This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

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new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

15933 

Vol. 77, No. 53 

Monday, March 19, 2012 

DEPARTMENT OF AGRICULTURE 

Animal and Plant Health Inspection 

Service 

7 CFR Part 319 

[Docket No. APHIS–2007–0117] 

RIN 0579–AC90 

Importation of Wooden Handicrafts 

From China 

Correction 

In rule document 2012–4962 

beginning on page 12437 in the issue of 

Thursday, March 1, 2012 make the 

following correction: 

On page 12439, in the third column, 

in footnote 2, in the third line ‘‘https:// 

www.ippc.int/index.php?id=13399&tx_

publication_pi1*showUid]=133703&

frompage=13399&type=publication&

subtype=&L=0#item.’’ should read 

‘‘https://www.ippc.int/index.php?id=

13399&tx_publication_pi1[showUid]=

133703&frompage=13399&type=

publication&subtype=&L=0#item.’’ 

[FR Doc. C1–2012–4962 Filed 3–16–12; 8:45 am] 

BILLING CODE 1505–01–D 

DEPARTMENT OF AGRICULTURE 

Farm Service Agency 

7 CFR Parts 761, 762, 764, 765, and 766 

RIN 0560–AI04 

Conservation Loan Program 

AGENCY: Farm Service Agency, USDA. 

ACTION: Final rule. 

SUMMARY: In September 2010, the Farm 

Service Agency (FSA) implemented the 

new Conservation Loan (CL) Program 

authorized by the Food, Conservation, 

and Energy Act of 2008 (the 2008 Farm 

Bill). FSA added the CL Program 

provisions to the existing direct and 

guaranteed loan regulations. The 

provisions provide CL program 

eligibility and servicing options for the 

direct and guaranteed loans made 

through the CL Program. FSA is 

amending the Farm Loan Programs 

(FLP) direct and guaranteed loan 

regulations for the CL Program based on 

public comments received on the 

interim rule. 

DATES: Effective Date: This rule is 

effective May 18, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Connie Holman; telephone: (202) 690– 

0756. Persons with disabilities who 

require alternative means for 

communication (Braille, large print, 

audio tape, etc.) should contact the 

USDA Target Center at (202) 720–2600 

(voice and TDD). 

SUPPLEMENTARY INFORMATION: 

Background 

Section 5002 of the 2008 Farm Bill 

(Pub. L. 110–246) authorized the 

establishment of the CL Program by 

amending section 304 of the 

Consolidated Farm and Rural 

Development Act (CONACT, 7 U.S.C. 

1924). CL loan funds may be used to 

finance the cost of carrying out a 

qualified conservation project. FSA 

published an interim rule (75 FR 54005– 

54016) on September 3, 2010, to add CL 

loan making and servicing provisions to 

the existing direct and guaranteed loan 

regulations. The regulations in 7 CFR 

parts 761, 762, 764, 765, and 766 were 

amended. Those changes to the 

regulation were effective on September 

3, 2010. 

Subsequently, on May 13, 2011, FSA 

published a notice in the Federal 

Register (76 FR 27986) announcing that 

FSA was no longer accepting direct or 

guaranteed applications for the CL 

Program because of a lack of funding. 

On March 7, 2012, FSA published 

another notice in the Federal Register 

(77 FR 13530–13531) announcing that 

we are now accepting guaranteed loan 

applications. However, due to a lack of 

program funding, direct CL applications 

are not being accepted at this time. 

In this final rule, FSA addresses the 

comments received on the interim rule 

and the changes being made in response 

to those comments. The amended 

regulations will be used to service 

outstanding direct and guaranteed CLs 

and to process any new loan 

applications, subject to the availability 

of funding. 

Fifteen commenters submitted 

comments on the interim rule during 

the 60-day comment period. Comments 

were received from the Independent 

Community Bankers of America, 

National Sustainable Agriculture 

Coalition, Forestry Service Division of 

Oklahoma Department of Agriculture 

Food and Forestry, Natural Resources 

Conservation Service (NRCS), American 

Farmland Trust, the general public, and 

FSA employees. This rule was also 

included in the Joint Regional Tribal 

Consultation Strategy facilitated by 

USDA in seven regional consultation 

meetings from November 2010 through 

January 2011. 

The comments addressed multiple 

provisions of the rule. Many of the 

comments received during the comment 

period were supportive. The 

commenters supported many of the CL 

provisions such as the eligible uses for 

CL loan funds, the requirement for 

applicants to obtain an approved NRCS 

conservation plan, the exemption of 

‘‘test for credit’’ and ‘‘graduation’’ 

requirements from the program, loan 

limits, the streamlined CL application 

process, and the targeting of direct and 

guaranteed loan funds for certain 

producer types. 

A number of issues raised in the 

comments resulted in changes to the 

regulations. The overall changes are 

summarized below followed by a 

discussion of the individual comment 

issues and the responses. 

Summary of Amendments to the 

Regulations 

Part 761 provides the general and 

administrative regulations for both 

direct and guaranteed loans. The 

regulation in 7 CFR part 762 specifies 

requirements and procedures that apply 

to making and servicing Guaranteed 

Loans. The regulation in 7 CFR part 763 

specifies the requirements and 

procedures for direct loan making. FSA 

is making several amendments to these 

regulations based on the comments. 

FSA is making a minor amendment to 

the definition of ‘‘Conservation 

Practice’’ to coincide with the definition 

in NRCS regulations. FSA will add a 

definition of ‘‘Forest Stewardship 

Management Plan,’’ make a minor 

amendment to the definition of 

‘‘Conservation Project’’ to add a 

provision to allow conservation 


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15934 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 

measures that are included in a Forest 

Stewardship Management Plan 

approved by the USDA Forest Service to 

be considered eligible uses of CL loan 

funds. Also, FSA is making conforming 

changes to the regulations to allow for 

the inclusion of a Forest Stewardship 

Management Plan. 

FSA is changing the length of the 

repayment period to specify that 

guaranteed CLs may be scheduled over 

a repayment period not to exceed 30 

years. This is a change from the interim 

rule, which limited the repayment term 

of guaranteed CLs to 20 years, the same 

repayment term as direct CLs making 

guaranteed CLs slightly more 

advantageous than direct CLs and thus 

reducing the potential competition 

between commercial lenders and FSA. 

FSA is also clarifying the guaranteed 

loan restructuring requirement to state 

that lenders must ensure that the 

borrower remains in compliance with 

the approved conservation plan or the 

Forest Stewardship Management Plan. 

FSA is making a change to specify 

that CLs made to purchase equipment or 

for real estate purposes of $25,000 or 

less may be secured by a lien on 

chattels. This is a change from the 

interim rule that required FSA to take 

real estate as security, regardless of the 

loan purpose or amount, as first priority 

if real estate security was available. FSA 

further specifies that FSA may accept 

the best lien obtainable on real estate, 

without title clearance or legal service, 

on loans of $25,000 or less. However, if 

FSA is uncertain of the record owner or 

debts against real estate, a title search 

will be required. This change reflects 

the reduced risk of loss with these small 

loans. 

Discussion of Comments and Responses 

The following provides a summary of 

the comments received and FSA’s 

response, including changes we are 

making to the regulations based on the 

comments. 

Definitions 

Comment: FSA should acknowledge 

the role of Forest Stewardship 

Management Plans in the CL Program to 

clarify that Nonindustrial Private Forest 

(NIPF) landowners are excluded from 

eligibility, even though forestry 

practices are included in 7 CFR 762.121 

and 764.231 as an authorized loan 

purpose or use. FSA should include a 

specific reference to NIPF landowners. 

Response: FSA is amending the 

regulations by adding a definition in 

§ 761.2 of ‘‘Forest Stewardship 

Management Plan’’ and providing that 

any conservation practice included in 

the Forest Stewardship Management 

Plan will be an eligible use of CL funds 

under §§ 762.121 and 764.131. 

Comment: The definition of 

‘‘Conservation Practice’’ should be 

amended to coincide with the definition 

in NRCS regulations. 

Response: FSA is amending the 

definition in § 761.2(b) of ‘‘Conservation 

Practice’’ based on the NRCS regulation. 

Eligibility, Graduation, and Market 

Placement 

Comment: Regardless of Section 304 

of the CONACT, special notice must be 

made of the exception of the test for 

credit, family farm, and graduation 

requirements for the CL Program. FSA is 

straying from their original purpose of 

providing credit to those who are unable 

to obtain credit through other sources. 

Response: FSA disagrees with the 

comment. Section 304 of the CONACT 

explicitly eliminates the test for credit 

and does not require that a family sized 

farm be involved to qualify for the CL 

Program. By eliminating these 

requirements it is evident that the 

objective of the CL Program is to 

encourage all farmers to implement 

conservation practices and not for the 

program to serve as a safety net for 

farmers who cannot obtain credit 

elsewhere. No changes have been made 

in response to this comment. 

Comment: FSA did not have a 

sufficient excuse to implement a new 

program that will benefit farmers 

beyond the traditional FSA customer 

base. 

Response: Inclusion of the CL 

Program in the CONACT and the 

subsequent allotment of funds by 

Congress clearly demonstrates 

Congressional intent to have this 

program implemented as authorized in 

the legislation. 

Comment: Direct loans should only be 

made to family sized farms. This would 

maximize the number of participants in 

the CL Program. 

Response: Section 304 of the 

CONTACT does not limit direct loans 

based on the size of the farm; therefore, 

no change is being made to this policy. 

Comment: Add the following 

statement from the interim rule 

preamble that ‘‘This will facilitate 

timely implementation of conservation 

practices that would otherwise be 

postponed due to lack of monetary 

resources’’ to the final rule eligibility 

requirements requiring that applicants 

‘‘must demonstrate to the satisfaction of 

the Agency that the CL is needed to 

facilitate the timely implementation of 

conservation activities that would 

otherwise be postponed due to lack of 

monetary resources.’’ 

Response: The purpose of the CL 

Program is to enhance the environment 

by facilitating implementation of 

conservation measures. Section 304 of 

the CONACT explicitly eliminates the 

test for credit and does not require a 

family sized farm for the CL Program. 

By excluding these requirements from 

the qualifications for a CL, it is clear 

that the CL Program is to serve as an 

inducement for implementation of 

conservation practices. Requiring every 

applicant to demonstrate need would 

undermine the intended purpose of the 

CL Program and be in conflict with the 

authorizing statute. Therefore, FSA is 

not making this change. 

Comment: The blanket exemption that 

allows CL funds to be used to support 

non-eligible enterprises is a mismatch, 

enabling non-farm facilities to qualify 

for a conservation loan without a 

conservation plan approved by a 

competent official. 

Response: The intent of the CL 

Program is to provide loans to allow 

farmers to address conservation needs 

on their land. In the interim rule, in 

§ 764.232, FSA included language that 

requires CL Program participants who 

operate non-eligible enterprises to also 

be involved in agricultural production 

in order to be qualified for the CL 

Program. Program provisions also 

require that CL Program participants 

have an NRCS approved conservation 

plan or Forest Stewardship Management 

Plan to meet eligibility requirements. 

This eliminates the possibility of nonfarm facilities without an approved 

conservation plan or Forest Stewardship 

Management Plan qualifying for the CL 

Program. Therefore, FSA is not making 

a change in response to this comment. 

Comment: FSA should limit the 

number of CLs awarded to applicants 

who are eligible for, and able to obtain, 

credit from a production credit 

association, a Federal Land Bank, or 

other cooperative or private sources. 

Response: FSA is not making the 

suggested change. As authorized, the 

purpose of the CL Program is to 

encourage farmers to implement 

conservation measures and does not 

include the traditional Farm Loan 

Programs provision that limits eligibility 

to those farmers who cannot obtain 

credit from commercial lenders. If FSA 

limited the number of CLs awarded, 

FSA would undermine the intent of the 

CL provisions and purpose of the CL 

Program, which is to fund conservation 

projects. 

Comment: In the absence of the 

family-farm eligibility requirement, FSA 

should require that non-family farm 

applicants have at least 75 percent of 

their assets involved in agricultural 


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Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 15935 

production and earn at least 75 percent 

of their income from agricultural 

activities. 

Response: The exclusion of the test 

for credit and family farm size as 

eligibility requirement for the CL 

Program demonstrates that the purpose 

of the program is to fund conservation 

practices. Establishing a minimum asset 

or income level requirement would 

impose restrictions that are not 

authorized because it could be seen as 

a test for credit that does not apply to 

the CL Program. Therefore, FSA is not 

making the change. 

Comment: Do not amend 7 CFR 

762.110 to specify that market 

placement will not be applicable to the 

CL Program. 

Response: Market placement is used 

to assist qualified existing direct loan 

borrowers and new direct loan 

applicants in obtaining a guaranteed 

farm loan from a commercial lender. 

Utilization of the Market Placement 

Program means the borrower or 

applicant may be able to obtain credit 

elsewhere. The CONACT exempts CL 

Program from the ‘‘credit elsewhere’’ 

requirement. Because FSA will not be 

making a ‘‘credit elsewhere’’ eligibility 

determination, there would be no reason 

to determine if a CL applicant or 

existing CL borrower should be 

considered for market placement. 

Therefore, FSA is not making the 

change. 

Comment: FSA should not have 

changed the ‘‘graduation’’ definition in 

the interim rule because the 2008 Farm 

Bill does not prohibit FSA from 

requesting CL borrowers to graduate, but 

rather only prohibits FSA from 

requiring CL borrowers to refinance. 

Remove the change from the regulation 

and make all necessary conforming 

changes. 

Response: FSA will not be making the 

change. Section 304(g) of the CONACT 

exempts the CL Program from 

graduation requirements established in 

section 333(3) of the CONACT. A CL 

borrower does not have to agree to 

obtain a loan from a commercial lender; 

therefore, graduation does not apply to 

the CL Program. Prior to the interim 

rule, FSA’s definition of graduation 

encompassed all FLP loans. To 

implement this exemption, CL had to be 

excluded from the definition. However, 

excluding CL from the graduation 

definition does not prohibit a CL 

borrower from paying the loan in full 

prior to the maturity date. 

Funding 

Comment: The final rule should make 

clear that CL funding is provided to FSA 

separately and that funds for the CL 

Program will not attach to funding for 

other FLP programs as the other FLP 

programs are solely aimed at farmers 

and ranchers who cannot obtain credit 

elsewhere and who are no larger than 

family sized farms. 

Response: No change will be made for 

this comment. Each year funds are 

appropriated to each specific loan 

program. Previous appropriations bills 

have been worded such that funds can 

be transferred between programs with 

the Secretary’s approval and 

Congressional notification. While this 

has been done in the past, it has only 

been done towards the end of the fiscal 

year and only in cases where resources 

will be unused and where there are 

shortfalls in other programs. 

Comment: FSA should target 50 

percent of direct and guaranteed CL 

funds for beginning and socially 

disadvantaged farmers, owner or tenants 

who use loans to convert to sustainable 

or organic agriculture production 

systems, and producers who use loans 

to build conservation structures or 

establish conservation practices to 

comply with highly erodible land 

conservation exemptions. 

Response: FSA will not make this 

change. FSA is targeting 35 percent of 

direct and guaranteed CL funds to the 

priorities listed in 7 CFR 761.210, which 

includes all the groups listed in the 

comment. An additional 15 percent of 

direct CL funds are targeted for SDA 

participation rates in accordance with 

section 355 of the CONACT. The 15 

percent is based on an estimated 

national average of the county wide 

percentages. The allocation is being kept 

at a national level given the small 

amount of funding for the Program. This 

gives a total of 50 percent of CL funding 

targeted to the various groups as 

specified by the 2008 Farm Bill and 

section 304 of the CONACT. 

Comment: Given ‘‘limited funding,’’ a 

determination should be required that 

the conservation practice(s) would not 

be able to be completed without the CL 

loan being extended. 

Response: FSA is not making the 

suggested change. Implementing 

eligibility restrictions on the financial 

condition of an operation is in 

contradiction to the intent of the CL 

Program, which is to encourage all 

farmers to implement beneficial 

conservation practices. 

Comment: As part of FSA’s effort to 

prioritize CL funding for beginning 

farmers, FSA should send CL Program 

informational materials to producers 

enrolled in the Conservation Reserve 

Program Transition Incentives Program. 

Response: This is an outreach issue, 

and it is not necessary to make a change 

in the final rule. FSA will continue to 

utilize all available opportunities to 

market the CL Program. 

Application Requirements 

Comment: Amend 7 CFR 761.210 to 

require that the conservation plan 

demonstrate NRCS Field Office 

Technical Guide quality criteria for at 

least three resource concerns are or will 

be exceeded. The language in 7 CFR 

761.210 establishing the priority for CL 

funding is ambiguous and highly 

problematic and the requirements for 

priority funding should be more 

explicit. 

Response: The conservation plan on 

which the priority funding 

determination is based on is a product 

of NRCS. FSA recognizes the expertise 

of NRCS in this area and believes that 

NRCS is better equipped to make the 

determination as to whether the 

conservation practices being 

implemented constitute ‘‘moving 

toward’’ sustainable agriculture. FSA 

will, therefore, not be making the 

change. 

Terms 

Comment: There is nothing to 

distinguish or explain why or when a 

borrower would seek a guaranteed loan 

versus a direct loan and FSA should 

allow a longer term for guaranteed loans 

than for direct loans. 

Response: FSA will make a change to 

the rule in §§ 762.124 and 762.145 to 

allow guaranteed CLs to be scheduled 

for repayment over a period not to 

exceed 30 years from the date of the 

note or a shorter period if necessary to 

assure that the loan will be adequately 

secured. The change will make 

guaranteed CLs slightly more 

advantageous and thereby reduce the 

potential competition between 

commercial lenders and FSA. 

Streamlined CLs 

Comment: The USDA Economic 

Research Service (ERS) reported that 

farm business’ debt-to-asset ratio was 

expected to decline to 11.2 percent and 

debt-to-equity was expected to decline 

to 12.5 percent. FSA’s 40 percent debtto-asset ratio is too high and FSA should 

be more flexible and reserve the 40 

percent ratio for family sized farms 

while requiring a lower ratio for larger 

than family sized farms. 

Response: The 11.2 percent debt to 

asset ratio (D/A) mentioned in the 

comment represents all US farm debt 

divided by all US farm assets and is not 

a true representation of the median US 

farm’s D/A ratio. A University of 

Minnesota study showed that 39 percent 

of Minnesota farms had a D/A ratio of 


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15936 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 

greater than 60 percent. ERS defines a 

favorable financial position as positive 

cash flow with D/A less than or equal 

to 40 percent and marginal solvency as 

positive cash flow with D/A of greater 

than 40 percent, making 40 percent a 

reasonable parameter. FSA believes that 

by tying D/A ratio to the size of the farm 

could increase confusion and present 

more instances for inconsistency in 

interpretation. Since the 40 percent D/ 

A ratio discussed is simply the 

threshold permitting reduced loan 

application paperwork and not for loan 

qualification, FSA is not making the 

change. 

Comment: For streamlined CL 

eligibility, FSA should require not only 

a majority of the members of an entity 

have a FICO score of 700, but that those 

members represent a majority of the 

ownership of the entity. This would 

ensure that these members would be the 

individuals truly responsible for key 

decision making for the entity and could 

be the ones making the important 

decisions regarding repayment of the 

loan. 

Response: FSA will not make this 

change. Members with the majority 

ownership of the entity are not always 

the decision makers, and there is no 

way to insure that in every case the 

decision makers of the entity are also 

the members that have the required 

FICO score. Tying FICO scores to the 

percentage of ownership could increase 

confusion and present more instances 

for inconsistency in interpretation. 

Direct CLs 

Comment: FSA should consider 

adding a requirement that an applicant 

for a direct loan must provide evidence 

that they cannot complete the 

conservation practice with a guaranteed 

loan in lieu of a direct loan. 

Response: Section 304(g) of the 

CONACT explicitly exempts the 

program in FSA from the requirement of 

‘‘credit elsewhere.’’ By excluding this 

requirement from the qualifications for 

a CL, Congress clearly signaled the 

intent that the CL Program serves as an 

inducement for implementation of 

conservation practices. Adopting this 

suggestion would undermine the 

purpose of the CL Program, so FSA will 

not make the change. 

Comment: If the CL funding is being 

awarded to a project for which Federal, 

State, or local permits must be obtained, 

then FSA should not release CL funding 

until the applicant has secured all 

necessary permits. 

Response: This change is not 

necessary. FSA regulation 7 CFR 

1940.309 deals with environmental due 

diligence and addresses the requirement 

for applicants to obtain permits when 

required by local and State laws. In 

addition, 7 CFR 761.10(c)(2) requires 

that applicants obtain required State 

and local construction approvals and 

permits prior to loan closing when 

developing real estate. 

Guaranteed CLs 

Comment: The guarantee to lenders 

should be 90 percent because otherwise 

there would be diminishing incentives 

to utilize the guaranteed loan program 

and greater incentives to utilize the 

government funded direct loan program. 

Response: FSA will not make this 

change since Section 304(e) of the 

CONACT mandates the 75 percent 

guarantee. 

Comment: The requirement that 

lenders certify that a CL borrower is in 

compliance with the conservation plan 

when restructuring should be modified 

to require ‘‘the lender or appropriate 

USDA office at the discretion of the 

lender.’’ USDA officials may be in the 

best position to determine compliance 

with conservation plans. Also, USDA 

officials should be required to make the 

determination in an expedited manner. 

Response: FSA reworded the text in 

§ 762.145 to provide that for CLs the 

lender will ‘‘ensure that the borrower is 

maintaining the practice for which the 

CL was made,’’ rather than ‘‘certify’’ the 

borrower is in compliance with the 

approved conservation or Forest 

Stewardship Management Plan. This 

also will be included in the FSA 

administrative handbook to clarify the 

requirement. 

Security and Title Clearance 

Comment: As published in the 

interim rule, 7 CFR 764.235 was added 

to provide that direct CLs will be 

secured in accordance with 7 CFR 

764.103 through 764.106. Furthermore, 

CLs are required to be secured first by 

a lien on real estate, if available and 

then by chattels if determined 

acceptable by FSA. The requirement to 

require real estate as security priority is 

too restrictive when the loan funds will 

be used to purchase chattels or for lower 

loan amounts. The requirement of 

taking real estate as priority also 

increases the closing cost expenses to 

borrowers when the loan amount may 

be relatively small and consideration 

should be given to the fact that many of 

these loans will receive significant cost 

share payments from NRCS that will 

result in very small net loan amounts. 

Security requirements could be met by 

either real estate or chattels depending 

on the use of loan funds much like 

FSA’s direct Operating Loan (OL). Loans 

up to $25,000 should be secured first by 

chattels, with real estate taken as 

additional security if available. 

Response: FSA will make changes to 

this security requirement in § 764.235 

based on this comment. A lien on 

chattel security will be acceptable for all 

loans made to purchase equipment or 

for loans of less than $25,000. A lien on 

real estate will still be required for all 

loans of $25,000 or greater when funds 

are used for real estate purposes. 

Comment: For CLs of $25,000 or less, 

FSA should be able to accept the best 

lien obtainable without title clearance or 

legal service. 

Response: FSA will make the change 

in § 764.235 to provide that for CLs of 

$25,000 or less, when real estate is taken 

as security only a certification of 

ownership in real estate is required. For 

loans greater than $25,000 title 

clearance will still be required. As a 

result, real estate title clearance 

requirements for CLs will mirror that of 

the Emergency Loan Program. 

General Program 

Comment: FSA should work with 

NRCS to ensure that producers seeking 

assistance for implementing 

conservation projects are fully aware of 

the availability of the funds through 

FSA’s CL Program. 

Response: FSA is presently working 

with NRCS to market the CL Program 

and will continue to utilize all available 

opportunities to market the CL Program. 

Comment: There is no need to 

establish a new program. FSA should 

simply revise the existing Farm 

Ownership (FO) regulations to add 

projects eligible to be financed with FO 

funds. 

Response: While both FO and Farm 

Operating (OL) loan funds may be used 

for conservations purposes, the 

requirements for these programs are 

more restrictive than those authorized 

for the CL Program. FO and OL 

eligibility require that applicants be 

unable to obtain sufficient credit 

elsewhere at reasonable rates and terms 

and be the operator of a family farm 

after the loan is closed. Furthermore, 

recipients of FO and OL direct loan 

assistance must agree to graduate when 

credit is available from other sources at 

reasonable rates and terms. Revising the 

existing FO or OL regulations would 

eliminate the accessibility to credit for 

conservation projects for FSA’s nontraditional customers and, therefore, 

undermine the purpose of the CL 

Program. FSA is not making this change. 

Comment: FSA should have issued 

the rule as a proposed rule instead of an 

interim rule. The objective of the CL 

Program did not necessitate an interim 


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Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 15937 

rule implementing the program 

immediately in lieu of a proposed rule. 

Response: Many farmers who need 

and want to implement conservation 

measures on their land, often do not 

have the ‘‘up front’’ funds available to 

pay out-of-pocket costs not covered by 

many USDA conservation programs that 

provide only cost share assistance after 

the project is completed. While these 

conservation projects are 

environmentally valuable, they often 

contribute very little to the economic 

productivity of the farming operation 

providing little incentive for private 

sector lending institutions to provide 

financing. This often means 

implementation of vital conservation 

measures must be postponed. This is 

particularly true for farmers in the 

livestock sector who often experience 

dramatic swings in profitability but may 

also have the most critical need to 

implement conservation practices. In 

keeping with the Presidential initiatives 

such as ‘‘A 21st Century Strategy for 

America’s Great Outdoors,’’ USDA 

determined that there was good cause to 

announce the new Conservation Loan 

and Loan Guarantee Program by 

publishing an interim rule that became 

effective immediately upon publication 

to allow FSA to make loans with fiscal 

year 2010 funds. By implementing the 

CL and Loan Guarantee Program this 

way FSA allowed the public the 

opportunity to comment and was also 

able to fund several conservation 

projects with fiscal year 2010 funds. 

Executive Order 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 not 

significant under Executive Order 12866 

and, therefore, OMB was not required to 

review this final rule. 

Environmental Evaluation 

The requirements found in 7 CFR part 

1940, subpart G, must be met for the CL 

Program consistent with the existing 

direct and guaranteed loan regulations. 

Executive Order 12372 

Executive Order 12372, 

‘‘Intergovernmental Review of Federal 

Programs,’’ requires consultation with 

State and local officials. The objectives 

of the Executive Order are to foster an 

intergovernmental partnership and a 

strengthened Federalism, by relying on 

State and local processes for State and 

local government coordination and 

review of proposed Federal Financial 

assistance and direct Federal 

development. For reasons set forth in 

the Notice to 7 CFR part 3015, subpart 

V (48 FR 29115, June 24, 1983), the 

programs and activities within this rule 

are excluded from the scope of 

Executive Order 12372. 

Executive Order 12988 

This rule has been reviewed in 

accordance with Executive Order 12988, 

‘‘Civil Justice Reform.’’ This rule 

preempts State and local laws, 

regulations, or policies that are in 

conflict with this rule. This rule will not 

have retroactive effect. Before any 

judicial action may be brought regarding 

the provisions of this rule, all 

administrative remedies in accordance 

with 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 do 

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 does 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.’’ This 

Executive Order imposes requirements 

on the development of regulatory 

policies that have tribal implications or 

preempt tribal laws. The USDA Office of 

Tribal Relations has concluded that the 

policies contained in this rule do not 

have Tribal implications that preempt 

Tribal law. This rule was included in 

the Joint Regional Consultation Strategy 

facilitated by USDA from November 

2010 through January 2011. This 

consolidated consultation efforts of 70 

rules from the 2008 Farm Bill. USDA 

sent senior level agency staff to seven 

regional locations and consulted with 

Tribal leadership in each region on the 

rules. Once consultation meetings were 

completed, USDA analyzed the 

feedback and incorporated any 

appropriate changes into the regulations 

through rulemaking procedures. There 

were no comments about this 

rulemaking during the Tribal 

Consultation. 

USDA will respond in a timely and 

meaningful manner to all Tribal 

government requests for consultation 

concerning this rule and will provide 

additional venues, such as webinars and 

teleconferences, to periodically host 

collaborative conversations with Tribal 

leaders and their representatives 

concerning ways to improve this rule in 

Indian country. 

Unfunded Mandates 

Title II of the Unfunded Mandates 

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 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 objective of the rule. This rule 

contains no Federal mandates as 

defined by Title II of UMRA for State, 

local, or Tribal governments or for the 

private sector. Therefore, this rule is not 

subject to the requirements of sections 

202 and 205 of UMRA. 

Federal Assistance Programs 

The changes in this rule affect the 

following FSA program as listed in the 

Catalog of Federal Domestic Assistance: 

10.099 Conservation Loans 

Paperwork Reduction Act 

This final rule requires no changes or 

adds new collection to the currently 

approved information collections by 

OMB under the control numbers of 

0560–0155, 0560–0233, 0560–0236, 

0560–0237, 0560–0238, and 0560–0230. 

E-Government Act Compliance 

FSA 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. 


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15938 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 

List of Subjects 

7 CFR Part 761 

Loan programs-Agriculture. 

7 CFR Part 762 

Agriculture, Credit, Loan programsAgriculture. 

7 CFR Part 764 

Agriculture, Credit, Loan programsAgriculture. 

7 CFR Part 765 

Agriculture, Credit, Loan programsAgriculture. 

7 CFR Part 766 

Agriculture, Agricultural 

commodities, Credit, Livestock, Loan 

programs –Agriculture. 

Accordingly, the interim rule 

amending 7 CFR parts 761, 762, 764, 

765, and 766, which was published at 

75 FR 54005–54016 on September 3, 

2010, is adopted as a final rule with the 

following changes: 

PART 761—FARM LOAN PROGRAMS; 

GENERAL PROGRAM 

ADMINISTRATION 

■ 1. The authority citation for part 761 

continues to read as follows: 

Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. 

■ 2. Amend § 761.2(b) as follows: 

■ a. Revise the definitions of 

‘‘conservation practice’’ and 

‘‘conservation project’’ to read as set 

forth below, and 

■ b. Add the definition, in alphabetical 

order, for ‘‘Forest Stewardship 

Management Plan’’ to read as set forth 

below. 

§ 761.2 Abbreviations and definitions. 

* * * * * 

(b) * * * 

Conservation practice means a 

specific treatment, such as a structural 

or vegetative measure, or management 

technique, commonly used to meet 

specific needs in planning and 

implementing conservation, for which 

standards and specifications have been 

developed. Conservation practices are 

contained in the appropriate NRCS 

Field Office Technical Guide (FOTG), 

which is based on the National 

Handbook of Conservation Practices 

(NHCP). 

Conservation project means 

conservation measures that address 

provisions of a conservation plan or 

Forest Stewardship Management Plan. 

* * * * * 

Forest Stewardship Management Plan 

means a property-specific, long-term, 

multi-resource plan that addresses 

private landowner objectives while 

recommending a set and schedule of 

management practices designed to 

achieve a desired future forest condition 

developed and approved through the 

USDA Forest Service or its agent. 

* * * * * 

PART 762—GUARANTEED FARM 

LOANS 

■ 3. The authority citation for part 762 

continues to read as follows: 

Authority: 5 U.S.C. 301, and 7 U.S.C. 1989. 

■ 4. Revise § 762.110(a)(1)(vii) and (c)(3) 

to read as follows: 

§ 762.110 Loan application. 

(a) * * * 

(1) * * * 

(vii) For CL guarantees, a copy of the 

conservation plan or Forest Stewardship 

Management Plan; 

* * * * * 

(c) * * * 

(3) For CL guarantees, a copy of the 

conservation plan or Forest Stewardship 

Management Plan; 

* * * * * 

■ 5. Revise § 762.121(c) introductory 

text to read as follows: 

§ 762.121 Loan purposes. 

* * * * * 

(c) CL purposes. Loan funds disbursed 

under a CL guarantee may be used for 

any conservation activities included in 

a conservation plan or Forestry 

Stewardship Management Plan 

including, but not limited to: 

* * * * * 

■ 6. Revise § 762.124(d) to read as 

follows: 

§ 762.124 Interest rates, terms, charges, 

and fees. 

* * * * * 

(d) CL terms. Each loan must be 

scheduled for repayment over a period 

not to exceed 30 years from the date of 

the note or such shorter period as may 

be necessary to assure that the loan will 

be adequately secured, taking into 

account the probable depreciation of the 

security. 

* * * * * 

■ 7. Amend § 762.145 as follows: 

■ a. Revise paragraph (b)(10) to read as 

set forth below, and 

■ b. Revise the second sentence of 

paragraph (c)(1)(iii) to read as set forth 

below. 

§ 762.145 Restructuring guaranteed loans. 

* * * * * 

(b) * * * 

(10) For CL, the lender must ensure 

that the borrower is maintaining the 

practice for which the CL was made. 

(c) * * * 

(1) * * * 

(iii) * * * The maturity date cannot 

exceed 30 years from the date of the 

original note. 

* * * * * 

PART 764—DIRECT LOAN MAKING 

■ 8. The authority citation for part 764 

continues to read as follows: 

Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. 

■ 9. Revise § 764.51(b)(15) to read as 

follows: 

§ 764.51 Loan application. 

* * * * * 

(b) * * * 

(15) For CL only, a conservation plan 

or Forest Stewardship Management Plan 

as defined in § 761.2 of this chapter; and 

* * * * * 

■ 10. Revise § 764.231(a) introductory 

text to read as follows: 

§ 764.231 Conservation loan uses. 

(a) CL funds may be used for any 

conservation activities included in a 

conservation or Forestry Service 

Stewardship Management Plan, 

including but not limited to: 

* * * * * 

■ 11. Revise § 764.235 to read as 

follows: 

§ 764.235 Security requirements. 

(a) The loan must be secured in 

accordance with requirements 

established in §§ 764.103 through 

764.106. 

(b) Loans to purchase chattels will be 

secured by a first lien on chattels 

purchased with loan funds. Real estate 

may be taken as additional security if 

needed. 

(c) Loans of $25,000 of less for real 

estate purposes will be secured in the 

following order of priority: 

(1) By a lien on chattels determined 

acceptable by the Agency, and then 

(2) By a lien on real estate, if available 

and necessary. When real estate is taken 

as security a certification of ownership 

in real estate is required. Certification of 

ownership may be in the form of an 

affidavit that is signed by the applicant, 

names all of the record owners of the 

real estate in question and lists the 

balances due on all known debts against 

the real estate. Whenever the Agency is 

uncertain of the record owner or debts 

against the real estate security, a tile 

search is required. 

(d) Loans greater than $25,000 for real 

estate purposes will be secured in the 

following order of priority: 


emcdonald on DSK29S0YB1PROD with RULES
Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 15939 

(1) By a lien on real estate, if 

available, and then 

(2) By a lien on chattels, if needed and 

determined acceptable by the Agency. 

(e) For loans greater than $25,000 title 

clearance is required when real estate is 

taken as security. 

■ 12. Revise § 764.402(d)(1)(ii) to read 

as follows: 

§ 764.402 Loan closing. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) As provided in § 764.235 for CLs 

and § 764.355 for EMs; 

* * * * * 

Signed on March 12, 2012. 

Carolyn B. Cooksie, 

Acting Administrator, Farm Service Agency. 

[FR Doc. 2012–6558 Filed 3–16–12; 8:45 am] 

BILLING CODE 3410–05–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2007–27023; Directorate 

Identifier 98–ANE–47–AD; Amendment 39– 

16971; AD 2012–04–15] 

RIN 2120–AA64 

Airworthiness Directives; Pratt & 

Whitney Turbofan Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: We are superseding an 

existing airworthiness directive (AD) for 

all Pratt & Whitney (PW) JT9D series 

turbofan engines. That AD currently 

requires revisions to the Airworthiness 

Limitations Section (ALS) of the 

manufacturer’s Instructions for 

Continued Airworthiness (ICA) to 

include required enhanced inspection of 

selected critical life-limited parts at 

each piece-part opportunity. This new 

AD requires additional revisions to the 

JT9D series engines ALS sections of the 

manufacturer’s ICA. This AD was 

prompted by the need to require 

enhanced inspection of selected critical 

life-limited parts of JT9D series engines. 

We are issuing this AD to prevent 

critical life-limited rotating engine part 

failure, which could result in an 

uncontained engine failure and damage 

to the airplane. 

DATES: This AD is effective April 23, 

2012. 

ADDRESSES: 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Management Facility between 

9 a.m. and 5 p.m., Monday through 

Friday, except Federal holidays. The AD 

docket contains this AD, the regulatory 

evaluation, any comments received, and 

other information. The address for the 

Docket Office (phone: 800–647–5527) is 

Document Management Facility, U.S. 

Department of Transportation, Docket 

Operations, M–30, West Building 

Ground Floor, Room W12–140, 1200 

New Jersey Avenue SE., Washington, 

DC 20590. 

FOR FURTHER INFORMATION CONTACT: Ian 

Dargin, Aerospace Engineer, Engine & 

Propeller Directorate, FAA, 12 New 

England Executive Park, Burlington, MA 

01803; phone: 781–238–7178; fax: 781– 

238–7199; email: ian.dargin@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Discussion 

We issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 to supersede AD 2007–05–17, 

Amendment 39–14978 (72 FR 10350, 

March 8, 2007). That AD applies to the 

specified products. That NPRM 

published in the Federal Register on 

November 22, 2011 (76 FR 72130). That 

NPRM proposed to continue to require 

revisions to the ALS of the 

manufacturer’s ICA to include required 

enhanced inspection of selected critical 

life-limited parts at each piece-part 

opportunity. That NPRM also proposed 

to require additional revisions to the 

JT9D series engines ALS sections of the 

manufacturer’s ICA. 

Comments 

We gave the public the opportunity to 

participate in developing this AD. We 

received no comments on the NPRM. 

Conclusion 

We reviewed the relevant data and 

determined that air safety and the 

public interest require adopting the AD 

as proposed. 

Costs of Compliance 

We estimate that 438 JT9D series 

engines are installed on airplanes of 

U.S. registry and will be affected by this 

AD. We also estimate that about 4 work 

hours per engine are needed to perform 

the actions, and that the average labor 

rate is $85 per work hour. Since this is 

an added inspection requirement that 

will be part of the normal maintenance 

cycle, no additional parts costs are 

involved. Based on these figures, we 

estimate the total cost of the AD to U.S. 

operators to be $148,920. 

Authority for This Rulemaking 

Title 49 of the United States Code 

specifies the FAA’s authority to issue 

rules on aviation safety. Subtitle I, 

section 106, describes the authority of 

the FAA Administrator. Subtitle VII: 

Aviation Programs, describes in more 

detail the scope of the Agency’s 

authority. 

We are issuing this rulemaking under 

the authority described in subtitle VII, 

part A, subpart III, section 44701: 

‘‘General requirements.’’ Under that 

section, Congress charges the FAA with 

promoting safe flight of civil aircraft in 

air commerce by prescribing regulations 

for practices, methods, and procedures 

the Administrator finds necessary for 

safety in air commerce. This regulation 

is within the scope of that authority 

because it addresses an unsafe condition 

that is likely to exist or develop on 

products identified in this rulemaking 

action. 

Regulatory Findings 

This AD will not have federalism 

implications under Executive Order 

13132. This AD will not have a 

substantial direct effect on the States, on 

the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. 

For the reasons discussed above, I 

certify that this AD: 

(1) Is not a ‘‘significant regulatory 

action’’ under Executive Order 12866, 

(2) Is not a ‘‘significant rule’’ under 

DOT Regulatory Policies and Procedures 

(44 FR 11034, February 26, 1979), 

(3) Will not affect intrastate aviation 

in Alaska, and 

(4) Will not have a significant 

economic impact, positive or negative, 

on a substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act. 

List of Subjects in 14 CFR Part 39 

Air transportation, Aircraft, Aviation 

safety, Incorporation by reference, 

Safety. 

Adoption of the Amendment 

Accordingly, under the authority 

delegated to me by the Administrator, 

the FAA amends 14 CFR part 39 as 

follows: 

PART 39—AIRWORTHINESS 

DIRECTIVES 

■ 1. The authority citation for part 39 

continues to read as follows: 


emcdonald on DSK29S0YB1PROD with RULES