United 
States market that is caused by a war, flood, hurricane, or other 
natural disaster, or other similar event,'' CCC can only dispose of its 
sugar inventory by methods that do not increase the net supply of sugar 
available for human consumption in the United States. There should not 
be much inventory subject to this provision because the main sugar 
surplus management strategy in the recently amended statute is the 
removal of sugar surpluses through CCC sugar purchases and disposal 
through conversion to bioenergy.
    CCC can sell sugar for human consumption if an emergency shortage 
condition exists, and the event is caused by a war, flood, hurricane, 
or other natural disaster, or other similar event. By including the 
universe of causes--manmade, natural, and ``other similar event,'' CCC 
has great discretion in determining the cause triggering an emergency 
shortage. Therefore, the only practical limitation on CCC's ability to 
sell sugar for human consumption depends on what constitutes the 
``existence of an emergency shortage.'' This concept is important 
because CCC is required under the sugar marketing allotment program and 
Harmonized Tariff Schedule to ensure an adequate supply of sugar for 
domestic consumption. Additionally, the sugar tariff-rate quota 
management provisions of the 2008 amendments require USDA to increase 
sugar supplies if an emergency shortage exists.
    CCC is requesting comment from the public on establishing a 
definition of an emergency shortage. Webster's Dictionary defines an 
emergency as a sudden or unexpected occurrence demanding prompt action. 
Some recent examples of unexpected manmade or natural occurrences that 
reduced domestic refined sugar supplies are the late sugar beet crop of 
2005, Hurricane Katrina, and the Imperial refinery explosion in 
Savannah, Georgia in February 2008. CCC determined that the delayed 
beet crop and Katrina resulted in sudden shortages that could not be 
resolved by redistributing available domestic supplies and took 
immediate action to increase supply. However, with respect to the 
February 2008 refinery explosion, CCC delayed action until the 
following August when it contemplated the threat of a refined shortage, 
in recognition that shortages are most likely to occur in the August-
September period when domestic sugar stocks are at their yearly lowest 
point. The law directs USDA to take action to increase supplies when an 
emergency shortage ``exists,'' not when it is ``contemplated.'' CCC 
could define an emergency shortage as a supply failure affecting sugar 
deliveries and disrupting the ongoing operations of sugar product 
manufacturers, i.e., defaults or force majeure on contracts affecting 
10 percent of average monthly deliveries. Alternatively, CCC could 
determine an emergency shortage exists when sugar prices spike a 
certain percentage, i.e., 50 percent above the loan level, or 10 cents 
above the loan level. Alternatively, CCC could also leave the term 
undefined so as to maintain maximum flexibility in meeting the needs of 
the domestic sugar market.

Feedstock Flexibility Program (Proposed New Subpart G)

    Section 9001 of the 2008 Farm Bill amends section 9010 of the 2002 
Farm Bill to require CCC to implement FFP to control the domestic sugar 
supply and avoid forfeitures. Under this program, CCC is required to 
buy surplus sugar as needed to avoid forfeitures of sugar loan 
collateral and sell that surplus sugar to bioenergy producers. 
Bioenergy, as defined by section 9001 of the 2008 amendments, means 
fuel grade ethanol and other biofuel. The 2008 amendments require the 
Secretary to annually notify eligible bioenergy sugar sellers and 
producers of the quantity of sugar to be made available for purchase 
and sale in the crop year following the date of that notification. The 
2008 amendments also require quarterly revised estimates and 
notification.
    CCC proposes to add a new subpart G to establish general provisions 
for operating FFP. Through FFP, CCC would buy and sell sugar for 
bioenergy production, based on predictions of sugar surplus conditions 
months into the future, a process that involves unavoidable uncertainty 
and risk. CCC proposes general provisions that are intended to provide 
flexibility in program administration. CCC requests comments on 
alternative methods to administer the program while meeting the 
requirements of the 2008 amendments.
    FFP will be administered through contracts for the purchase and 
sale of sugar, and products that yield sugar, when CCC determines that 
sugar loan collateral is likely to be forfeited under the sugar loan 
program. The contracts will include the specific terms and conditions 
associated with each purchase and sale. CCC expects to amend its 
contract terms through time as it learns how to most effectively 
facilitate the diversion of sugar to ethanol and other bioenergy 
production.

Surplus Determination

    As required by the 2008 amendments, each year CCC will estimate the 
likelihood of sugar forfeitures by September 1, for the following 
fiscal year, and announce the quantity of sugar to be purchased and 
sold for bioenergy production. In addition, CCC will make quarterly 
announcements of revised estimates. Quarterly revised estimates will be 
important because the USDA annual estimate reported on September 1 for 
the following fiscal year's sugar market will potentially be subject to 
significant error due to uncertainties in making the estimate. The 
sugarcane and sugar beet harvest for making sugar in the following 
fiscal year does not normally begin until after September 1 of the 
prior year. Very little is known about the condition of the crop on 
September 1, when USDA is required by the 2008 amendments to make its 
annual estimate of sugar surplus. The harvest for sugar in Mexico 
begins in December; therefore, the uncertainties are aggravated by the 
effect of Mexican imports on the U.S. sugar market. Another major 
source of potential error is the fact that the current fiscal year is 
not over by September 1. Any changes to the current year automatically 
alter the current year's ending stocks, and the next year's beginning 
stocks and supply. CCC's purchase and sale plans would be affected by 
the large degree of uncertainty in USDA's sugar market projections on 
September 1.
    CCC requests comments on how CCC should calculate a sugar market 
surplus, particularly for the estimate by September 1, when 
uncertainties are greatest. For example, CCC could calculate the 
surplus by comparing the World Agricultural Supply and Demand Estimate 
(WASDE) ending stocks to the ending stocks for an adequately supplied 
market. In the past, an ending stock of 14.5 percent of expected annual 
use was considered to predict adequate supply for the following year. 
Alternatively, CCC could compare WASDE stocks to the stock level 
expected to result in forfeitures and declare any projected stocks 
above these amounts to be surplus. However, this method is inadequate 
for determining surplus by type of sugar, raw versus refined, because 
the WASDE is an amalgamation of both sugars. Certainly,

[[Page 64841]]

current WASDE tight ending stocks-to-use ratios do not reflect the 
current raw sugar surplus.
    There are two possible types of errors with surplus determination: 
(1) Over-estimating the surplus and buying and selling sugar for 
bioenergy that results in market shortages later in the year or (2) 
under-estimating the surplus resulting in excess supply later in the 
year. The consequences of these two types of errors are different. 
Sugar used to make bioenergy cannot be recovered to be marketed for 
human consumption if needed later; however, sugar not sold early in the 
year can later be sold for bioenergy production. The first type of 
risk, that of over-estimating the surplus, has more serious 
consequences and costs than the second type. CCC proposes to reduce the 
over-estimation risk by staggering purchases of sugar for bioenergy 
purchases, rather than making one purchase for the entire year. CCC 
plans to be more conservative in purchasing sugar for bioenergy early 
in the year than later in the year, when market factors are better 
known. CCC would calculate the surplus for the whole year as required 
by the 2008 amendments, but then only tender a percentage of the 
estimated surplus for bid immediately. The percentage could change with 
each quarterly revised estimate. CCC would not retract accepted bids.
    CCC requests comments on appropriate methods to estimate the 
likelihood of forfeitures and to determine the quantity of sugar to be 
purchased in each quarter. How should CCC calculate the annual sugar 
market surplus and update that estimate? Should a minimum percentage of 
the expected surplus be tendered for bid each quarter, and should that 
minimum be set in the regulations?

Eligible Sugar

    CCC is required to purchase raw, refined, or in-process sugar for 
FFP that would otherwise have been marketed for human consumption in 
the United States or could otherwise have been used for the extraction 
of sugar marketed for human consumption. The 2008 amendments define all 
these forms of sugar as eligible commodities for FFP. For example, in-
process sugar products such as beet thick juice or cane syrup are 
eligible. Since the program objective is to reduce forfeitures of CCC 
sugar loan collateral, CCC proposes that the in-process sugar products 
would be evaluated in terms of refined crystalline sugar yield in 
determining CCC's unit purchase price. For example, if processing the 
thick juice would yield 70 percent sugar for human consumption, then 
CCC would only consider 70 percent of the sugar in the thick juice in 
evaluating the per unit price. Likewise, raw sugar would be evaluated 
in terms of its refined equivalent to determine a sales price per unit. 
This reduction in price is not required by the 2008 amendments, but it 
is consistent with the 2008 amendments' goal of buying sugar for FFP to 
manage the market for sugar for human consumption. CCC requests 
comments on and proposed alternatives to this provision.
    CCC proposes that for FFP, it will only purchase sugar products 
that are eligible to be placed under loan with the federal sugar loan 
program. Sugar eligible to be placed under loan must be processed in 
the United States from domestically-grown sugarcane, sugar beets, in-
process sugars, or molasses. As an alternative, CCC could allow FFP to 
purchase sugar products from all sources, including imported sugar and 
sugar products from eligible domestic sellers. Forfeitures are expected 
to occur when the total sugar supply for human consumption is greater 
than the level that can support domestic sugar prices above the price 
support loan proceeds. That surplus could be caused in part by Mexican 
imports or by sugar made domestically from non-domestic sources. CCC 
requests comments on whether eligible sugar for FFP should be limited 
to sugar located within the United States and derived from domestically 
produced sugarcane or sugar beets.

Eligible Sugar Sellers and Buyers

    The 2008 amendments require that the entity selling sugar to CCC be 
located in the United States and that eligible buyers be bioenergy 
producers. The 2008 amendments define eligible sellers as entities 
located in the United States, but do not require that eligible buyers 
be located in the United States. CCC proposes to limit eligible buyers 
to those bioenergy producers who will use the purchased sugar to 
produce bioenergy in their facilities in United States. This 
restriction is intended to ensure that the increase in energy supplies 
from the program will benefit the American public paying for FFP. CCC 
requests comments on whether to include bioenergy producers located 
outside the United States as eligible buyers.

Competitive Procedures

    CCC proposes to announce offers (also referred to as tenders) to 
the public outlining the terms and conditions of the sugar purchase and 
sale contracts. CCC also proposes to negotiate contracts directly with 
sellers or buyers if CCC determines that such negotiation will result 
in either reduced likelihood of forfeited sugar compared to alternative 
means or reduced costs of removing sugar from the market, which will 
reduce the likelihood of sugar forfeited to CCC. CCC proposes to try 
several contracting strategies to discover the most efficient and cost-
effective strategy to subsidize the production of bioenergy with 
surplus sugar, given the restrictions specified in the 2002 Farm Bill. 
CCC requests comments on alternative contracting strategies and on 
whether those strategies should be specified in the regulation.
    CCC is required by the 2008 amendments to store the sugar for no 
more than 30 days after CCC purchases the sugar. Realistically, this 
means that the purchasing bioenergy producer must be identified before 
CCC purchases surplus sugar. CCC does not propose specifically how it 
would do that, although CCC proposes to specify that the buyer must 
take delivery of the sugar within 30 days of purchase. CCC could 
identify (pre-qualify) bioenergy producers willing to take sugar or 
sugar products under specific terms (price, amount, type of sugar, 
etc.). Alternatively, CCC could require the sugar seller to identify 
the purchasing bioenergy producer and incorporate a contract of sale 
between CCC and the bioenergy producer specifying terms, including 
price, in their offer to sell sugar to CCC. CCC proposes to use both 
these strategies and evaluate which is more effective. CCC requests 
comments on alternative strategies.
    The 2008 amendments prohibit, to the maximum extent possible, CCC 
from paying storage fees under FFP. Therefore, as a condition of bid 
acceptance into FFP, CCC would not pay any storage fees.

Sugar To Be Used for Bioenergy Production

    CCC expects that the selling price for sugar, with the restriction 
that it only be used for making bioenergy, will be considerably below 
the market price for sugar that can be used for human consumption. This 
price differential could create an incentive for FFP sugar to leak into 
the domestic human consumption market. Therefore, CCC will monitor the 
contracts to ensure that the FFP sugar is only being used for bioenergy 
production. CCC proposes to include an audit clause in the contracts to 
purchase sugar for bioenergy production. The auditors would view the 
records upon request, as specified in the contract, to verify that 
sugar

[[Page 64842]]

purchased for bioenergy production was only used for bioenergy 
production.
    In addition to auditing records, CCC would send an auditor to the 
bioenergy factory purchasing surplus sugar under FFP to verify that the 
quantity purchased is physically entering the factory as an input in 
accordance with the contract. Examination could be performed for every 
event or by random checks. In any case, substantial liquidated damages, 
to be determined, could be imposed for willfully furnishing false 
information to CCC. CCC requests comment on the auditing or monitoring 
methods that should be used. For example:
     Are there alternative processes that CCC should use to 
ensure that the FFP sugar is not sold for human consumption?
     What kinds of documentation, audits, and monitoring would 
be appropriate?
     Should the methods of proof be specified in the rule, or 
in the contract between CCC and the bioenergy producer?

Executive Orders 12866 and 13563

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasized the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility.
    The Office of Management and Budget (OMB) initially designated this 
proposed rule as economically significant under Executive Order 12866 
and, therefore, OMB reviewed this proposed rule. Due to increases in 
sugar prices since the initial designation the current cost benefit 
analysis shows the annual regulatory impact to be less than the 
threshold of $100 million, therefore the rule is a significant 
regulatory action, but is no longer considered an economically 
significant regulatory action. A summary of the cost-benefit analysis 
of this rule is provided below and is available at http://www.regulations.gov and from the contact listed above.

Clarity of the Regulation

    Executive Order 12866, as supplemented by Executive Order 13563, 
requires each agency to write all rules in plain language. In addition 
to your substantive comments on these proposed rules, we invite your 
comments on how to make them easier to understand. For example:
     Are the requirements in the rule clearly stated? Are the 
scope and intent of the rule clear?
     Does the rule contain technical language or jargon that is 
not clear?
     Is the material logically organized?
     Would changing the grouping or order of sections or adding 
headings make the rule easier to understand?
     Could we improve clarity by adding tables, lists, or 
diagrams?
     Would more, but shorter, sections be better? Are there 
specific sections that are too long or confusing?
     What else could we do to make the rule easier to 
understand?

Summary of Costs and Benefits

    FFP, along with the impact of higher sugar loan rates than in the 
2002 Farm Bill, is expected to cost an average of $8.7 million per year 
for the next 10 years. Because of uncertainty about future sugar 
markets and trade flows, the $8.7 million average annual cost of FFP is 
the composite of two scenarios which differ in their assumptions about 
the Mexican sugar market. The first scenario (with a 75 percent 
probability) assumes that Mexican sugarcane acreage does not increase 
and that high fructose corn syrup (HFCS) use in Mexico continues to be 
strong (but not as strong as in the second scenario), resulting in no 
FFP costs. The second scenario (with a 25 percent likelihood) assumes 
larger Mexican sugarcane acreage (partly due to higher U.S. sugar loan 
rates under the 2008 Farm Bill) and lower Mexican sugar demand compared 
to the first scenario. With the resulting larger sugar shipments to the 
U.S., and lower U.S. sugar prices, this second scenario results in FFP 
activation and FFP costs.
    These additional costs are due to two factors. First, the higher 
U.S. sugar loan rates under the 2008 Farm Bill may encourage increased 
Mexican sugarcane acreage, as described in the second scenario above, 
and also mean that if surplus sugar is purchased to prevent 
forfeitures, the price at which it must be purchased is higher than 
previously. Second, the returns to the CCC associated with selling 
sugar for ethanol, if FFP is activated, are significantly lower than if 
sales could be made for human consumption (a prior mechanism for 
disposal of sugar inventory that was used but is no longer authorized). 
Increased sugar program loan rates account for $35.4 million and 
restricted CCC disposal options for surplus sugar account for $26.1 
million of the total $61.5 million increase in over what disposal of 
excess sugar inventory would cost if the 2002 Farm Bill were still in 
effect.

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601, 
the Agency has determined that there will not be a significant economic 
impact on a substantial number of small entities. The entities that 
would be affected by this rule are sugar producers and sugar bioenergy 
producers. The sugar producers are not small businesses according to 
the North American Industry Classification System and the U.S. Small 
Business Administration. There are currently no commercial bioenergy 
producers in the United States who use sugar as a feedstock. The 
bioenergy producers in the United States who use other commodities as a 
feedstock and might be expected to purchase sugar as a feedstock in the 
future are not small businesses.

Environmental Review

    The environmental impacts of this rule have been considered in a 
manner consistent with the provisions of the National Environmental 
Policy Act (NEPA) (42 U.S.C. 4321-4347), the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and Farm Service 
Agency (FSA) regulations for compliance with NEPA (7 CFR part 799). The 
changes to the sugar program required by Title IX of the 2008 
amendments identified in this proposed rule are considered non-
discretionary. Therefore, FSA has determined that NEPA does not apply 
to this proposed rule and no environmental assessment or environmental 
impact statement will be prepared.

Executive Order 12372

    This program is not subject to Executive Order 12372, 
``Intergovernmental Review of Federal Programs,'' which requires 
consultation with State and local officials. See the notice related to 
7 CFR part 3015, subpart V, published in the Federal Register on June 
24, 1983 (48 FR 29115).

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, ``Civil 
Justice Reform.'' The provisions of this proposed rule will not have 
preemptive effect with respect to any State or local laws, regulations, 
or policies that conflict with such provision or which otherwise impede 
their full implementation. The rule will not have retroactive effect. 
Before any judicial

[[Page 64843]]

action may be brought regarding the provisions of this rule, the 
administrative appeal provisions of 7 CFR parts 11 and 780 must be 
exhausted.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule will not have any 
substantial direct effect on States, the relationship between the 
Federal government and the States, or the distribution of power and 
responsibilities among the various levels of government. Nor would this 
proposed rule impose substantial direct compliance costs on State and 
local governments. Therefore, consultation with the States is not 
required.

Executive Order 13175

    This proposed rule has been reviewed for compliance with Executive 
Order 13175, ``Consultation and Coordination with Indian Tribal 
Governments.'' The policies in this rule do not have Tribal 
implications that preempt Tribal law.

Unfunded Mandates

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, or Tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit analysis, for proposed and final rules with 
Federal mandates that may result in expenditures of $100 million or 
more in any 1 year for State, local, or Tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule. This 
rule contains no Federal mandates under the regulatory provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 
104-4) for State, local, and Tribal government or the private sector. 
Therefore, this rule is not subject to the requirements of sections 202 
and 205 of UMRA.

Paperwork Reduction Act

    The information collection for FFP is currently approved under OMB 
control number 0560-0177. We anticipate that fewer than 10 sugar 
producers will participate in the bioenergy program in the next three 
years. Therefore, there are no changes to the current information 
collection as approved by OMB.

E-Government Act Compliance

    CCC is committed to complying with the E-Government Act, 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.

List of Subjects in 7 CFR Part 1435

    Loan programs--agriculture, Penalties, Price support programs, 
Reporting and recordkeeping requirements, Sugar.

    For the reasons discussed above, FSA proposes to amend 7 CFR part 
1435 as follows:

PART 1435--SUGAR PROGRAM

    1. Revise the authority citation for part 1435 to read as follows:

    Authority: 7 U.S.C. 1359aa-1359jj, 7272, and 8110; 15 U.S.C. 
714b and 714c.

    2. Add subpart E to read as follows:
Subpart E--Disposition of CCC Inventory
Sec.
1435.400 General statement.
1435.401 CCC sugar inventory disposition.

Subpart E--Disposition of CCC Inventory


Sec.  1435.400  General statement.

    (a) This subpart will be applicable in the event that an eligible 
commodity is owned and held in CCC inventory and not acquired through 
the Feedstock Flexibility Program as set forth in subpart G of this 
part.
    (b) An eligible commodity is raw, refined, or in-process sugar that 
is eligible to be marketed in the United States for human consumption 
or to be used for the extraction of sugar for human consumption.


Sec.  1435.401  CCC sugar inventory disposition.

    (a) CCC will dispose of inventory in the following manner, if CCC 
has not determined there is an emergency shortage of sugar for human 
consumption in the domestic market:
    (1) By sale to bioenergy producers under the Feedstock Flexibility 
Program as set forth in subpart G of this part,
    (2) By transfer to sugarcane and sugar beet processors under the 
Processor Sugar Payment-In-Kind Program as set forth in subpart F of 
this part,
    (3) Buyback of certificates of quota eligibility, or
    (4) Using any other authority for the disposition of CCC-owned 
sugar that does not increase the net quantity of sugar available for 
human consumption in the United States.
    (b) CCC may use any authority for the disposition of CCC-owned 
sugar, if CCC has determined there is an emergency shortage of sugar 
for human consumption in the domestic market caused by war, flood, 
hurricane, or other natural disaster, or similar event, as determined 
by CCC.
    3. Add subpart G to read as follows:
Subpart G--Feedstock Flexibility Program
Sec.
1435.600 General statement.
1435.601 Sugar surplus determination and public announcement.
1435.602 Eligible commodity to be purchased by CCC.
1435.603 Eligible sugar seller.
1435.604 Eligible sugar buyer.
1435.605 Competitive procedures.
1435.606 Miscellaneous.
1435.607 Appeals.

Subpart G--Feedstock Flexibility Program


Sec.  1435.600  General statement.

    (a) This subpart will be applicable to any sugar seller located in 
the United States and any bioenergy producer located in the United 
States who contracts with CCC to sell or purchase surplus sugar, which 
may be sold in the United States for the production of bioenergy as set 
forth in this subpart or other purposes as set forth in subpart E of 
this part, when CCC determines that such action will reduce forfeitures 
of sugar pledged as collateral for CCC sugar loans.
    (b) [Reserved]


Sec.  1435.601  Sugar surplus determination and public announcement.

    (a) The Secretary will estimate the quantity of sugar likely to be 
forfeited to CCC in the following fiscal year by September 1.
    (b) Not later than the January 1, April 1, and July 1 of the fiscal 
year, the Secretary will re-estimate the quantity of sugar likely to be 
forfeited to CCC in the fiscal year.
    (c) The Secretary will announce by press release for the above 
dates a purchase and sale strategy, which includes the quantity and 
timing of the sugar to be purchased and sold to bioenergy producers, 
and that reflects the estimate of sugar likely to be forfeited to CCC 
and the uncertainty surrounding the estimate.


Sec.  1435.602  Eligible commodity to be purchased by CCC.

    (a) CCC will only purchase raw sugar, refined sugar, or in-process 
sugar that is eligible to be used as collateral in the federal Sugar 
Loan Program.
    (1) Sugar may not have been processed from imported sugarcane,

[[Page 64844]]

sugar beets, in-process sugars, or molasses; and
    (2) Sugar must have been processed in the United States.
    (b) Sugar or in-process sugar purchased directly from any domestic 
sugar beet and sugarcane processor that made the sugar or in-process 
sugar must be credited against its sugar marketing allocation to be 
eligible for purchase under this program.
    (c) CCC will purchase sugar located in the United States.
    (d) CCC will only purchase an eligible commodity if the purchased 
commodity would reduce the likelihood of forfeitures of CCC sugar 
loans, as determined by CCC.
    (e) CCC will evaluate an offer to sell an eligible commodity to CCC 
based upon CCC's estimate of the reduction in refined sugar supply 
available for human consumption due to the purchase. For example, if 
processing the thick juice would yield 70 percent sugar for human 
consumption, then CCC will only consider 70 percent of the sugar in the 
thick juice in evaluating the per unit sales price.


Sec.  1435.603  Eligible sugar seller.

    (a) To be considered an eligible sugar seller, the sugar seller 
must be located in the United States.
    (b) [Reserved]


Sec.  1435.604  Eligible sugar buyer.

    (a) To be considered an eligible sugar buyer, the bioenergy 
producer must produce bioenergy products, including fuel grade ethanol 
or other biofuels.
    (b) The bioenergy producer and its production facilities that use 
CCC sugar or in-process sugar must be located in the United States.


Sec.  1435.605  Competitive procedures.

    (a) CCC will generally submit tenders for bids, before entering 
into contracts with any eligible sugar seller and buyer that minimize 
CCC net outlays.
    (b) CCC may, at times, negotiate contracts directly with sellers or 
buyers, if CCC determines that such negotiation will result in either 
reduced likelihood of forfeited sugar under the CCC sugar loan program 
or reduced costs of removing sugar from the market, which will reduce 
the likelihood of sugar forfeited to CCC.


Sec.  1435.606  Miscellaneous.

    (a) As a sugar buyer, the bioenergy producer must take possession 
of the sugar or in-process sugar no more than 30 days from the date of 
CCC's purchase.
    (b) CCC, to the maximum extent practicable, will not pay storage 
fees for sugar or in-process sugar purchased under this program.
    (c) Each bioenergy producer that purchases sugar through FFP must 
provide proof to CCC that the sugar has been used in the bioenergy 
factory for the production of bioenergy.


Sec.  1435.607  Appeals.

    (a) The administrative appeal regulations of parts 11 and 780 of 
this title apply to this part.
    (b) [Reserved]

    Signed at Washington, DC, on October 13, 2011.
Bruce Nelson,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 2011-26974 Filed 10-18-11; 8:45 am]
BILLING CODE 3410-05-P