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Rules and Regulations Federal Register

45441 

Vol. 78, No. 145 

Monday, July 29, 2013 

DEPARTMENT OF AGRICULTURE 

Commodity Credit Corporation 

7 CFR Part 1435 

RIN 0560–AH86 

Sugar Program; Feedstock Flexibility 

Program for Bioenergy Producers 

AGENCY: Commodity Credit Corporation 

and Farm Service Agency, USDA. 

ACTION: Final rule. 

SUMMARY: This rule amends regulations 

that specify the methods that the 

Commodity Credit Corporation (CCC) 

can use to dispose of its sugar inventory 

and establishes the new Feedstock 

Flexibility Program (FFP). Through FFP, 

the Secretary is required to purchase 

sugar and sell it to produce bioenergy as 

a means to avoid forfeitures of sugar 

loan collateral under the Sugar Program. 

The FFP regulations are required by the 

Food, Conservation, and Energy Act of 

2008 (the 2008 Farm Bill) amendments 

to the Food Security and Rural 

Investment Act of 2002 (the 2002 Farm 

Bill), and as further amended by the 

American Taxpayer Relief Act of 2012. 

DATES: Effective date: July 29, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Barbara Fecso; telephone (202) 720– 

4146. Persons with disabilities who 

require alternative means for 

communications (Braille, large print, 

audio tape, etc.) should contact the 

USDA Target Center at (202) 720–2600 

(voice and TDD). 

SUPPLEMENTARY INFORMATION: 

Background 

Under the Sugar Program, domestic 

sugar beet or sugarcane processors may 

borrow from CCC, pledging their sugar 

production as collateral for any such 

loan, and then satisfy their loans either 

by repaying the loan on or before loan 

maturity or by transferring the title for 

the collateral to CCC immediately 

following loan maturity, also known as 

‘‘forfeiture’’ of collateral (as specified in 

7 CFR 1435.105). The Farm Service 

Agency (FSA) administers the Sugar 

Program for CCC. The regulations for 

sugar loans in 7 CFR 1435 parts A and 

B are not changing. CCC is required to 

operate the Sugar Program, to the 

maximum extent practicable at no cost 

to the Federal government, by avoiding 

forfeitures to CCC. If domestic sugar 

market conditions are such that market 

rates are less than forfeiture level, 

current law requires CCC to use FFP to 

purchase sugar and sell such sugar to 

bioenergy producers to avoid forfeitures. 

This final rule amends the Sugar 

Program regulations to implement FFP 

and to establish appropriate methods for 

the disposition of sugar inventory that 

CCC has acquired other than through 

FFP. CCC may acquire sugar through 

forfeiture of CCC sugar loans or through 

sugar purchases to reduce the cost of the 

Sugar Program under the cost reduction 

options provided by section 1009 of the 

Food Security Act of 1985 (7 U.S.C. 

1308a, Pub. L. 99–198). Implementation 

of FFP is required by the amendment by 

section 9001 of the 2008 Farm Bill (Pub. 

L. 110–246) to section 9010 of the 2002 

Farm Bill (7 U.S.C. 8110, Pub. L. 107– 

171), and as further amended by section 

701(f)(9) of the American Taxpayer 

Relief Act of 2012 (Pub. L. 112–240). 

Regulations implementing FFP are in 7 

CFR part 1435, ‘‘Sugar Program,’’ in new 

subpart G, ‘‘Feedstock Flexibility 

Program.’’ Regulations implementing 

sugar disposition methods are in 7 CFR 

part 1435 in new subpart E, 

‘‘Disposition of CCC Inventory.’’ 

FFP addresses sugar surpluses sooner 

than the current Sugar Program by 

permanently removing such sugar from 

the market for human consumption. The 

current Sugar Program removes surplus 

sugar from the market near the end of 

the crop year as sugarcane and sugar 

beet processors forfeit sugar loan 

collateral to CCC. The acquired 

inventory can be stored for resale to the 

market upon improvement in market 

prices. Under FFP, CCC may remove 

surplus sugar from the market earlier in 

the year, as FFP requires CCC to avoid 

sugar loan forfeitures. FFP also requires 

the surplus sugar to be used to produce 

bioenergy, which precludes CCC’s resale 

of inventory into the market for human 

consumption. 

Current law provides USDA authority 

for these programs through the 2013 

sugar crop year (which runs from 

October 1, 2013 to September 30, 2014). 

Recent indications in the sugar market 

suggest that forfeitures may occur in 

crop year 2012. However, if sugar prices 

remain below the forfeiture level, CCC 

may be required to use FFP to purchase 

sugar before August 1, 2013, the first 

date that 2012-crop loans can be 

forfeited to CCC. The last year in which 

sugar loan forfeitures occurred was 

2005. The methods specified in this rule 

for both purchases under FFP and 

disposition of CCC sugar inventory are 

not expected to be used in most years. 

CCC published a proposed rule in the 

Federal Register on October 19, 2011 

(76 FR 64839–64844), with respect to 

the 2008 amendments that would 

establish FFP and restrict CCC sugar 

inventory disposition outlets to nonfood use under non-emergency shortage 

conditions. CCC received six comments 

on the proposed rule. The comments 

and responses are discussed later in this 

document. As explained below, no 

major changes are being made in 

response to comments, because CCC has 

determined, based on the evenly 

balanced opposing and supporting 

comments for specific changes, that the 

proposed rule equitably balances the 

conflicting interests of sugar producers 

and sugar users. CCC has made other 

changes from the proposed rule in this 

final rule clarifying the types of sugar 

eligible for FFP and eliminating the 

eligibility requirement that the eligible 

bioenergy producers’ facility be located 

in the United States. 

Sugar Program Background 

Administration of the current Sugar 

Program requires CCC to balance 

domestic supply with demand so that 

U.S. sugar prices are no less than levels 

specified in the 2008 Farm Bill and to 

maintain an adequate domestic sugar 

supply. This rule does not change CCC’s 

management of sugar loans, sugar 

marketing allotments, or import tariffrate quotas (TRQs). Specifically, this 

rule introduces purchases and sales of 

sugar for bioenergy production under 

FFP as a proactive means for CCC to 

avoid forfeitures. FFP is expected to be 

unnecessary in most years, as USDA’s 

long term projections indicate a 

generally strong domestic sugar market 

in the future. 

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45442 Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Rules and Regulations 

Sugar Inventory Disposition 

This rule adds a new subpart E, 

‘‘General Disposition of CCC Inventory,’’ 

to 7 CFR part 1435 to implement the 

2008 Farm Bill requirements and the 

2012 amendments to the 2002 Farm Bill. 

Subpart E applies to sugar in inventory 

that CCC owns, such as sugar obtained 

from forfeited loan collateral. CCC does 

not expect to regularly use these 

methods, as it is legislatively required to 

operate FFP to avoid forfeitures. 

As specified in Subpart E, CCC will 

dispose of sugar held in CCC inventory 

in ways that do not increase the 

domestic supply of sugar for human 

consumption, except in conditions of 

emergency sugar shortages. CCC may, 

under non-emergency conditions, 

dispose of sugar held in inventory 

through sales under FFP (new subpart 

G), through the Processor Sugar 

Payment-in-Kind (PIK) Program (7 CFR 

part 1435 subpart F, which is not 

changing), through buybacks of 

Certificates of Quota Eligibility (CQEs), 

which are issued under 15 CFR part 

2011 to TRQ holding countries and 

authorize sugar to enter the United 

States under the TRQs, or through other 

applicable CCC disposition authority in 

such a way as not to increase the 

domestic supply of sugar for human 

consumption. Under the PIK disposal 

option, CCC would swap sugar 

inventory for retired sugarcane or sugar 

beet acreage. CCC disposed of 473,000 

tons of sugar inventory under a similar 

PIK Program in fiscal year (FY) 2001 

and FY 2002. Under the CQE option, 

CCC would allow traders to swap CQEs 

for sugar inventory. CCC disposed of 

116,000 tons of sugar inventory under 

CQE swaps in FY 2002 and FY 2003. 

Both methods reduce sugar in the 

domestic supply for human 

consumption. The announcements of 

the use of such methods to dispose of 

sugar held in inventory will be placed 

on the FSA Commodity Operations Web 

site at http://www.fsa.usda.gov/FSA/

webapp?area=home&subject=coop&

topic=landing. 

If there is an emergency shortage of 

sugar for human consumption in the 

domestic market, the Secretary may use 

applicable CCC authority to dispose of 

sugar inventory, including sales for 

human consumption. 

As amended by the 2008 Farm Bill, 

section 9010 of the 2002 Farm Bill 

specifies that an emergency shortage of 

sugar for human consumption in the 

United States market is one ‘‘caused by 

a war, flood, hurricane, other natural 

disaster, or other similar event.’’ CCC 

did not propose to define ‘‘emergency 

shortage’’ in the proposed rule, and 

noted that the ‘‘similar event’’ clause 

provides flexibility to respond to 

shortages caused by manmade events. In 

the background section of the proposed 

rule, CCC requested comments on 

whether CCC should define ‘‘emergency 

shortage’’ in the rule, either by listing 

the specific types of events that cause a 

shortage or by specifying a formula 

based on price or stock levels that 

constitute a shortage. As discussed in 

more detail later in this document, the 

comments received were not in 

agreement on whether there should be 

a specific definition or what that 

definition should be. Therefore, CCC 

has retained the language of section 

9010 in the final rule that specifies the 

causes of an emergency shortage, but 

has not adopted a specific formula for 

what constitutes a shortage. CCC 

therefore retains flexibility to make a 

determination whether particular 

circumstances constitute an ‘‘other 

similar event’’ that has caused an 

emergency shortage, and whether a 

particular price or stock level 

constitutes a shortage. There were no 

comments received on any other sugar 

disposition provisions specified in the 

proposed rule. Consequently, CCC did 

not make any substantive changes to 

those provisions. 

Subpart G—Feedstock Flexibility 

Program 

New subpart G specifies how CCC 

will operate FFP. Through FFP, CCC 

will buy sugar as needed to avoid 

forfeitures of sugar loan collateral and 

sell that sugar to bioenergy producers. 

Bioenergy, as defined in section 9001 of 

the 2008 Farm Bill, amending section 

9010 of the 2002 Farm Bill, means fuel 

grade ethanol and other biofuel. 

As amended by the 2008 Farm Bill, 

section 9010 of the 2002 Farm Bill 

requires the Secretary to estimate, by 

September 1 of each year, the likelihood 

of sugar forfeitures for the following 

crop year, and announce the quantity of 

sugar to be made available for purchase 

and sale for bioenergy production. In 

addition, CCC will make quarterly 

announcements of revised estimates of 

such quantity. CCC’s purchase and sale 

plans will be affected by the large 

degree of uncertainty in USDA’s sugar 

market projections made early in the 

year. As specified in this rule, CCC will 

update the estimated quantity of sugar 

to be made available for purchase and 

sale under FFP not later than January 1, 

April 1, and July 1 of each year. Any 

FFP purchases expected in calendar 

year 2013 for the 2012 crop will be 

announced in the quarterly updates in 

FY 2013. 

The 2008 Farm Bill amendments 

specify that the only commodities 

eligible to be made available for 

purchase under FFP are ‘‘raw or refined, 

or in-process sugar’’ that would 

otherwise have been marketed for 

human consumption in the United 

States or could otherwise have been 

used for the extraction of sugar 

marketed for human consumption. 

Applicable law requires that the 

entity selling sugar to CCC be located in 

the United States. The 2008 Farm Bill 

amendments do not require that the 

sugar buyer’s bioenergy facilities be 

located in the United States. CCC 

nevertheless initially proposed to limit 

eligible buyers to those bioenergy 

producers who would use the 

purchased sugar to produce bioenergy 

in their facilities in the United States. 

This restriction was initially proposed 

to benefit the American taxpayer, who 

is paying for FFP, and CCC indeed 

received one (favorable) comment 

related to such proposed restriction. 

However, section 9010 of the 2002 Farm 

Bill, as amended, expressly provides 

that the sale of sugar to bioenergy 

producers must be conducted in a 

manner that ensures the Sugar Program 

is operated at no cost to the Federal 

Government by avoiding forfeitures to 

CCC. To restrict eligible buyers to those 

bioenergy producers whose production 

facilities are located in the United States 

may restrict the pool of sugar buyers, 

potentially increasing the cost to the 

Federal Government and the likelihood 

of forfeitures to CCC. Such a result 

would be contrary to the interests of the 

American taxpayer. Consequently, the 

final rule does not adopt this restriction. 

Ultimately, CCC estimates that few if 

any prospective buyers would seek to 

use the sugar to produce bioenergy at 

facilities outside the United States, as it 

is not expected to be cost-effective to 

transport over longer distances sugar 

that must be used for bioenergy 

production. 

Any biofuel producer that wishes to 

participate in the Environmental 

Protection Agency’s (EPA’s) Renewable 

Fuel Standard (RFS) program must 

comply with EPA regulations, in 40 CFR 

part 80; however, participation in RFS 

is not a requirement for participation in 

FFP. Assuming all of the applicable RFS 

requirements are met, EPA has 

confirmed that ethanol produced from 

U.S. sugarcane would qualify for an 

advanced fuel RIN, and that ethanol 

produced from U.S. sugar produced 

from U.S. sugar beets would qualify for 

a conventional RIN, subject to certain 

grandfathering provisions. 

CCC will invite sugar producers to 

sell sugar for FFP and shortly thereafter 

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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Rules and Regulations 45443 

invite bioenergy producers to bid on 

purchasing sugar for bioenergy 

production. The terms and conditions of 

the sugar purchase and sale contracts 

will be outlined in the dual invitations. 

The invitations will be placed on the 

FSA Commodity Operations Web site at 

http://www.fsa.usda.gov/FSA/webapp?

area=home&subject=coop&

topic=landing. Alternatively, CCC may 

negotiate contracts directly with sellers 

or buyers, if CCC determines that such 

negotiation, compared to other means, 

either will reduce the likelihood of 

forfeited sugar or reduce costs of 

removing sugar from the market. CCC 

may employ several contracting 

strategies to discover the most costeffective strategy to manage FFP. 

The 2008 Farm Bill amendments 

require that purchasers of sugar under 

FFP take possession within 30 days after 

the date of purchase from CCC. CCC will 

therefore attempt, when possible, to 

identify a bioenergy producer (sugar 

buyer) before CCC purchases sugar, and 

require the buyer to take possession of 

the sugar within 30 days of purchase. 

Since the law prohibits CCC, to the 

maximum extent possible, from paying 

storage fees for FFP sugar, CCC will 

structure the FFP contracts so that CCC 

does not pay any storage fees. Specific 

terms and conditions will be outlined in 

the invitations to sell and buy sugar for 

the FFP. For instance, potential sugar 

buyers will have the opportunity to 

discuss and arrange storage and load out 

terms with the sugar seller prior to 

placing bids. As specified in subpart E, 

sugar acquired by CCC through methods 

other than FFP, such as sugar loan 

forfeitures, may also be sold for 

bioenergy production through FFP. 

Since the value of sugar required to be 

sold for bioenergy production will likely 

be less than the market price for sugar 

used for human consumption, there is 

an incentive for FFP sugar sold to 

bioenergy producers to leak into the 

domestic human consumption market. 

Therefore, CCC will require proof from 

each FFP bioenergy producer that the 

sugar is used in the bioenergy facility 

for the production of bioenergy. 

Bioenergy producers, at minimum, will 

be required to permit CCC access to the 

bioenergy facility to verify compliance; 

however, CCC may also require a 

performance bond or a similar 

instrument to assure that the purchased 

sugar is used to produce bioenergy. 

Specific terms and conditions of any 

such bond or instrument will be 

specified in the invitations to sell and 

buy sugar for the FFP. 

As noted above, CCC is not specifying 

the precise contracting method or 

language in the rule in order to maintain 

maximum flexibility in achieving 

program goals in the most cost effective 

way. 

Discussion of Comments 

The comments CCC received in 

response to the proposed rule were from 

a representative of all sugar producers, 

a representative of sugar beet 

processors, a representative of 

companies that use sugar and 

sweeteners to manufacture foods and 

beverages, and three members of the 

general public. Half of the comments 

offered specific suggestions to amend 

the provisions in the proposed rule; the 

rest generally opposed or supported the 

Sugar Program. There was not a 

consensus on any of the suggested 

changes. There was general support for 

many of the provisions in the proposed 

rule, including how eligible forms of 

sugar for FFP are defined and CCC’s 

proposed flexible approach to how 

purchases will be made if needed. Two 

commenters recommended terminating 

the Sugar Program, which CCC does not 

have authority to do; another comment 

generally supported FFP. The other 

comments offered specific suggestions 

to amend the rule or provided specific 

suggestions on how the rule should be 

implemented. The following provides a 

summary of the issues in the comments 

and CCC’s responses, including changes 

being made to the final rule in response 

to the comments. 

Disposition of Sugar Inventory 

Comment: CCC should leave 

‘‘emergency shortage’’ undefined. 

Leaving the term undefined would give 

CCC the flexibility needed to operate the 

program successfully and that linking 

the term to a price formula is not 

authorized by the 2008 Farm Bill 

amendments. Defining the term in this 

inventory disposal regulation might 

automatically, and inappropriately, lead 

to the same definition being applied to 

the administration of the TRQs as 

required by 7 U.S.C. 1359kk. 

Response: The 2008 Farm Bill 

amendments specify some of the 

potential causes of an emergency 

shortage, but do not define an 

emergency shortage in terms of either 

price or a supply disruption. Based on 

a lack of consensus of commenters, this 

rule does not define the term. (See 

below, other commenters suggested that 

this term be defined.) CCC also wishes 

to maintain flexibility to determine 

whether particular events and their 

consequences give rise to an emergency 

shortage of sugar for human 

consumption in the United States 

market. 

Comment: CCC should define the 

term ‘‘emergency shortage’’ because 

market participants deserve to have a 

clear picture of CCC’s thinking on this 

issue. Emergency shortage should be 

defined the same way it is used when 

CCC decides to increase the sugar TRQ. 

The definition should define an 

emergency shortage in terms of the 

effects, not the cause (for example, 

supply disruptions and price spikes). A 

specific percentage price increase above 

the loan forfeiture would be a useful 

way to measure what price constitutes 

an emergency shortage. Also, CCC 

should consider declarations of force 

majeure, plant closures, slowdowns, 

and temporary shutdowns in production 

lines as emergencies. CCC should 

consider establishing a benchmark of 

‘‘adequate supplies at reasonable 

prices,’’ as already specified in the 

Harmonized Tariff Schedule of the 

United States, to determine if a shortage 

exists. 

Response: The 2008 Farm Bill 

amendments specify some of the causes 

that can give rise to an emergency 

shortage, but do not define what 

constitutes a shortage in terms of its 

effects. Other commenters suggested 

that this term be left undefined. Based 

on a lack of consensus of commenters, 

this rule does not define the term. CCC 

will use discretion to determine when 

an emergency shortage exists, and not 

define a specific formula or price level 

in the rule. The 2008 Farm Bill 

amendments require a triggering event 

before CCC can declare an ‘‘emergency 

shortage.’’ From past experience with 

sugar shortages caused by disasters, CCC 

recognizes that it must be flexible to 

mitigate the unforeseen consequences of 

disastrous events. However, CCC would 

consider food manufacturing plant 

closures and similar events as events 

that could give rise to an emergency 

shortage. 

Comment: CCC should not limit 

eligible causes of emergency shortages 

to only the natural causes specifically 

mentioned in the 2008 Farm Bill 

amendments, since the amendments 

also include references to ‘‘other natural 

disaster, or other similar event.’’ 

However, the 2008 Farm Bill 

amendments are clear that the triggering 

event must be ‘‘similar’’—it does not 

give CCC complete discretion to 

consider any event or market condition 

as the cause of an emergency shortage. 

The courts have repeatedly upheld the 

principle of ejusdem generis—that 

where general words follow specific 

ones, the general words must be 

construed to include only objects 

similar to those specified. The final rule 

should use the 2008 Farm Bill 

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45444 Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Rules and Regulations 

amendments language, but in 

implementation, it must be clear that 

mere high prices or low ending stocks 

do not constitute a similar event to war 

or hurricane. An eligible manmade 

event causing a shortage of sugar must 

be similar to a war, that is, an extreme 

event that results in massive loss of life, 

property destruction, or a severe 

disruption of international trade—not 

merely low ending stocks or high prices. 

Similarly, an ‘‘other natural disaster’’ 

cause of sugar shortage must be on the 

order of a flood or hurricane that causes 

death and destruction, and not a more 

localized event such as a tornado or hail 

storm. 

Response: CCC has decided not to 

define the ‘‘emergency shortage’’ or its 

causes in the regulation as there was no 

consensus among commenters. CCC also 

wishes to maintain flexibility to 

determine whether particular events 

and their consequences give rise to an 

emergency shortage of sugar for human 

consumption in the United States 

market. The final rule uses the specific 

language from the 2008 Farm Bill 

amendments to specify what constitutes 

a cause of an emergency shortage. 

Feedstock Flexibility Program 

In the proposed rule, CCC requested 

comment on how CCC should calculate 

a sugar market surplus, particularly for 

the required September 1 estimate, 

when uncertainties are greatest. CCC 

also requested comments on appropriate 

methods to estimate the likelihood of 

forfeitures and to determine the quantity 

of sugar to be purchased in each quarter. 

In comments on the proposed rule, both 

sugar producers and sugar users 

supported estimating a surplus based on 

comparing stocks to stock levels that 

have resulted in forfeitures in the past. 

Sugar producers supported a generally 

flexible approach with no specific 

numerical trigger for implementing FFP, 

while sugar users supported an 

unspecified numerical threshold above 

the stock level that triggered forfeitures 

in the past. In the absence of a 

consensus on a specific formula for 

determining that forfeitures are likely, 

CCC retained the flexible language from 

the proposed rule that does not specify 

a formula CCC will use to determine the 

quantity of sugar likely to be forfeited. 

In the proposed rule, CCC asked for 

comments on whether the regulations 

should specify one particular method of 

contracting for FFP purchases. There 

was a consensus that FFP should have 

the flexibility to determine the most 

appropriate approach if and when the 

program is needed. 

Comment: The option provided in the 

proposed rule that CCC declare a sugar 

market surplus to be any stocks level 

appearing in USDA’s World 

Agricultural Supply and Demand 

Estimates (WASDE) report that are over 

and above the stock level expected to 

result in forfeitures should be used. 

Response: The WASDE stock levels 

will certainly be considered in 

analyzing whether a surplus exists. In 

the absence of a consensus on any 

specific formula as to what level 

represents an expectation of forfeitures, 

CCC has not specified a formula for 

what constitutes a surplus in this rule. 

Comment: The level of stocks that 

produced forfeitures in the past may not 

lead to forfeitures in the future. Stocks 

can be, and have been, somewhat higher 

than the traditional ideal level of 14.5 

percent, or even 15.5 percent, without 

leading to forfeitures. Use some 

projected stock level above the level that 

has triggered forfeitures in the past to 

predict surpluses. 

Response: In the absence of a 

consensus on any specific formula as to 

what level represents an expectation of 

forfeitures, CCC has not specified what 

constitutes a surplus in this rule. 

Comment: CCC should not use any 

numerical stipulation to specify the 

likelihood of forfeitures or for 

determining quantities to purchase. 

Response: There is no formula 

specified in the rule for what constitutes 

a surplus. CCC will use objective criteria 

based on market data to justify its 

determination of forfeiture risk and 

quantities to purchase. 

Comment: We support CCC’s FFP 

sugar purchase strategy of staggering 

CCC purchases for biofuel as the market 

unfolds, rather than one single 

purchase. 

Response: CCC is required by 

applicable law to estimate the quantity 

to be made available for purchase and 

sale under FFP quarterly, but will take 

a conservative approach early in the 

year, as discussed in the background 

section of the proposed rule. 

Comment: CCC should wait until the 

end of the FY, when forfeitures could 

occur, to make any purchases for FFP. 

Response: CCC will make quarterly 

estimates of the quantity of eligible 

sugar that will be made available for 

purchase and sale under the FFP, and 

announce by press release the quantity, 

if any, and timing of availability of FFP 

purchases and sales. If the projected 

surplus is large, CCC will need to make 

purchases before the end of the FY to 

achieve the goal of avoiding sugar loan 

forfeitures. CCC’s purchases will be 

more conservative earlier in the year 

than later, due to the greater level of 

uncertainty early in the year. CCC 

cannot wait to make FFP purchases only 

when forfeitures would occur, for 

example, in August for FY 2013, 

because a principal goal of FFP is to 

prevent forfeitures. 

Comment: We support CCC’s proposal 

that to be eligible for FFP, sugar must be 

processed and located in the United 

States from domestically-grown 

sugarcane and sugar beets. Also, only 

biofuel facilities within the U.S. should 

be eligible to purchase sugar. 

Response: CCC clarifies the language 

in 7 CFR part 1435, subpart G that to be 

eligible for FPP, the sugar seller must be 

located in the United States. As 

specified in this rule, eligible sugar for 

FFP purchase must have been processed 

in the United States from domesticallygrown sugarcane and sugar beets. 

However, eligible buyers are not 

required to use the purchased FFP sugar 

in U.S. facilities. Section 9010 of the 

2002 Farm Bill, as amended, expressly 

provides that the sale of sugar to 

bioenergy producers must be conducted 

in a manner that ensures the Sugar 

Program is operated at no cost to the 

Federal Government by avoiding 

forfeitures to CCC. To restrict eligible 

buyers to those bioenergy producers 

whose production facilities are located 

in the United States may restrict the 

pool of sugar buyers, potentially 

increasing the cost to the Federal 

Government and the likelihood of 

forfeitures to CCC. Consequently, the 

final rule does not adopt this restriction. 

Comment: CCC needs to take a 

flexible approach to contracting to 

arrive at the most cost-efficient way to 

manage FFP. We support the approach 

in the proposed rule that FFP tender 

offers will include both a seller and 

buyer of sugar for bioenergy production 

to minimize FFP costs. We also support 

the strategy of pre-qualifying bioenergy 

producers willing to buy FFP sugar. 

Response: CCC will generally employ 

competitive procedures to minimize 

CCC costs. Since commenters supported 

a flexible approach, CCC will not 

specify a specific purchase method in 

the rule. 

Comment: CCC should evaluate offers 

in light of the forfeiture equivalent price 

so that sellers do not earn substantially 

more for selling surplus sugar to FFP 

than they would by forfeiting sugar to 

CCC. CCC must structure the contracting 

procedure to minimize the chance for 

FFP sugar sellers to receive more than 

they would if they forfeited sugar under 

loan. 

Response: CCC has the authority to 

limit bid acceptance; no modification of 

the rule is necessary to address this 

comment. The terms of CCC’s sugar 

purchase compared to the terms of 

forfeiture will determine if CCC can 

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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Rules and Regulations 45445 

expect to pay more or less under FFP 

than the forfeiture proceeds. In 2000, a 

year in which forfeitures previously 

occurred, CCC limited acceptable offers 

to less than the forfeiture proceeds, 

resulting in CCC paying less, and in 

some cases substantially less, for sugar 

purchased by processors than the 

proceeds later retained from forfeiture. 

However, the storage cost restriction 

and other FFP requirements may affect 

CCC’s terms of purchase and CCC’s 

determination of an acceptable offer. 

Comment: CCC should include an 

audit clause in the contract to purchase 

sugar for bioenergy production to avoid 

fraud and misuse and to ensure the 

sugar does not enter the human 

consumption chain. 

Response: As specified in this rule, 

each bioenergy producer that purchases 

sugar through FFP must provide proof 

to CCC that the sugar is used by such 

producer for the production of 

bioenergy. 

Comment: The rule language is not 

consistent. The language in the example 

specified in § 1435.602(e), ‘‘Eligible 

commodity to be purchased by CCC,’’ is 

inconsistent with the proposed rule text 

in the rest of that paragraph. The 

example indicates that CCC would only 

consider a percentage of the refined 

sugar expected to be made from a sugar 

bearing product, when the other 

language in the same paragraph stated 

that all of the expected sugar to be made 

from the product would be considered 

in evaluating a bid. 

Response: CCC has corrected the 

language so that the example is 

consistent with the rest of the regulatory 

text in that section. 

Summary of Changes 

In summary, as discussed above, CCC 

is making minor changes to the 

regulatory text in response to comments, 

including a correction and several 

clarifications. Sugar buyers and sugar 

producers had opposing comments on 

both sugar disposition and FFP, with 

buyers generally wanting CCC to take 

actions that would keep prices as low as 

possible, and sellers wanting CCC to 

take actions to support prices as high as 

possible. Given these irreconcilable 

opposing interests and lack of 

consensus on approach, CCC has made 

no substantive changes in response to 

comments, because the evenly balanced 

comments reflect that the proposed rule, 

to the extent possible within the 

requirements of applicable law, 

balances the different stakeholder 

interests. 

CCC has made other changes from the 

proposed rule, not in response to 

comments, to clarify its evaluation of 

the types of sugar eligible for FFP and 

the location of eligible bioenergy 

producers. CCC has also determined 

that it should not limit eligible 

bioenergy producers to those with 

production facilities in the United 

States. Such a limitation was 

determined to unnecessarily limit 

competition for CCC sugar and may 

increase program costs. 

Effective Date 

The Administrative Procedure Act (5 

U.S.C. 553) provides generally that 

before rules are issued by Government 

agencies, the rule must be published in 

the Federal Register, and the required 

publication of a substantive rule is to be 

not less than 30 days before its effective 

date. One of the exceptions is when the 

agency finds good cause for not delaying 

the effective date. CCC finds that there 

is good cause for making this rule 

effective less than 30 days after 

publication in the Federal Register 

because this rule allows CCC to prevent 

sugar in the U.S. market from being 

forfeited to CCC. The margin between 

the raw sugar market price and the raw 

sugar price level encouraging forfeiture 

fell in 2012 from 13.8 to 1.6 cents per 

pound. Therefore, to avoid possible 

forfeitures for crop year 2012, this final 

rule is effective when published in the 

Federal Register. 

Executive Orders 12866 and 13563 

Executive Order 12866, ‘‘Regulatory 

Planning and Review,’’ and Executive 

Order 13563, ‘‘Improving Regulation 

and Regulatory Review,’’ direct agencies 

to assess all costs and benefits of 

available regulatory alternatives and, if 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). Executive Order 13563 

emphasized the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. 

The Office of Management and Budget 

(OMB) designated this rule as 

significant under Executive Order 12866 

and, therefore, OMB reviewed this rule. 

A summary of the cost-benefit analysis 

of this rule is provided below and is 

available at http://www.regulations.gov 

and from the contact listed above. 

Summary of Costs and Benefits 

Predicting conditions months into the 

future is a process that involves 

inevitable uncertainty, with variables 

subject to change. Current baseline 

projections developed by USDA 

indicate that FFP authorities may be 

necessary only once during the 10-year 

baseline period. The analysis estimated 

a 76.9 percent chance of FFP being 

activated in FY 2013. 

FSA assumes that 300,000 tons of 

CCC sugar loan collateral will be 

forfeited in FY 2013 if FFP is not 

implemented. FFP is expected to cost 

CCC an estimated $54.5 million more 

than using the least-cost surplus 

management option. The total cost 

associated with FFP is $92.3 million 

(300,000 tons × 2,000 lbs × 15.38 cents 

per lb = $92.3 million). Despite this 

cost, FFP has at least one benefit that is 

not available with other sugar supply 

reduction methods. Specifically, FFP 

will allow the generation of Renewable 

Identification Numbers (RINs), which 

will help gasoline and diesel blenders 

meet their Renewable Fuels Standard 

(RFS) mandates in 2014. 

The current baseline projections 

indicate that there are no sugar loan 

forfeitures or CCC purchases of sugar for 

ethanol expected from FY 2014–2023, 

because projected raw cane and refined 

beet sugar prices are above the 

minimum prices that would result in 

forfeitures. More specifically, FFP is 

projected to be unneeded after FY 2013 

because the domestic market is no 

longer projected to be in surplus, and 

the world market is projected to affect 

domestic prices above rate levels 

specified in the 2008 Farm Bill. 

Expected growth in U.S. beet and 

cane sugar production over the next 

decade is projected to be very modest— 

less than 5 percent over the projections 

period. Sugar use is projected to grow 

about 0.7 percent a year, or 7 percent 

over the decade. Mexican imports are 

expected to average 12.8 percent of U.S. 

domestic sugar use. TRQ sugar imports 

from U.S. commitments made to 

member states of the World Trade 

Organization (WTO) and under existing 

trade agreements are expected to 

average 1.444 million short tons, raw 

value (STRV) annually. World raw sugar 

prices (Intercontinental Exchange No. 

11, nearby futures) forecasts by the 

Organization for Economic Co-operation 

and Development (OECD) are used in 

the analysis, which average 21.58 cents 

per pound through the projection 

period, which is above the U.S. Sugar 

Program’s support rate of 20.9 cents per 

pound. 

Regulatory Flexibility Act 

In accordance with the Regulatory 

Flexibility Act, 5 U.S.C. 601, FSA has 

determined that there will not be a 

significant economic impact on a 

substantial number of small entities. 

The entities that would be affected by 

this rule are sugar producers and sugar 

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45446 Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Rules and Regulations 

bioenergy producers. The sugar 

producers are not small businesses 

according to the North American 

Industry Classification System and the 

U.S. Small Business Administration. 

There are currently no commercial 

bioenergy producers in the United 

States who use sugar solely as a 

feedstock, although sugar may be 

blended with other feedstocks currently 

used in the manufacture of bioenergy. 

The bioenergy producers in the United 

States who use other commodities as a 

feedstock and that might be expected to 

purchase sugar as a feedstock are not 

small businesses. 

Environmental Review 

The environmental impacts of this 

rule have been considered in a manner 

consistent with the provisions of the 

National Environmental Policy Act 

(NEPA, 42 U.S.C. 4321–4347), the 

regulations of the Council on 

Environmental Quality (40 CFR parts 

1500–1508), and FSA regulations for 

compliance with NEPA (7 CFR part 

799). The changes to the Sugar Program 

required by Title IX of the 2008 Farm 

Bill identified in this rule are 

considered non-discretionary. 

Therefore, CCC has determined that 

NEPA does not apply to this rule and no 

environmental assessment or 

environmental impact statement will be 

prepared. 

Executive Order 12372 

This program is not subject to 

Executive Order 12372, 

‘‘Intergovernmental Review of Federal 

Programs,’’ which requires consultation 

with State and local officials. See the 

notice related to 7 CFR part 3015, 

subpart V, published in the Federal 

Register on June 24, 1983 (48 FR 29115). 

Executive Order 12988 

This rule has been reviewed under 

Executive Order 12988, ‘‘Civil Justice 

Reform.’’ This rule would not preempt 

State and or local laws, and regulations, 

or policies unless they present an 

irreconcilable conflict with this rule. 

The rule will not have retroactive effect. 

Before any judicial action may be 

brought regarding the provisions of this 

rule, the administrative appeal 

provisions of 7 CFR parts 11 and 780 

must be exhausted. 

Executive Order 13132 

This rule has been reviewed under 

Executive Order 13132, ‘‘Federalism.’’ 

The policies contained in this rule will 

not have any substantial direct effect on 

States, the relationship between the 

Federal government and the States, or 

the distribution of power and 

responsibilities among the various 

levels of government. Nor would this 

rule impose substantial direct 

compliance costs on State and local 

governments. Therefore, consultation 

with the States is not required. 

Executive Order 13175 

This rule has been reviewed for 

compliance with Executive Order 

13175, ‘‘Consultation and Coordination 

with Indian Tribal Governments.’’ The 

policies in this rule do not have Tribal 

implications that preempt Tribal law. 

Unfunded Mandates 

Title II of the Unfunded Mandate 

Reform Act of 1995 (UMRA, Pub. L. 

104–4) requires Federal agencies to 

assess the effects of their regulatory 

actions on State, local, or Tribal 

governments or the private sector. 

Agencies generally must prepare a 

written statement, including a cost 

benefit analysis, for proposed and final 

rules with Federal mandates that may 

result in expenditures of $100 million or 

more in any 1 year for State, local, or 

Tribal governments, in the aggregate, or 

to the private sector. UMRA generally 

requires agencies to consider 

alternatives and adopt the more cost 

effective or least burdensome alternative 

that achieves the objectives of the rule. 

This rule contains no Federal mandates 

under the regulatory provisions of Title 

II of the Unfunded Mandates Reform 

Act of 1995 for State, local, and Tribal 

government or the private sector. 

Therefore, this rule is not subject to the 

requirements of sections 202 and 205 of 

UMRA. 

Paperwork Reduction Act 

We anticipate that in the next 3 years 

fewer than 10 sugar producers will 

participate in FFP by selling their sugar 

to CCC. In addition, FSA estimates that 

in each of the next 3 years, fewer than 

10 bioenergy producers will participate 

in FFP by buying sugar from CCC. Each 

of these will use a different form to 

collect different types of information. 

Therefore, the Paperwork Reduction Act 

exemption specified in 5 CFR 1320.3(c) 

applies because fewer than 10 sugar 

producers or 10 bioenergy producers are 

expected to need to complete the 

respective forms for selling or buying 

sugar for FFP. 

E-Government Act Compliance 

CCC is committed to complying with 

the E-Government Act, to promote the 

use of the Internet and other 

information technologies to provide 

increased opportunities for citizen 

access to Government information and 

services, and for other purposes. 

List of Subjects in 7 CFR Part 1435 

Loan programs-agriculture, Penalties, 

Price support programs, Reporting and 

recordkeeping requirements, Sugar. 

For the reasons discussed above, CCC 

amends 7 CFR part 1435 as follows: 

PART 1435—SUGAR PROGRAM 

■ 1. Revise the authority citation for part 

1435 to read as follows: 

Authority: 7 U.S.C. 1359aa–1359jj, 7272, 

and 8110; 15 U.S.C. 714b and 714c. 

■ 2. Add subpart E to read as follows: 

Subpart E—Disposition of CCC Inventory 

Sec. 

1435.400 General statement. 

1435.401 CCC sugar inventory disposition. 

Subpart E—Disposition of CCC 

Inventory 

§ 1435.400 General statement. 

This subpart will be applicable in the 

event that raw, refined, or in-process 

sugar is owned and held in CCC 

inventory (accumulated under the 

program authorized by section 156 of 

the Federal Agriculture Improvement 

and Reform Act, as amended) as 

specified in subpart B of this part. 

§ 1435.401 CCC sugar inventory 

disposition. 

(a) CCC will dispose of inventory in 

the following manner, if CCC has not 

determined there is an emergency 

shortage of sugar for human 

consumption in the domestic market: 

(1) By sale to bioenergy producers 

under the Feedstock Flexibility Program 

as specified in subpart G of this part, 

(2) By transfer to sugarcane and sugar 

beet processors under the Processor 

Sugar Payment-In-Kind Program as 

specified in subpart F of this part, 

(3) By the buyback of certificates of 

quota eligibility (CQEs), or 

(4) By the use of any other authority 

for the disposition of CCC-owned sugar 

for nonfood use or otherwise in a 

manner that does not increase the net 

quantity of sugar available for human 

consumption in the United States. 

(b) CCC may use any of its authority 

for the disposition of CCC-owned sugar, 

if CCC has determined there is an 

emergency shortage of sugar for human 

consumption in the domestic market 

caused by war, flood, hurricane, or other 

natural disaster, or similar event, as 

determined by CCC. 

■ 3. Add subpart G to read as follows: 

Subpart G—Feedstock Flexibility Program 

Sec. 

1435.600 General statement. 

1435.601 Sugar surplus determination and 

public announcement. 

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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Rules and Regulations 45447 

1435.602 Eligible sugar to be purchased by 

CCC. 

1435.603 Eligible sugar seller. 

1435.604 Eligible sugar buyer. 

1435.605 Competitive procedures. 

1435.606 Miscellaneous. 

1435.607 Appeals. 

Subpart G—Feedstock Flexibility 

Program 

§ 1435.600 General statement. 

(a) The provisions of this subpart will 

be applied when CCC determines that 

buying sugar is necessary to avoid 

forfeitures of sugar pledged as collateral 

for CCC sugar loans. 

(b) This subpart will be applicable to: 

(1) Any sugar seller who contracts 

with CCC to sell sugar, and 

(2) Any bioenergy producer who 

contracts with CCC to purchase sugar 

for the production of bioenergy. 

§ 1435.601 Sugar surplus determination 

and public announcement. 

(a) CCC will estimate by September 1 

the quantity of sugar that will be made 

available for purchase and sale under 

FFP for the following crop year. 

(b) Not later than January 1, April 1, 

and July 1 of the fiscal year, CCC will 

re-estimate the quantity of sugar that 

will be made available for purchase and 

sale under the FFP for the crop year. 

(c) CCC will announce by press 

release the estimates in paragraphs (a) 

and (b) of this section, which will reflect 

CCC’s forecast of sugar likely to be 

forfeited to CCC and any uncertainty 

surrounding that forecast. 

§ 1435.602 Eligible sugar to be purchased 

by CCC. 

(a) CCC will only purchase raw sugar, 

refined sugar, or in-process sugar for 

FFP that is eligible to be used as 

collateral under the CCC Sugar Loan 

Program, as specified in § 1435.102. 

(b) Raw sugar, refined sugar, or inprocess sugar purchased directly from 

any domestic sugar beet or sugarcane 

processor that made the raw sugar, 

refined sugar, or in-process sugar will be 

credited against the processor’s sugar 

marketing allocation. (The definition for 

‘‘marketing’’ in § 1435.2 applies to this 

subpart.) 

(c) CCC will only purchase sugar 

located in the United States. 

(d) CCC will evaluate an offer to sell 

sugar to CCC based upon CCC’s estimate 

of the reduction in refined sugar supply 

available for human consumption due to 

the purchase. For example, if processing 

thick juice (an in-process sugar) would 

yield 70 percent sugar for human 

consumption, then CCC will only 

consider 70 percent of the volume of the 

thick juice in evaluating the per unit 

sales price. 

(e) CCC will only purchase the sugar 

if such purchase would reduce the 

likelihood of forfeitures of CCC sugar 

loans, as determined by CCC. 

§ 1435.603 Eligible sugar seller. 

(a) To be considered an eligible sugar 

seller, the sugar seller must be located 

in the United States. 

(b) [Reserved] 

§ 1435.604 Eligible sugar buyer. 

(a) To be considered an eligible sugar 

buyer, the bioenergy producer must 

produce bioenergy products, including 

fuel grade ethanol or other biofuels. 

(b) [Reserved] 

§ 1435.605 Competitive procedures. 

(a) CCC will generally issue tenders 

for bids, before entering into contracts 

with any eligible sugar seller or buyer, 

with the intent of selecting the bid(s) 

that represents the least cost to CCC of 

removing sugar from the market. 

(b) CCC may, at times, negotiate 

contracts directly with sellers or buyers, 

if CCC determines that such negotiation 

will result in either reduced likelihood 

of forfeited sugar under the CCC sugar 

loan program or reduced costs of 

removing sugar from the market, which 

will reduce the likelihood of forfeitures 

of sugar to CCC. 

§ 1435.606 Miscellaneous. 

(a) As a sugar buyer, a bioenergy 

producer must take possession of the 

sugar no more than 30 days from the 

date of CCC’s purchase. 

(b) CCC, to the maximum extent 

practicable, will not pay storage fees for 

the sugar purchased under this program. 

A bioenergy producer must assume any 

storage costs accrued from date of 

contract to date of taking possession of 

the sugar. 

(c) Each bioenergy producer that 

purchases sugar through FFP must 

provide proof as specified by CCC that 

the sugar has been used in the bioenergy 

factory for the production of bioenergy 

and permit access for USDA to verify 

compliance. 

§ 1435.607 Appeals. 

(a) The administrative appeal 

regulations of parts 11 and 780 of this 

title apply to this part. 

(b) [Reserved] 

Signed on July 24, 2013. 

Juan M. Garcia, 

Administrator, Farm Service Agency, and 

Executive Vice President, Commodity Credit 

Corporation. 

[FR Doc. 2013–18160 Filed 7–26–13; 8:45 am] 

BILLING CODE 3410–05–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 40 

[Docket No. RM12–19–000; Order No. 782] 

Revisions to Modeling, Data, and 

Analysis Reliability Standard 

AGENCY: Federal Energy Regulatory 

Commission. 

ACTION: Final rule. 

SUMMARY: In this Final Rule, pursuant to 

section 215 of the Federal Power Act, 

the Federal Energy Regulatory 

Commission (Commission) approves 

Modeling, Data, and Analysis (MOD) 

Reliability Standard MOD–028–2, 

submitted to the Commission for 

approval by the North American Electric 

Reliability Corporation (NERC), the 

Commission-certified Electric 

Reliability Organization. The 

Commission finds that the proposed 

Reliability Standard represents an 

improvement over the currentlyeffective standard, MOD–028–1 because 

the proposed Reliability Standard 

clarifies the timing and frequency of 

Total Transfer Capability calculations 

needed for Available Transfer Capability 

calculations. The Commission also 

approves NERC’s proposed 

implementation plan and retirement of 

the currently-effective standard. 

DATES: This rule is effective September 

27, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Rachel Bryant (Legal Information), 

Office of General Counsel, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 

20426, (202) 502–6155, 

rachel.bryant@ferc.gov. 

Syed Ahmad (Technical Information), 

Office of Electric Reliability, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 

20426, (202) 502–8718, 

syed.ahmad@ferc.gov. 

Christopher Young (Technical 

Information), Office of Energy of 

Energy Policy and Innovation, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 

20426, (202) 502–6403, 

christopher.young@ferc.gov. 

SUPPLEMENTARY INFORMATION: 

144 FERC ¶ 61,027 

United States Of America 

Federal Energy Regulatory Commission 

Before Commissioners: Jon Wellinghoff, 

Chairman; Philip D. Moeller, John R. 

Norris, Cheryl A. LaFleur, and Tony Clark. 

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