Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 12985 

2First and last section of order. 

3Name of order. 

4Appropriate part number. 

5Next consecutive section number. 

6Appropriate representative period for the order. 

products assigned to Class I use 

pursuant to § 1000.43(d) of this chapter 

and other source milk allocated to Class 

I pursuant to § 1000.44(a)(3) and (8) and 

the corresponding steps of § 1000.44(b) 

of this chapter, except other source milk 

that is excluded from the computations 

pursuant to § 1007.60(d) and (e) of this 

chapter; and 

(d) Route disposition in the marketing 

area from a partially regulated 

distributing plant that exceeds the skim 

milk and butterfat subtracted pursuant 

to 1000.76(a)(1)(i) and (ii) of this 

chapter. 

PART 1007—MILK IN THE SOUTHEAST 

MARKETING AREA 

■ 4. Section 1007.85 is revised, to read 

as follows: 

§ 1007.85 Assessment for order 

administration. 

On or before the payment receipt date 

specified under § 1007.71, each handler 

shall pay to the market administrator its 

pro rata share of the expense of 

administration of the order at a rate 

specified by the market administrator 

that is no more than $.08 per 

hundredweight with respect to: 

(a) Receipts of producer milk 

(including the handler’s own 

production) other than such receipts by 

a handler described in § 1000.9(c) of this 

chapter that were delivered to pool 

plants of other handlers; 

(b) Receipts from a handler described 

in § 1000.9(c) of this chapter; 

(c) Receipts of concentrated fluid milk 

products from unregulated supply 

plants and receipts of nonfluid milk 

products assigned to Class I use 

pursuant to § 1000.43(d) of this chapter 

and other source milk allocated to Class 

I pursuant to § 1000.44(a)(3) and (8) of 

this chapter and the corresponding steps 

of § 1000.44(b) of this chapter, except 

other source milk that is excluded from 

the computations pursuant to 

§ 1007.60(d) and (e) of this chapter; and 

(d) Route disposition in the marketing 

area from a partially regulated 

distributing plant that exceeds the skim 

milk and butterfat subtracted pursuant 

to 1000.76(a)(1)(i) and (ii) of this 

chapter. 

[Note: The following will not appear in the 

Code of Federal Regulations.] 

Marketing Agreement Regulating the 

Handling of Milk in Certain Marketing 

Areas 

The parties hereto, in order to 

effectuate the declared policy of the Act, 

and in accordance with the rules of 

practice and procedure effective 

thereunder (7 CFR part 900), desire to 

enter into this marketing agreement and 

do hereby agree that the provisions 

referred to in paragraph I hereof, as 

augmented by the provisions specified 

in paragraph II hereof, shall be and are 

the provisions of this marketing 

agreement as if set out in full herein. 

I. The findings and determinations, 

order relative to handling, and the 

provisions of § ll to ll2 all 

inclusive, of the order regulating the 

handling of milk in the lll3

marketing area (7 CFR part ll4) which 

is annexed hereto; and 

II. The following provisions: §ll5

Record of milk handled and 

authorization to correct typographical 

errors. 

(a) Record of milk handled. The 

undersigned certifies that he/she 

handled during the month of lll6, 

lll hundredweight of milk covered 

by this marketing agreement. 

(b) Authorization to correct 

typographical errors. The undersigned 

hereby authorizes the Deputy 

Administrator, or Acting Deputy 

Administrator, Dairy Programs, 

Agricultural Marketing Service, to 

correct any typographical errors which 

may have been made in this marketing 

agreement. 

Effective date. This marketing 

agreement shall become effective upon 

the execution of a counterpart hereof by 

the Department in accordance with 

Section 900.14(a) of the aforesaid rules 

of practice and procedure. 

In Witness Whereof, The contracting 

handlers, acting under the provisions of 

the Act, for the purposes and subject to 

the limitations herein contained and not 

otherwise, have hereunto set their 

respective hands and seals. 

Signature 

By (Name) lllllllllllllll

(Title) lllllllllllllllll

(Address) llllllllllllllll

(Seal) 

Attest llllllllllllllllll

Dated: February 25, 2014. 

Rex A. Barnes, 

Associate Administrator. 

[FR Doc. 2014–04692 Filed 3–6–14; 8:45 am] 

BILLING CODE 3410–02–P 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Parts 1005 and 1007 

[Doc. No. AMS–DA–09–0001; AO–388–A17 

and AO–366–A46; DA–05–06–A] 

Milk in the Appalachian and Southeast 

Marketing Areas; Final Partial Decision 

on Proposed Amendments to 

Marketing Agreements and to Orders 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Proposed rule. 

SUMMARY: This final decision proposes 

to permanently adopt revised 

transportation credit balancing fund 

provisions for the Appalachian and 

Southeast milk marketing orders. 

Specifically, this document Establishes 

a variable mileage rate factor using a 

fuel cost adjustor to determine the 

transportation credit payments of both 

orders; increases the transportation 

credit assessment rate for the 

Appalachian order to $0.15 per 

hundredweight; and establishes a zero 

diversion limit standard on loads of 

milk requesting transportation credits. 

Separate decisions will address the 

proposed adoption of an intra-market 

transportation credit provision for the 

Appalachian and Southeast orders and 

for increasing the transportation credit 

rate assessment for the Southeast order. 

This final decision is subject to 

producer approval. Producer approval 

for this action will be determined 

concurrently with amendments adopted 

in a separate final decision that amends 

the Class I pricing and other provisions 

of the Appalachian, Southeast, and 

Florida milk marketing orders. 

FOR FURTHER INFORMATION CONTACT: Erin 

Taylor, USDA/AMS/Dairy Programs, 

Order Formulation and Enforcement 

Branch, STOP 0231–Room 2971, 1400 

Independence Avenue SW., 

Washington, DC 20250–0231, (202) 720– 

7183, email address: Erin.Taylor@

ams.usda.gov. 

SUPPLEMENTARY INFORMATION: This final 

decision proposes to permanently adopt 

amendments that: (1) Establish a 

variable transportation credit mileage 

rate factor which uses a fuel cost 

adjustor in both orders; (2) Increase the 

Appalachian order’s maximum 

transportation credit assessment rate to 

$0.15 per hundredweight (cwt); and (3) 

Establish a zero diversion limit standard 

on loads of milk requesting 

transportation credits. 

This administrative action is governed 

by the provisions of sections 556 and 

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12986 Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 

557 of Title 5 of the United States Code 

and, therefore, is excluded from the 

requirements of Executive Order 12866. 

The amendments to the rules 

proposed herein have been reviewed 

under Executive Order 12988, Civil 

Justice Reform. They are not intended to 

have a retroactive effect. If adopted, the 

proposed amendments would not 

preempt any state or local laws, 

regulations, or policies, unless they 

present an irreconcilable conflict with 

this rule. 

The Agricultural Marketing 

Agreement Act of 1937, as amended (7 

U.S.C. 601–674) (the Act), provides that 

administrative proceedings must be 

exhausted before parties may file suit in 

court. Under section 608c(15)(A) of the 

Act, any handler subject to an order may 

request modification or exemption from 

such order by filing a petition with the 

United States Department of Agriculture 

(USDA) stating that the order, any 

provision of the order, or any obligation 

imposed in connection with the order is 

not in accordance with the law. A 

handler is afforded the opportunity for 

a hearing on the petition. After a 

hearing, USDA would rule on the 

petition. The Act provides that the 

district court of the United States in any 

district in which the handler is an 

inhabitant, or has its principal place of 

business, has jurisdiction in equity to 

review USDA’s ruling on the petition, 

provided a bill in equity is filed not 

later than 20 days after the date of the 

entry of the ruling. 

Regulatory Flexibility Act and 

Paperwork Reduction Act 

In accordance with the Regulatory 

Flexibility Act (5 U.S.C. 601–612), the 

Agricultural Marketing Service has 

considered the economic impact of this 

action on small entities and has certified 

that this proposed rule would not have 

a significant economic impact on a 

substantial number of small entities. For 

the purpose of the Regulatory Flexibility 

Act, a dairy farm is considered a ‘‘small 

business’’ if it has an annual gross 

revenue of less than $750,000, and a 

dairy products manufacturer is a ‘‘small 

business’’ if it has fewer than 500 

employees. 

For the purposes of determining 

which dairy farms are ‘‘small 

businesses,’’ the $750,000 per year 

criterion was used to establish a 

marketing guideline of 500,000 pounds 

per month. Although this guideline does 

not factor in additional monies that may 

be received by dairy producers, it 

should be an inclusive standard for 

most small dairy farms. For purposes of 

determining a handler’s size, if the plant 

is part of a larger company operating 

multiple plants that collectively exceed 

the 500-employee limit, the plant will 

be considered a large business even if 

the local plant has fewer than 500 

employees. 

During January 2006, the time of the 

hearing, there were 3,055 dairy farmers 

pooled on the Appalachian order (Order 

5) and 3,367 dairy farmers pooled on the 

Southeast order (Order 7). Of these, 

2,889 dairy farmers (95 percent) in 

Order 5 and 3,218 dairy farmers (96 

percent) in Order 7 were considered 

small businesses. 

During January 2006, there were a 

total of 37 handlers operating plants 

associated with the Appalachian order 

(22 fully regulated plants, 11 partially 

regulated plants, 2 producer-handlers 

and 2 exempt plants). A total of 52 

plants were associated with the 

Southeast order (31 fully regulated 

plants, 9 partially regulated plants and 

12 exempt plants). The number of plants 

meeting the small business criteria 

under the Appalachian and Southeast 

orders were 9 (24 percent) and 18 (35 

percent), respectively. 

The amendments that are 

recommended for permanent adoption 

in this decision revise the transportation 

credit provisions of the Appalachian 

and Southeast orders. The Appalachian 

and Southeast orders contain provisions 

for a transportation credit balancing 

fund. To partially offset the costs of 

transporting supplemental milk into 

each marketing area to meet fluid milk 

demand at distributing plants during the 

months of July through December, 

handlers are charged an assessment 

year-round to generate revenue used to 

make payments to qualified handlers. 

The adopted amendments establish a 

variable mileage rate factor that would 

be adjusted monthly by changes in the 

price of diesel fuel (a fuel cost adjustor) 

as reported by the Department of Energy 

for paying claims from the 

transportation credit balancing funds of 

the Appalachian and Southeast orders. 

Prior to their interim adoption, the 

mileage rate of both orders was fixed at 

0.35 cents per cwt per mile. 

The adopted amendments increase 

the transportation credit assessment rate 

for the Appalachian order. Specifically, 

the maximum assessment rate for the 

Appalachian order is increased to $0.15 

per cwt. The transportations credit 

assessment rate for the Southeast order 

is increased by actions taken in a 

separate rulemaking (73 FR 14153). The 

higher assessment rate is intended to 

minimize the proration and depletion of 

the order’s transportation credit 

balancing fund during those months 

when supplemental milk is needed. The 

higher assessment rate for the 

Appalachian order adopted in this 

decision is necessary due to expected 

higher mileage reimbursement rates 

arising from escalating fuel costs, the 

transporting of milk over longer 

distances and the expected continuing 

need to rely on supplemental milk 

supplies arising from declining local 

milk production in the marketing areas. 

The transportation credit assessment 

rate for the Southeast order was 

increased from 10 cents per cwt to 20 

cents per cwt on an interim basis (71 FR 

62377). Subsequent to this increase, a 

separate rulemaking affecting the 

Southeast order proposed an additional 

increase in the assessment rate to 30 

cents per cwt. A tentative partial 

decision (73 FR 11194), effective 

February 25, 2008, describes the record 

evidence supporting a 30 cents per cwt 

transportation credit assessment rate. 

The 30 cents per cwt assessment rate 

was then adopted on an interim basis 

(73 FR 14153) effective March 18, 2008. 

Since these separate decisions address 

the higher assessment rate, there is no 

further consideration to this issue in 

this proceeding. 

Proposals published in the hearing 

notice as Proposal 2, seeking to establish 

an intra-market transportation credit 

provision for the Appalachian and 

Southeast orders, and Proposal 5, 

seeking to reduce the volume of milk 

diverted to plants located outside of the 

Appalachian and Southeast milk 

marketing areas, will be addressed in a 

separate decision. No further discussion 

of these proposals is made in this 

decision. 

The adopted amendments also amend 

the Producer milk provisions of the 

Appalachian and Southeast orders by 

eliminating the current ability to pool 

diverted milk associated with 

supplemental milk receiving a 

transportation credit payment. As 

previously indicated in the tentative 

partial final decision of this rulemaking 

(71 FR 54118), this decision does not 

specifically adopt the Dean Foods 

Company proposal (published in the 

hearing notice as Proposal 4), but agrees 

with the need to limit diverted milk 

pooled on the order made possible by 

supplemental milk eligible to receive 

transportation credits. 

Prior to amendments adopted on an 

interim basis, the Appalachian and 

Southeast orders provided 

transportation credits on supplemental 

shipments of milk for Class I use 

provided the milk was from dairy 

farmers who are not defined as a 

‘‘producer’’ under the orders. A 

producer under the order is defined as 

a dairy farmer who: (1) during the 

immediately preceding months of 

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Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 12987 

March through May and not more than 

50 percent of the milk production of the 

dairy farmer, in aggregate, is received as 

producer milk by either order during 

those 3 months; and (2) produced milk 

on a farm not located within the 

specified marketing areas of either 

order. The provisions of each order 

provide the market administrator the 

discretionary authority to adjust the 50 

percent milk production standard to 

assure orderly marketing and efficient 

handling of milk in the marketing areas. 

Adoption of the proposed 

amendments will be applied to all 

Appalachian and Southeast order 

handlers and producers, which consist 

of both large and small businesses. 

Since the adopted amendments will 

affect all producers and handlers 

equally regardless of their size, the 

amendments would not have a 

significant economic impact on a 

substantial number of small entities. 

The Agricultural Marketing Service is 

committed to complying with the EGovernment 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. 

This notice does not require 

additional information collection that 

needs clearance by the Office of 

Management and Budget (OMB) beyond 

currently approved information 

collection. The primary sources of data 

used to complete the forms are routinely 

used in most business transactions. 

Forms require only a minimal amount of 

information that can be supplied 

without data processing equipment or a 

trained statistical staff. Thus, the 

information collection and reporting 

burden is relatively small. Requiring the 

same reports for all handlers does not 

significantly disadvantage any handler 

that is smaller than the industry 

average. 

No other burdens are expected to fall 

on the dairy industry as a result of 

overlapping Federal rules. This 

rulemaking proceeding does not 

duplicate, overlap, or conflict with any 

existing Federal rules. 

Prior Documents in This proceeding 

Notice of Hearing: Issued December 

22, 2005; published December 28, 2005 

(70 FR 76718). 

Tentative Partial Decision: Issued 

September 1, 2006; published 

September 13, 2006 (71 FR 54118). 

Interim Final Rule: Issued October 19, 

2006; published October 25, 2006 (71 

FR 62377). 

Preliminary Statement 

A public hearing was held upon 

proposed amendments to the marketing 

agreement and the orders regulating the 

handling of milk in the Appalachian 

and Southeast marketing areas. The 

hearing was held, pursuant to the 

provisions of the Agricultural Marketing 

Agreement Act of 1937 (AMAA), as 

amended (7 U.S.C. 601–674), and the 

applicable rules of practice and 

procedure governing the formulation of 

marketing agreements and marketing 

orders (7 CFR part 900). 

The proposed amendments set forth 

below are based on the record of a 

public hearing held in Louisville, KY, 

on January 10–12, 2006, pursuant to a 

notice of hearing issued December 22, 

2005, published December 28, 2005 (70 

FR 76718). 

Upon the basis of the evidence 

introduced at the hearing and the record 

thereof, the Administrator, on 

September 1, 2006, issued a Tentative 

Partial Decision, published in the 

Federal Register on September 13, 2006 

(71 FR 54118) containing notice of the 

opportunity to file written exception 

thereto. 

The material issues on the record of 

hearing relate to: 

1. Transportation Credits 

A. Establishing a variable mileage rate 

factor. 

B. Increasing the maximum 

assessment rates. 

C. Establishing diversion limit 

standards. 

Findings and Conclusions 

This final decision specifically 

addresses proposals published in the 

hearing notice as Proposals 3, 1, and 

certain objectives of Proposal 4. 

Proposal 3 seeks to establish a variable 

mileage rate factor (MRF) using a fuel 

cost adjustor. Proposal 1 seeks to 

increase the maximum transportation 

credit assessment rates for both orders. 

The intent of Proposal 4 is to discourage 

the volume of milk pooled by diversions 

by reducing the amount of 

transportation credits a handler could 

receive. A complete discussion and 

findings on these three proposals 

appears after the summary of testimony. 

Proposal 2, seeking to establish an 

intra-market transportation credit 

provision for both the Appalachian and 

Southeast orders and Proposal 5, 

seeking to reduce the volume of milk 

diverted to an out-of-area plant, will be 

addressed in a separate decision. 

Accordingly, no further references to 

Proposals 2 and 5 will be made in this 

decision. 

The following findings and 

conclusions on the material issues are 

based on evidence presented at the 

hearing and the record thereof: 

1. Transportation Credits 

A. Establishing a Variable Mileage Rate 

Factor 

A proposal, published in the hearing 

notice as Proposal 3, seeking to establish 

a variable mileage rate factor (MRF) that 

uses a fuel cost adjustor in the 

transportation credit payment 

provisions in both the Appalachian and 

Southeast orders, is recommended for 

permanent adoption. At the time of the 

hearing, the two orders provided for a 

fixed mileage rate of $0.035 per cwt per 

mile. The proposal was offered by Dairy 

Farmers of America, Inc. (DFA). DFA is 

a dairy farmer member-owned CapperVolstead cooperative that at the time of 

the hearing had 12,800 member farmers 

whose milk was pooled throughout the 

Federal order system, including on the 

Appalachian and Southeast orders. 

A witness appearing on behalf of 

Southern Marketing Agency, Inc. (SMA) 

and Dairy Cooperative Marketing 

Association, Inc. (DCMA) testified in 

support of Proposal 3. SMA and DCMA 

are marketing agencies-in-common 

operating in the southeast region of the 

country. Members of SMA at the time of 

the hearing included Arkansas Dairy 

Cooperative Association; Dairy Farmers 

of America, Inc.; Dairymen’s Marketing 

Cooperative, Inc.; Lone Star Milk 

Producers, Inc.; and Maryland & 

Virginia Milk Cooperative Association, 

Inc. Members of DCMA at the time of 

the hearing included the 

abovementioned members of SMA; Zia 

Milk Producers Association; Select Milk 

Producers Association; Cooperative 

Milk Producers Association, Inc.; and 

Southeast Milk, Inc. Dairylea 

Cooperative, Inc. also requested that the 

witness testify on their behalf and in 

support of Proposal 3. 

The SMA witness testified that the 

southeastern region of the United States 

is experiencing declining milk 

production while the population and 

demand for fluid milk are increasing. As 

a result, the witness stated that handlers 

servicing the Appalachian and 

Southeast marketing areas must 

continually seek supplemental supplies 

of milk from outside their normal 

milksheds. The witness added that the 

volume of supplemental milk needed to 

meet demand that cannot be met by 

local production and the distances from 

where the supplemental milk is 

obtained continues to increase. The 

witness explained that these marketing 

conditions cause the transportation 

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12988 Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 

credit balancing funds to be depleted at 

a rate faster than the rate at which 

handlers are assessed. 

The SMA witness presented monthly 

fuel cost data for the United States and 

nine U.S. sub-regions from the Energy 

Information Administration of the 

United States Department of Energy 

(EIA). Relying on EIA data, the witness 

asserted that the cost of diesel fuel has 

escalated sharply in recent years. 

According to the witness, the national 

average diesel fuel price in mid-1997 

was reported to be approximately $1.15 

to $1.17 per gallon while the national 

average diesel fuel price in mid-2005 

was reported to be $2.20 to $2.50 per 

gallon. The witness emphasized that 

diesel fuel prices are much higher than 

the prices that existed when the 

transportation credit provisions were 

first implemented in 1996 and amended 

in 1997. 

The SMA witness noted that the cost 

of hauling has also increased. Relying 

on EIA data, the SMA witness estimated 

the cost of hauling to be in the range of 

$1.75 to $1.80 per loaded mile in 1997, 

whereas the cost in 2005 was about 

$2.35 per loaded mile. As diesel fuel 

costs have increased, the witness 

explained, so have other costs such as 

equipment, insurance, and labor. 

The SMA witness emphasized that 

there have been no adjustments made to 

the MRF of the transportation credit 

provisions since they were last amended 

in 1997. The witness recounted that the 

original mileage rate was reduced by 5 

percent, from $0.037 per cwt per mile to 

$0.035 per cwt per mile in 1997. 

The SMA witness explained that in 

1997, approximately 94 to 95 percent of 

the transportation costs of supplemental 

milk were covered by transportation 

credit balancing fund payments. The 

witness reiterated that since no 

adjustments have been made to the 

orders’ transportation credit 

reimbursement rate since 1997, the 

percentage of hauling costs covered by 

the transportation credits today are 

substantially less than those in 1997. 

According to the SMA witness, the 

use of a fixed mileage rate is not 

responsive to changes in hauling costs. 

The witness explained that Proposal 3 

would compute a variable 

transportation credit mileage rate per 

cwt per mile that would adjust with 

changes in the cost of diesel fuel. The 

witness stressed the importance of, and 

the need for, keeping information on 

hauling costs current by using 

independent fuel cost data. The witness 

stated that hauling cost rates, adjusted 

for changes in fuel costs, are common in 

the industry. 

The SMA witness illustrated 

components used to calculate the 

proposed variable MRF. According to 

the witness, a monthly average diesel 

fuel price, a reference diesel fuel price, 

an average mile-per-gallon truck fuel 

use, a reference hauling cost per loaded 

mile and a reference load size are the 

components needed to calculate the 

proposed variable MRF. 

Using EIA data for the United States 

and nine U.S. sub-regions, the SMA 

witness explained that using the Lower 

Atlantic and Gulf Coast EIA regions in 

computing the monthly mileage rates 

would be reflective of the Appalachian 

and Southeast marketing areas. Relying 

on EIA data, the witness explained that 

the Lower Atlantic region is comprised 

of the states of Virginia, West Virginia, 

North Carolina, South Carolina, Georgia, 

and Florida. Similarly, the witness 

added, the Gulf Coast region is 

comprised of Alabama, Mississippi, 

Arkansas, Louisiana, Texas, and New 

Mexico. According to the witness, of the 

nine sub-regions described by the EIA, 

the Lower Atlantic and Gulf Coast 

regions best reflect the Appalachian and 

Southeast marketing areas 

geographically. The witness also noted 

that according to EIA data, the diesel 

fuel costs for these two regions are 

among the lowest reported nationally. 

In establishing a reference diesel fuel 

price for the proposed transportation 

credit mileage rate calculation, the SMA 

witness relied on EIA retail diesel fuel 

prices for the time period of October to 

November 2003. During that period, the 

witness said, diesel fuel prices averaged 

$1.48 per gallon nationally and ranged 

from $1.42 per gallon in the Lower 

Atlantic to $1.43 per gallon in the Gulf 

Coast EIA regions. Due to relatively 

little fluctuation of diesel fuel prices 

during October to November 2003, the 

witness was of the opinion that this 

period is a fair and conservative 

timeframe on which to establish a 

reference diesel fuel price. The witness 

concluded by suggesting $1.42 per cwt 

per mile should be used as the reference 

diesel fuel price. 

The SMA witness submitted a random 

selection of actual milk hauler bills as 

the basis for computing the reference 

hauling cost component of the proposed 

MRF. According to the witness, actual 

origination and destination points, 

miles moved, and rates and fuel 

surcharges per loaded mile were 

depicted on each hauling bill. For the 

month of October 2005, the witness 

stated that hauling costs ranged from 

$1.89 to $2.70 per loaded mile, with the 

average being $2.48 per loaded mile. In 

order to be consistent with the 

timeframe used for the reference diesel 

fuel price, the witness submitted 

selected milk hauling bills from October 

to November 2003 as the basis for 

determining the reference hauling cost. 

The witness testified that for this time 

period the simple average hauling rate 

charged per loaded mile in the 

Southeast was $1.9332 and $1.8913, 

respectively, and averaged $1.9122. 

Accordingly, the witness offered that 

the average hauling rate of $1.91 per 

loaded mile should become the 

reference hauling cost used in 

calculating the MRF. 

The SMA witness provided data 

compiled by the United States 

Department of Transportation (USDOT) 

on combination truck fuel economy. 

According to the witness, the USDOT 

data indicated that the average miles 

traveled per gallon for a combination 

truck in 2002 was 5.2. The witness was 

of the opinion that dairy industry fuel 

economy is similar, as it ranges between 

5.0 to 6.0 miles per gallon. Accordingly, 

the witness advocated using a 5.5 miles 

per gallon fuel consumption rate in 

computing the proposed MRF. The 

witness also testified that a 5,600 gallon 

tanker, at its fullest capacity, can carry 

48,160 pounds of milk. Therefore, the 

witness explained, 48,000 pounds 

should be the reference load size used 

in calculating the MRF. 

The SMA witness summarized that 

Proposal 3 calculates a variable monthly 

MRF by using: (1) EIA data from a base 

period defined as October and 

November 2003, (2) hauling cost of 

$1.91 per loaded mile, (3) a reference 

diesel fuel rate of $1.42 per gallon, (4) 

a fuel economy of 5.5 miles per gallon 

and (5) a load size of 48,000 pounds. 

The SMA witness explained that the 

proposed mileage rate would be 

calculated by averaging the four most 

recent weeks of retail on-highway diesel 

prices for both the Lower Atlantic and 

Gulf Coast, as reported by the EIA prior 

to each order’s announcement of the 

Advance Class milk prices. According to 

the witness, the proposed mileage rate 

would then be computed and included 

in each order’s announcement of 

Advanced Class milk prices that are 

announced publicly on or before the 

23rd of the month. 

The SMA witness stressed that, for a 

variety of reasons, the proposed mileage 

rate computation reflects less than the 

actual cost of hauling. The witness 

asserted that the proposed mileage rate 

is based on costs of hauling from 2003, 

rather than a more current timeframe, 

and therefore would only reflect 

changes in the cost of diesel fuel since 

that time. The witness also reiterated 

that the proposed mileage rates would 

apply only to Class I milk shipped in 

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Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 12989 

excess of 85 miles, directly from farms 

to plants. The SMA witness was of the 

opinion that transportation costs will 

continue to increase and that adopting 

the proposed changes to the 

transportation credit provisions will 

avoid exhausting the transportation 

credit balancing fund before costs are 

reimbursed. 

The SMA witness asserted at the time 

of the hearing that they were incurring 

substantial losses in supplying 

supplemental milk for Class I use to the 

Appalachian and Southeast marketing 

areas. The witness indicated that 

hauling costs in supplying 

supplemental milk exceed $15 million 

annually. 

A comment filed by SMA in response 

to the Tentative Final Decision 

reiterated support for the adoption of 

Proposal 3. 

Six DFA farmer-members testified in 

support of Proposal 3. According to 

these witnesses, it is the cooperative 

members of SMA who are acting as 

handlers to supply the supplemental 

fluid milk needs of both marketing 

areas. According to the witnesses, this 

results in additional costs that are 

absorbed by the dairy farmer members 

of the cooperatives that comprise SMA. 

The witnesses argued that hauling costs 

and the distances supplemental milk 

must be hauled continue to increase. 

The six DFA dairy farmer witnesses 

were of the opinion that Proposal 3 is 

a reasonable solution to deal with the 

continued production decline and 

population driven demand increase in 

the southeastern region of the United 

States. The witnesses were of the 

opinion that using a fuel adjustor that 

moves up and down with changes in the 

cost of diesel fuel would more 

adequately cover the costs of 

transporting supplemental milk to the 

two marketing areas. 

A post-hearing brief submitted by 

DFA, and supported by SMA, reiterated 

support for adopting a fuel cost adjustor. 

A post-hearing brief was submitted on 

behalf of Arkansas Dairy Cooperative 

Association (ADCA) in support of 

Proposal 3. According to ADCA, its 

members’ milk does not usually qualify 

for transportation credit payments 

because it is typically pooled on the 

Southeast and Central orders yearround. However, ADCA noted that its 

members are impacted by the cost of 

hauling supplemental milk into the 

southeast because of its membership in 

a marketing agency-in-common. 

A post-hearing brief was submitted on 

behalf of Dairymen’s Marketing 

Cooperative, Inc. (DMCI) in support of 

Proposal 3. The brief emphasized that as 

fuel costs continue to increase, the Class 

I differential surface becomes more 

outdated and unable to reflect the costs 

of moving milk. 

A post-hearing brief was submitted on 

behalf of Lone Star Milk Producers 

(Lone Star) in support of Proposal 3 

because it would establish updated 

mileage rates for payments from the 

transportation credit balancing funds. 

The brief stated that the hauling cost 

factor used to develop the mileage rate 

for the transportation credit balancing 

fund has not been updated since the 

mid 1990’s and is inadequate. 

A post-hearing brief submitted by 

Maryland & Virginia Milk Producers 

Cooperative Association, Inc. (Maryland 

& Virginia) reiterated support for the 

adoption of Proposal 3. 

A post-hearing brief was submitted on 

behalf of South East Dairy Farmers 

Association (SEDFA). The brief 

expressed support for a variable mileage 

rate based on the changes in the cost of 

diesel fuel. The brief stated that the 

industry uses a consistent fuel economy 

estimate of 5.0 to 6.0 miles per gallon 

when calculating expected milk 

transportation costs. The brief stressed 

that the extreme rise in diesel fuel 

prices in recent months has made the 

adoption of Proposal 3 critical for 

producers who incur the cost of hauling 

milk to the market. 

A witness appearing on behalf of 

Southeast Milk, Inc. (SMI) testified in 

support of Proposal 3. SMI is a dairy 

marketing cooperative with, at the time 

of the hearing, approximately 300 dairy 

farmer members in Florida, Georgia, 

Alabama, and Tennessee. The SMI 

witness stated that relying on cost 

indexes of other government agencies 

determined on a national scale makes 

the data less subject to manipulation by 

any given industry. 

A witness testified on behalf of Dean 

Foods Company (Dean) in support of 

Proposal 3. According to the witness, 

Dean owns and operates 8 plants 

regulated by the Appalachian marketing 

area and 10 plants regulated by the 

Southeast marketing area. The Dean 

witness agreed with the benefit of using 

an adjustor in determining the MRF to 

reflect changes in fuel prices over time. 

However, the witness also was of the 

opinion that the MRF should be reduced 

to 95 percent in order to be consistent 

with the Secretary’s past decisions that 

transportation credits do not encourage 

the uneconomic movement of milk or 

inefficiencies. 

The Dean witness testified that the 

marketing areas are in need of 

supplemental milk supplies and that 

supplying such milk presents 

challenges. Nevertheless, the witness 

expressed concern for the continuing 

and potential future abuse of 

transportation credits. The witness 

asserted that current order provisions 

allow supplemental milk to receive 

transportation credits, when such milk 

is not demanded. Moreover, the witness 

stressed that there is no assurance that 

transportation credit balancing fund 

payments would flow to the dairy 

farmer members of the cooperatives 

acting as handlers located in the two 

marketing areas regardless of the 

producers’ status as independent or 

cooperative members. 

A post-hearing brief submitted on 

behalf of Dean reiterated support for 

Proposal 3, indicating that disorderly 

marketing conditions exist because the 

milk supply in the Southeastern United 

States is deficit and the cost of 

supplying the market is not borne 

equally. Additionally, a comment filed 

by Dean in response to the Tentative 

Final Decision expressed continued 

support for the adoption of Proposal 3. 

A dairy farmer who supplies milk to 

Dean testified in support of the intent of 

Proposal 3. The witness stated that a 

dynamic mileage rate that adjusts to the 

energy markets is better than a static 

factor that is unable to adjust in 

response to changes in energy costs. 

A dairy farmer who markets milk to 

Dean through Dairy Marketing Service 

(DMS) testified in favor of Proposal 3. 

The witness stated that using a variable 

MRF derived from a source outside of 

the dairy industry, such as the USDOT, 

would help decrease the chances of 

industry participants manipulating the 

information that should be used in 

calculating a MRF. 

A witness appearing on behalf of 

Land O’Lakes, Inc. (LOL) testified in 

support of Proposal 3. LOL is a dairy 

farmer member-owned Capper-Volstead 

cooperative with, at the time of the 

hearing, over 4,000 member farmers 

whose milk is pooled on 6 Federal 

Orders. The witness stated that its 

members’ milk located in the Northeast 

and Midwest have provided 

supplemental supplies to both the 

Appalachian and Southeast marketing 

orders for the past 10 years. 

According to the witness, LOL 

supplies supplemental milk to the 

Appalachian and Southeast orders and 

experiences high milk hauling costs. 

The witness asserted that using diesel 

fuel prices as the basis for the MRF 

would make it responsive to actual costs 

incurred by the handlers moving milk 

into these two deficit markets. 

A post-hearing brief submitted by 

LOL reiterated support for the adoption 

of Proposal 3. The brief said that in 

order to fulfill the supplemental milk 

needs of the Appalachian and Southeast 

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order marketing areas, milk is sourced 

from 28 States. According to the brief, 

this demonstrates that the distance milk 

must travel has further increased, 

thereby strengthening the justification 

for the adoption of Proposal 3. 

Additionally, a comment filed by LOL 

in response to the Tentative Final 

Decision expressed continued support 

for the adoption of Proposal 3. 

An independent dairy farmer from 

Tennessee testified in opposition to any 

changes to the Appalachian or 

Southeast marketing orders. The witness 

testified that additional government 

intervention in moving milk was not 

necessary and that supply and demand 

should be relied upon to dictate what 

services are needed. The witness 

asserted that amending the orders as 

proposed would change the way milk is 

moved, thereby hindering efficient milk 

hauling. The witness also was of the 

opinion that there is no assurance that 

transportation credits received for 

supplying supplemental milk would 

truly reach the market’s producers. The 

witness expressed concerns that the 

proposed increases in the transportation 

credit rate could affect producer 

decisions and producer blend prices. 

A witness testified on behalf of the 

Kentucky Dairy Development Council 

(KDDC). KDDC is a member-based 

organization that, at the time of the 

hearing, represented approximately 

1,360 dairy farmers in Kentucky. The 

witness did not state support for or 

opposition to the proposals presented at 

the hearing. The witness was of the 

opinion that noncompetitive pricing is 

discouraging milk production in the 

southeastern United States. The witness 

was of the opinion that farm milk prices 

in Kentucky and in the Southeastern 

States have eroded and that KDDC was 

opposed to any Federal Order changes 

which would further erode farm prices. 

The witness did testify in support of 

changes to the orders that would 

strengthen the position of dairy farmers 

in Kentucky and in other Southeastern 

States. 

A post-hearing brief submitted by 

KDDC in support of Proposal 3 said that 

Proposal 3 would benefit Kentucky 

dairy farmers by providing assistance in 

recovering market service costs. 

B. Increasing the Maximum Assessment 

Rate 

A proposal, published in the hearing 

notice as Proposal 1, offered by DFA, 

that seeks to increase the maximum 

transportation credit balancing fund 

assessment rates for the Appalachian 

and Southeast orders is adopted. 

Specifically, the maximum 

transportation credit balancing fund 

assessment rate in the Appalachian 

order is increased by $0.055 per cwt on 

Class I milk for an amended rate of 

$0.15 per cwt. The Southeast order’s 

maximum assessment rate was 

increased by $0.10 per cwt for an 

amended rate of $0.20 per cwt and 

implemented on an interim basis. 

Subsequent to the interim adoption of 

the $0.20 per cwt assessment rate, a 

separate rulemaking increased this rate 

to $0.30 per cwt (73 FR 14153). 

Accordingly, this decision would 

permanently adopt the higher 

assessment rate for the Appalachian 

order only. 

A witness appearing on behalf of 

DCMA and SMA testified in support of 

Proposal 1. As previously described in 

testimony regarding Proposal 3, the 

SMA witness said that the current 

transportation credit provisions provide 

for the collection of a maximum 

transportation credit assessment to 

handlers on all Class I milk for the 

Appalachian and Southeast marketing 

areas year-round. While the market 

administrator has the discretion to 

waive the maximum transportation 

credit assessments if deemed necessary, 

the SMA witness explained that the 

market administrator of each order 

collected the maximum assessments in 

2004 and 2005. However, the witness 

said that the collected assessments in 

both orders had been insufficient to pay 

the requested credits, thereby 

necessitating the prorating of payments 

from the transportation credit balancing 

fund. 

The SMA witness stated that even 

with the November 1, 2005, 

implementation of a transportation 

credit assessment increase of $0.03 per 

cwt for both orders, the assessment rate 

will likely not be able to ensure 

payments from the transportation credit 

balancing funds on all milk eligible to 

receive payment. 

The SMA witness estimated that the 

transportation credit assessment rate for 

the Appalachian order for 2004 would 

have needed to be $0.0889 per cwt and 

$0.0953 per cwt for all of 2005 to cover 

all of the transportation credits 

requested. The witness also estimated 

that the Southeast order transportation 

credit assessment rate would needed to 

have been $0.1318 per cwt and $0.1246 

per cwt in 2004 and 2005, respectively, 

to cover all requested credits. 

Additionally, the witness noted that the 

transportation credits requested for both 

the Appalachian and Southeast 

marketing orders for the months of July, 

September, and October of 2005 

exceeded the transportation credits 

requested in all of 2004. The witness 

said this also demonstrates that 

increased volumes of supplemental milk 

were transported from locations farther 

from the marketing areas. 

The witness said that the reason the 

market administrators prorated 

payments from the transportation credit 

balancing funds was because the rate of 

assessments exceeded collections. The 

witness was of the opinion that this 

occurred because more supplemental 

milk was sourced from more distant 

locations. 

Relying on market administrator data, 

the witness concluded that only 55 

percent of the actual cost of transporting 

supplemental milk was covered by the 

transportation credit payments in the 

Appalachian order in 2004. Similarly, 

only 39 percent of the actual cost was 

covered for the Southeast order during 

the same period. The witness further 

estimated that in 2005, only 53 percent 

and 43 percent of the actual hauling 

costs for supplemental milk would be 

covered for the Appalachian and 

Southeast orders, respectively. 

In explaining the need for the 

adoption of Proposal 3, the SMA 

witness reiterated that the combined 

effect of higher mileage hauling rates 

and the increased distance from which 

supplemental milk had to be hauled, 

resulted in a smaller portion of actual 

transportation costs being funded with 

transportation credits compared to the 

rate in 1997. The witness was of the 

opinion that transportation costs will 

continue to increase, making it 

necessary to again increase the 

assessment rate. 

Further illustrating the need to 

increase the maximum transportation 

credit assessment rate, the SMA witness 

indicated that if a transportation credit 

reimbursement rate of $0.046 per cwt 

per mile had been in place rather than 

the current rate of $0.035 per cwt per 

mile, the Appalachian order would have 

required an assessment of $0.133 per 

cwt in 2004 and an assessment of 

$0.1415 per cwt in 2005, to prevent the 

prorating of transportation credit claims. 

Similarly, the witness stated that for the 

Southeast order, the assessment rate 

would have needed to have been 

$0.1927 per cwt in 2004 and $0.1869 

per cwt in 2005. 

The SMA witness testified that the 

different rates of transportation credit 

balancing fund assessments proposed 

for the Appalachian and Southeast 

orders reflect the differing costs of 

supplying supplemental milk into each 

marketing area. The witness stated that 

while the transportation credit 

assessment was waived for 2 months 

during 2002 and 2003 in the 

Appalachian order, assessments were 

not waived for the Southeast order. The 

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1 70 FR 59221. 

witness asserted that while both orders 

rely on some of the same sources for 

supplemental milk, the Appalachian 

marketing area, at the time of the 

hearing, received most of its milk from 

the more northern Mid-Atlantic States 

while the Southeast marketing area 

received most of its supplemental milk 

from States located to the west and 

southwest of the marketing area. 

Furthermore, the witness added that 

different assessment rates for the two 

orders are warranted because at the time 

of the hearing, supplemental milk 

moved greater distances to service the 

Southeast market than it did to service 

the Appalachian market. 

The six DFA dairy farmer witnesses 

that testified in support of Proposal 3 

also testified in support of increasing 

the transportation credit assessments for 

both orders. The witnesses were of the 

opinion that the assessment increases 

would generate funds needed to 

maintain a sufficient transportation 

credit fund balance capable of paying on 

eligible claims. In addition, the 

witnesses were of the opinion that the 

orders’ current location adjustments 

were not able to reflect the rapidly 

increasing costs of transporting milk 

from where it is located to where it is 

needed. Similarly, the witnesses stated 

that over-order premiums cannot be 

garnered from the market to offset 

rapidly increasing transportation costs. 

The six DFA dairy farmer witnesses 

were also of the opinion that the intent 

of increasing the transportation credit 

assessment rates was a reasonable 

solution to mitigate continued 

production declines and the increasing 

demand for milk in the southeastern 

United States due to continued 

population increases in that region. The 

witnesses added that the markets’ 

producers face higher fuel costs and 

longer hauling distances associated with 

obtaining supplemental milk. When 

producers go out of business, the 

witnesses said, the gap between supply 

and demand widens thereby increasing 

the cost of supplying the market with 

supplemental milk. 

Post-hearing briefs submitted by DFA 

reiterated the position and testimony of 

SMA in support of increasing the 

transportation credit assessment rates 

immediately. 

A post-hearing brief was submitted on 

behalf of Select Milk Producers, Inc. 

(Select) and Continental Dairy Products, 

Inc. (Continental) in support of Proposal 

1. At the time of the hearing, Select’s 

members were located in New Mexico, 

Texas, Kansas, and Oklahoma, while 

Continental’s members were located in 

Indiana, Michigan, and Ohio. The brief 

stated that both cooperatives supply the 

Appalachian and Southeast marketing 

areas with supplemental milk. Select 

and Continental expressed support for 

proponent’s hearing testimony in favor 

of increasing the transportation credit 

assessment rates of the two orders. The 

brief stated that while the proposals 

under consideration will not fix longterm marketing and transportation 

problems, Proposal 1 should be adopted 

in conjunction with USDA’s 

consideration of alternative approaches 

aimed at correcting the milk deficit 

problems in the southeast region of the 

United States. 

The Select/Continental brief 

expressed the opinion that blend prices, 

not Class I prices, provide the economic 

incentive to supply milk to a marketing 

area. The brief stated that when 

producers in a large marketing area 

share the same blend price, the 

incentive to move milk within the large 

marketing area is greatly diminished. In 

addition, the brief indicated that the 

pricing of diverted milk ignores the 

value of milk to the market where 

pooled, which results in milk being 

pooled that is not available to meet the 

Class I needs of the market. 

A post-hearing brief was submitted on 

behalf of Southeast Dairy Farmer 

Association (SEDFA). The brief 

expressed support for Proposal 1 as 

published in the hearing notice. SEDFA 

represents cooperative and independent 

producers who are regular and 

supplemental milk suppliers located in 

and outside of the Appalachian and 

Southeast marketing areas. 

The SEDFA brief asserted that 

whether milk is produced inside or 

outside of the two marketing areas, the 

cost of moving Class I supplemental 

milk should be borne by the 

marketplace. The brief stated that while 

the reimbursement of actual hauling 

costs is much lower than in 1997, the 

amount of supplemental milk being 

brought into the marketing areas is 

increasing. The brief concluded that 

because reimbursement of actual 

hauling cost is smaller, the higher costs 

not reimbursed have fallen 

disproportionately on producers. The 

brief agreed with Lone Star and 

Maryland & Virginia that the $0.03 

increase in the transportation credit 

assessments implemented in November 

2005 1 would be insufficient to cover the 

expected transportation credit claims 

during 2006. 

A witness appearing on behalf of LOL 

testified in support of Proposal 1. The 

LOL witness agreed with other 

proponents that the transportation 

credit balancing fund for both orders 

has been insufficient to support 

transportation credit payments. While 

the witness supported the transportation 

credit assessment increases effective in 

November 2005, the witness did not 

think that this would be sufficient to 

reimburse future claims. 

A post-hearing brief submitted by 

LOL reiterated its support for the 

adoption of Proposal 1. The brief 

indicated that the southeast region of 

the country is not able to fulfill Class I 

demands during any season of the year 

and must rely on a supplemental milk 

supply from about 28 States outside the 

Appalachian and Southeast marketing 

areas. The brief noted that 

transportation credits installed in the 

southeastern region in 1996 were based 

on the recognition that the region’s 

Class I needs could only be met by 

supplemental milk from dairy farms 

located outside of the region. 

A witness testifying on behalf of Dean 

expressed cautious support for 

increasing the transportation credit 

assessment rates of the two orders 

because the availability of additional 

credits must be balanced with 

consideration for abuses and undesired 

results. The witness was of the opinion 

that handlers who receive such credits 

are also pooling milk on the orders 

through the diversion process which 

does not actually serve the markets’ 

Class I needs. 

A post-hearing brief submitted on 

behalf of Dean agreed with proponents 

of Proposal 1 that disorderly marketing 

conditions exist. The brief stated that 

the southeast area’s milk supply is 

deficit and the cost of supplying the 

market is not borne equally. 

A witness testified on behalf of SMI 

in opposition to Proposal 1. The witness 

characterized transportation credits as a 

subsidy. The witness further expressed 

that subsidizing the transportation of 

milk produced outside of the marketing 

areas results in economic disincentives 

for local milk production and provides 

incentives for local milk supplies to be 

replaced by milk from outside the two 

marketing areas. The witness noted that 

when transportation credits were first 

adopted in 1996, the average Class I 

utilization of the southeast region was 

in the mid-80 percent range. Since the 

implementation of transportation 

credits, the witness said, Class I 

utilization had fallen to the 60 percent 

range. It was the opinion of the witness 

that transportation credit provisions are 

contributing to declining milk 

production in the two marketing areas. 

The SMI witness testified that 

transportation credits should be 

eliminated. As an alternative, the 

witness suggested: (1) Establishing a 

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method whereby Class I prices could be 

adjusted based on more regional 

marketing conditions; (2) adopting a 

base-excess plan; (3) increasing the 

current Class I differential level; and (4) 

any other provisions that would 

encourage local milk production. 

A Kentucky dairy farmer testified in 

opposition to Proposal 1. The witness 

argued that providing transportation 

credits devalues local milk, which 

results in lower prices to local 

producers and causes declining milk 

production in the two marketing areas. 

The witness expressed concern that 

Proposal 1 would encourage more milk 

from outside the marketing areas to be 

pooled on the orders even though it is 

not delivered to either marketing area 

on a daily basis, as is the locally 

produced milk. According to the 

witness, local producers are not able to 

receive the full value for local 

production because transportation 

credits give price advantages to 

producers located far from the 

marketing areas. The witness concluded 

by stating that pooling milk located 

outside of both marketing areas does not 

represent Class I use and therefore this 

milk should not be pooled on the 

Appalachian or Southeast orders. 

A dairy farmer witness who supplies 

milk to Dean testified in opposition to 

Proposal 1. The witness viewed 

increasing assessment rates on 

transportation credits as detrimental to 

those dairy farmers who are located in 

the Appalachian and Southeast 

marketing areas and who regularly 

supply the Class I needs of the market. 

The witness was of the opinion that 

Proposal 1 lacks safeguards on the 

amount of additional milk that could be 

pooled on the orders by diversion. The 

witness said that this additional pooled 

milk would unnecessarily lower the 

blend price received by producers and 

essentially result in out-of-area milk 

supplies becoming less expensive 

relative to milk produced in-area. As a 

consequence, the witness said, local inarea producers will be forced out of 

business because of lower prices. 

Should this occur, the witness said, the 

need for additional out-of-area 

supplemental milk supplies would 

further increase to meet the Class I 

needs of the marketing areas. 

The witness suggested that instead of 

providing additional transportation 

credits, a review of the level of Class I 

differentials and a review of diversions 

and touch-base provisions should be 

considered in another hearing. 

An independent dairy farmer from 

Tennessee testified against making any 

changes to the Appalachian and 

Southeast marketing orders, including 

the adoption of Proposal 1. In addition 

to the witness’ testimony regarding 

Proposal 3 as was already described, the 

witness was of the opinion that 

additional government intervention to 

provide for increasing the transportation 

credit assessment rate was not necessary 

and that supply and demand forces 

should dictate what services are needed. 

The witness asserted that amending the 

orders as proposed would change the 

way milk is transported and would 

hinder efficient handling of milk. The 

witness was of the opinion that there 

would be no assurance that the 

transportation credits would benefit the 

producers who were pooled on the two 

orders and had incurred the additional 

costs of servicing the Class I market. 

A dairy farmer, who also markets milk 

to Dean through DMS, testified in 

opposition to Proposal 1. The witness 

said that local producers of the 

Appalachian and Southeast marketing 

areas are unable to supply all the fluid 

milk needs of the two marketing areas 

because local milk production in these 

areas is declining. The witness 

suggested that if Proposal 1 were 

adopted, an accounting of the total 

transportation costs of all milk 

movements should be supplied to the 

market administrators and be made 

available for public inspection. The 

witness also suggested making changes 

to the level of adjustments of milk 

prices by location (location adjustments) 

as an alternative to increasing the 

transportation credit assessment rate. 

The witness said if location adjustments 

were changed, the pooling standards for 

both orders would also need to be 

adjusted. Specifically, the witness 

suggested increasing the number of 

days’ production needed to touch base, 

or increasing the performance standards 

of the orders. 

A post-hearing brief submitted by the 

Kentucky Dairy Development Council 

(KDDC) supported Proposal 1. The brief 

noted that increasing the transportation 

credit assessment rate would benefit 

Kentucky dairy farmers by providing 

assistance in recovering costs associated 

with serving the market. 

C. Establishing Diversion Limit 

Standards 

A proposal submitted by Dean Foods, 

published in the hearing notice as 

Proposal 4, seeks to reduce a handler’s 

ability to utilize transportation credits to 

qualify producers for pooling on the 

orders. The intent of the proposal is to 

limit the pooling of additional surplus 

milk on the orders through the diversion 

process. At the time of the hearing, large 

volumes of milk were being pooled 

through diversions on the Appalachian 

and Southeast orders from locations 

distant from the marketing areas. While 

Proposal 4 would provide incentives to 

limit the pooling of milk through the 

diversion process, it would do so 

indirectly by limiting the payment of 

transportation credits. This decision 

chooses to directly limit diversions by 

establishing a zero diversion limit on 

milk that receives transportation credits. 

A witness appearing on behalf of 

Dean testified in support of Proposal 4 

while also expressing cautious support 

for the proposed transportation credit 

assessment increase (Proposal 1). The 

witness was of the opinion that handlers 

supplying supplemental milk to the two 

marketing areas receive a financial 

benefit from pooling diverted milk on 

the orders even though the milk does 

not ultimately serve the fluid market. 

The witness explained that while the 

diverted milk typically does not serve 

the two markets, it seeks to be pooled 

on the two orders because the blend 

prices are higher than what this milk 

could receive if pooled on other Federal 

orders. 

The Dean witness testified that the 

establishment of large marketing orders 

has created new marketing problems. 

According to the witness, when the 

Federal order system had a larger 

number of smaller markets, each order’s 

marketwide pools were small. Markets 

with large populations relative to 

associated milk, the witness explained, 

had higher Class I utilizations and 

higher blend prices to attract 

supplemental milk supplies. Markets 

with significant supplies of milk and 

smaller populations, the witness related, 

had lower Class I utilizations and 

producers pooled in those markets were 

provided with the economic incentive 

to look for higher returns from markets 

with higher blend prices. The witness 

further explained that smaller marketing 

areas limited the size of the Class I 

market and, in turn, limited how much 

milk could be pooled by diversion. The 

witness said that when orders were 

smaller, there were disincentives to 

pooling milk and the orders were more 

effective in limiting a handler’s ability 

to pool milk through diversions. 

According to the witness, the relative 

value of diverted milk was tied to its 

distance from the market. 

The Dean witness also testified that 

the Class I price surface adopted during 

Federal milk order reform changed the 

relative relationship of milk value to its 

distance from the market. According to 

the witness, the location value of 

diverted milk prior to reform was 

determined by adjusting milk value 

according to its distance from an order’s 

pricing point. The witness said this 

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resulted in each plant having a different 

location adjustment value to its milk 

receipts depending on the order on 

which its receipts were pooled. The 

witness explained that the further milk 

was located from the order’s pricing 

point, the less likely it was to be pooled 

as a diversion. 

The Dean witness expressed concern 

that no longer valuing milk relative to 

the order on which it is pooled had a 

material effect on the value of pooling 

milk located far from the market by 

diversion. The witness was of the 

opinion that the flatter Class I price 

surface, with fixed differential levels by 

county, places a value on milk that is 

not reflective of its value to the 

marketing order where pooled making it 

economically desirable to pool milk 

located far from the market through the 

diversion process. The witness was also 

of the opinion that this served to 

provide the incentive for pooling distant 

milk by diversion. 

The Dean witness testified that even 

though there are closer milk supplies, 

distant milk is being pooled on both 

orders. The witness further asserted that 

transportation credits amplify the 

pooling of milk on the orders, which 

does not service the markets’ Class I 

needs. The witness was of the opinion 

that pooling distant milk by diversion 

clearly results in disorderly marketing 

conditions within the two markets. 

According to the witness, when such 

milk is pooled, local farmers who are 

consistently serving the Class I needs of 

the markets receive a needlessly lower 

blend price. 

According to the Dean witness, the 

objective of Proposal 4 is to modify the 

receipt of transportation credits 

depending on a handler’s specific 

service to the Class I need of the markets 

and to lower transportation credit 

payments to those handlers who have 

higher levels of diversions. The witness 

stated that the current reimbursement 

rate of transportation credits is the same 

for each handler regardless of the level 

of its relative service to the fluid market. 

The witness explained that when a 

handler delivers 100 percent of its 

receipts to a pool distributing plant, it 

receives transportation credits at the 

same rate as a handler delivering only 

the minimum volume needed to meet 

the pooling qualifications. The witness 

conveyed that the handlers meeting 

only the minimum pooling standards 

are then able to divert milk which is not 

actually available to the market. 

Additionally, the witness indicated that 

adjusting a handler’s receipt of 

transportation credits in this way will 

maintain and help extend the 

transportation credit balancing funds. 

The Dean witness acknowledged the 

need for balancing because distributing 

plants do not typically need to receive 

milk every day of the week. However, 

the witness asserted that unlimited 

diversions undermine the purpose of 

the Federal order system. The witness 

explained that the proposed 30 percent 

diversion limit on supplemental milk 

seeking transportation credits is 

reasonable because a distributing plant 

typically receives milk five days per 

week. The need to divert milk 2 days 

per week, the witness explained, 

justifies the 30 percent diversion limit. 

The Dean witness explained that based 

on data provided by the market 

administrator, there are handlers in both 

orders who divert significantly more 

pounds of milk than the orders need to 

balance the Class I demands of pool 

distributing plants, and yet still receive 

transportation credits. 

A post-hearing brief submitted on 

behalf of Dean reiterated support for the 

adoption of Proposal 4 provided that 

Proposals 1 and 3 are adopted. The brief 

stated that Proposal 4, when adopted in 

conjunction with Proposals 1 and 3, 

would tend to limit the abuse of 

transportation credits on supplemental 

milk for Class I use as a result of the cap 

on the receipt of transportation credits 

by handlers suggested in Proposal 4. 

The brief also stressed that, if adopted, 

the provisions detailed in Proposal 4 

would lead to the exercise of some 

control over the amount of milk that 

would be pooled on the orders through 

the diversion process. 

A dairy farmer who supplies milk to 

Dean testified in support of Proposal 4. 

The witness agreed with Dean and other 

witnesses that orders should only pool 

the milk of producers who truly serve 

the Class I needs of the market, 

otherwise revenue essentially leaves the 

two marketing areas. According to the 

witness, this loss of revenue leads area 

dairy farmers to exit the industry, 

thereby further reducing the availability 

of local milk supplies and increasing the 

need for acquiring more milk produced 

from far outside the marketing areas. 

The witness was of the opinion that it 

is the shipments of supplemental milk 

into the marketing areas that provide the 

ability to pool milk by diversion when 

it is not available to the market. 

A witness from SMI testified in 

support of Proposal 4, provided 

Proposals 1 and 3 are adopted. 

A Kentucky dairy producer testified 

in support of Proposal 4 and said that 

supplemental milk receiving 

transportation credits should be subject 

to some limits on the amount of 

additional milk that can be pooled by 

diversion. The witness was of the 

opinion that transportation credits give 

producers located outside the marketing 

areas a price advantage because their 

diverted milk receives the blend price of 

the orders. 

A witness appearing on behalf of LOL 

testified in opposition to Proposal 4. 

The witness noted that transportation 

credits were established to attract 

supplemental milk and to partially 

offset the cost of hauling supplemental 

milk into the deficit markets. The 

witness explained that the orders’ 

specify the conditions that must be met 

to be eligible to receive transportation 

credit payments. The current 

transportation credit provisions, the 

witness said, already limit payments for 

supplemental milk from outside the 

marketing areas to include only the milk 

of dairy farmers who are not defined as 

‘‘producers’’ under the orders. The 

witness also said that payments are 

limited to Class I pounds and are not 

paid on the first 85 miles of hauling 

milk from farms to the plant receiving 

supplemental milk. 

The LOL witness stressed that 

additional limitations would do nothing 

to encourage the delivery of needed 

supplemental milk into the marketing 

areas during the short production 

months. The witness was of the opinion 

that if the intent is to change the 

diversion limits of the orders, then those 

changes should be addressed in a 

separate hearing. 

A post-hearing brief submitted by 

LOL reiterated its position given at the 

hearing opposing Proposal 4. The brief 

also stated that Proposal 4 improperly 

assumes that all handlers supplying 

supplemental milk have equal access to 

distributing plants and that distributing 

plants’ Class I use of milk is the same 

as the Class I utilization of the two 

markets. 

A witness appearing on behalf of 

SMA also testified in opposition to 

Proposal 4. The witness was of the 

opinion that the orders touch-base and 

diversion limit standards already 

provide sufficient safeguards to pooling 

milk not needed for Class I use. The 

SMA witness explained that it is 

difficult to establish specific diversion 

limits on supplemental milk, as 

contained in Proposal 4, because of 

individual differences in the balancing 

needs of each distributing plant, noting 

that these needs continually change. 

The witness emphasized that difficulties 

in balancing the orders’ pool 

distributing plants exist year-round, and 

that suppliers sometimes have no 

control over factors that may alter 

balancing needs. The witness noted that 

some of SMA’s purchase agreements for 

supplemental milk included 

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arrangements where transportation 

credit payments are paid directly to the 

supplying cooperative. In this regard, 

the witness expressed concern that 

providing a separate diversion limit on 

milk receiving transportation credit 

payments would unfairly penalize the 

cooperative when a distributing plant 

overestimates its need for supplemental 

milk. The witness stated that extreme 

variations in daily, weekly, and monthly 

deliveries to pool distributing plants 

occur. Relying on market administrator 

data for January 2004 through October 

2005 that showed the ratio of the 

highest delivery to lowest delivery day, 

the witness concluded that a 30 percent 

reserve factor would not have been 

sufficient to cover distributing plant 

balancing needs. 

The SMA witness also was of the 

opinion that Proposal 4 would give pool 

distributing plant operators an 

advantage over cooperatives who, in 

their capacity as handlers, are supplying 

supplemental milk. The witness said 

that while cooperatives handle the 

majority of supplemental milk for the 

orders, they may receive little or no 

transportation credit payments under 

Proposal 4. According to the witness, a 

diversion limit could only benefit those 

handlers in nearer proximity to the 

marketing areas. 

A post-hearing brief was submitted on 

behalf of ADCA in opposition to 

Proposal 4. The brief stressed that the 

seasonality of production in the 

southeastern region is the highest in the 

country and as such, a greater reserve of 

milk must be available. The brief 

concluded that Proposal 4 would create 

inequities between handlers supplying 

supplemental milk while also 

encouraging uneconomic movements of 

milk. 

A post-hearing brief was submitted on 

behalf of DMCI in opposition to 

Proposal 4. The brief asserted that there 

are too many unanswered questions as 

to how Proposal 4 would be applied. 

The brief stated that a distributing 

plant’s reserve milk needs are an 

individual business decision and should 

only be limited by the order’s pooling 

provisions. 

A post-hearing brief submitted by 

DFA and other SMA members reiterated 

their opposition to Proposal 4. The brief 

noted that during many months, a 30 

percent diversion limit is insufficient to 

cover balancing needs. Therefore, if 

Proposal 4 were implemented, the brief 

said, it could disproportionately affect 

different supplemental supplies and 

distributing plants in the marketing 

areas. 

A post-hearing brief was submitted on 

behalf of Lone Star in opposition to 

Proposal 4. The premise of its 

opposition was that Proposal 4 would 

establish a ‘‘one-size-fits-all’’ diversion 

limit for all Class I handlers. The brief 

noted that a distributing plant’s reserve 

milk needs are individual decisions in 

response to its customer base and 

seasonal changes in demand. The brief 

expressed the opinion that the orders 

already provide for some of the most 

strict diversion limit standards and 

touch-base requirements in the Federal 

order system. 

Comments and Exceptions 

Comments filed by Dean in response 

to the tentative partial decision 

supported the proposed amendments as 

recommended by USDA. The brief 

offered support of USDA’s alternative to 

Proposal 4 which, in its opinion, more 

directly addressed the problem of 

pooling diverted milk that is associated 

with supplemental milk supplies. Dean 

also stated that since the Department’s 

alternative continued to address the 

intent of Proposal 4, it would support 

the adoption of Proposals 1 and 3. In 

brief, Dean expressed that USDA’s 

decision adequately addressed concerns 

it expressed at the hearing regarding 

pooling abuse and ensuring that 

transportation credits only reimburse 

handlers for a portion of the 

supplemental hauling costs. 

Comments filed on behalf of SMA 

also expressed support for the 

amendments recommended in the 

tentative final decision. SMA stated that 

the recommended amendments would 

ensure that there are sufficient funds 

available to fund the transportation 

credit balancing fund and that 

transportation credits would better 

reflect the changing costs of supplying 

supplemental milk to the southeastern 

region. Comments filed on behalf of 

LOL supported the adoption of 

Proposals 1 and 3. LOL stated that 

increasing the transportation credit 

assessment rates and updating the 

payment rate to better reflect the cost of 

fuel were long overdue improvements to 

the two orders’ transportation credit 

provisions. However, LOL took 

exception with USDA’s 

recommendation regarding Proposal 4 

(pooling of diverted milk through 

supplemental milk supplies). LOL 

argued that by not allowing diversions 

on supplemental milk supplies, 

supplemental milk suppliers located 

outside of the marketing areas would 

bear the burden of balancing the 

markets’ seasonal milk needs. LOL also 

argued that while USDA asserted in the 

tentative final decision that limiting 

diversions on supplemental milk 

supplies would increase blend prices to 

the orders’ dairy farmers, no analysis 

was provided to verify the claim. 

Additionally, LOL wrote that the record 

reveals the problem with diversions is 

greater in the Southeast marketing area 

and therefore unique marketing 

conditions call for unique provisions in 

each order. 

Findings/Discussion 

The issue before USDA in this 

decision is the consideration of changes 

to the transportation credit and closely 

related provisions of the Appalachian 

and Southeast milk marketing orders. 

Transportation credit provisions have 

been a feature of the current orders (and 

their predecessor orders) since 1996. 

The need for transportation credit 

provisions arose from a consistent need 

to import milk from considerable 

distances to the marketing areas during 

certain months of the year when local 

milk production was not sufficient to 

meet Class I demands. Transportation 

credit provisions provide payments to 

handlers to cover a portion of the costs 

of hauling supplemental milk supplies 

into the Appalachian and Southeast 

marketing areas during the months of 

January, February, and July through 

December—a time period during which 

supplemental milk is needed to meet 

the demand for Class I milk at 

distributing plants. 

The transportation credit provisions 

are designed to distinguish between 

producers who regularly supply the 

Appalachian and Southeast markets 

from producers who are supplemental 

suppliers (not regular suppliers) of these 

markets. Only milk from producers who 

are both located outside of the 

marketing area and who are not 

considered ‘‘producers’’ of the order is 

eligible to receive transportation credits. 

The record reveals that the 

Appalachian marketing area, and in 

particular, the Southeast marketing area, 

are chronically unable to meet Class I 

demands. Local milk production 

relative to demand has declined and is 

expected to continue declining. 

Consequently, local milk production is 

not always able to fulfill the Class I 

needs of the markets which necessitates 

the need for supplemental milk from 

distant locations. As local milk 

production has eroded, the volume of 

supplemental milk needed for fluid use 

has increased, while at the same time 

the distance from the marketing areas 

from which the supplies are obtained 

has increased. This development is 

particularly evident for the Southeast 

marketing area. These combined factors 

have caused the transportation credit 

balancing fund (TCBF) to be insufficient 

in covering requested transportation 

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2 62 FR 39738. 

3 It should be noted that as a result of the 

Emergency Hurricane hearing held for the 

Appalachian, Florida and Southeast marketing 

orders during the fall of 2004, a reasonable haul rate 

used to determine how handlers would be 

compensated for the transportation costs of 

extraordinary movements of milk was established 

for a temporary time period. Specifically, a 

maximum of $2.25 per loaded mile hauling rate was 

established (69 FR 71697). 

credit payments. The TCBF will likely 

not be able to cover future requested 

payments unless the amendments 

contained in this decision are adopted. 

While both marketing areas are able to 

supply the Class I needs of their 

respective markets during the spring 

‘‘flush’’ months without the need for 

transportation credits, the record clearly 

indicates that both orders are unable to 

fully supply their fluid needs with local 

production during the last 6 months of 

the year. The chronic shortage of milk 

for fluid uses during this period has 

worsened over time, especially in the 

Southeast marketing area. Evidence 

shows that the trend of declining 

production relative to demand will 

result in an increased need for 

supplemental milk supplies and it is 

likely that this trend will continue into 

the foreseeable future. 

Variable Mileage Rate Factor—A Fuel 

Cost Adjustor 

Based on record evidence, this 

decision continues to find that the 

mileage rate factor (MRF) used to 

determine the payment of transportation 

credits should include a fuel cost 

adjustor as proposed in DFA’s Proposal 

3. 

The original fixed mileage rate for 

both orders was $0.037 per cwt per mile 

when the transportation credit 

provisions were first established in 

1996. The computation of the 

transportation credit payments was 

based on the total miles supplemental 

milk was shipped from its point of 

origination to its destination—the 

receiving pool distributing plant. In 

1997, several amendments were made to 

the transportation credit provisions of 

the orders that included a reduction of 

the mileage rate from $0.037 per cwt per 

mile to the current $0.035 per cwt per 

mile.2

Additional amendments made in 1997 

to the transportation credit provisions 

specified the exclusion of the first 85 

miles supplemental milk was hauled 

from farms in determining the total 

miles shipped. Additionally, the 1997 

amendments eliminated the use of the 

orders’ producer settlement fund as a 

source of revenue for the payment of 

transportation credits on supplemental 

milk when the TCBF was unable to pay 

net transportation credit claims. No 

other amendments have been made to 

the MRF used in the transportation 

credit provisions since 1997. 

Proposal 3 adjusts the MRF 

accordingly with changes in the cost of 

diesel fuel. Specifically, the component 

factors used in the determination of the 

variable MRF used in the calculation of 

TCBF payments include: a monthly 

average diesel fuel price; a reference 

diesel fuel price; an average mile-pergallon truck fuel use; a reference 

hauling cost per loaded mile; and a 

reference load size. 

The Energy Information 

Administration (EIA) data for the United 

States and nine U.S. sub-regions are a 

reliable and reasonable data source to be 

used in the establishment of certain 

components required to determine a 

variable MRF. The data are 

representative of diesel fuel prices in 

the Appalachian and Southeast 

marketing orders and can be relied upon 

as a basis upon which adjustments to 

the MRF can be made. Reliance on EIA 

data, as it is independent and unbiased, 

will make determination of the MRF 

objective and uniformly applicable to all 

handlers. 

The proponent’s suggested that the 

use of the Lower Atlantic and Gulf Coast 

EIA regions in the computation of 

monthly mileage rates for the 

Appalachian and Southeast orders is 

reasonable. The record reveals that the 

Lower Atlantic and Gulf Coast regions 

best reflect the Appalachian and 

Southeast marketing areas 

geographically. Additionally, the record 

reflects that the diesel fuel prices 

reported for these two regions are 

among the lowest in the country. Hence, 

it is appropriate to utilize these 

geographically defined data sets in the 

mileage rate calculations. 

The record reveals that fuel prices and 

other factors impacting hauling prices 

have increased greatly since the 

establishment of transportation credits. 

Specifically, the record indicates that 

current diesel fuel prices exceed those 

prices that prevailed when 

transportation credit provisions were 

first implemented in 1996 and amended 

in 1997. The national average diesel fuel 

prices in mid-1997 were reported to be 

approximately $1.15 to $1.17 per gallon, 

while the national average diesel fuel 

price in mid-2005 was reported to be 

$2.20 to $2.50 per gallon. Additionally, 

while diesel fuel prices have increased, 

all other costs impacting hauling have 

also increased. According to the record, 

EIA data indicates that hauling costs 

ranged from $1.75 to $1.80 per loaded 

mile in 1997 and were about $2.35 per 

loaded mile in January 2006. 

Establishing a reference diesel fuel price 

for the MRF calculation using the EIA 

retail diesel fuel prices from October to 

November 2003 data is reasonable. 

According to the EIA data, national 

average diesel fuel costs during this 

period demonstrated price stability 

relative to any other time between 1997 

and 2005. 

From October to November 2003, 

national diesel fuel prices fluctuated by 

only $0.001. Specifically, diesel fuel 

prices averaged $1.48125 per gallon in 

October 2003 and $1.48225 per gallon in 

November 2003. Similarly, the record 

shows that, for both the Lower Atlantic 

and Gulf Coasts, diesel fuel prices 

ranged from $1.4210 to $1.43075 per 

gallon between October and November 

2003. The stability of diesel fuel prices 

during October to November 2003 

supports this period as a reasonable 

point in time for use in determining a 

reference diesel fuel price. Therefore, 

the record supports using $1.42 per 

gallon as the reference diesel price in 

the MRF calculation. 

Evidence submitted by SMA provides 

a basis for the determination of a 

reference average hauling cost per 

loaded mile as a component for 

determining the MRF. The evidence 

consisted of data randomly selected 

from actual hauler bills paid to 

cooperatives during October and 

November 2003, and October and 

November 2005. The record supports 

the use of hauling cost data from 

October and November 2003 as a basis 

for the calculation of a reference hauling 

cost in the MRF consistent with the time 

frame used for the reference diesel 

price. 

The randomly selected hauling bills 

depict actual origination and 

destination points of the milk hauled, 

miles traveled, and the rates and fuel 

surcharges per loaded mile for each bill. 

For the month of October 2005, the data 

indicate that hauling costs ranged from 

$1.89 to $2.70 per loaded mile, with an 

average cost of $2.48 per loaded mile. 

Data also show that the simple average 

hauling rate charged per loaded mile in 

the Southeast marketing area was 

$1.9332 and $1.8913 in October and 

November 2003, respectively, yielding a 

two-month simple average cost of 

$1.9122 per loaded mile. Therefore, it is 

reasonable to conclude that a reference 

hauling rate of $1.91 per loaded mile be 

used as a component in the MRF 

calculations.3

Another component needed in the 

calculation of the MRF is the average 

number of miles traveled per gallon of 

fuel used in transporting milk. 

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Combination truck fuel economy data, 

regularly maintained by the United 

States Department of Transportation, 

indicates that the average miles per 

gallon for a combination truck was 5.2 

in 2002; and 5.1 in 2003. The record 

also consists of testimony revealing that 

the dairy industry typically estimates 

fuel economy at between 5.0–6.0 miles 

per gallon. Therefore, given that 5.5 

miles per gallon is the median point, 

and the goal of this decision is to 

promote efficiencies, the record finds 

that a 5.5-mile per gallon fuel 

consumption rate is reasonable and 

should be used to compute the MRF. 

The record also supports the use of 

48,000 pounds as a reasonable reference 

load size for determining the MRF. Data 

reveal that a 5,600 gallon tanker truck at 

maximum capacity can carry 48,160 

pounds of milk. Therefore, 48,000 

pounds is appropriate for use as the 

reference load size component in 

calculating the MRF. 

Proposal 3 would calculate the MRF 

by averaging the four most recent weeks 

of weekly retail on-highway diesel 

prices for both the Lower Atlantic and 

Gulf Coast, as reported by the EIA. 

Record evidence supports announcing 

the monthly MRF at the same time as 

Advanced Class Prices, on or before the 

23rd of the month. This way, handlers 

will know in advance the rate at which 

transportation credits will be paid. 

Table 1 shows an example of the 

calculation of the MRF to be used in the 

transportation credit provisions: 

BILLING CODE 3510–22–P 

BILLING CODE 3510–22–C 


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4The Southeast order transportation credit 

assessment rate has subsequently been increased in 

a separate rulemaking proceeding (73 FR 14153). 

5 62 FR 39738. 

6 70 FR 59221. 

Concern exists that relying on a 

variable MRF may result in reimbursing 

the total, rather than a portion, of the 

hauling costs on supplemental milk. In 

this regard, a variable MRF that is 

consistent and reflective of the original 

intent of the transportation credit 

provisions of the Appalachian and 

Southeast orders is necessary. As 

already discussed, approximately 94 to 

95 percent of the total transportation 

costs on supplemental milk were 

covered by the TCBF payments for both 

orders in 1997. However, the record 

reveals that for 2005, 53 percent and 42 

percent of the total transportation costs 

for the Appalachian and Southeast 

orders, respectively, were covered by 

TCBF payments. 

Due to a number of unknown 

variables, it is not possible to 

predetermine the percent of the total 

transportation costs that will be 

reimbursed by TCBF payments. 

However, the transportation credit 

provisions already contain 

precautionary measures for how the 

MRF is calculated. The record indicates 

that reference diesel fuel prices and 

reference hauling costs per loaded mile 

are components of the mileage rate 

calculation and are based on 2003 data 

that are more current than the data 

considered and adopted in 1997 

establishing a fixed mileage rate. 

Finally, current transportation credit 

provisions do not include the first 85 

miles that supplemental milk is shipped 

from farms in determining the total 

miles shipped. This feature also plays a 

part to safeguard against excessive 

transportation credit payments. 

Maximum Assessment Rates 

This decision continues to find that 

the transportation credit assessment rate 

in the Appalachian order should be 

increased to $0.15 per cwt on all Class 

I milk pooled.4

As discussed earlier in this decision, 

transportation credit provisions of the 

Appalachian and Southeast orders were 

originally established to partially offset 

the cost of transporting supplemental 

milk supplies into each marketing area 

to meet fluid milk demands. The 

transportation credit assessment rates 

have been increased twice in an effort 

to ensure that the TCBF would be 

sufficient to meet the expected claims. 

When first established for the 

Appalachian, Southeast, and 

predecessor orders (Orders 5, 7, 11 and 

46), the maximum transportation credit 

assessment charged to Class I handlers 

was $0.06 per cwt for each order. The 

first increase, adopted in 1997, raised 

the maximum assessment by $0.005 per 

cwt for the Appalachian order and by 

$0.01 per cwt for the Southeast order.5

The second increase in the maximum 

assessment rates for both orders became 

effective in November 2005.6 The 

maximum assessment rates for both 

orders were increased by $0.03 per cwt, 

from $0.065 to $0.095 per cwt for the 

Appalachian order, and from $0.070 to 

$0.10 per cwt for the Southeast order. 

The hearing record reveals that the 

Appalachian order was able to pay all 

transportation credit claims for every 

month since implementation through 

September 2004. For the remainder of 

2004, the Appalachian Market 

Administrator began prorating the 

transportation credit payments. 

Specifically, the record shows that for 

the Appalachian order, 41, 39, and 43 

percent of the transportation credit 

claims were paid in October, November, 

and December of 2004, respectively. The 

Appalachian order paid 90 percent and 

31 percent of the claims in September 

and October of 2005, respectively. 

Despite the assessment rate increase that 

became effective November 2005, the 

evidence indicates that only 58 percent 

of the transportation credit claims for 

the Appalachian order were paid. Table 

2 below illustrates the percent paid from 

the TCBF for the Appalachian order: 

TABLE 2—PERCENT OF

TRANSPORTATION CREDITS PAID

[Percent of Transportation Credits Paid] 

Appalachian 

marketing area 

FO 5 

Jul 04 .................................... 100.0 

Aug 04 .................................. 100.0 

Sep 04 .................................. 100.0 

Oct 04 ................................... 40.6 

Nov 04 .................................. 39.0 

Dec 04 .................................. 45.7 

Jul 05 .................................... 100.0 

Aug 05 .................................. 100.0 

Sep 05 .................................. 91.9 

Oct 05 ................................... 30.6 

Nov 05 * ................................ 58.5 

* Effective November 1, 2005, the transportation credit assessment rates were increased 

by 3 cents for the Appalachian order. 

Source: Appalachian Market Administrator 

data. 

The record demonstrates that at a 

transportation credit mileage rate of 

$0.0035 per cwt per mile, the TCBF 

assessment for Appalachian marketing 

area has been insufficient to pay all 

transportation credit claims, especially 

during the time when payment of 

credits was most needed. Preventing the 

prorating of the transportation credit 

reimbursement payments would have 

required a higher assessment rate. 

Evidence submitted by the SMA witness 

showed that the maximum 

transportation credit assessment rate for 

the Appalachian order would have 

needed to be $0.0889 and $0.0953 per 

cwt, for 2004 and 2005, respectively. 

Such evidence further supports the need 

to increase the transportation credit 

assessment rate. 

The adoption of the variable MRF that 

is calculated and adjusted with changes 

in diesel fuel prices (as presented in 

Proposal 3), will most likely increase 

the current mileage rate of $0.035 per 

cwt per mile. Relying on EIA data, the 

record reveals that applying the 

calculated mileage rates to the months 

of July through December 2005 would 

have resulted in transportation credit 

mileage rates ranging from $0.0432 to$ 

0.0461 per cwt per mile for both orders. 

If a transportation credit mileage 

reimbursement rate of $0.046 per cwt 

per mile had been in place, rather than 

the current rate of $0.035 cents per cwt, 

the maximum transportation credit 

assessments needed for the Appalachian 

order to ensure that the TCBF covered 

all claims, would have been $0.133 and 

$0.1415 per cwt for 2004 and 2005, 

respectively. This analysis supports 

concluding, and this final decision 

continues to find, that increasing the 

Appalachian order maximum 

transportation credit assessment rate, as 

contained in Proposal 1, by $0.055, to 

$0.15 per cwt is warranted. 

Precautionary measures, which 

decrease the likelihood that the rate of 

assessments occurs in excess of actual 

handler claims, are currently provided 

for within the transportation credit 

provisions of the orders. The 

transportation credit provisions provide 

the market administrator the authority 

to reduce or waive assessments as 

necessary to maintain sufficient fund 

balances for the payment of the 

transportation credits requested. 

Therefore, increasing the maximum 

transportation credit assessment rate 

will not result in an accumulation of 

funds beyond what is needed to pay 

transportation credit claims and no 

additional precautionary measures are 

necessary beyond those currently 

provided. 

The record supports concluding that 

local milk production is expected to 

continue declining within both 

marketing areas and will result in an 

even greater reliance on supplemental 

milk to meet the fluid milk needs of the 

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markets. Record evidence shows a 

constant increase in both the volume 

and the distance, from which 

supplemental milk supplies are 

obtained. It is reasonable to conclude 

that future transportation credit claims 

will increase. In this regard, it is 

important to prevent exhausting the 

TCBF before the payment of claims on 

the supplemental milk have been met. 

Doing so is consistent with the 

fundamental purposes of the 

transportation credit provisions. 

Therefore, increasing the transportation 

credit assessment rate as contained in 

Proposal 1, will better assure that the 

rate of assessments will keep pace with 

the payments from the TCBF. 

Diversion Limit Standard for 

Supplemental Milk 

The intent of a proposal offered by 

Dean, published in the hearing notice as 

Proposal 4, seeks to provide a method 

to limit the amount of additional milk 

being pooled by diversion on the 

Appalachian and Southeast orders. As 

proposed, Dean’s proposal would 

change the amount of transportation 

credits paid on eligible supplemental 

milk depending on the amount of milk 

delivered to plants other than pool 

distributing plants—this includes 

diversions to plants located outside of 

the marketing areas and deliveries to 

pool supply plants. Simply put, the 

greater the volume of diversions, the 

lower the amount of transportation 

credits paid. In this regard, Dean’s 

proposal attempts to provide an 

incentive to limit diversions indirectly 

by reducing transportation credits paid 

on supplemental milk. This decision 

agrees with the need to limit pooling 

diverted milk on the orders that is 

linked to supplemental milk deliveries 

to distributing plants. Rather than 

attempt to create disincentives to 

pooling diverted milk indirectly, this 

decision addresses the issue directly by 

adopting a zero diversion limit standard 

on supplemental milk deliveries to 

distributing plants that receive 

transportation credits. 

The record reveals that the volume of 

supplemental milk needed to serve the 

Class I needs of the marketing areas has 

grown over time and is expected to 

continue growing. Supplemental milk is 

representing a greater percentage of the 

Southeast market’s total Class I 

utilization. The record reveals that for 

the months of July through December, 

supplemental milk accounted for 16 

percent of total Class I utilization in 

2004. For 2005, such supplemental milk 

as a percent of total Class I utilization 

increased to 19 percent. 

In addition, the record indicates that, 

for the Southeast marketing area, the 

monthly weighted average distance 

supplemental milk eligible to receive 

transportation credits traveled ranged 

from 578 to 627 miles, during July 

through December 2000. During July 

through November 2005, the weighted 

average distance increased, ranging from 

682 to 755 miles. The amount of 

supplemental milk receiving 

transportation credits during 2005 was 

nearly 686 million pounds. In 2000 and 

2004 the amounts were 363 million and 

541 million, respectively. This 

represents an 89 percent increase in the 

amount of supplemental milk receiving 

transportation credits from 2000 to 2005 

and a 27 percent increase since 2004. 

For the Southeast order, the record 

reveals that total diversions at locations 

outside of the Appalachian and 

Southeast marketing areas totaled 883.4 

million pounds in 2004. Total 

diversions outside of the marketing 

areas for 2005, not including the months 

of November and December, were 965.6 

million pounds, an increase of 9.3 

percent from 2004. Such data for 

November and December 2005 are not 

contained in the record. For the months 

of January through June, when 

transportation credits are not available, 

total diversions outside the marketing 

areas increased almost 18 percent from 

2004 to 2005. During the time period of 

July through October, when 

transportation credits are available, 

such diversions increased over 27 

percent from 2004 to 2005. It is 

reasonable, given the trend of the data, 

that the percentage increase from 2004 

would have been greater than 27 percent 

if data had been available for the 

months of November and December 

2005. 

It is reasonable to conclude that 

diversions outside the Appalachian and 

Southeast marketing areas are most 

likely attributed to supplemental milk 

that is eligible to receive transportation 

credits. The record reveals that for the 

Southeast marketing area, the 27 percent 

increase in the amount of milk receiving 

transportation credits from 2004 

through 2005 corresponds with the 27 

percent increase of diversions outside 

the marketing areas between 2004 and 

2005. It is also reasonable to conclude 

from the record that it is in the interest 

of the handler supplying supplemental 

milk, and in this case, the cooperatives 

in their capacity as handlers, to 

maximize the value of diversions. Doing 

so would require pooling the maximum 

amount of diverted milk to the closest 

location from where supplemental milk 

was sourced. Therefore, relying on data 

provided by the Market Administrator 

for the Southeast marketing area for the 

months when transportation credits are 

available, the calculated total maximum 

diverted pounds associated with 

supplemental milk would have totaled 

over 178 million pounds in 2004, and 

over 226 million pounds in 2005. On 

the basis of these calculations, an 

estimate of diversions attributed to 

supplemental milk is 64 percent of total 

diversions for both 2004 and 2005, 

ranging from 56 percent to 77 percent of 

the total known diversions outside the 

marketing areas. 

The contribution from diversions 

associated with supplemental milk as 

compared to total outside diversions is 

nearly three times greater than the 

contribution of the supplemental milk 

to Class I utilization. As previously 

discussed, for 2004 and 2005, 

supplemental milk represented about 

15.9 and 19 percent, respectively, of 

total Class I utilization. However, 

estimated diversions attributable to 

supplemental milk represent 

approximately 64 percent of total 

diversions. Clearly, not only do 

transportation credits offset the costs of 

hauling supplemental milk to the 

markets, they also contribute to pooling 

much more milk on the orders through 

the diversion process. 

For the Appalachian order, data 

contained in the record is much more 

limited for determining the diversions 

arising from transportation credit 

eligible supplemental milk. What can be 

reasonably concluded is that the pooling 

of diverted milk linked to supplemental 

milk is not occurring on nearly the 

magnitude as is the case for the 

Southeast order. For the Appalachian 

order, evidence indicates that total 

diversions at locations outside of the 

Appalachian and Southeast marketing 

areas, for the time period of January 

through June, increased by 64.4 percent 

from 2004 to 2005. Total diversions 

from the time period of July through 

November, when transportation credits 

are available, decreased over 20 percent 

from 2004 to 2005. 

For the Appalachian order, only 2 

months of data—October and November 

2005—is available to estimate the 

maximum diversions that could be 

associated with supplemental milk. 

Relying on Appalachian Market 

Administrator data, it is estimated that 

the maximum diversions from 

transportation credit eligible milk 

during October and November 2005 

were approximately 34 percent and 28 

percent, respectively, of the total 

diversions at locations outside the 

Appalachian and Southeast marketing 

areas. Supplemental milk on the 

Appalachian order for October and 

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Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 12999 

November 2005 was approximately 19 

percent, and 16 percent, respectively, of 

the total Class I milk pooled. 

Pooling the diversions of this milk 

differs from pooling diverted milk that 

is part of the regular supply of milk of 

the marketing area. Pooling diverted 

milk associated with transportation 

credit eligible supplemental milk, 

allows more milk to be pooled on the 

order than normal. Pooling this milk is 

different than pooling milk that is part 

of the regular supply for the marketing 

area. The difference is that producers of 

milk eligible to receive transportation 

credits are not a part of the regular and 

consistent supply of milk that serves the 

Class I needs of the markets. In fact, 

transportation credit qualifying criteria 

exclude the milk of producers who are 

regularly pooled on the orders. These 

producers are, therefore, supplemental 

suppliers of milk to the Appalachian 

and Southeast marketing areas. 

Pooling diverted milk arising from 

supplemental milk eligible to receive 

transportation credits not only offsets 

the intended benefit of increasing the 

supply of milk for fluid uses, it also 

lowers blend prices to those producers 

who regularly and consistently supply 

the Class I needs of the markets. Higher 

blend prices provide important 

economic signals—the incentive to: (1) 

Continue supplying the markets; (2) 

increase local production; and (3) attract 

the milk of producers to become regular 

and consistent suppliers. 

Lowering blend prices received by 

producers who regularly supply the 

markets relative to producers who 

supply supplemental milk sends 

contradictory pricing signals. Lower 

blend prices do not send the proper 

price signals to local producers to 

increase local production or to continue 

supplying the Class I needs of the 

markets. Furthermore, lower blend 

prices fail to create the price signals 

necessary to attract a regular and 

consistent milk supply. 

The availability of transportation 

credits on supplemental milk has 

clearly provided a platform to pool 

additional diverted milk at locations 

distant to the marketing areas. Milk 

diverted from supplemental producers 

is more likely to be diverted at locations 

far from the marketing areas. The record 

reveals that suppliers of the 

supplemental milk to the Appalachian 

and Southeast marketing areas pool 

diverted milk at locations as far away as 

California and Utah. Supplemental milk 

suppliers benefit in three ways: (1) 

Receiving reimbursement for costs of 

transporting milk to the deficit markets; 

(2) receiving cost savings from the 

diverted milk not transported to the 

marketing areas; and (3) receiving 

higher blend prices on the diverted milk 

that would have otherwise been pooled 

on a different order with a typically 

lower blend price. 

The pooling of milk that is not part of 

the regular and consistent supply of 

milk which serves the Class I needs of 

the market is contradictory to the intent 

of an order’s pooling standards and 

provisions. The pooling standards of the 

orders serve to identify the milk of 

producers who regularly and 

consistently serve the Class I needs of 

the marketing areas. Pooling milk that is 

available but not immediately needed 

for Class I use is provided through 

diversion limit standards. Diversion 

limit standards provide the criteria for 

determining how much additional milk 

can be pooled on the orders. Diverted 

milk in this context reflects the 

legitimate reserve supply of milk 

available to serve the Class I needs of 

the marketing areas and, therefore, 

receives the blend price of the orders. 

Since implementation of Federal milk 

order reform, there have been many 

formal rulemakings that have amended 

orders to more properly identify the 

milk of producers which should and 

should not be pooled on the orders. The 

milk of producers who are the 

consistent and reliable suppliers serving 

the Class I needs of the market should 

be pooled even when it is not 

immediately needed for Class I use. 

However, this foundational principle of 

orderly marketing in milk marketing 

orders is essentially disregarded for 6 

months each year when the orders allow 

the pooling of diverted milk from 

producers who are specifically 

identified as not being ‘‘producers’’ 

under either of the orders. 

The lowering of blend prices by 

pooling such diverted milk is an 

unintended outcome not foreseen when 

the transportation credit provisions of 

the Appalachian and Southeast orders 

were implemented and amended. As the 

blend prices are reduced so is the 

incentive for local milk production. The 

markets become less capable of 

supplying their own Class I needs and 

supplemental milk supplies needed to 

meet Class I needs are not likely to be 

supplied without reliance on additional 

transportation credits. 

The pooling of diverted milk 

associated with supplemental milk 

would seem to offer substantial benefits 

to cooperative suppliers. The record 

reveals that when transportation credits 

were first implemented, well over 90 

percent of hauling costs were offset. The 

record further reveals that more recent 

conditions suggest that only about 45 

percent is being reimbursed. This 

clearly represents a burden borne by the 

cooperatives supplying supplemental 

milk. 

Pooling diverted milk at locations far 

from the marketing areas based on 

supplemental milk eligible to receive 

transportation credits would provide 

additional revenue to help offset 

hauling costs not covered by the current 

transportation credit assessment rates. 

This diverted milk receives the blend 

price of the order where it is pooled. 

The benefit is that the blend price 

received on such diverted milk, on 

either the Appalachian or Southeast 

order, is historically higher than the 

price the milk would otherwise receive. 

As presented above, this final 

decision adopts a variable mileage rate 

factor that will reimburse hauling costs 

at a level more reflective of actual costs, 

in addition to a significantly higher 

transportation credit assessment. To the 

extent that it is necessary to offset the 

higher costs of transporting 

supplemental milk, the adoption of a 

variable MRF and the increase in the 

transportation credit assessment rates 

should significantly reduce or eliminate 

the need to seek generating revenue to 

offset hauling costs at the expense of the 

producers who are regularly and 

consistently supplying milk to meet the 

Class I needs of the two marketing areas. 

LOL took exception with the 

proposed zero diversion limit standard 

arguing that it would shift the burden of 

balancing the southeastern markets’ 

seasonal milk needs onto the markets’ 

supplemental milk suppliers. LOL also 

argued that USDA should provide an 

analysis to verify that adoption of this 

standard would, in fact, increase the 

orders’ blend prices. 

The transportation credit provisions 

of the Southeast and Appalachian 

orders are designed to attract 

supplemental milk supplies for Class I 

use when the orders’ regular supplies 

cannot meet demand. Supplemental 

suppliers choose to provide this service 

and are subsequently compensated by 

receiving the orders’ blend price and the 

ability to receive a transportation credit 

to reimburse them for part of the 

hauling cost. If, at any time, a 

supplemental supplier does not believe 

they are adequately compensated for 

their service, they may cease providing 

supplemental supplies. This decision 

continues to find that allowing milk 

diversions on supplemental milk 

supplies receiving a transportation 

credit lowers the TCBF monies available 

to supplemental milk loads that are 

actually delivered to the southeastern 

markets, and ultimately decreases the 

blend price paid to the orders’ 

producers. A quantitative assessment is 

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13000 Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 

not necessary to conclude that the 

pooling of this diverted milk on the 

orders is disorderly and should not 

occur. 

Rulings on Proposed Findings and 

Conclusions 

Briefs, proposed findings, and 

conclusions were filed on behalf of 

certain interested parties. These briefs, 

proposed findings, conclusions, and the 

evidence in the record were considered 

in making the findings and conclusions 

set forth above. To the extent that the 

suggested findings and conclusions filed 

by interested parties are inconsistent 

with the findings and conclusions set 

forth herein, the claims to make such 

findings or reach such conclusions are 

denied for the reasons previously stated 

in this decision. 

General Findings 

The findings and determinations 

hereinafter set forth supplement those 

that were made when the Appalachian 

and Southeast orders were first issued 

and when they were amended. The 

previous findings and determinations 

are hereby ratified and confirmed, 

except where they may conflict with 

those set forth herein. 

The following findings are hereby 

made with respect to the aforesaid 

marketing agreements and orders: 

(a) The tentative marketing 

agreements and the orders, as hereby 

proposed to be amended, and all of the 

terms and conditions thereof, will tend 

to effectuate the declared policy of the 

Act; 

(b) The parity prices of milk as 

determined pursuant to section 2 of the 

Act are not reasonable with respect to 

the price of feeds, available supplies of 

feeds, and other economic conditions 

that affect market supply and demand 

for milk in the marketing area, and the 

minimum prices specified in the 

tentative marketing agreements and the 

orders, as hereby proposed to be 

amended, are such prices as will reflect 

the aforesaid factors, ensure a sufficient 

quantity of pure and wholesome milk, 

and be in the public interest; and 

(c) The tentative marketing 

agreements and the orders, as hereby 

proposed to be amended, will regulate 

the handling of milk in the same 

manner as, and will be applicable only 

to persons in the respective classes of 

industrial and commercial activity 

specified in, the marketing agreements 

upon which a hearing have been held. 

Rulings on Exceptions 

In arriving at the findings and 

conclusions, and the regulatory 

provisions of this decision, each of the 

exceptions received was carefully and 

fully considered in conjunction with the 

record evidence. To the extent that the 

findings and conclusions and the 

regulatory provisions of this decision 

are at variance with any of the 

exceptions, such exceptions are hereby 

overruled for the reasons previously 

stated in this decision. 

Marketing Agreement and Order 

Annexed hereto and made a part 

hereof are two documents—a Marketing 

Agreement regulating the handling of 

milk and an Order amending the order 

regulating the handling of milk in the 

Appalachian and Southeast marketing 

areas, that was approved by producers 

and published in the Federal Register 

on October 25, 2006 (71 FR 62377). 

These documents have decided upon as 

the detailed and appropriate means of 

effectuating the foregoing conclusions. 

It is hereby ordered that this entire 

decision and the Marketing Agreement 

annexed hereto be published in the 

Federal Register. 

Determination of Producer Approval 

and Representative Period 

The month of July 2013 is hereby 

determined to be the representative 

period for the purpose of ascertaining 

whether the issuance of the order, as 

amended and as hereby proposed to be 

amended, regulating the handling of 

milk in the Appalachian and Southeast 

marketing areas is approved or favored 

by producers, as defined under the 

terms of the order as hereby proposed to 

be amended, who during such 

representative period were engaged in 

the production of milk for sale within 

the aforesaid marketing area. 

List of Subjects in 7 CFR Parts 1005 and 

1007 

Milk Marketing Orders. 

Order Amending the Order Regulating 

the Handling of Milk in the 

Appalachian and Southeast Marketing 

Areas 

This order shall not become effective 

until the requirements of § 900.14 of the 

rules of practice and procedure 

governing proceedings to formulate 

marketing agreements and marketing 

orders have been met. 

Findings and Determinations 

The findings and determinations 

hereinafter set forth supplement those 

that were made when the orders were 

first issued and when they were 

amended. The previous findings and 

determinations are hereby ratified and 

confirmed, except where they may 

conflict with those set forth herein. 

(a) Findings. A public hearing was 

held upon certain proposed 

amendments to the tentative marketing 

agreements and to the orders regulating 

the handling of milk in the 

Appalachian, Florida and Southeast 

marketing areas. The hearing was held 

pursuant to the provisions of the 

Agricultural Marketing Agreement Act 

of 1937, as amended (7 U.S.C. 601–674), 

and the applicable rules of practice and 

procedure (7 CFR part 900). 

Upon the basis of the evidence 

introduced at such hearing and the 

record thereof, it is found that: 

(1) The said orders as hereby 

amended, and all of the terms and 

conditions thereof, will tend to 

effectuate the declared policy of the Act; 

(2) The parity prices of milk, as 

determined pursuant to section 2 of the 

Act, are not reasonable in view of the 

price of feeds, available supplies of 

feeds, and other economic conditions 

which affect market supply and demand 

for milk in the aforesaid marketing 

areas. The minimum prices specified in 

the orders as hereby amended are such 

prices as will reflect the aforesaid 

factors, insure a sufficient quantity of 

pure and wholesome milk, and be in the 

public interest; and 

(3) The said orders as hereby 

amended regulate the handling of milk 

in the same manner as, and are 

applicable only to persons in the 

respective classes of industrial or 

commercial activity specified in, a 

marketing agreement upon which a 

hearing has been held. 

Order Relative to Handling 

It is therefore ordered, that on and 

after the effective date hereof, the 

handling of milk in the Appalachian 

and Southeast marketing areas shall be 

in conformity to and in compliance with 

the terms and conditions of the orders, 

as amended, and as hereby amended, as 

follows: 

For the reasons set forth in the 

preamble, 7 CFR parts 1005 and 1007 

are proposed to be amended as follows: 

■ 1. The authority citation for 7 CFR 

parts 1005 and 1007 continues to read 

as follows: 

Authority: 7 U.S.C. 601–674, and 7253. 

PART 1005—MILK IN THE 

APPALACHIAN MARKETING AREA 

■ 2. Section 1005.13 is amended by 

revising paragraphs (d)(3) and (d)(4) to 

read as follows: 

§ 1005.13 Producer milk. 

* * * * * 

(d) * * * 

(3) The total quantity of milk so 

diverted during the month by a 

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Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 13001 

cooperative association shall not exceed 

25 percent during the months of July 

through November, January, and 

February, and 35 percent during the 

months of December and March through 

June, of the producer milk that the 

cooperative association caused to be 

delivered to, and physically received at, 

pool plants during the month, excluding 

the total pounds of bulk milk received 

directly from producers meeting the 

conditions as described in 

§ 1005.82(c)(2)(ii) and (iii), and for 

which a transportation credit is 

requested; 

(4) The operator of a pool plant that 

is not a cooperative association may 

divert any milk that is not under the 

control of a cooperative association that 

diverts milk during the month pursuant 

to paragraph (d) of this section. The 

total quantity of milk so diverted during 

the month shall not exceed 25 percent 

during the months of July through 

November, January, and February, and 

35 percent during the months of 

December and March through June, of 

the producer milk physically received at 

such plant (or such unit of plants in the 

case of plants that pool as a unit 

pursuant to § 1005.7(d) during the 

month, excluding the quantity of 

producer milk received from a handler 

described in § 1000.9(c) of this chapter 

and excluding the total pounds of bulk 

milk received directly from producers 

meeting the conditions as described in 

§ § 1005.82(c)(2)(ii) and (iii), and for 

which a transportation credit is 

requested; 

* * * * * 

■ 3. Section 1005.81 is amended by 

revising paragraphs (a) and (b) to read 

as follows: 

§ 1005.81 Payments to the transportation 

credit balancing fund. 

(a) On or before the 12th day after the 

end of the month (except as provided in 

§ 1000.90 of this chapter), each handler 

operating a pool plant and each handler 

specified in § 1000.9(c) shall pay to the 

market administrator a transportation 

credit balancing fund assessment 

determined by multiplying the pounds 

of Class I producer milk assigned 

pursuant to § 1005.44 by $0.15 per 

hundredweight or such lesser amount as 

the market administrator deems 

necessary to maintain a balance in the 

fund equal to the total transportation 

credits disbursed during the prior June– 

February period. In the event that 

during any month of the June–February 

period the fund balance is insufficient 

to cover the amount of credits that are 

due, the assessment should be based 

upon the amount of credits that would 

had been disbursed had the fund 

balance been sufficient. 

(b) The market administrator shall 

announce publicly on or before the 23rd 

day of the month (except as provided in 

§ 1000.90) the assessment pursuant to 

paragraph (a) of this section for the 

following month. 

■ 4. Section 1005.82 is amended by 

revising paragraphs (d)(2)(ii) and 

(d)(3)(iv) to read as follows: 

§ 1005.82 Payments from the 

transportation credit balancing fund. 

* * * * * 

(d) * * * 

(2) * * * 

(ii) Multiply the number of miles so 

determined by the mileage rate for the 

month computed pursuant to 

§ 1005.83(a)(6); 

* * * * * 

(3) * * * 

(iv) Multiply the remaining miles so 

computed by the mileage rate for the 

month computed pursuant to 

§ 1005.83(a)(6); 

* * * * * 

■ 5. Add Section 1005.83 to read as 

follows: 

§ 1005.83 Mileage Rate for the 

Transportation Credit Balancing Fund. 

(a) The market administrator shall 

compute a mileage rate each month as 

follows: 

(1) Compute the simple average 

rounded to three decimal places for the 

most recent four (4) weeks of the Diesel 

Price per Gallon as reported by the 

Energy Information Administration of 

the United States Department of Energy 

for the Lower Atlantic and Gulf Coast 

Districts combined. 

(2) From the result in paragraph (a)(1) 

in this section subtract $1.42 per gallon; 

(3) Divide the result in paragraph 

(a)(2) of this section by 5.5, and round 

down to three decimal places to 

compute the fuel cost adjustment factor; 

(4) Add the result in paragraph (a)(3) 

of this section to $1.91; 

(5) Divide the result in paragraph 

(a)(4) of this section by 480; 

(6) Round the result in paragraph 

(a)(5) of this section down to five 

decimal places to compute the mileage 

rate. 

(b) The market administrator shall 

announce publicly on or before the 23rd 

day of the month (except as provided in 

§ 1000.90 of this chapter) the mileage 

rate pursuant to paragraph (a) of this 

section for the following month. 

PART 1007—MILK IN THE SOUTHEAST 

MARKETING AREA 

■ 6. Section 1007.13 is amended by 

revising paragraphs (d)(3) and (d)(4) to 

read as follows: 

§ 1007.13 Producer milk. 

* * * * * 

(d) * * * 

(3) The total quantity of milk diverted 

during the month by a cooperative 

association shall not exceed 25 percent 

during the months of July through 

November, January, and February, and 

35 percent during the months of 

December and March through June, of 

the producer milk that the cooperative 

association caused to be delivered to, 

and physically received at, pool plants 

during the month, excluding the total 

pounds of bulk milk received directly 

from producers meeting the conditions 

as described in section 1007.82(c)(2)(ii) 

and (iii), and for which a transportation 

credit is requested; 

(4) The operator of a pool plant that 

is not a cooperative association may 

divert any milk that is not under the 

control of a cooperative association that 

diverts milk during the month pursuant 

to paragraph (d) of this section. The 

total quantity of milk so diverted during 

the month shall not exceed 25 percent 

during the months of July through 

November, January and February, and 

35 percent during the months of 

December and March through June of 

the producer milk physically received at 

such plant (or such unit of plants in the 

case of plants that pool as a unit 

pursuant to § 1007.7(e)) during the 

month, excluding the quantity of 

producer milk received from a handler 

described in § 1000.9(c) of this chapter, 

excluding the total pounds of bulk milk 

received directly from producers 

meeting the conditions as described in 

section 1007.82(c)(2)(ii) and (iii), and for 

which a transportation credit is 

requested. 

* * * * * 

■ 7. Section 1007.81 is amended by 

revising paragraph (b) to read as follows: 

§ 1007.81 Payments to the transportation 

credit balancing fund. 

* * * * * 

(b) The market administrator shall 

announce publicly on or before the 23rd 

day of the month (except as provided in 

§ 1000.90 of this chapter) the assessment 

pursuant to paragraph (a) of this section 

for the following month. 

■ 8. Section 1007.82 is amended by 

revising paragraphs (d)(2)(ii) and 

(d)(3)(iv) to read as follows: 

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13002 Federal Register / Vol. 79, No. 45 / Friday, March 7, 2014 / Proposed Rules 

7First and last section of order. 

8Name of order. 

9Appropriate Part number. 

10Next consecutive section number. 

11Appropriate representative period for the order. 

§ 1007.82 Payments from the 

transportation credit balancing fund. 

* * * * * 

(d) * * * 

(2) * * * 

(ii) Multiply the number of miles so 

determined by the mileage rate for the 

month computed pursuant to 

§ 1007.83(a)(6); * * * * * 

(3) * * * 

(iv) Multiply the remaining miles so 

computed by the mileage rate for the 

month computed pursuant to 

§ 1007.83(a)(6); 

* * * * * 

■ 9. Add a new Section 1007.83 to read 

as follows: 

§ 1007.83 Mileage Rate for the 

Transportation Credit Balancing Fund. 

(a) The market administrator shall 

compute the mileage rate each month as 

follows: 

(1) Compute the simple average 

rounded to three decimal places for the 

most recent 4 weeks of the Diesel Price 

per Gallon as reported by the Energy 

Information Administration of the 

United States Department of Energy for 

the Lower Atlantic and Gulf Coast 

Districts combined. 

(2) From the result in paragraph (a)(1) 

in this section subtract $1.42 per gallon; 

(3) Divide the result in paragraph 

(a)(2) of this section by 5.5, and round 

down to three decimal places to 

compute the fuel cost adjustment factor; 

(4) Add the result in paragraph (a)(3) 

of this section to $1.91; 

(5) Divide the result in paragraph 

(a)(4) of this section by 480; 

(6) Round the result in paragraph 

(a)(5) of this section down to five 

decimal places to compute the MRF. 

(b) The market administrator shall 

announce publicly on or before the 23rd 

day of the month (except as provided in 

§ 1000.90 of this chapter) the mileage 

rate pursuant to paragraph (a) of this 

section for the following month. 

[This marketing agreement will not appear 

in the Code of Federal Regulations.] 

Marketing Agreement Regulating the 

Handling of Milk in Certain Marketing 

Areas 

The parties hereto, in order to 

effectuate the declared policy of the Act, 

and in accordance with the rules of 

practice and procedure effective 

thereunder (7 CFR part 900), desire to 

enter into this marketing agreement and 

do hereby agree that the provisions 

referred to in paragraph I hereof, as 

augmented by the provisions specified 

in paragraph II hereof, shall be and are 

the provisions of this marketing 

agreement as if set out in full herein. 

I. The findings and determinations, 

order relative to handling, and the 

provisions of § ll to ll7 all 

inclusive, of the order regulating the 

handling of milk in the lll8

marketing area (7 CFR Part ll9) which 

is annexed hereto; and 

II. The following provisions: §ll10

Record of milk handled and 

authorization to correct typographical 

errors. 

(a) Record of milk handled. The 

undersigned certifies that he/she 

handled during the month of lll,11

lll hundredweight of milk covered 

by this marketing agreement. 

(b) Authorization to correct 

typographical errors. The undersigned 

hereby authorizes the Deputy 

Administrator, or Acting Deputy 

Administrator, Dairy Programs, 

Agricultural Marketing Service, to 

correct any typographical errors which 

may have been made in this marketing 

agreement. 

Effective date. This marketing 

agreement shall become effective upon 

the execution of a counterpart hereof by 

the Department in accordance with Sec. 

900.14(a) of the aforesaid rules of 

practice and procedure. 

In Witness Whereof, The contracting 

handlers, acting under the provisions of 

the Act, for the purposes and subject to 

the limitations herein contained and not 

otherwise, have hereunto set their 

respective hands and seals. 

Signature 

By (Name) lllllllllllllll

(Title) lllllllllllllllll

(Address) llllllllllllllll

(Seal) 

Attest llllllllllllllllll

Dated: February 25, 2014. 

Rex A. Barnes, 

Associate Administrator. 

[FR Doc. 2014–04693 Filed 3–6–14; 8:45 am] 

BILLING CODE 3410–02–P 

NUCLEAR REGULATORY 

COMMISSION 

10 CFR Part 72 

[NRC–2013–0051] 

Shielding and Radiation Protection 

Review Effort and Licensing 

Conditions for Dry Storage 

Applications 

AGENCY: Nuclear Regulatory 

Commission. 

ACTION: Draft interim staff guidance; 

withdrawal. 

SUMMARY: The U.S. Nuclear Regulatory 

Commission (NRC) is announcing the 

withdrawal of draft Spent Fuel Storage 

and Transportation Interim Staff 

Guidance No. 26A (SFST–ISG–26A), 

Revision 0, ‘‘Shielding and Radiation 

Protection Review Effort and Licensing 

Parameters for 10 CFR Part 72 

Applications.’’ 

DATES: The withdrawal is effective as of 

March 7, 2014. 

ADDRESSES: Please refer to Docket ID 

NRC–2013–0051 when contacting the 

NRC about the availability of 

information regarding this document. 

You may access publicly-available 

information related to this document 

using any of the following methods: 

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for Docket ID NRC–2013–0051. Address 

questions about NRC dockets to Carol 

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please contact the NRC’s Public 

Document Room (PDR) reference staff at 

1–800–397–4209, 301–415–4737, or by 

email to pdr.resource@nrc.gov. Draft 

SFST–ISG–26A, Revision 0 is available 

electronically under ADAMS Accession 

No. ML13010A570. 

• NRC’s PDR: You may examine and 

purchase copies of public documents at 

the NRC’s PDR, Room O1–F21, One 

White Flint North, 11555 Rockville 

Pike, Rockville, Maryland 20852. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Michel Call, Office of Nuclear Material 

Safety and Safeguards, U.S. Nuclear 

Regulatory Commission, Washington, 

DC 20555–0001; telephone: 301–287– 

9183; email: Michel.Call@nrc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Draft SFST–ISG–26A proposed 

guidance for the NRC staff to use when 

reviewing the shielding and radiation 

protection portions of applications for 

certificates of compliance (CoC), 

specific licenses, and amendments 

mstockstill on DSK4VPTVN1PROD with PROPOSALS