[Federal Register Volume 74, Number 10 (Thursday, January 15, 2009)]
[Rules and Regulations]
[Pages 2293-2317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-530]



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Rules and Regulations
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Federal Register / Vol. 74, No. 10 / Thursday, January 15, 2009 / 
Rules and Regulations

[[Page 2293]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1466

RIN 0578-AA45


Environmental Quality Incentives Program

AGENCY: Natural Resources Conservation Service and Commodity Credit 
Corporation, United States Department of Agriculture.

ACTION: Interim final rule with request for comment.

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

SUMMARY: This interim final rule with request for comment amends the 
existing Environmental Quality Incentives Program (EQIP) regulations to 
incorporate programmatic changes as authorized by amendments in the 
Food, Conservation, and Energy Act of 2008 (2008 Act).

DATES: Effective Date: This rule is effective January 15, 2009.
    Comment date: Submit comments on or before March 16, 2009.

ADDRESSES: You may send comments (identified by Docket Number NRCS-IFR-
08005), which will be available to the public in their entirety, using 
any of the following methods:
    Government-wide rulemaking Web site: Go to http://regulations.gov 
and follow the instructions for sending comments electronically.
    Mail: Financial Assistance Programs Division, U.S. Department of 
Agriculture, Natural Resources Conservation Service, 1400 Independence 
Avenue, SW., Room 5237S, Washington, DC 20250-2890.
    Fax: (202) 720-4265.
    Hand Delivery Room: Room 5237S of the USDA South Office Building, 
1400 Independence Avenue, SW., Room 5237, Washington, DC 20250, between 
9 a.m. and 4 p.m., Monday through Friday, except Federal Holidays.
    This interim final rule may be accessed via Internet. Users can 
access the NRCS homepage at http://www.nrcs.usda.gov/; select the Farm 
Bill link from the menu; select the Interim final link from beneath the 
Final and Interim Final Rules Index title. 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).
    To view public comments, please ask the guard at the entrance to 
the South Office Building to call 202-720-4527 in order to be escorted 
into the building.

FOR FURTHER INFORMATION CONTACT: Greg Johnson, Director, Financial 
Assistance Programs Division, U.S. Department of Agriculture, Natural 
Resources Conservation Service, Room 5237, P.O. Box 2890, Washington, 
DC 20013-2890. Phone: (202) 720-1845. Fax: (202) 720-4265.

SUPPLEMENTARY INFORMATION:

Regulatory Certifications

Executive Order 12866

    Pursuant to Executive Order 12866 (FR Doc. 93-24523, September 30, 
1993), this interim final rule with request for comment is an 
economically significant regulatory action, since it results in an 
annual effect on the economy of $100 million or more. The 
administrative record is available for public inspection in Room 5831 
South Building, USDA, 14th and Independence Avenue, SW., Washington, 
DC. Pursuant to Executive Order 12866, NRCS conducted an economic 
analysis of the potential impacts associated with this program. A 
summary of the economic analysis can be found at the end of this 
preamble and a copy of the analysis is available upon request from the 
Director, Financial Assistance Programs Division, Natural Resources 
Conservation Service, Room 5237S, Washington, DC 20250-2890 or 
electronically at: http://www.nrcs.usda.gov/programs/eqip/ under the 
EQIP Rules and Notices with Supporting Documents title.

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    Section 2904(c) of the Food, Conservation, and Energy Act of 2008 
requires that the Secretary use the authority in section 808(2) of 
title 5, United States Code, which allows an agency to forego SBREFA's 
usual 60-day Congressional Review delay of the effective date of a 
major regulation if the agency finds that there is a good cause to do 
so. NRCS hereby determines that it has good cause to do so in order to 
meet the Congressional intent to have the conservation programs, 
authorized or amended by Title II, in effect as soon as possible. 
Accordingly, this rule is effective upon filing for public inspection 
by the Office of the Federal Register.

Executive Order 13175

    Executive Order 13175 requires agencies to consult and collaborate 
with tribes, if policies or actions have substantial direct effects on 
tribes. NRCS has determined that this regulation does not have a 
substantial direct effect on tribes, since these regulatory provisions 
are required by statute, and these provisions do not impose 
unreimbursed compliance costs or preempt Tribal law. As a result, 
consultation is not required.

Regulatory Flexibility Act

    The interim final rule will not have a significant environmental 
impact on small entities. NRCS has determined that the Regulatory 
Flexibility Act does not apply.

Environmental Analysis

    Availability of the Environmental Assessment (EA) and Finding of No 
Significant Impact (FONSI). A programmatic environmental assessment has 
been prepared in association with this rulemaking. The analysis has 
determined that there will not be a significant impact to the human 
environment and as a result an Environmental Impact Statement is not 
required to be prepared (40 CFR part 1508.13). The EA and FONSI are 
available for review and comment for 30 days from the date of 
publication of this interim final rule in the Federal Register. A copy 
of the EA and FONSI may be obtained from the following Web site: http://www.nrcs.usda.gov/programs/Env_Assess/. A hard copy may also be 
requested from the following address and contact: National 
Environmental Coordinator, Natural Resources Conservation Service, 
Ecological Sciences Division, 1400 Independence Ave., SW., Washington, 
DC 20250. Comments from the public

[[Page 2294]]

should be specific and reference that comments provided are on the EA 
and FONSI. Public comment may be submitted by any of the following 
means: (1) E-mail comments to <a href="/cdn-cgi/l/email-protection#19575c49582b292921596e7d7a376c6a7d78377e766f"><span class="__cf_email__" data-cfemail="b6f8f3e6f78486868ef6c1d2d598c3c5d2d798d1d9c0">[email protected]</span></a>, (2) e-mail to egov 
Web site--http://www.regulations.gov, or (3) written comments to: 
National Environmental Coordinator, Natural Resources Conservation 
Service, Ecological Sciences Division, 1400 Independence Ave., SW., 
Washington, DC 20250.

Civil Rights Impact Analysis

    NRCS has determined through a Civil Rights Impact Analysis that the 
interim final rule discloses no disproportionately adverse impacts for 
minorities, women, or persons with disabilities. Increased payment 
rates and advance payment for historically underserved producers, 
coupled with the national target of setting aside five percent of EQIP 
funds for socially disadvantaged farmers and ranchers and an additional 
five percent of EQIP funds for beginning farmers and ranchers is 
expected to increase participation among these groups. The data 
presented indicates producers who are members of the protected groups 
have participated in NRCS conservation programs at parity with other 
producers. Extrapolating from historical participation data, it is 
reasonable to conclude that NRCS programs, including EQIP, will 
continue to be administered in a non-discriminatory manner. Outreach 
and communication strategies are in place to ensure all producers will 
be provided the same information to allow them to make informed 
compliance decisions regarding the use of their lands that will affect 
their participation in USDA programs. EQIP applies to all persons 
equally regardless of their race, color, national origin, gender, sex, 
or disability status. Therefore, the EQIP rule portends no adverse 
civil rights implications for women, minorities and persons with 
disabilities.

Paperwork Reduction Act

    Section 2904 of the 2008 Act provides that the promulgation of 
regulations and the administration of Title II of this Act shall be 
made without regard to chapter 35 of Title 44 of the United States 
Code, also known as the Paperwork Reduction Act. Therefore, NRCS is not 
reporting recordkeeping or estimated paperwork burden associated with 
this interim final rule.

Government Paperwork Elimination Act

    NRCS is committed to compliance with the Government Paperwork 
Elimination Act, which requires Government agencies, in general, to 
provide the public the option of submitting information or transacting 
business electronically to the maximum extent possible. To better 
accommodate public access, NRCS has developed an online application and 
information system for public use.

Executive Order 12988

    This interim final rule has been reviewed in accordance with 
Executive Order 12988, Civil Justice Reform. The provisions of this 
interim final rule are not retroactive. The provisions of this interim 
final rule preempt State and local laws to the extent that such laws 
are inconsistent with this interim final rule. Before an action may be 
brought in a Federal court of competent jurisdiction, the 
administrative appeal rights afforded persons at parts 614, 780, and 11 
of this title must be exhausted.

Federal Crop Insurance Reform and Department of Agriculture 
Reorganization Act of 1994

    The Federal Crop Insurance Reform and Department of Agriculture 
Reorganization Act of 1994, Title III, section 304, requires that for 
each proposed major regulation with a primary purpose to regulate 
issues of human health, human safety, or the environment, USDA is to 
publish an analysis of the risks addressed by the regulation and the 
costs and benefits of the regulation. NRCS has determined that such a 
risk assessment does not apply to this interim final rule. NRCS 
recognizes that although such assessments can be quite helpful, the Act 
pertains only to a rule that has been designated as a ``proposed major 
regulation.'' NRCS does not consider ``interim final'' or ``final'' 
rules as falling into the category of proposed major regulations.

Unfunded Mandates Reform Act of 1995

    NRCS assessed the effects of this rulemaking action on State, 
local, and Tribal governments, and the public. This action does not 
compel the expenditure of $100 million or more in any one year 
(adjusted for inflation) by any State, local, or Tribal governments, or 
anyone in the private sector; therefore, a statement under section 202 
of the Unfunded Mandates Reform Act of 1995 is not required.

Economic Analysis--Executive Summary

    Pursuant to Executive Order 12866, Regulatory Planning and Review, 
the Natural Resources Conservation Service (NRCS) has conducted a 
benefit-cost analysis (BCA) of the Environmental Quality Incentives 
Program (EQIP) as formulated for the Interim Final Rule. This 
requirement provides decision makers with the opportunity to develop 
and implement a program that is beneficial, cost effective, and that 
minimizes negative impacts to health, human safety, and the 
environment. Congress passed amendments to the program that requires 
the Secretary of Agriculture, within 90 days after the enactment of the 
EQIP amendments, to promulgate regulations necessary to carry out the 
program.
    In considering alternatives for implementing EQIP, the United 
States Department of Agriculture (USDA) followed the legislative intent 
to optimize environmental benefits, address natural resource concerns 
and problems, establish an open participatory process, and provide 
flexible assistance to producers who apply appropriate conservation 
measures that enable the satisfaction of Federal and State 
environmental requirements. Because EQIP is a voluntary program, the 
program will not impose any obligation or burden upon agricultural 
producers who choose not to participate. The program has been 
authorized by the Congress at $7.325 billion over the five-year period 
beginning in fiscal year (FY) 2008 through FY 2012, with annual amounts 
of $1.2 billion for FY 2008, $1.337 billion in FY 2009, $1.45 billion 
in FY 2010, $1.588 billion in FY 2011, and $1.75 billion in FY 2012.
    The EQIP technical and financial assistance facilitates the 
adoption of conservation practices that, when installed or applied to 
technical standards, can mitigate degradation of the environment. These 
actions are not limited to their beneficial impacts on resource 
conditions on-site, but produce significant off-site environmental 
benefits for the public-at-large, such as the reduction of non-point 
source water pollution, leading to enhancements to freshwater and 
marine water quality and fish habitat, improved aquatic recreation 
opportunities, and reduced sedimentation of reservoirs, streams, and 
drainage channels; more efficient irrigation water usage; improved air 
quality by reducing wind erosion; an increase in carbon stored in the 
soil, leading to reduced atmospheric amounts of carbon; reduced 
pollution of surface and ground water, leading to enhanced drinking 
water supplies; reduced flood damages; conserved energy; and 
enhancements to wildlife habitat. Most of these factors are taken into 
consideration in the transfer benefit values used in this analysis.

[[Page 2295]]

    Other significant environmental impacts have an appearance of being 
solely a private benefit, such as: The maintenance of the long-term 
productivity of the resource base, improved grazing productivity, more 
efficient crop use of animal waste and fertilizer and the fostering of 
energy conservation. However for this analysis, these impacts are 
considered as public benefits in that they have also have impacts in 
input and output markets, i.e. increasing the availability of those 
inputs at lower prices and/or for use in other sectors of the economy. 
This analysis did not utilize a social welfare impact model or general 
equilibrium model that would show these final producer and consumer 
welfare changes (brought about by changes in inputs used and output 
levels of EQIP participants). Thus, the economic impacts estimated in 
this analysis by these changes should be considered as first 
approximations of possible social welfare gains in input and output 
markets. In this analysis, the benefit categories which could be 
construed as having a high component of private benefit are clearly 
identified.
    There is another group of benefits derived from EQIP which can not 
be empirically estimated at this time. As explained in the body of the 
report, there are also many conservation practices for which economic 
benefit estimates are not available. For example, the benefits derived 
from the remaining five percent of the EQIP funds used for 23 practices 
for which monetary benefits are important but could not easily be 
estimated (over half of these remaining funds were for the Pest 
Management Practice--595). As a result, they are not included in the 
quantitative estimates of benefits. In addition, many other 
environmental impacts were not included in this economic analysis 
because no clear conversion methods of the environmental impacts to 
economic terms were available. For additional information on these 
environmental impacts, see the NEPA environmental assessment for this 
regulation. In the future, nationally consistent estimates of 
beneficial environmental outcomes resulting from conservation practices 
and systems will be possible through the use of the results from the 
interagency Conservation Effects Assessment Project (CEAP). CEAP was 
established to develop a scientific understanding and methodology for 
estimating the environmental benefits and effects of conservation 
practices on agricultural landscapes at national, regional, and 
watershed scales. CEAP will become a science-based plan designed to 
help meet the conservation and technology challenges of the future 
through a coordinated multi-agency assessment, research, and outreach-
extension program to translate science into practice. CEAP has been 
underway since 2003, and is composed of multiple components focusing on 
cropland, grazing land, wetlands, and wildlife, and watersheds. Initial 
CEAP results will be available for the cropland component in FY2009. 
Some results from the wetlands, wildlife, and watershed assessment 
components are already available at: http://www.nrcs.usda.gov/technical/nri/ceap/. These results are expected to improve the Agency's 
ability to report on long-term conservation benefits being delivered by 
programs, such as EQIP.
    Despite these limitations in our ability to estimate environmental 
benefits, the new EQIP is expected to have a substantial effect on the 
environment due to expanded funding compared with a baseline of 
continuing EQIP at an annual funding level of roughly $1 billion. 
Resource treatments are estimated to increase protection for an 
additional 3.9 million acres for sheet and rill water erosion 
reduction, 3.9 million acres for wind erosion reduction improving air 
quality, 5.6 million acres for improved fertilizer management, 2.0 
million acres for net irrigation water reduction, 17.5 million acres 
for grazing land productivity, and 2.8 million acres of improved 
wildlife habitat. Also, the waste from an additional 1.3 million animal 
units will be treated under the new program directly improving water 
quality. Using these quantity changes plus benefit transfer values 
derived from the literature, total benefits are estimated at $10.4 
billion for EQIP with the 2008 Act expanded funding allocation. 
Throughout the analysis, benefit estimates are compared to $10.4 
billion total costs which include both the EQIP funds and costs borne 
by participants, producing a net benefit of approximately $57 million 
above total costs.

Methodology

    In developing the BCA for EQIP, it is necessary to identify a 
baseline for comparison. The baseline for this analysis is EQIP as 
reauthorized in the 2002 Act with FY 2007 funding levels. In the 2002 
Act, EQIP funding for FY 2005 through FY 2008 was capped at roughly $1 
billion until the 2008 Act was passed when additional funding was 
provided. The actual FY 2007 funding level of $978 million is used as 
the baseline.
    Public costs quantified in this analysis are the total TA and FA 
assistance funds outlined in the Congressional Budget Office's (CBO) 
scoring of the 2008 Act. Private costs are out-of-pocket costs paid 
voluntarily by participants. As stated above, the quantifiable benefits 
are a subset of the environmental benefits that accrue to the types of 
practices implemented through EQIP. Available data and literature 
support benefits in the following benefit categories:
    <bullet> Animal waste management (leading to improved water quality 
through better management) 1/ \1\;
---------------------------------------------------------------------------

    \1\ The ``1/'' above signifies that this benefit category could 
be construed as having elements of both environmental and private 
benefit impacts. More information on these distinctions is provided 
in the document.
---------------------------------------------------------------------------

    <bullet> Sheet and rill water erosion (reducing soil erosion);
    <bullet> Grazing land productivity (increasing yields) 1/;
    <bullet> Irrigation water use (reducing quantity used);
    <bullet> Air quality (through reduced wind erosion);
    <bullet> Fertilizer use (reduced fertilizer expense through 
nutrient management not associated with animal waste) 1/;
    <bullet> Wildlife habitat (enhanced wildlife viewing and hunting);
    <bullet> Energy use (reduced energy consumption associated with 
conservation tillage practices); and,
    <bullet> Carbon sequestration (higher soil carbon levels associated 
with conservation tillage and grassland practices).
    In order to conduct the analysis, certain assumptions were made 
based on the available data.
    <bullet> The practice mix for the current (2007-base) and the new 
EQIP is the same. The new rule places additional emphasis on energy, 
organic practices, and forest management; however, due to the lack of 
benefit data for these types of practices, their associated benefits 
are not included in this analysis.\2\
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    \2\ Additional time and resources would be necessary to modify 
the present model to incorporate such shifts in program emphasis.
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    <bullet> Quantifiable and per-unit benefits are constant and based 
on national average estimates.
    <bullet> Technical assistance costs incurred by NRCS are based on 
the full workload associated with implementing EQIP and take into 
consideration projected average contract sizes.
    <bullet> Average annual and net present value calculations use 
discount factors of seven and three percent, which are recommended by 
the Office of Management and Budget (OMB). All tables are presented 
using the seven percent discount rate. The analysis is also calculated 
using the three percent discount rate (see table 9).

[[Page 2296]]

    <bullet> Environmental benefits generated in the animal waste 
management benefit category were adjusted downward by 42 percent to 
account for mandatory regulatory requirements associated with large 
concentrated animal feeding operations (CAFOs). This reduction is 
necessary to avoid any double counting of benefits attributed to EPA's 
CAFO regulations. The total CAFO-related costs associated with 
conservation practices were reduced by 23 percent
    <bullet> Other than large CAFOs meeting EPA regulatory 
requirements, the adoption of conservation practices by EQIP 
participants is assumed to be solely attributed to their participation 
in EQIP.

Conclusions

    The EQIP benefit-cost analysis assumes that the basic program 
features of EQIP created in 2002 (the ``current program'') remains the 
same, but is funded at higher funding allocations as a result of the 
2008 Act.
    The summary table below shows the estimated values of each benefit 
category and the estimated costs associated with EQIP for the 
``current'' (2007-base) and ``new'' (with increased funding) scenario. 
Under the assumption that the current program continues at level 
funding, the expected present value of benefits over the period of FY 
2007 to FY 2012 is estimated at $7.1 billion, with $0.5 billion coming 
from improved animal waste management and $6.6 billion from improved 
land treatment. Expected net benefits are estimated at $39 million 
above total costs, including producer costs, other non-federal costs, 
and federal (EQIP) costs.
    With expanded funding, the estimated present value of benefits over 
the period of FY 2007 to FY 2012 was $10.4 billion with $0.8 billion 
coming from improved animal waste management and $9.6 billion from land 
treatment. Estimated net benefits were $57 million above total costs. 
This provides $18 million in additional net benefits due to the 
expansion of EQIP funds in the 2008 Farm Bill over the roughly $1.0 
billion annual baseline funding.

                 Table 1--Summary of Cumulative 5-Year EQIP Benefits and Costs Over FY 2008-FY 2012, Using a Seven Percent Discount Rate
                                                               [$ million of 2007 dollars]
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                                                 2007 EQIP with                                  2007 EQIP with
                                     To not        $1 billion/      2008 Act     Increases with    $1 billion/      2008 Act
        Benefit Category         implement EQIP   year FY 2008-    benefits &     the 2008 Act   year (acres or     (acres or              Unit
                                                     FY 2012          costs                       animal units)   animal units)
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    Animal waste management *..              $0            $554            $816            $262       2,724,000       4,061,000  Animal Units.
    Sheet and rill water                      0           1,948           2,869             920       8,019,000      11,955,000  Acres.
     erosion.
    Grazing land productivity..               0           3,111           4,580           1,470      35,586,000      53,057,000  Acres.
    Irrigation water use.......               0             231             341             109       4,014,000       5,985,000  Acres.
    Air quality................               0             181             266              85       8,039,000      11,985,000  Acres.
    Fertilizer use.............               0             601             885             284      11,370,000      16,953,000  Acres.
    Wildlife habitat...........               0             172             254              81       5,660,000       8,439,000  Acres.
    Energy use.................               0             210             309              99       7,446,000      11,102,000  Acres.
    Carbon sequestration.......               0              82             121              39      41,525,000      61,911,000  Acres.
                                ------------------------------------------------------------------------------------------------------------------------
        Grand Total Benefits...               0           7,091          10,441           3,350
Costs:
    Total costs **.............               0           7,053          10,384           3,332  ..............  ..............  .......................
Net Benefits:
    Net benefits...............               0              39              57              18  ..............  ..............  .......................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Environmental benefits from improved animal waste management attributed to EQIP are 42 percent below the total CAFO-related benefits to account for
  environmental benefits captured by EPA regulatory requirements on large CAFOs. Likewise, costs associated with large CAFOs represent about 23 percent
  of NRCS costs related to CAFOs of all sizes. These costs were deducted from the analysis as well.
** Total costs include all federal costs plus private and other non-federal costs which have historically matched federal EQIP FA funding at an overall
  50 percent cost-share rate discounted at seven percent. Costs associated with large CAFOs (roughly 23 percent) were deducted from the analysis.

Section 2904 of the Food, Conservation, and Energy Act of 2008

    The Commodity Credit Corporation (CCC) is not required by 5 U.S.C. 
553 or by any other provision of law, to publish a notice of proposed 
rulemaking with respect to the subject matter of this rule. Section 
2904 of the 2008 Act requires regulations to be published within 90 
days after the date of enactment and authorizes the CCC to promulgate 
an interim final rule effective upon publication with an opportunity 
for notice and comment. CCC has determined that an interim final rule 
is necessary to expedite the effective date of rulemaking in order to 
meet the intent of section 2904.

Discussion of Program

    The 2008 Act has reauthorized and amended the Environmental Quality 
Incentives Program, which had been added to the Food Security Act of 
1985 (1985 Act) (16 U.S.C. 3801 et seq.) by the Federal Agriculture 
Improvement and Reform Act of 1996 (1996 Act) (16 U.S.C. 3839aa). The 
program is implemented under the general supervision and direction of 
the Chief of NRCS, who is a Vice President of the Commodity Credit 
Corporation (CCC).
    Through EQIP, NRCS provides assistance to farmers and ranchers to 
conserve and enhance soil, water, air, and related natural resources on 
their land. Eligible lands include cropland, grassland, rangeland, 
pasture, wetlands, nonindustrial private forest land, and other 
agricultural land on which agricultural or forest-related products,

[[Page 2297]]

or livestock are produced and natural resource concerns may be 
addressed. Participation in the program is voluntary.
    Under EQIP, NRCS will provide assistance in a manner that will 
promote agricultural production, forest management, and environmental 
quality as compatible goals; optimize environmental benefits; and help 
farmers and ranchers meet Federal, State, and local environmental 
requirements. NRCS will offer a consolidated and simplified program 
throughout the Nation using the technical services of NRCS and 
technical service providers. NRCS first allocated $130 million in EQIP 
funds in 1996. Since the program began, NRCS has entered into 314,000 
contracts with farmers and ranchers to apply conservation practices on 
approximately 143 million acres. The Agency has evaluated twelve years 
of program implementation and has assessed opportunities to improve 
program administration. The changes in this interim final rule are the 
result of this evaluation and the statutory changes authorized by the 
2008 Act.
    In summary, these changes include, but are not limited to:
    <bullet> Extending EQIP's implementation through fiscal year 2012.
    <bullet> Adding or revising the following terms and associated 
definitions: ``agricultural land,'' ``estimated income foregone,'' 
``forest management plan,'' ``integrated pest management,'' ``legal 
entity,'' ``local working group,'' ``National Organic Program,'' 
``nonindustrial private forest land,'' ``operation and maintenance 
agreement,'' ``organic system plan,'' ``payment,'' ``person,'' 
``socially disadvantaged farmer or rancher,'' and ``technical 
assistance.''
    <bullet> Reaffirming EQIP's eligible lands to include nonindustrial 
private forest lands.
    <bullet> Providing payments for conservation practices related to 
organic production and for conservation practices related to the 
transition to organic production.
    <bullet> Providing payments up to 75 percent of the estimated costs 
associated with planning, design, materials, equipment, installation, 
labor, management, maintenance, or training, or up to 100 percent of 
the estimated income foregone by a producer to implement particular 
conservation practices.
    <bullet> Giving the State Conservationist, as delegated by the 
Chief, discretion to accord great significance to a conservation 
practice that the Secretary determines promotes residue management, 
nutrient management, air quality management, invasive species 
management, pollinator habitat, animal carcass management technology, 
or pest management.
    <bullet> Limiting payments to $20,000 per year or $80,000 during 
any six-year period for persons or legal entities who receive payments 
for conservation practices related to organic production or the 
transition to organic production.
    <bullet> Authorizing NRCS to cancel or otherwise nullify a contract 
if a producer who is receiving payments for conservation measures 
related to organic production is not pursuing organic certification or 
is not in compliance with the Organic Foods Production Act of 1990 (7 
U.S.C. 6501 et seq.).
    <bullet> Requiring NRCS to prioritize applications: (1) Based on 
overall cost-effectiveness, (2) based on how effectively and 
comprehensively the project addresses the designated resource concern 
or resource concerns, (3) that best fulfill the purposes of EQIP, and 
(4) that improve conservation practices or systems in place at the time 
the contract offer is accepted or that will complete a conservation 
system. (Note: Items 2 and 3 are included in the existing EQIP 
regulations.)
    <bullet> Requiring applications of similar crop or livestock 
operations to be grouped together for evaluation purposes.
    <bullet> Requiring NRCS to consider a plan developed in order to 
acquire a permit under a water or air quality regulatory program as 
equivalent to a plan of operations, if the plan contains elements 
equivalent to those required in a plan of operations. Section 2506 of 
the 2008 Act amends Sec.  1240E(b) of the 1985 Act to require the 
Secretary, to the maximum extent practicable to eliminate duplication 
of planning activities.
    <bullet> Requiring a forest management plan when the EQIP plan of 
operations addresses forestland.
    <bullet> Lowering the payment limitation for participants from 
$450,000 to $300,000 during any six-year period, except for projects 
having special environmental significance, in such cases the payments 
will be limited to $450,000.
    <bullet> Providing payments, through the Conservation Innovation 
Grants Program (CIG), to producers to implement practices to address 
air quality concerns from agricultural operations and to meet Federal, 
State, and local regulatory requirements.
    <bullet> Creating criteria to evaluate an acceptable watershed-wide 
project for the purpose of implementing water conservation or 
irrigation practices on newly irrigated lands.
    <bullet> Providing an increased payment rate to historically 
underserved producers that include limited resource, beginning, and 
socially disadvantaged farmers or ranchers.
    <bullet> Providing advance payments, of up to 30 percent of the 
anticipated costs to be incurred for the purpose of purchasing 
materials or services to implement a conservation practice, to 
historically underserved producers.
    <bullet> Establishing a national target to set aside five percent 
of EQIP funds for socially disadvantaged farmers or ranchers and an 
additional five percent of EQIP funds for beginning farmers or 
ranchers.
    The fundamental purpose of the program, assisting farmers and 
ranchers to implement conservation practices to provide environmental 
benefits, has not changed. Revisions to the program have focused 
primarily on expanding participation among traditionally underserved 
populations, including organic growers; limiting payments to $300,000 
per legal entity or person, except for environmentally significant 
projects; streamlining the application and ranking process; and 
expanding practices and activities that are eligible for payment under 
EQIP. The interim final rule also includes changes to streamline 
program implementation and make the participant's contract 
responsibilities clearer and more transparent.

Conservation Innovation Grants

    The 2008 Act added a provision to EQIP which dedicates funding 
under the Conservation Innovation Grants program (CIG) to address air 
quality specifically. Section 1240H of the 1985 Act, as amended by 
section 2509 of the 2008 Act, authorizes the Secretary to provide 
payments to producers to implement practices, including innovative 
practices, to address air quality concerns from agricultural 
operations. NRCS will use these dedicated funds to assist producers in 
adopting and implementing existing and innovative practices to address 
air quality concerns. Eligible practices will meet NRCS Field Office 
Technical Guide (FOTG) standards or interim practice standards, 
approved by the State Conservationist, in consultation with the State 
Technical Committee. Section 1240B(b) of the 1985 Act specifies that 
payments are limited to ``implementing practices.'' Payments for stand-
alone equipment that have beneficial impacts on air quality are not 
authorized; however, payments for conservation practices may include

[[Page 2298]]

consideration of the costs authorized for equipment that is deemed an 
essential component of a conservation practice included in the FOTG. 
NRCS welcomes comments and suggestions on new innovative practices that 
may be approved for payment, such as but not limited to, improvements 
in mobile or stationary equipment, including engines, and the use of 
slow and controlled release fertilizers. NRCS also welcomes comment 
about how the CIG air quality provisions should be implemented.

Summary of Provisions

    The regulation is organized into three subparts: Subpart A--General 
Provisions; Subpart B--Contracts and Payments; Subpart C--General 
Administration. The basic structure of the regulation has not changed. 
However, NRCS proposes amending several sections in Subparts A and B to 
make the regulation consistent with the requirements of the 2008 Act 
amendments, streamline processes and procedures, and increase 
transparency of the program, particularly as it relates to a 
participant's contract responsibilities. Below is a summary of each 
section. The summary of Subpart C is limited, since a majority of the 
changes in Subpart C are minor.

Subpart A--General Provisions

    Section 1466.1, ``Applicability,'' is revised as follows:
    Section 1466.1 sets forth the purpose, scope, and objectives of 
EQIP. In paragraph (a), NRCS clarifies the program's purposes to 
include forest management. Paragraph (a) also reaffirms the original 
statutory intent, ensuring EQIP continues to provide assistance to 
farmers and ranchers to address soil, water and air quality; wildlife 
habitat; surface and groundwater conservation; and related natural 
resource concerns. This interim final rule reiterates the statutory 
intent that EQIP purposes are to be achieved by implementing 
conservation practices, and includes a new reference to energy 
conservation on eligible land.
    NRCS added paragraph (b) to clarify where EQIP assistance is 
available. EQIP continues to be available to eligible persons or legal 
entities in all 50 States, the District of Columbia, the Commonwealth 
of Puerto Rico, Guam, the Virgin Islands of the United States, American 
Samoa, and the Commonwealth of the Northern Mariana Islands.
    Section 1466.2, ``Administration,'' describes the roles of NRCS, 
State Technical Committees, and local working groups. Paragraph (b) of 
Sec.  1466.2, which required consultations between the Farm Service 
Agency (FSA) and NRCS has been deleted, since a 2003 decision by the 
Secretary authorizes NRCS to administer EQIP in its entirety.
    NRCS continues to administer EQIP at the State and local levels. 
Determinations related to eligible practices and payment rates are made 
at the State level, in consultation with the State Technical Committee. 
State Technical Committees and local working groups are bodies that 
provide advice to the State Conservationist and designated 
conservationist on technical and programmatic matters related to the 
implementation of the 1985 Act's conservation programs. State Technical 
Committees and local working groups consist of representatives from 
Federal, State, Tribal, and local governments, as well as 
nongovernmental organizations and individuals, who have conservation 
expertise.
    Section 1466.3, ``Definitions,'' sets forth definitions for terms 
used throughout this regulation. Several new definitions have been 
added, such as: ``estimated income foregone,'' ``forest management 
plan,'' ``integrated pest management,'' ``National Organic Program,'' 
``nonindustrial private forest land,'' ``operation and maintenance 
agreement,'' ``organic system plan,'' and ``socially disadvantaged 
farmer and rancher.'' Other definitions have been revised to 
accommodate requirements of the 2008 Act including: ``agricultural 
land,'' ``animal waste management facility,'' ``Conservation Innovation 
Grants,'' ``conservation practice,'' ``legal entity,'' ``local working 
group,'' ``participant,'' ``payment,'' ``person,'' ``producer,'' and 
``technical assistance,'' while others have been revised in an effort 
to make them consistent with other NRCS-administered programs, such as 
``agricultural operation,'' ``applicant,'' ``cost-effectiveness,'' 
``EQIP plan of operations,'' ``liquidated damages,'' ``Natural 
Resources Conservation Service,'' ``operation and maintenance,'' 
``priority resource concern,'' ``resource concern,'' and ``wildlife.'' 
The remaining definitions, ``historically underserved producer,'' 
``livestock,'' ``Regional Conservationist,'' ``State Conservationist,'' 
and ``technical service provider,'' have been revised in an effort to 
simplify and clarify definitions within the rule. Specifically, the 
following definitions have been amended:
    The definition of ``agricultural land'' is revised to include those 
areas identified by EQIP's authorizing legislation as eligible land. 
The definition added the term ``grassland'' to clarify that such lands 
are eligible for EQIP assistance. The definition also further defined 
agricultural lands to include lands on which agricultural and forest-
related products, or livestock are produced. Agricultural lands may 
include cropped woodland, marshes, incidental areas included in the 
agricultural operation, and other types of agricultural land used for 
production of livestock. Incidental areas are areas, within the 
agricultural operation that is receiving conservation treatment, which 
may not be grazed or cropped. Such areas may include, but are not 
limited to, pivot corners, access roads, and streambanks.
    NRCS revises the definition of ``agricultural operation'' to make 
it consistent with other conservation programs administered by NRCS. 
``Agricultural operation'' is defined as a ``parcel or parcels of land 
whether contiguous or noncontiguous, which the producer is listed as 
the operator or owner/operator in the FSA record system, which is under 
the effective control of the producer at the time the producer applies 
for contract, and that is operated by the producer with equipment, 
labor, management, and production, forestry, or cultivation practices 
that are substantially separate from other operations.''
    The definition of ``animal waste management facility'' is clarified 
to state that such a facility will be implemented within the context of 
a Comprehensive Nutrient Management Plan and is consistent with the 
Field Office Technical Guide.
    The definition of ``applicant'' is revised to include the 2008 
Act's added terminology. Specifically, the term ``individual,'' is 
replaced with the term ``person,'' and the word ``legal'' is inserted 
prior to ``entity'' to reflect these changes. ``Applicant'' is defined 
as follows: ``a person, legal entity, joint operation, or tribe that 
has an interest in an agricultural or forestry operation, as defined in 
part 1400 of this chapter, who has requested to participate in EQIP.''
    NRCS requests public comment on the current definition of ``at-risk 
species.'' As currently defined, ``at risk species means any plant or 
animal species as determined by the State Conservationist, with advice 
from the State Technical Committee, to need direct intervention to halt 
its population decline.'' Specifically, NRCS seeks public comment on 
how to tailor the definition to better assist species in greatest need.
    The term, ``beginning farmer and rancher,'' remains the same as the 
definition included in the final rule

[[Page 2299]]

published on May 30, 2003 (68 FR 32337), as defined by 7 U.S.C. 
1991(a). Throughout the text, the term has become a subset of the 
``historically underserved producer'' term to reduce the number of 
times it and other associated terms are cited in the regulation.
    NRCS also revises the ``Conservation Innovation Grants'' definition 
to accommodate the 2008 Act's clarification that forest management is 
considered agricultural production under EQIP. NRCS defines 
``Conservation Innovation Grants'' as ``competitive grants made under 
EQIP to individuals, and governmental and non-governmental 
organizations to stimulate and transfer innovative technologies and 
approaches, to leverage Federal funds, and to enhance and protect the 
environment, in conjunction with agricultural production and forest 
management.'' The term ``transfer'' is added to show that one of the 
purposes of the Conservation Innovation Grants is to transfer 
innovation to the private sector.
    The definition, ``conservation practice,'' is changed to reflect 
the 2008 Act's expansion of the definition of ``conservation practice'' 
beyond structural and land management practices, to include forest 
management and vegetative practices, as well as other practices that 
achieve the program purposes and positive environmental outcomes, like 
comprehensive nutrient management plans, forest management plans, and 
other plans determined acceptable by the Chief. NRCS has built upon the 
statutory examples of planning activities that are comprehensive in 
nature, such as agricultural energy management plans, dryland 
transition plans, integrated pest management plans, and other planning 
activities that meet FOTG requirements, approved by the NRCS State 
Conservationist, in consultation with the State Technical Committee. 
NRCS requests comments from the public on what type of comprehensive 
planning activities should be eligible for payment under EQIP. 
Throughout this regulation, the term ``conservation practice'' replaces 
the terms ``structural practices'' and ``land management practices,'' 
except where ``structural practices is specifically mentioned.''
    Within the definition of ``contract,'' NRCS replaces the terms 
``individual'' and ``entity'' with the term, ``participant.'' 
``Contract'' means ``a legal document that specifies the rights and 
obligations of any participant in the program.'' An EQIP contract is a 
binding cooperative agreement for the transfer of assistance from USDA 
to the participant to share in the costs in applying the conservation 
practices.
    The term, ``cost-share payments'' is removed to reflect the amended 
statutory language. To comply with the statutory change, the terms, 
``cost-share payments'' and ``incentive payments'' have been merged to 
form one definition, entitled ``payments,'' which means financial 
assistance provided to the participant for estimated costs incurred 
performing or implementing conservation practices, including costs for: 
Materials, equipment, labor, design and installation, maintenance, 
management, or training, as well as the estimated income foregone by 
the participant for designated conservation practices. The term 
``payment'' replaces the terms ``cost-share payments'' and ``incentive 
payments'' throughout the regulation.
    NRCS revises the definition of ``cost-effectiveness.'' The term 
``cost-effectiveness'' means the ``least-costly option for achieving a 
given set of conservation objectives.''
    The term, ``entity,'' is replaced by the term, ``legal entity,'' to 
reflect the definitions outlined in the amendments to Section 1201 of 
the 1985 Act by Section 2001 of the 2008 Act.
    The definition of ``estimated income foregone'' is added to clarify 
how producers will be compensated in accordance with Section 1240B(d) 
of the 1985 Act. As defined, ``estimated income foregone means an 
estimate of the net income loss associated with the adoption of a 
conservation practice, including a change in land use or land taken out 
of production or the opportunity cost associated with the adoption of a 
conservation practice. This shall not include losses of income due to 
disasters or other events unrelated to the conservation practice.''
    The definition, ``EQIP plan of operations,'' is revised to clarify 
for applicants, participants, and the public that an operation and 
maintenance agreement and EQIP plan of operations are components of the 
EQIP contract.
    NRCS includes the acronym, ``FOTG,'' in the definition of ``field 
office technical guide'' and also removes the term, ``treatment,'' and 
replaces it with the inclusive term, ``conservation practices,'' which 
is defined in Sec.  1466.3. NRCS defines ``Field Office Technical Guide 
(FOTG)'' as follows: ``the official local NRCS source of resource 
information and interpretations of guidelines, criteria, and 
requirements for planning and applying conservation practices and 
conservation management systems. It contains detailed information on 
the conservation of soil, water, air, plant, and animal resources 
applicable to the local area for which it is prepared.''
    NRCS adds a definition for the term, ``forest management plan,'' 
into Sec.  1466.3 as a result of requirements included in the 
amendments to Section 1240E of the 1985 Act by Section 2506 of the 2008 
Act. A forest management plan means a site-specific plan that is 
prepared by a professional resource manager and approved by the State 
Conservationist. The plan, which is compatible with the participant's 
objectives, identifies and describes actions to be taken by the 
participant to enhance soil, water, air, fish, and wildlife resources 
on such land.
    Section 1240E, as amended by Section 2506 of the 2008 Act, requires 
a forest management plan, when the EQIP plan of operations addresses 
nonindustrial private forest land. The amendment gives discretion to 
the Secretary to determine the types of forest management plans that 
are eligible for EQIP payment. Indian forest lands, administered by the 
Bureau of Indian Affairs (BIA), have requirements for the 
implementation of forest management activities and these standards will 
be utilized when developing a forest management plan on BIA-
administered land. NRCS has included the guidelines for a forest 
management plan within the ``forest management plan'' definition, but 
has given further discretion to the appropriate State Conservationist. 
A forest management plan may be a forest stewardship plan, as defined 
in the Cooperative Forestry Assistance Act of 1978, or another site-
specific plan that contains elements equivalent to those of a forest 
management plan, approved by State Conservationist, in consultation 
with the State Forester or the BIA, where Indian forest lands and the 
associated natural resources are administered by BIA. The plan will 
comply with Federal, State, Tribal, and local laws, regulations, and 
permit requirements. NRCS is requesting public comment on other types 
of forest management plans that may be considered to be eligible for 
EQIP payment.
    The term ``historically underserved producer'' combines the terms 
``beginning farmer or rancher'', ``limited resource farmer or rancher'' 
and ``socially disadvantaged farmer or rancher'' and their respective 
definitions into one term to simplify terms within the interim final 
rule. Definitions for ``beginning farmer and rancher'' and ``limited 
resource farmer and rancher'' remain the same as those definitions 
outlined in EQIP's final rule published on May 30, 2003. However, the 
definition for ``socially

[[Page 2300]]

disadvantaged farmer or rancher'' has been added in accordance with the 
2008 Act which sought to expand EQIP participation to be more inclusive 
of farmers and ranchers who have been subjected to racial or ethnic 
prejudices because of their identity as a member of a group, without 
regard to their individual qualities. This definition originates from 
Section 2501(g) of the Food, Agricultural, Conservation, and Trade Act 
of 1990, which defines ``socially disadvantaged.''
    NRCS removes the term, ``incentive payments.'' To reflect the 
statutory language, NRCS merges the terms ``cost share payments'' and 
``incentive payments'' into one single term, entitled ``payments.'' 
``Payment'' means financial assistance provided to the participant for 
estimated costs incurred performing or implementing conservation 
practices, including costs for: Materials, equipment, labor, design and 
installation, maintenance, management, or training, as well as the 
estimated income forgone by the participant for designated practices.
    NRCS inserts the term, ``integrated pest management,'' into Sec.  
1466.3 as result of changes made by Section 2001 of the 2008 Act to 
Section 1201(a)(16) of the 1985 Act. The definition is the same as the 
statutory definition which defines integrated pest management as ``a 
sustainable approach to managing pests by combining biological, 
cultural, physical, and chemical tools in a way that minimizes 
economic, health, and environmental risks.''
    NRCS replaces the term, ``land management practice,'' with the more 
inclusive term, ``conservation practice,'' to reflect statutory 
changes. In accordance with the 2008 Act amendments, the term, 
``conservation practice,'' is expanded beyond structural and land 
management practices, to include forest management and vegetative 
practices, as well as other practices that fulfill the program 
purposes, like comprehensive nutrient management plans, forest 
management plans, and other plans determined to be acceptable by the 
Chief. NRCS has expanded the definition of conservation practice to 
include planning activities that are comprehensive and holistic in 
nature, such as agricultural energy management plans, dryland 
transition plans, integrated pest management plans, and other 
assessment and planning activities that meet FOTG requirements, 
approved by the NRCS State Conservationist in consultation with the 
State Technical Committee.
    The term, ``legal entity,'' replaces the term, ``entity,'' to 
reflect the definition set out in amendments by Section 2001 of the 
2008 Act.
    The term, ``limited resource farmer and rancher,'' remains the same 
as the definition included in the former program regulation, with an 
accommodation made to increase the level of gross farm sales from 
$100,000 to $155,200. Throughout portions of the text, the term has 
become a subset of the ``historically underserved producer,'' in order 
to reduce the number of times it and other associated terms are recited 
in the regulation.
    The term, ``liquidated damages,'' is revised to clarify when and 
under what circumstances liquidated damages are collected. Liquidated 
damages is defined as a ``sum of money stipulated in the EQIP contract 
that the participant agrees to pay NRCS if the participant fails to 
adequately complete the terms of the contract. The sum represents an 
estimate of the technical assistance expenses incurred by NRCS to 
service the contract, and reflects the difficulties of proof of loss 
and the inconvenience or non-feasibility of otherwise obtaining an 
adequate remedy.''
    The term, ``livestock,'' is simplified and reflects the definition 
contained in the 2008 Act. It is the responsibility of the Chief to 
determine livestock operations that are eligible for EQIP assistance. 
The decisionmaking authority resides with the Chief in order to ensure 
consistency among States.
    The term, ``local working group,'' has been revised. Local working 
groups are defined in 7 CFR part 610.
    The term, ``National Organic Program,'' has been inserted to 
implement the 2008 Act's amendments related to conservation practices 
associated with organic production or for conservation practices 
related to the transition to organic production. The National Organic 
Program is a national program which regulates the standards for any 
farm, wild crop harvesting, or handling operation that wants to sell an 
agricultural product as organically produced. The National Organic 
Program is administered by the Agricultural Marketing Service.
    The term, ``Natural Resources Conservation Service,'' has been 
inserted to define the USDA agency that has responsibility for 
administering EQIP.
    The term, ``nonindustrial private forest land'' has been inserted 
based on the definition in the 2008 Act amendments. Nonindustrial 
private forest land is rural land, as determined by the Secretary, that 
has existing tree cover or is suitable for growing trees; and is owned 
by any nonindustrial private individual, group, association, 
corporation, Indian tribe, or other private legal entity that has 
definitive decision-making authority over the land.
    NRCS revises the definition of ``operation and maintenance'' to 
clarify that participants are expected to maintain EQIP-funded 
conservation practices for the conservation practice's lifespan, as set 
forth in the operation and maintenance agreement. By maintaining the 
conservation practice for its lifespan, the participant ensures that 
the conservation practice will function for its intended use and will 
not cause harm or damage to the environment.
    NRCS adds the term, ``operation and maintenance agreement,'' to 
describe the document that, in conjunction with the EQIP plan of 
operations, specifies the Agency expectation that participants will 
operate and maintain conservation practices installed with EQIP 
assistance.
    NRCS adds the term, ``organic system plan,'' which is defined as a 
management plan for organic production or for an organic handling 
operation that has been agreed to by the producer or handler and the 
certifying agent. The Organic System Plan includes written plans 
concerning all aspects of agricultural production or handling.
    NRCS revises the definition, ``participant,'' to reflect the 2008 
Act's statutory definition of ``person'' and ``legal entity.'' A 
participant is a person, joint venture, legal entity, or tribe who is 
receiving payment or is responsible for implementing the terms and 
conditions of an EQIP contract.
    The term, ``payment,'' has been added and replaces the terms ``cost 
share payments'' and ``incentive payments.'' The term, ``payment,'' 
means financial assistance provided to the participant for estimated 
costs incurred performing or implementing conservation practices, 
including costs for: Materials, equipment, labor, design and 
installation, maintenance, management, or training, as well as the 
estimated income foregone by the participant for designated 
conservation practices. The term ``payment'' replaces the terms, ``cost 
share payments'' and ``incentive payments'' throughout the text.
    The definition for ``person'' is revised to reflect the 
requirements of part 1400 of this chapter, the regulation which details 
CCC's payment limitation policies.
    NRCS revises the term ``priority resource concern'' to align 
program terminology with other conservation programs administered by 
NRCS.
    The term ``producer'' has been expanded to reflect the 2008 Act's

[[Page 2301]]

amendments to EQIP so that ``producer'' now means a person or legal 
entity or joint operation who is engaged in agricultural production or 
forestry management. The term, ``livestock,'' is removed from this 
definition, because the term, ``agricultural production,'' is inclusive 
of livestock operations.
    The term, ``Regional Assistant Chief,'' has replaced the term, 
``Regional Conservationist.'' In 2004, the NRCS reorganized, eliminated 
six Regional Conservationist positions, and created three Regional 
Assistant Chief positions. This definition has been revised to reflect 
that change.
    The term, ``resource concern,'' replaces the term, ``related 
resource concern,'' in an effort to streamline program terminology with 
other conservation programs administered by NRCS.
    NRCS inserts the term, ``socially disadvantaged farmer or 
rancher,'' and its associated definition. A ``socially disadvantaged 
farmer or rancher'' is a farmer or rancher who has been subjected to 
racial or ethnic prejudices because of their identity as a member of a 
group without regard to their individual qualities. The definition for 
``socially disadvantaged farmer or rancher,'' which includes members of 
Indian tribes, has been added in accordance with the 2008 Act which 
sought to expand EQIP participation to be more inclusive of farmers and 
ranchers who have been subjected to racial or ethnic prejudices. This 
definition originates from Section 2501(g) of the Food, Agricultural, 
Conservation, and Trade Act of 1990, which defines ``socially 
disadvantaged.''
    NRCS revises the definition of ``State Conservationist'' to clarify 
that the former State Conservationist of Hawaii position has become the 
director of the Pacific Islands.
    NRCS revises the term, ``technical assistance,'' to mirror the 
definition provided in the amendments by Section 2001 of the 2008 Act.
    NRCS revises the definition, ``technical service provider (TSP),'' 
to clarify that TSPs are used to provide technical services to program 
participants, in lieu of or on behalf of NRCS. A TSP is ``an 
individual, private-sector entity, or public agency certified by NRCS 
to provide technical services to program participants in lieu of or on 
behalf of NRCS.''
    NRCS revises the term, ``wildlife,'' to make the definition 
consistent with definitions used in the other cost-share programs 
administered by NRCS.
    Section 1466.4, ``National priorities,'' has been amended to 
address comments made by the public. On March 23, 2005, NRCS published 
a Request for Public Comments (70 FR 14578) soliciting comments from 
the public on which resource concerns should be given national 
priority. NRCS sought public feedback in order to ensure that the 
stated national priorities reflected the most pressing natural resource 
needs while providing emphasis to off-site environmental benefits. NRCS 
received written comments from 85 individuals, agencies, and non-
governmental organizations. In addition, NRCS held numerous public 
listening forums in which the public was invited to comment on the 
priorities. After consideration of the public input, NRCS determined 
that the former program's national priorities adequately address the 
natural resource issues that were foremost identified, as no emerging 
issues of significance surfaced as a result of the feedback. However, 
as a result of public feedback and the need for clarification in the 
program, the first priority has been separated into two concerns, one 
for water quality, to include concentrated animal feeding operation 
(CAFO) as well as non-point source pollution, and a separate priority 
for water conservation, to address the quantity of ground and surface 
water available.
    Section 1466.5, ``National allocation and management,'' addresses 
national allocations and national program accountability. Overall, the 
changes in this section were changes in terminology, rather than 
changes in policies and procedures. NRCS replaces the terms, 
``beginning farmers and rancher'' and ``limited resource producer,'' 
with the term, ``historically underserved producer.'' NRCS has revised 
its allocation process to integrate all performance-based funding with 
initial allocations each year. This change eliminates the need for a 
national reserve; therefore, the ``national reserve'' reference is 
removed.
    Section 1466.6, ``State allocation and management,'' is an existing 
section that describes State Conservationists' responsibilities in the 
allocation of funds and the implementation of the program. This section 
was revised in an effort to streamline terminology among NRCS-
administered programs and make existing terminology consistent with the 
2008 Act amendments.
    Section 1466.7, ``Outreach activities,'' describes how NRCS will 
establish special program outreach activities at the national, State, 
and local levels. While NRCS has made efforts to extend its outreach to 
limited resource, beginning, and socially disadvantaged farmers and 
ranchers that include tribes, this section is revised to clarify the 
Agency outreach activities, and to specifically emphasize the need to 
provide assistance to ``socially disadvantaged farmers or ranchers'' as 
defined in Sec.  1466.3 and the 2008 Act amendments.
    Section 1466.8, ``Program requirements,'' sets forth land and 
applicant eligibility and the amount of EQIP funding to be used for 
livestock production, beginning farmers and ranchers, and socially 
disadvantaged farmers and ranchers. Producer associations and farmer 
cooperatives may submit applications, plans, and other necessary 
program materials on behalf of producers. However, eligibility and 
contract requirements still apply to any participant as set forth in 
Sec.  1466.8. Specifically, Sec.  1466.8 is revised as follows:
    In paragraph (a) the term ``nonindustrial private forest land'' is 
included. Within this paragraph, NRCS eliminates the term, ``land use 
adjustments,'' leaving the more inclusive term, ``conservation 
practices.'' In paragraph (b)(2), NRCS replaces the term ``farming 
operation'' with the term ``agricultural operation,'' which is defined 
in Sec.  1466.3. In paragraph (b)(4), a participant may substitute a 
plan developed for the purposes of acquiring an air or water quality 
permit for an EQIP plan of operations, provided the former plan 
contains elements equivalent to those elements required by an EQIP plan 
of operations.
    NRCS moves provisions in Sec.  1466.24 to Sec.  1466.8 to better 
organize the participant's requirements. As a result, paragraph (b)(6) 
is inserted in Sec.  1466.8, which requires a person or legal entity to 
submit to NRCS its tax identification or unique identifier number when 
applying for EQIP assistance. Where applicable, American Indians, 
Alaska Natives, and Pacific Islanders may use another unique identifier 
for each individual eligible for payment.
    NRCS revises paragraph (c) to further clarify EQIP's working 
landscape to include non-industrial private forestland, and other land 
on which agricultural products, forest-related products, and livestock 
are produced. These areas are identified in the 2008 Act's amendment of 
eligible lands and in the program's purposes. Other agricultural lands 
include cropped woodland, marshes, incidental areas included in the 
agricultural operation, and other types of agricultural land used for 
production of livestock. Within paragraph (c), NRCS also clarifies that 
publicly owned land is eligible if it is an actively managed component 
of the agricultural and forestry operation and

[[Page 2302]]

the conservation practice contributes to an improvement in an 
identified resource concern that is located on private land. To 
demonstrate adequate control of the land, members of Indian tribes 
should provide valid Tribal documentation and or documentation from the 
BIA. The BIA may assist NRCS with acquiring the appropriate 
authorization from the ``certified'' owners.
    Within paragraph (c), the term, ``operating unit'' is replaced with 
the term, ``agricultural operation,'' and the term, ``natural,'' was 
eliminated in an effort to create consistent terminology among the 
conservation programs administered by NRCS.
    Paragraph (e) has been inserted to ensure that five percent of the 
funds will be allocated to assist socially disadvantaged farmers or 
ranchers and an additional five percent of the funds will be allocated 
to assist beginning farmers or ranchers. In implementing the statutory 
change, NRCS considered three ways to allocate funds to meet the 2008 
Act's requirements: (1) Issuing the allocations at the National level 
to defined geographic areas, where such groups are prevalent; (2) 
issuing the allocations to each State; or (3) establishing a national 
target that conforms to the statutory language, but providing States 
flexibility to designate money to each specified group based on 
potential demand in a given State. Under Option 3, NRCS pools the money 
and establishes a ten percent target for each State, enabling State 
Conservationists to designate money to the specified groups based on 
potential demand. NRCS has selected Option 3 to ensure that nationwide 
these groups of producers will benefit from EQIP assistance. Similar to 
EQIP's national livestock target, overall State-level percentages will 
be tracked at the national level to ensure that the amended national 
goals are met.
    The effect of allocating the funds at the State level, with the 
targets being monitored at the national level will be threefold: (1) 
Funds will be provided to applicants who may be in the greatest need 
for additional assistance; (2) priority resource concerns may be better 
addressed; and (3) NRCS will assure that the national targets for these 
groups are met.
    Section 1466.9, ``EQIP plan of operations,'' describes the 
requirements of the EQIP plan of operations, which is a component of 
the EQIP contract. Producers will be required to develop and apply a 
plan of operations that addresses identified priority resource 
concerns. The producer develops the plan of operations with the 
assistance of NRCS or other public or private technical service 
providers. The majority of this section has remained the same, with the 
following exceptions:
    Paragraph (a) is revised to accommodate for the expansion of the 
term, ``conservation practice,'' which includes conservation planning 
activities. All conservation practices must be carried out in 
accordance with NRCS technical guidance. This technical guidance 
includes, but is not limited to, the NRCS FOTG, National Planning 
Procedures Handbook, General Manual 180, Part 409, Conservation 
Planning Policy, and other appropriate technical guidance as determined 
by the State Conservationist or designated conservationist.
    Paragraph (c)(2) is revised by adding the term, ``natural 
resource,'' when listing a participant's potential objectives. 
Specifically (c)(2) is revised as follows: ``To the extent practicable, 
the quantitative or qualitative goals for achieving the participant's 
conservation, natural resource, and environmental objectives.''
    Paragraph (d) of the former program regulation is moved to 
paragraph (b) of this interim final rule to clarify the participant's 
responsibilities as they relate to the EQIP plan of operations. 
Paragraph (b) states that it is the participant's responsibility to 
implement the EQIP plan of operations.
    Paragraph (c) details the elements required in an EQIP plan of 
operations. Paragraph (c)(3) is also revised to accommodate the 
expansion of the term ``conservation practice'' by the 2008 Act 
amendments, which now includes activities such as conservation 
planning, design, and installation. An EQIP plan of operations may be 
made up of one or more conservation practices such as those activities 
listed above, in addition to structural, land management, vegetative, 
and forestry practices. Paragraph (c)(4) is revised to clarify that the 
EQIP plan of operations must include operation and maintenance, as well 
as timing and sequence of conservation practices.
    Paragraph (e) is added to ensure that producers who address 
forestland in their EQIP plan of operations develop and implement a 
forest management plan that is approved by the State Conservationist. 
As defined in Sec.  1466.3, a forest management plan is a site-specific 
plan that is compatible with the participant's objectives and 
identifies and describes actions to be taken by the participant to 
conserve and enhance soil, water, air, fish, and wildlife resources on 
such land. The forest management plan should be developed to comply 
with Federal, State, Tribal, and local laws, regulations, and permit 
requirements.
    NRCS inserts paragraph (f) to specify criteria to evaluate 
acceptable watershed-wide projects for the purposes of implementing 
water conservation or irrigation practices on newly irrigated lands, in 
accordance with section 1240B(h) of the 1985 Act. In determining an 
acceptable watershed-wide project, the State Conservationist will 
ensure:
    <bullet> The project area has a current, comprehensive water 
resource assessment;
    <bullet> The project plan has demonstrated effective water 
conservation and management strategies; and
    <bullet> The project sponsors have consulted with relevant State, 
Tribal, and local agencies.
    NRCS proposes to use the watershed assessments and State, Tribal, 
and local agency consultation in order to ensure that conservation 
practices implemented under EQIP are not in conflict with Federal, 
State, Tribal, and local water laws. The additional criteria also help 
to ensure that conservation practices are not applied to the detriment 
of other resource concerns within that watershed. For example, 
additional criteria may include, but is not limited to: Concurrence by 
State and local water management agencies that the anticipated 
activities will not be a detriment to existing resources; concurrence 
from State fish and wildlife agencies that the land can be irrigated 
with no detriment to in-stream flow for aquatics; and verification that 
the appropriate water permits have been acquired. NRCS is interested in 
comments on the criteria for determining acceptable watershed-wide 
projects, particularly with respect to what should be included in a 
comprehensive water resource assessment and what should be considered 
in determining effective water conservation and management strategies 
at the watershed scale.
    Section 1466.10, ``Conservation practices,'' describes how NRCS 
determines eligible conservation practices. The State Conservationist 
determines which conservation practices are eligible for payment and 
the maximum payment rates in the State. The State Conservationist may 
limit practice eligibility in some localities depending on the resource 
concerns. Throughout this section, to reflect statutory changes, NRCS 
replaces terms, such as ``structural and land management practices,'' 
and ``cost-share and incentive payments,'' with more inclusive terms, 
like ``conservation

[[Page 2303]]

practices'' and ``payments,'' respectively.
    NRCS deletes the former program regulation's paragraph (b), which 
prohibits payments for practices applied before application for 
participation has been made and combines it with paragraph (c), since a 
practice applied prior to application is a practice applied prior to 
contract approval. Payments will not be made for a conservation 
practice that was applied prior to program application or contract 
approval, unless a waiver is granted by the State Conservationist or 
designated conservationist prior to implementation of the conservation 
practice.
    In paragraph (c), NRCS adds the term, ``water conservation,'' to 
clarify EQIP's purposes, as follows: ``A participant will be eligible 
for payments for water conservation and irrigation related conservation 
practices only on land that has been irrigated for two of the last five 
years prior to application for assistance.''
    To reflect the 2008 Act's expansion of the term, ``conservation 
practices,'' NRCS includes the term, ``management approaches,'' in 
paragraph (d). NRCS revises paragraph (d) as follows: ``Where new 
technologies or management approaches that provide a high potential for 
optimizing environmental benefits have been developed, NRCS may approve 
interim conservation practice standards that incorporate new 
technologies and provide financial assistance for pilot work to 
evaluate and assess the performance, efficacy, and effectiveness of the 
new technology or management approach.''
    Section 1466.11, ``Technical services provided by qualified 
personnel not affiliated with USDA,'' was added in the 2003 final rule 
to address technical assistance provided by non-USDA personnel. NRCS is 
authorized to use Federal, State, or local agencies, or private 
entities to provide technical assistance. As determined by the State 
Conservationist, NRCS may contract with private vendors or enter 
cooperative agreements with other Federal, State, or local entities for 
services related to EQIP implementation.
    Throughout this section, the term, ``technical services,'' replaces 
the phrase, ``and other assistance,'' to make this regulation 
consistent with the 2008 Act's amendment that added the definition of 
``technical services.'' Section 1201(a)(25) of the 1985 Act, as amended 
by Section 2001 of the 2008 Act, defines ``technical services'' as 
``conservation planning, technical consultation, and assistance with 
design and implementation of conservation practices.'' In light of this 
statutory change, Sec.  1466.11(b) is revised as follows: 
``Participants may use technical services from qualified personnel of 
other Federal, State, and local agencies, Indian tribes, or individuals 
who are certified as TSPs by NRCS.''
    Using the same rationale as applied to paragraph (b), paragraph (c) 
is revised as follows: ``Technical services provided by qualified 
personnel not affiliated with USDA may include, but are not limited to: 
Conservation planning; conservation practice survey, layout, design, 
installation, and certification; information, education; and training 
for producers.''

Subpart B--Contracts and Payments

    Section 1466.20, ``Application for contracts and selecting offers 
from producers,'' is revised to split into two separate paragraphs, (a) 
``application acceptance'' and (b) ``selecting offer,'' to better 
clarify these policies. The revisions to this section are a result of 
both statutory and streamlining changes.
    Paragraph (a) clarifies that EQIP applications will be accepted 
throughout the year, with the State Conservationist or designated 
conservationist ranking applications at selected times throughout the 
year. Paragraphs (a)(2) and (3) have been inserted to enable the State 
Conservationist to group and rank applications that share similar 
resource objectives, economic status, cultural, or sociological 
backgrounds. In the case of paragraph (a)(2), the 2008 Act amendment 
requires the State Conservationist or designated conservationist, where 
practicable, to group applications based on the type of agricultural 
operation and rank accordingly. NRCS may extend this idea beyond 
agricultural operations to encourage the State Conservationist or 
designated conservationist to establish Statewide, area-wide, or local 
ranking pools. Applications may be grouped within ranking pools, which 
may be created to address a specific resource concern, a specific 
geographic area, a specific type of agricultural operation, or a 
specific group of applications that complete conservation systems. 
Spatially, ranking pools may be centered around a wildlife migration 
corridor, watershed, airshed, or other area of special significance. In 
the case of ranking pools, applications that meet the criteria 
established by the State Conservationist or designated conservationist, 
with advice from the State Technical Committee and local working group, 
where appropriate, will be evaluated against other applications that 
meet the same criteria. Each application will be ranked accordingly 
within that ranking pool or grouping of applications.
    The ranking pools streamline conservation program delivery, 
enabling producers to receive conservation assistance in a more 
expedited manner. For example, the State Conservationist may announce 
an initiative to protect a specific at-risk species or a resource, such 
as a municipal water supply, and designate a specified funding amount 
available to producers within the State or a designated region. 
Applicants may apply by proposing specific conservation practices that 
would create habitat for this at-risk species or protect the drinking 
water source. Applications that address this specific resource concern 
within the State or region would be evaluated against other 
applications and funded accordingly.
    Paragraph (b) details how applications will be prioritized. When 
selecting EQIP applications, the State Conservationist or designated 
conservationist, with advice from the State Technical Committee or 
local working group, respectively, will develop a ranking process to 
prioritize applications for funding that addresses national, State, 
Tribal, and local priority resource concerns. NRCS will select 
applications that fulfill the program purposes, address the priority 
resource concern and offer significant environmental benefit. In 
developing this ranking process, NRCS will expand its focus to include 
energy conservation, in addition to the traditional resource concerns 
that include: Soil, water and air quality; wildlife habitat; and 
surface and groundwater conservation. To reflect the statutory intent 
and ensure both timely and effective conservation improvements, NRCS 
has expanded the selection criteria to give priority to applications 
that:
    <bullet> Indicate a willingness by the applicant to complete all 
conservation practices in an expedited manner;
    <bullet> Effectively and comprehensively address the designated 
resource concern or resource concerns; and
    <bullet> Improve existing conservation practices or improve and 
complete a conservation system. To be eligible for higher ranking for 
this criterion, these existing practices or systems shall be in place 
at the time the contract offer is accepted.
    For applications that include water conservation or irrigation 
efficiency conservation practices, the 2008 Act amendment also requires 
NRCS to give priority to applications that demonstrate a reduction in 
water use by the agricultural operation. As a condition of receiving a 
higher ranking within the

[[Page 2304]]

grouping of water conservation applications, the producer agrees not to 
use any associated water savings to bring new land under irrigation 
production, excluding incidental land needed for efficient operations. 
A producer who brings new land under irrigation production may be 
excluded from this condition, if the producer is participating in a 
watershed-wide project that will effectively conserve water. In 
evaluating whether a watershed-wide project is acceptable, the State 
Conservationist will ensure that:
    <bullet> The project area has a current, comprehensive water 
resource assessment;
    <bullet> The project plan has demonstrated effective water 
management strategies; and
    <bullet> The project sponsors have consulted relevant State, 
Tribal, and local agencies.

The ultimate fate of associated water savings from water conservation 
or irrigation efficiency conservation practices depend on State water 
laws. NRCS does not have authority over State water rights and laws. 
The saved water could remain in the stream, provide aquifer recharge, 
or be utilized by another agricultural producer with more junior water 
rights. In essence, once the water leaves the agricultural operation, 
overall in-stream flow or aquifer recharge may be impacted by other 
sources.
    Section 1466.20 also addresses contract approval authority. NRCS is 
revising Sec.  1466.20 to require the appropriate Regional Assistant 
Chief to approve all contracts that exceed $150,000 and are up to 
$300,000.
    Section 1466.21, ``Contract requirements,'' identifies elements 
contained within an EQIP contract and the responsibilities of the 
participant who is party to the EQIP contract. This section also 
addresses EQIP contract funding limitations. To receive payment, an 
applicant must enter into an EQIP contract. Generally, the EQIP 
contract identifies all conservation practices to be implemented, their 
timing and sequence, and the operation and maintenance needed to 
maintain the conservation practice for its lifespan. As a condition of 
receiving EQIP payments for forestry-related practices, the 2008 Act 
amendments require a participant to have a forest management plan. To 
address this requirement, NRCS revises paragraph (b) to state that the 
participant must implement a forest management plan when the EQIP plan 
of operations addresses nonindustrial private forest land. The forest 
management plan will be developed in accordance with the NRCS FOTG 
requirements and will comply with Federal, State, Tribal, and local 
laws, regulations, and permits.
    NRCS continues to use a contract funding limitation to manage the 
program. In the past, NRCS has limited the contract amount to reflect 
the person/legal entity payment limitation. Prior to the 2008 Act, the 
contract and payment limitations were each $450,000. NRCS retains the 
practice of limiting the contract amount to the person/legal entity 
payment limitation for ease in recordkeeping and for facilitating 
situations where a waiver up to $450,000 may be granted. As required by 
the 2008 Act, paragraph (d) is revised to reduce the contract funding 
limitation from $450,000 to $300,000. NRCS also specifies in paragraph 
(d) that this contract funding limitation may be waived for projects of 
special environmental significance. Projects of special environmental 
significance must meet the following criteria, as determined by the 
Chief:
    <bullet> Site-specific evaluation documents have been completed, 
documenting that the project will have substantial positive impacts on 
critical resources in or near the project area (e.g., impaired water 
bodies, at-risk species, drinking water supplies, or air quality 
attainment);
    <bullet> The project clearly addresses a national priority and 
State, Tribal, or local priorities; and
    <bullet> The project assists the participant in complying with 
Federal, State, Tribal, and local regulatory requirements.
    NRCS is also extending the policy of establishing a contract 
funding limitation to organic contracts. Participants who wish to enter 
into ``organic-only'' contracts are subject to a statutory annual 
payment limitation of $20,000 per year or $80,000 during any six-year 
period. These contract limitations will be instituted for ease in 
recordkeeping. However, participants who operate both organic and non-
organic operations will be encouraged to have separate contracts for 
their non-organic and organic operations. Producers wanting to 
implement practices outside of their organic operations may enter into 
another contract, but will be subject to the overall $300,000 person or 
legal entity payment limitation for all EQIP contracts. Both certified 
organic producers and those transitioning to an organic production 
system will have equal access for priority assistance. NRCS will 
encourage applicants to consolidate those conservation practices most 
directly related to organic production into a single contract to 
optimize the use of funding within both the annual and six-year payment 
limits.
    Section 1466.22, ``Conservation practice operation and 
maintenance,'' addresses the participant's responsibility for 
conservation practice operation and maintenance. Paragraphs (a) through 
(e) are revised to clarify that the O&M agreement is part of the EQIP 
contract. The O&M agreement specifies the terms and conditions under 
which the participant must operate and maintain the conservation 
practices installed with EQIP assistance. This section also clarifies 
that NRCS may periodically inspect conservation practices to ensure 
they are being maintained for the conservation practice lifespan as 
detailed in the O&M agreement. In the event that NRCS finds that a 
participant is not operating and maintaining practices for the 
specified lifespan during the contract duration, NRCS may request a 
refund of payments in accordance with the EQIP contract. If a 
conservation practice is continuing to function for the conservation 
purposes for which it was installed, NRCS may choose to not request a 
payment refund. NRCS has created an O&M agreement to articulate the 
Agency's expectation that the participant is responsible for 
maintaining each conservation practice. NRCS has developed this O&M 
agreement for two reasons: (1) To increase the transparency of a 
participant's contract responsibilities; (2) to ensure these 
conservation practices are maintained for the length of time for which 
they were designed and created.
    Section 1466.23, ``Payment rates and levels,'' formerly addressed 
cost-share rates, incentive payment levels, and payment eligibility. 
Incentive payments have been removed in accordance with the 2008 Act 
amendments. In the place of incentive payments, participants will 
receive payments for estimated costs incurred or income foregone in 
implementing a practice. The terms ``cost-share payments'' and 
``incentive payments'' have been replaced throughout this section with 
the more inclusive term, ``payments.'' Specifically, NRCS has revised 
the following paragraphs:
    The original paragraph (c) becomes paragraph (a); as a result, 
paragraphs are realigned accordingly. NRCS revises paragraph (a) to 
clarify how eligible conservation practices will be selected. In 
developing a list of conservation practices eligible for payment, the 
State Conservationist, in consultation with the State Technical 
Committee, will examine the cost-effectiveness, implementation 
efficiency, and longevity of the conservation practice.

[[Page 2305]]

NRCS will select a conservation practice based on the number of 
resource concerns the conservation practice will address or how 
comprehensively the conservation practice will address the resource 
concern and its ability to assist producers in meeting regulatory 
requirements.
    NRCS revises paragraph (b) to specify that payment rates will be 
established by the State Conservationist or designee, with advice from 
the State Technical Committee or local working group. In determining 
the payment rate, NRCS will use the guidance found in paragraph (c), in 
addition to examining the cost of implementing a practice.
    Paragraphs (c)(1) and (2) are revised to allow participants to 
receive: (i) Up to 75 percent of the estimated costs incurred by 
implementing a conservation practice, (ii) up to 100 percent of the 
estimated income foregone by participant for implementing a practice, 
or both (i) and (iii) where a producer incurs both costs in 
implementing a conservation practice and foregoes income related to 
practice implementation. When determining estimated income foregone, 
the State Conservationist, as specified in section 1240B(d)(3) of the 
1985 Act, may provide a higher payment rate, provided the rate does not 
exceed 100 percent, to the following conservation practices: residue 
management, nutrient management, air quality management, invasive 
species management, pollinator habitat, animal carcass management 
technology, or pest management. In accordance with this paragraph, a 
producer simultaneously may receive payments for performing a practice, 
as well as income foregone for implementing such a practice.
    For participants who are identified as historically underserved 
producers, in accordance with Sec.  1466.3, NRCS may award the 
applicable payment rate and an additional payment rate that is not less 
than 25 percent above the applicable payment rate, provided this 
increase does not exceed 90 percent of the estimated incurred costs 
associated with the conservation practice.
    NRCS also revises paragraph (c)(3) to clarify that payments made to 
a participant will be reduced proportionately below the rate 
established by the State Conservationist or designated conservationist 
to the extent that the total financial contributions for a conservation 
practice from other sources exceed 100 percent of the estimated costs 
incurred for implementing or performing the conservation practice.
    Paragraph (c)(4) is inserted to reflect Congress's intent to 
provide payments for conservation practices that assist producers in 
organic production or transition to organic production. Paragraph 
(c)(4) also clarifies that payments may not be made to cover the costs 
associated with acquiring the actual organic certification.
    NRCS removes the former program regulations' reference to NRCS 
providing incentive payments, in accordance with the 2008 Act, which 
also removed references to incentive payments. NRCS will reimburse 
participants for estimated costs incurred and income foregone in 
accordance with Sec.  1466.23(c).
    NRCS adds paragraph (e) to enable NRCS to adjust payment for 
conservation practices scheduled after the year of contract obligation. 
Inflation, higher fuel costs, and increased labor impact the cost of 
implementing a conservation practice. This provision provides the 
Agency flexibility to compensate participants based on the increased 
costs.
    Section 1466.24, ``EQIP payments,'' provides direction on payment 
eligibility and payment limitations. Section 1240G of the 1985 Act, as 
amended by Section 2508 of the 2008 Act limits payments to persons, 
joint operations, or legal entities to $300,000 during any six-year 
period, except for projects having special environmental significance. 
For projects of special environmental significance, payments will be 
limited to $450,000 (during any six-year period). In order to ensure 
that no individual will receive more than $300,000 (unless a waiver up 
to $450,000 is granted), NRCS will track all EQIP funds paid and 
attributable to any individual by the social security identification 
number or unique identification number. To participate in EQIP, the 
person or legal entity's application must contain all members or 
beneficiaries, their tax identification numbers, and the percentage 
interest of each member or beneficiary. The BIA, as a fiduciary, may 
assist NRCS in distributing funds to individual Indians or Indian 
tribes. With regard to contracts on Indian land, payments exceeding the 
payment limitation may be made to the Tribal participant if an official 
of BIA or a Tribal official certifies in writing that no one 
individual, directly or indirectly, will receive more than the 
limitation.
    For the purposes of applying the payment limitation and in 
accordance with the 2008 Act, the six-year period will include those 
payments made in fiscal years 2009 through 2014. NRCS will honor 
payment and contract limits that exceed $300,000 for those persons, 
joint operations, and legal entities that entered into a contract with 
NRCS prior to October 1, 2008. Contracts entered into prior to October 
1, 2008, are governed by the payment limitations contained within the 
2002 Act. The 2002 Act limited payments and contracts to $450,000. The 
2008 Act reduced the payment limit to $300,000. NRCS will apply these 
new statutory and regulatory limitations, beginning with fiscal year 
2009 contracts and will ensure that no new participants exceed the 
$300,000 limit during the effectiveness of the 2008 Act. Contracts 
entered into prior to October 1, 2008 are not affected by the revision 
in payment limitation. Specifically, the following provisions have been 
changed in this section.
    Paragraph (a) is revised to reduce the person, joint operation, or 
legal entity payment limitation from $450,000 to $300,000. This payment 
limitation applies to the six-year period, following a participant 
entering into a contract with NRCS, starting the year the contract is 
signed. Payments received for technical assistance shall be excluded 
from this limitation. The person, joint operation, or legal entity 
payment limitation may be waived for projects of special environmental 
significance. Projects of special environmental significance must meet 
the following criteria, as determined by the Chief:
    <bullet> The project will have substantial positive impacts on 
critical resources in or near the project area (e.g., impaired water 
bodies, at-risk species, or air quality attainment);
    <bullet> The project clearly addresses a national and State, 
Tribal, or local priorities; and
    <bullet> The project assists the participant in complying with 
Federal, State, or local regulatory requirements.
    Paragraph (c) is inserted to reflect the 2008 Act's limitation on 
payments to a person or legal entity, directly or indirectly, for 
conservation practices related to organic production. Payments for 
practices related to organic production shall not exceed $20,000 per 
year or $80,000 during any six-year period. This limitation excludes 
payments related to technical assistance and pertains only to 
conservation practices applied related to organic production. A 
producer may receive additional payments and is not subject to the 
organic payment limitation for conservation practices performed outside 
of those related to organic production, provided the sum total of all 
payments received does not exceed $300,000 (unless a waiver is granted 
for an environmentally significant project).
    NRCS revises paragraph (d) to reflect the statutory requirement 
that

[[Page 2306]]

participants who wish to receive payments for conservation practices 
related to organic production or the transition to organic production 
must carry out an organic system plan, as defined in section 1466.3, or 
develop and implement conservation practices for certified organic 
production that are consistent with an organic system plan and with 
EQIP's purposes. NRCS will offer conservation planning assistance to 
producers with an interest in organic production as authorized in 
section 1240B(i) of the 1985 Act, as amended by section 2503 of the 
2008 Act.
    Paragraph (d) is further revised to enable the Agency to provide 
advance payments to historically underserved producers, as provided in 
the 2008 Act amendments. Prior to this revision, EQIP policy required a 
participant to certify that a conservation practice had been completed 
before NRCS approved or issued payments. However, due to financial 
hardship by some applicants, the 1985 Act has been amended to enable 
``historically underserved producers'' to receive advance payments up 
to 30 percent of the amount needed to implement a conservation practice 
for the purpose of purchasing needed materials or services. The advance 
payments will assist participants who lack financial resources to 
participate in the program.
    Paragraph (d)(6) addresses the provisions related to the Adjusted 
Gross Income Limitation as it applies to conservation programs. Section 
1001D of the Food Security Act of 1985, as amended by section 1604 of 
the 2008 Act, provides that a person, joint operation, or legal entity 
shall not be eligible to receive any payments from conservation 
programs under Title XII of the 1985 Act and section 524(b) of the 
Federal Crop Insurance Act (7 U.S.C. 1524(b)), which includes EQIP, 
during a crop, fiscal, or program year, if the average adjusted gross 
income of the individual, joint operation, or legal entity exceeds 
$1,000,000, unless not less than 66.66 percent of the average adjusted 
gross income of the person, joint operation, or legal entity is average 
adjusted gross farm income. This provision of the 1985 Act will be 
implemented in accordance with part 1400 of this chapter. Since NRCS 
will be making a commitment for payments under an EQIP contract for a 
period of time into the future, NRCS will make a one-time eligibility 
determination in accordance with part 1400 of this chapter. These 
limitations do not extend to federally recognized Indian tribes.
    Paragraph (d)(12) is revised to reflect the expansion of the term 
``conservation practice.'' NRCS or other Technical Service Providers 
must certify that the conservation practice has been carried out in 
accordance with NRCS technical guidance. This technical guidance 
includes, but is not limited to, the NRCS FOTG, National Planning 
Procedures Handbook, General Manual 180, Part 409, ``Conservation 
Planning Policy,'' and other technical guidance as determined by the 
State Conservationist or designated conservationist.
    Section 1466.24(d)'s provisions related to depriving tenants and 
sharecroppers of EQIP payments is moved to Sec.  1466.35, since the 
provision pertains directly to misrepresentation, scheme, and device, 
which is addressed in Sec.  1466.35.
    Section 1466.25, ``Contract modifications and transfers of land,'' 
is revised to clarify the participant's contract responsibilities as 
they relate to loss of control of the land and the obligations incurred 
by the transferee. In detailing these obligations, NRCS also states 
that the participant and transferee assume the obligations not only of 
the contract, but also the O&M agreement. This section also promulgates 
NRCS's pre-existing policy by adding paragraph (e), which specifies 
that if a conservation practice fails through no fault of the 
participant, the State Conservationist may issue payments to re-
establish the practice.
    Section 1466.26, ``Contract violations and termination,'' addresses 
the procedures that NRCS should take when a violation has occurred or a 
contract termination is needed. Specifically, Sec.  1466.26 is revised 
as follows:
    Paragraph (a) has been inserted to promulgate existing contract 
requirements and specify that the State Conservationist may terminate a 
contract when it is in the public interest, when the participant fails 
or refuses to correct a contract violation, or when a termination is 
needed as a result of conditions beyond the participant's control. The 
State Conservationist may unilaterally terminate an agreement when a 
termination is in the public interest, the participant refuses to 
correct a violation, or the participant is unable to comply with the 
contract terms. In the event a contract is terminated, the State 
Conservationist has the ability to retrieve all or a proportion of the 
payments. When a participant claims that the reason for the violation 
is a form of hardship, the claim must be documented and have existed 
after the participant entered into the contract. When a participant 
makes a hardship claim, the participant will provide documentation that 
details the hardship and for how long the hardship has existed and why 
the hardship has prevented fulfilling requirements of the contract. 
Examples of hardship include: Natural disasters, major illness, farm or 
ranch building destruction, bankruptcy, and public interest (e.g., 
military service, public utilities' easement or condemnation of land, 
or environmental and archeological concerns).
    Paragraph (e) notifies potential EQIP participants that NRCS has 
the ability to collect liquidated damages. Paragraph (e) also gives 
notice to the public that participants who violate EQIP contracts may 
be determined ineligible for future NRCS-administered conservation 
program funding. For clarity, the following provisions are moved to 
paragraph (e), ``If NRCS terminates a contract, the participant will 
forfeit all rights for future payments under the contract and may be 
required to pay liquidated damages as prescribed in the contract, and 
refund all or part of the payments received, plus interest.'' NRCS also 
revises paragraph (e)(2) to provide flexibility to either reduce or 
waive the amount of liquidated damages.
    NRCS adds paragraph (e)(2)(i) to clarify that proof of hardship 
must be documented, and such hardship must have occurred after the 
contract was signed by both parties.
    NRCS adds paragraph (f) to provide that a contract, under which a 
producer is receiving payments for conservation practices related to 
organic production, may be terminated, if the State Conservationist, in 
consultation with the State Technical Committee, determines that the 
producer is not pursuing organic certification or is decertified.
    Section 1466.27, ``Conservation Innovation Grants,'' is amended to 
stipulate that NRCS will not reimburse the grantee for indirect costs. 
The bulk of CIG's policies and procedures were revised on January 3, 
2005, and promulgated in Sec.  1466.27. To locate information about 
this program, consult the NRCS Web site at: http://www.nrcs.usda.gov/programs/cig/.

Subpart C--General Administration

    Section 1466.31, ``Compliance with regulatory measures,'' is 
revised by adding the term, ``permits,'' to clarify that it is the 
participant's responsibility to obtain necessary permits before 
commencing or carrying out conservation practices.
    Section 1466.32, ``Access to operating unit,'' is revised to notify 
potential EQIP applicants that an authorized NRCS representative may 
enter an operating unit or tract for the purpose of confirming 
compliance with program requirements during the term of the

[[Page 2307]]

contract. NRCS will continue to provide the participant with notice, 
prior to entering the property.
    Section 1466.33, ``Equitable relief,'' remains unchanged.
    Section 1466.34 is revised to add the term, ``legal entity,'' to 
clarify that legal entities shall be subject to the same provisions as 
persons.
    Section, 1466.35, ``Misrepresentation and scheme or device,'' is 
revised to insert the following clause from Sec.  1466.24, ``Adopted 
any scheme or device for the purpose of depriving any tenant or 
sharecropper of the payments to which such person would otherwise be 
entitled under the program.''
    Section 1466.36, ``Environmental Credits for Conservation 
Improvements,'' is added to clarify NRCS's interest in environmental 
credits. NRCS recognizes that environmental benefits will be achieved 
by implementing conservation practices funded through EQIP, and that 
environmental credits may be gained as a result of implementing 
activities compatible with the purposes of an EQIP contract. NRCS 
asserts no direct or indirect interest in these credits. However, NRCS 
retains the authority to ensure that operation and maintenance 
requirements for EQIP-funded improvements are met, consistent with 
Sec.  1466.21 and Sec.  1466.22. Where activities may impact the land 
under an EQIP contract, participants are highly encouraged to request 
an O&M compatibility determination from NRCS prior to entering into any 
credit agreements.
    Section 2708, ``Compliance and Performance'', of the 2008 Act added 
a paragraph to section 1244(g) of the 1985 Act entitled, 
``Administrative Requirements for Conservation Programs,'' which states 
the following:
    ``(g) Compliance and performance.--For each conservation program 
under Subtitle D, the Secretary shall develop procedures--
    ``(1) To monitor compliance with program requirements;
    ``(2) To measure program performance;
    ``(3) To demonstrate whether long-term conservation benefits of the 
program are being achieved;
    ``(4) To track participation by crop and livestock type; and
    ``(5) To coordinate activities described in this subsection with 
the national conservation program authorized under section 5 of the 
Soil and Water Resources Conservation Act of 1977 (16 U.S.C. 2004).''
    This new provision presents in one place the accountability 
requirements placed on the Agency as it implements conservation 
programs and reports on program results. The requirements apply to all 
programs under Subtitle D, including the Wetlands Reserve program, the 
Conservation Security Program, the Conservation Stewardship Program, 
The Farm and Ranch Lands Protection Program, the Grassland Reserve 
Program, the Environmental Quality Incentives Program (including the 
Agricultural Water Enhancement Program), the Wildlife Habitat Incentive 
Program, and the Chesapeake Bay Watershed initiative. These 
requirements are not directly incorporated into these regulations, 
which set out requirements for program participants. However, certain 
provisions within these regulations relate to elements of section 
1244(g) of the 1985 Act and the Agency's accountability 
responsibilities regarding program performance. NRCS is taking this 
opportunity to describe existing procedures that relate to meeting the 
requirements of section 1244(g) of the 1985 Act, and Agency 
expectations for improving its ability to report on each program's 
performance and achievement of long-term conservation benefits. Also 
included is reference to the sections of these regulations that apply 
to program participants and that relate to the Agency accountability 
requirements as outlined in section 1244(g) of the 1985 Act.
    Monitor compliance with program requirements. NRCS has established 
application procedures to ensure that participants meet eligibility 
requirements, and follow-up procedures to ensure that participants are 
complying with the terms and conditions of their contractual 
arrangement with the government and that the installed conservation 
measures are operating as intended. These and related program 
compliance evaluation policies are set forth in Agency guidance (M--
440--512 and M--440--515 (http://directives.sc.egov.usda.gov/).
    The program requirements applicable to participants that relate to 
compliance are set forth in these regulations in Sec.  1466.8, 
``Program Requirements,'' Sec.  1466.9, ``EQIP Plan of Operations,'' 
Sec.  1466.21, ``Contract requirements,'' and Sec.  1466.22, 
``Conservation practice operation and maintenance.'' These sections 
make clear the general program eligibility requirements, participant 
obligations for implementing an EQIP plan of operations, participant 
contractual obligations, and requirements for operating and maintaining 
EQIP-funded conservation improvements.
    Measure program performance. Pursuant to the requirements of the 
Government Performance and Results Act of 1993 (Pub. L. 103-62, Sec. 
1116) and guidance provided by OMB Circular A-11, NRCS has established 
performance measures for its conservation programs. Program-funded 
conservation activity is captured through automated field-level 
business tools and the information is made publicly available at: 
http://ias.sc.egov.usda.gov/PRSHOME/. Program performance also is 
reported annually to Congress and the public through the annual 
performance budget, annual accomplishments report, and the USDA 
Performance Accountability Report. Related performance measurement and 
reporting policies are set forth in Agency guidance (GM--340--401 and 
GM--340--403 (http://directives.sc.egov.usda.gov/)).
    The conservation actions undertaken by participants are the basis 
for measuring program performance--specific actions are tracked and 
reported annually, while the effects of those actions relate to whether 
the long-term benefits of the program are being achieved. The program 
requirements applicable to participants that relate to undertaking 
conservation actions are set forth in these regulations in Sec.  
1466.9, ``EQIP Plan of Operations,'' Sec.  1466.21, ``Contract 
requirements,'' and Sec.  1466.22, ``Conservation practice operation 
and maintenance.'' These sections make clear participant obligations 
for implementing, operating, and maintaining EQIP-funded conservation 
improvements, which in aggregate result in the program performance that 
is reflected in Agency performance reports.
    Demonstrate whether long-term conservation benefits of the program 
are being achieved. Demonstrating the long-term natural resource 
benefits achieved through conservation programs is subject to the 
availability of needed data, the capacity and capability of modeling 
approaches, and the external influences that affect actual natural 
resource condition. While NRCS captures many measures of ``output'' 
data, such as acres of conservation practices, it is still in the 
process of developing methods to quantify the contribution of those 
outputs to environmental outcomes.
    NRCS currently uses a mix of approaches to evaluate whether long-
term conservation benefits are being achieved through its programs. 
Since 1982, NRCS has reported on certain natural resource status and 
trends through the National Resources Inventory (NRI), which provides 
statistically reliable, nationally consistent land cover/use and 
related

[[Page 2308]]

natural resource data. However, lacking has been a connection between 
these data and specific conservation programs.\3\ In the future, the 
interagency Conservation Effects Assessment Project (CEAP), which has 
been underway since 2003, will provide nationally consistent estimates 
of environmental effects resulting from conservation practices and 
systems applied. CEAP results will be used in conjunction with 
performance data gathered through Agency field-level business tools to 
help produce estimates of environmental effects accomplished through 
Agency programs, such as EQIP. In 2006 a Blue Ribbon panel evaluation 
of CEAP \4\ strongly endorsed the project's purpose but concluded 
``CEAP must change direction'' to achieve its purposes. In response, 
CEAP has focused on priorities identified by the Panel and clarified 
that its purpose is to quantify the effects of conservation practices 
applied on the landscape. Information regarding CEAP, including reviews 
and current status, is available at http://www.nrcs.usda.gov/technical/
NRI/ ceap/. Since 2004 and the initial establishment of long-term 
performance measures by program, NRCS has been estimating and reporting 
progress toward long-term program goals. Natural resource inventory and 
assessment, and performance measurement and reporting policies set 
forth in Agency guidance (GM--290--400; GM--340--401; GM--340--403)) 
(http://directives.sc.egov.usda.gov/).)
---------------------------------------------------------------------------

    \3\ The exception to this is the Conservation Reserve Program; 
since 1987 the NRI has reported acreage enrolled in CRP.
    \4\ Soil and Water Conservation Society. 2006. Final Report from 
the Blue Ribbon Panel Conducting an External Review of the U.S. 
Department of Agriculture Conservation Effects Assessment Project. 
Ankeny, IA: Soil and Water Conservation Society. This review is 
available at http://www.nrcs.usda.gov/technical/NRI/ceap/.
---------------------------------------------------------------------------

    Demonstrating the long-term conservation benefits of conservation 
programs is an Agency responsibility. Through CEAP, NRCS is in the 
process of evaluating how these long-term benefits can be achieved 
through the conservation practices and systems applied by participants 
under the program. The program requirements applicable to participants 
that relate to producing long-term conservation benefits are described 
previously under ``measuring program performance,'' i.e., Sec.  1466.9, 
``EQIP Plan of Operations,'' Sec.  1466.21, ``Contract requirements,'' 
and Sec.  1466.22, ``Conservation practice operation and maintenance.''
    Track participation by crop and livestock type. NRCS's automated 
field-level business tools capture participant, land, and operation 
information. This information is aggregated in the National 
Conservation Planning database and is used in a variety of program 
reports, for example in validating the program requirement for ensuring 
that 60 percent of funds are directed toward conservation practices 
related to livestock production. Additional reports will be developed 
to provide more detailed information on program participation to meet 
congressional needs. These and related program management procedures 
supporting program implementation are set forth in Agency guidance (M--
440--512 and M--440--515).
    The program requirements applicable to participants that relate to 
tracking participation by crop and livestock type are put forth in 
these regulations in Sec.  1466.8, ``Program Requirements,'' which 
makes clear program eligibility requirements, including eligible land 
and relationship to the production of agricultural, livestock, or 
forest-related products.
    Coordinate these actions with the national conservation program 
authorized under the Soil and Water Resources Conservation Act (RCA). 
The 2008 Act reauthorized and expanded on a number of elements of the 
RCA related to evaluating program performance and conservation 
benefits. Specifically, the 2008 Farm Bill added a provision stating,

    ``Appraisal and inventory of resources, assessment and inventory 
of conservation needs, evaluation of the effects of conservation 
practices, and analyses of alternative approaches to existing 
conservation programs are basic to effective soil, water, and 
related natural resources conservation.''

    The program, performance, and natural resource and effects data 
described previously will serve as a foundation for the next RCA, which 
will also identify and fill, to the extent possible, data and 
information gaps. Policy and procedures related to the RCA are set 
forth in Agency guidance (GM--290--400; M--440--525; GM--130--402) 
(http://directives.sc.egov.usda.gov/).
    The coordination of the previously described components with the 
RCA is an Agency responsibility and is not reflected in these 
regulations. However, it is likely that results from the RCA process 
will result in modifications to the program and performance data 
collected, to the systems used to acquire data and information, and 
potentially to the program itself. Thus, as the Secretary proceeds to 
implement the RCA in accordance with the statute, the approaches and 
processes developed will improve existing program performance 
measurement and outcome reporting capability and provide the foundation 
for improved implementation of the program performance requirements of 
section 1244(g) of the 1985 Act.

List of Subjects in 7 CFR Part 1466

    Agricultural operations, Conservation practices, Conservation 
payments, Natural resources, Payment rates, Contract, Animal feeding 
operations, Soil and water conservation, Soil quality, Water quality 
and water conservation, Wildlife, Forestry management.

0
For the reasons stated in the preamble, the Commodity Credit 
Corporation amends Part 1466 of Title 7 of the Code of Federal 
Regulations as follows:

PART 1466--ENVIRONMENTAL QUALITY INCENTIVES PROGRAM

0
1. The authority citation for part 1466 continues to read as follows:

    Authority: 15 U.S.C. 714b and 714c; 16 U.S.C. 3839aa-3839aa-8.

0
2. Subpart A, consisting of Sec. Sec.  1466.1 through 1466.9, is 
revised to read as follows:
Subpart A--General Provisions
Sec.
1466.1 Applicability.
1466.2 Administration.
1466.3 Definitions.
1466.4 National priorities.
1466.5 National allocation and management.
1466.6 State allocation and management.
1466.7 Outreach activities.
1466.8 Program requirements.
1466.9 EQIP plan of operations.

Subpart A--General Provisions


Sec.  1466.1  Applicability.

    (a) The purposes of the Environmental Quality Incentives Program 
(EQIP) are to promote agricultural production, forest management, and 
environmental quality as compatible goals, and to optimize 
environmental benefits. Through EQIP, the Natural Resources 
Conservation Service (NRCS) provides assistance to eligible farmers and 
ranchers to address soil, water, and air quality, wildlife habitat, 
surface and groundwater conservation, energy conservation, and related 
natural resource concerns. EQIP's financial and technical assistance 
helps producers comply with environmental regulations and enhance 
agricultural and forested lands in a cost-effective and environmentally 
beneficial manner. The purposes of the program are achieved by planning 
and implementing conservation practices on eligible land.

[[Page 2309]]

    (b) EQIP is available in any of the 50 States, the District of 
Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin Islands of 
the United States, American Samoa, and the Commonwealth of the Northern 
Mariana Islands.


Sec.  1466.2  Administration.

    (a) The funds, facilities, and authorities of the Commodity Credit 
Corporation (CCC) are available to NRCS for carrying out EQIP. 
Accordingly, where NRCS is mentioned in this Part, it also refers to 
the CCC's funds, facilities, and authorities where applicable.
    (b) NRCS supports ``locally led conservation'' by using State 
Technical Committees at the State level and local working groups at the 
county or parish level to advise NRCS on issues relating to the EQIP 
implementation such as:
    (1) Identification of priority resource concerns;
    (2) Identification of which conservation practices should be 
eligible for financial assistance; and
    (3) Establishment of payment rates.
    (c) No delegation in this Part to lower organizational levels shall 
preclude the Chief from making any determinations under this Part, or 
from reversing or modifying any determination made under this Part.
    (d) NRCS may enter into agreements with other Federal or State 
agencies, Indian tribes, conservation districts, units of local 
government, public or private organizations, and individuals to assist 
NRCS with implementation of the program in this Part.


Sec.  1466.3  Definitions.

    The following definitions will apply to this Part and all documents 
issued in accordance with this Part, unless specified otherwise:
    Agricultural land means cropland, grassland, rangeland, pasture, 
and other agricultural land, on which agricultural and forest-related 
products, or livestock are produced and resource concerns may be 
addressed. Other agricultural lands include cropped woodland, marshes, 
incidental areas included in the agricultural operation, and other 
types of agricultural land used for production of livestock.
    Agricultural operation means a parcel or parcels of land whether 
contiguous or noncontiguous, which the producer is listed as the 
operator or owner/operator in the Farm Service Agency (FSA) record 
system, which is under the effective control of the producer at the 
time the producer applies for a contract, and which is operated by the 
producer with equipment, labor, management, and production, forestry, 
or cultivation practices that are substantially separate from other 
operations.
    Animal waste management facility means a structural conservation 
practice, implemented in the context of a Comprehensive Nutrient 
Management Plan and consistent with the Field Office Technical Guide, 
which is used for storing, treating, or handling animal waste or 
byproducts, such as animal carcasses.
    Applicant means a person, legal entity, joint operation, or tribe 
that has an interest in an agricultural operation, as defined in part 
1400 of this chapter, who has requested in writing to participate in 
EQIP.
    At-risk species means any plant or animal species as determined by 
the State Conservationist, with advice from the State Technical 
Committee, to need direct intervention to halt its population decline.
    Beginning Farmer or Rancher means a person or legal entity who:
    (1) Has not operated a farm or ranch, or who has operated a farm or 
ranch for not more than 10 consecutive years. This requirement applies 
to all members of an entity, who will materially and substantially 
participate in the operation of the farm or ranch.
    (2) In the case of a contract with an individual, individually or 
with the immediate family, material and substantial participation 
requires that the individual provide substantial day-to-day labor and 
management of the farm or ranch, consistent with the practices in the 
county or State where the farm is located.
    (3) In the case of a contract with an entity or joint operation, 
all members must materially and substantially participate in the 
operation of the farm or ranch. Material and substantial participation 
requires that each of the members provide some amount of the 
management, or labor and management necessary for day-to-day 
activities, such that if each of the members did not provide these 
inputs, operation of the farm or ranch would be seriously impaired.
    Chief means the Chief of NRCS, United States Department of 
Agriculture (USDA), or designee.
    Comprehensive Nutrient Management Plan (CNMP) means a conservation 
system that is unique to an animal feeding operation (AFO). A CNMP is a 
grouping of conservation practices and management activities which, 
when implemented as part of a conservation system, will help to ensure 
that both production and natural resource protection goals are 
achieved. A CNMP incorporates practices to use animal manure and 
organic by-products as a beneficial resource. A CNMP addresses natural 
resource concerns dealing with soil erosion, manure, and organic 
byproducts and their potential impacts on all natural resources 
including water and air quality, which may derive from an AFO. A CNMP 
is developed to assist an AFO owner/operator in meeting all applicable 
local, Tribal, State, and Federal water quality goals or regulations. 
For nutrient impaired stream segments or water bodies, additional 
management activities or conservation practices may be required by 
local, Tribal, State, or Federal water quality goals or regulations.
    Conservation district means any district or unit of State, Tribal, 
or local government formed under State, Tribal, or territorial law for 
the express purpose of developing and carrying out a local soil and 
water conservation program. Such district or unit of government may be 
referred to as a ``conservation district,'' ``soil conservation 
district,'' ``soil and water conservation district,'' ``resource 
conservation district,'' ``land conservation committee,'' ``natural 
resource district,'' or similar name.
    Conservation Innovation Grants means competitive grants made under 
EQIP to individuals and governmental and non-governmental organizations 
to stimulate and transfer innovative technologies and approaches, to 
leverage Federal funds, and to enhance and protect the environment, in 
conjunction with agricultural production and forest management.
    Conservation practice means one or more conservation improvements 
and activities, including structural practices, land management 
practices, vegetative practices, forest management practices, and other 
improvements that achieve the program purposes, including such items as 
CNMPs, agricultural energy management plans, dryland transition plans, 
forest management plans, integrated pest management, and other plans 
determined acceptable by the Chief.
    Contract means a legal document that specifies the rights and 
obligations of any participant accepted into the program. An EQIP 
contract is a binding agreement for the transfer of assistance from 
USDA to the participant to share in the costs of applying conservation 
practices.
    Cost-effectiveness means the least costly option for achieving a 
given set of conservation objectives.
    Designated conservationist means an NRCS employee whom the State 
Conservationist has designated as responsible for EQIP administration 
in a specific area.

[[Page 2310]]

    EQIP plan of operations means the document that identifies the 
location and timing of conservation practices that the participant 
agrees to implement on eligible land in order to address the priority 
resource concerns, optimize environmental benefits, and address program 
purposes as defined in Sec.  1466.1. The EQIP plan of operations is 
part of the EQIP contract.
    Estimated income foregone means an estimate of the net income loss 
associated with the adoption of a conservation practice, including from 
a change in land use or land taken out of production or the opportunity 
cost associated with the adoption of a conservation practice. This 
shall not include losses of income due to disaster or other events 
unrelated to the conservation practice.
    Field office technical guide (FOTG) means the official local NRCS 
source of resource information and interpretations of guidelines, 
criteria, and requirements for planning and applying conservation 
practices and conservation management systems. It contains detailed 
information on the conservation of soil, water, air, plant, and animal 
resources applicable to the local area for which it is prepared.
    Forest management plan means a site-specific plan that is prepared 
by a professional resource manager, in consultation with the 
participant, and is approved by the State Conservationist. Forest 
management plans may include a forest stewardship plan, as specified in 
section 5 of the Cooperative Forestry Assistance Act of 1978 (16 U.S.C. 
2103a); another practice plan approved by the State Forester; or 
another plan determined appropriate by the State Conservationist. The 
plan is intended to comply with Federal, State, tribal, and local laws, 
regulations, and permit requirements.
    Historically underserved producer means an eligible person, joint 
operation, or legal entity who is a beginning farmer or rancher, 
socially disadvantaged farmer or rancher, or limited resource farmer or 
rancher.
    Indian land means:
    (1) Land held in trust by the United States for individual Indians 
or Indian tribes; or
    (2) Land, the title to which is held by individual Indians or 
Indian Tribes subject to Federal restrictions against alienation or 
encumbrance; or
    (3) Land which is subject to rights of use, occupancy and/or 
benefit of certain Indian Tribes; or
    (4) Land held in fee title by an Indian, Indian family or Indian 
Tribe.
    Indian Tribe means any Indian Tribe, band, nation, or other 
organized group or community, including any Alaska Native village or 
regional or village corporation as defined in or established pursuant 
to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.) 
which is recognized as eligible for the special programs and services 
provided by the United States to Indians because of their status as 
Indians.
    Integrated Pest Management means a sustainable approach to managing 
pests by combining biological, cultural, physical, and chemical tools 
in a way that minimizes economic, health, and environmental risks.
    Joint operation means, as defined in part 1400 of this chapter, a 
general partnership, joint venture, or other similar business 
organization in which the members are jointly and severally liable for 
the obligations of the organization.
    Legal entity means, as defined in part 1400 of this chapter, an 
entity created under Federal or State law that:
    (1) Owns land or an agricultural commodity, product, or livestock; 
or
    (2) Produces an agricultural commodity, product, or livestock.
    Lifespan means the period of time during which a conservation 
practice should be maintained and used for the intended purpose.
    Limited Resource Farmer or Rancher means:
    (1) A person with direct or indirect gross farm sales not more than 
$155,200 in each of the previous two years (adjusted for inflation 
using Prices Paid by Farmer Index as compiled by National Agricultural 
Statistical Service), and
    (2) Has a total household income at or below the national poverty 
level for a family of four, or less than 50 percent of county median 
household income in each of the previous two years (to be determined 
annually using Commerce Department Data).
    Liquidated damages means a sum of money stipulated in the EQIP 
contract that the participant agrees to pay NRCS if the participant 
fails to adequately complete the terms of the contract. The sum 
represents an estimate of the technical assistance expenses incurred to 
service the contract, and reflects the difficulties of proof of loss 
and the inconvenience or non-feasibility of otherwise obtaining an 
adequate remedy.
    Livestock means all animals produced on farms or ranches, as 
determined by the Chief.
    Livestock production means farm or ranch operations involving the 
production, growing, raising, or reproduction of livestock or livestock 
products.
    Local Working Group means the advisory body as defined in part 610 
of this title.
    National measures mean measurable criteria identified by the Chief, 
with the advice of other Federal agencies and State Conservationists, 
to help EQIP achieve the national priorities and statutory 
requirements.
    National Organic Program means the national program, administered 
by the Agricultural Marketing Service, which regulates the standards 
for any farm, wild crop harvesting, or handling operation that wants to 
sell an agricultural product as organically produced.
    National priorities means resource issues identified by the Chief, 
with advice from other Federal agencies and State Conservationists, 
which will be used to determine the distribution of EQIP funds and 
guide local EQIP implementation.
    Natural Resources Conservation Service is an agency of the USDA, 
which has responsibility for administering EQIP using the funds, 
facilities, and authorities of the CCC.
    Nonindustrial private forest land means rural land, as determined 
by the Secretary, that has existing tree cover or is suitable for 
growing trees; and is owned by any nonindustrial private individual, 
group, association, corporation, Indian Tribe, or other private legal 
entity that has definitive decision-making authority over the land.
    Operation and maintenance means work performed by the participant 
to keep the applied conservation practice functioning for the intended 
purpose during the conservation practice lifespan. Operation includes 
the administration, management, and performance of non-maintenance 
actions needed to keep the completed practice functioning as intended. 
Maintenance includes work to prevent deterioration of the practice, 
repairing damage, or replacement of the practice to its original 
condition if one or more components fail.
    Operation and maintenance (O&M) agreement means the document that, 
in conjunction with the EQIP plan of operations, specifies the 
operation and maintenance responsibilities of the participant for 
conservation practices installed with EQIP assistance.
    Organic System Plan means a management plan for organic production 
or for an organic handling operation that has been agreed to by the 
producer or handler and the certifying agent. The Organic System Plan 
includes all written plans that govern all

[[Page 2311]]

aspects of agricultural production or handling.
    Participant means a person, legal entity, joint operation, or tribe 
that is receiving payment or is responsible for implementing the terms 
and conditions of an EQIP contract.
    Payment means financial assistance provided to the participant 
based on the estimated costs incurred in performing or implementing 
conservation practices, including costs for: planning, design, 
materials, equipment, installation, labor, maintenance, management, or 
training, as well as the estimated income foregone by the producer for 
designated conservation practices.
    Person means, as defined in part 1400 of this chapter, an 
individual, natural person, and does not include a legal entity.
    Priority resource concern(s) means a resource concern that is 
identified by the State Conservationist, in consultation with the State 
Technical Committee, as a priority for a State, geographic area, or 
watershed level.
    Producer means a person, legal entity, or joint operation who has 
an interest in the agricultural operation, according to part 1400 of 
this chapter, or who is engaged in agricultural production or forestry 
management.
    Regional Assistant Chief means the NRCS employee authorized to 
direct and supervise NRCS activities in an NRCS region.
    Resource Concern means a specific natural resource problem that 
represents a significant concern in a State or region, and is likely to 
be addressed successfully through the implementation of the 
conservation activities by producers.
    Secretary means the Secretary of the USDA.
    Socially disadvantaged farmer or rancher means a farmer or rancher 
who has been subjected to racial or ethnic prejudices because of their 
identity as a member of a group without regard to their individual 
qualities.
    State Conservationist means the NRCS employee authorized to 
implement EQIP and direct and supervise NRCS activities in a State, the 
Caribbean Area, or the Pacific Island Area.
    State Technical Committee means a committee established by the 
Secretary in a State pursuant to 16 U.S.C. 3861.
    Structural practice means a conservation practice, including a 
vegetative practice, that involves establishing, constructing, or 
installing a site-specific measure to conserve and protect a resource 
from degradation, or improve soil, water, air, or related natural 
resources in the most cost-effective manner. Examples include, but are 
not limited to, animal waste management facilities, terraces, grassed 
waterways, tailwater pits, livestock water developments, contour grass 
strips, filterstrips, critical area plantings, tree plantings, 
establishment or improvement of wildlife habitat, and capping of 
abandoned wells.
    Technical assistance means technical expertise, information, and 
tools necessary for the conservation of natural resources on land 
active in agricultural, forestry, or related uses. The term includes 
the following:
    (1) Technical services provided directly to farmers, ranchers, and 
other eligible entities, such as conservation planning, technical 
consultation, and assistance with design and implementation of 
conservation practices; and
    (2) Technical infrastructure, including activities, processes, 
tools, and agency functions needed to support delivery of technical 
services, such as technical standards, resource inventories, training, 
data, technology, monitoring, and effects analyses.
    Technical Service Provider (TSP) means an individual, private-
sector entity, or public agency certified by NRCS to provide technical 
services to program participants, in lieu of or on behalf of NRCS.
    Wildlife means non-domesticated birds, fishes, reptiles, 
amphibians, invertebrates, and mammals.


Sec.  1466.4  National priorities.

    (a) The following national priorities, consistent with statutory 
resource concerns that include soil, water, wildlife, air quality, and 
related resource concerns, will be used in EQIP implementation:
    (1) Reductions of nonpoint source pollution, such as nutrients, 
sediment, pesticides, or excess salinity in impaired watersheds 
consistent with total maximum daily loads (TMDLs) where available; the 
reduction of surface and groundwater contamination; and the reduction 
of contamination from agricultural point sources, such as concentrated 
animal feeding operations;
    (2) Conservation of ground and surface water resources;
    (3) Reduction of emissions, such as particulate matter, nitrogen 
oxides, volatile organic compounds, and ozone precursors and depleters 
that contribute to air quality impairment violations of National 
Ambient Air Quality Standards;
    (4) Reduction in soil erosion and sedimentation from unacceptable 
levels on agricultural land; and
    (5) Promotion of at-risk species habitat conservation.
    (b) In consultation with other Federal agencies, NRCS will 
undertake periodic reviews of the national priorities and the effects 
of program delivery at the State and local level to adapt the program 
to address emerging resource issues. NRCS will:
    (1) Use the national priorities to guide the allocation of EQIP 
funds to the NRCS State offices,
    (2) Use the national priorities in conjunction with State and local 
priorities to assist with prioritization and selection of EQIP 
applications, and
    (3) Periodically review and update the national priorities 
utilizing input from the public and affected stakeholders to ensure 
that the program continues to address priority resource concerns.


Sec.  1466.5  National allocation and management.

    The Chief allocates EQIP funds to the State Conservationists to 
implement EQIP at the State and local level. In order to optimize the 
overall environmental benefits over the program duration, the Chief 
will:
    (a) Use an EQIP fund allocation formula that reflects national 
priorities and that uses available natural resource and resource 
concerns data to distribute funds to the State level. This procedure 
will be updated periodically to reflect adjustments to national 
priorities and information about resource concerns and program 
performance. The data used in the allocation formula will be updated as 
they become available.
    (b) Provide a performance incentive to NRCS in States that 
demonstrate a high level of program accomplishment in implementing 
EQIP. The Chief shall consider factors such as strategically planning 
EQIP implementation, effectively addressing national priorities and 
measures, State and local resource concerns, the program delivery 
effectiveness, the use of TSPs, and the number of contracts with 
historically underserved producers.
    (c) Establish State level EQIP performance goals based on national, 
regional, and State priorities.
    (d) Ensure that national, State and local level information 
regarding program implementation such as resource priorities, eligible 
practices, ranking processes, payment schedules, fund allocation, and 
program achievements are made available to the public.
    (e) Consult with other Federal agencies with the appropriate 
expertise and information when evaluating the considerations described 
in this section.

[[Page 2312]]

    (f) Authorize the State Conservationist, with advice from the State 
Technical Committee and local working groups, to determine how funds 
will be used and how the program will be administered to achieve 
national priorities in each State.
    (g) Utilize assessment, evaluation, and accountability procedures 
based on actual natural resource and environmental outcomes and 
results.


Sec.  1466.6  State allocation and management.

    The State Conservationist will:
    (a) Identify State priority resource concerns, with the advice of 
the State Technical Committee, which directly contribute toward meeting 
national priorities and measures, and will use NRCS's accountability 
system and other accountability tools to establish local level goals 
and treatment objectives;
    (b) Identify, as appropriate and necessary, designated 
conservationists who are NRCS employees that are assigned the 
responsibility to administer EQIP in specific areas; and
    (c) Use the following to determine how to manage EQIP and how to 
allocate funds within a State:
    (1) The nature and extent of priority resource concerns at the 
State and local level;
    (2) The availability of human resources, incentive programs, 
educational programs, and on-farm research programs from public, 
private, and Tribal sources, to assist with the activities related to 
the priority resource concerns;
    (3) The existence of multi-county and/or multi-State collaborative 
efforts to address regional priority resource concerns;
    (4) Program performance and results;
    (5) The degree of difficulty that producers face in complying with 
environmental laws; and
    (6) The presence of additional priority resource concerns and 
specialized farming operations, including but not limited to, specialty 
crop producers, organic producers, and small-scale farms.


Sec.  1466.7  Outreach activities.

    NRCS will establish program outreach activities at the national, 
State, and local levels in order to ensure that producers whose land 
has environmental problems and priority resource concerns are aware and 
informed that they may be eligible to apply for program assistance. 
Special outreach will be made to eligible producers with historically 
low participation rates, including but not restricted to, limited 
resource, socially disadvantaged, small-scale, or beginning farmers or 
ranchers, Indian Tribes, Alaska Natives, and Pacific Islanders.


Sec.  1466.8  Program requirements.

    (a) Program participation is voluntary. The applicant must develop 
an EQIP plan of operations for the agricultural or nonindustrial 
private forest land to be treated that serves as the basis for the EQIP 
contract. NRCS provides participants with technical assistance and 
payments to plan and apply needed conservation practices.
    (b) To be eligible to participate in EQIP, an applicant must:
    (1) Be in compliance with the highly erodible land and wetland 
conservation provisions found at part 12 of this title;
    (2) Have an interest in the agricultural operation as defined in 
part 1400 of this chapter;
    (3) Have control of the land for the term of the proposed contract 
period;
    (i) The Chief may determine that land administered by the Bureau of 
Indian Affairs (BIA), Indian land, or other such circumstances provides 
sufficient assurance of control,
    (ii) If the applicant is a tenant of the land involved in 
agricultural production or forestry management, the applicant shall 
provide the Chief with the written concurrence of the landowner in 
order to apply a structural conservation practice,
    (4) Submit an EQIP plan of operations or plan developed for the 
purposes of acquiring an air or water quality permit, provided these 
plans contain elements equivalent to those elements required by an EQIP 
plan of operations and are acceptable to the State Conservationist as 
being consistent with the purposes of the program;
    (5) Supply information, as required by NRCS, to determine 
eligibility for the program, including but not limited to, information 
to verify the applicant's status as a limited resource, beginning 
farmer or rancher, and payment eligibility as established by part 1400 
of this chapter; and
    (6) Provide a list of all members of the legal entity and embedded 
entities along with members' tax identification numbers and percentage 
interest in the entity. Where applicable, American Indians, Alaska 
Natives, and Pacific Islanders may use another unique identification 
number for each individual eligible for payment.
    (c) Eligible land includes agricultural land and nonindustrial 
private forest land, and other land on which agricultural products, 
livestock, or forest-related products are produced and resource 
concerns may be addressed. Other agricultural lands include cropped 
woodland, marshes, incidental areas included in the agricultural 
operation, and other types of agricultural land used for production of 
livestock. However, land may be considered for enrollment in EQIP only 
if NRCS determines that the land is:
    (1) Privately owned land;
    (2) Publicly owned land where:
    (i) The land is a working component of the participant's 
agricultural and forestry operation, and
    (ii) The participant has control of the land for the term of the 
contract, and
    (iii) The conservation practices to be implemented on the public 
land are necessary and will contribute to an improvement in the 
identified resource concern that is on private land; or
    (3) Indian land.
    (d) Sixty percent of available EQIP financial assistance will be 
targeted to conservation practices related to livestock production, 
including practices on grazing lands and other lands directly 
attributable to livestock production, as measured at the national 
level.
    (e) NRCS will establish a national target to set aside five percent 
of EQIP funds for socially disadvantaged farmers or ranchers and an 
additional five percent of EQIP funds for beginning farmers or 
ranchers.


Sec.  1466.9  EQIP plan of operations.

    (a) All conservation practices in the EQIP plan of operations must 
be approved by NRCS and developed and carried out in accordance with 
the applicable NRCS technical guidance.
    (b) The participant is responsible for implementing the EQIP plan 
of operations.
    (c) The EQIP plan of operations must include:
    (1) A description of the participant's specific conservation and 
environmental objectives to be achieved;
    (2) To the extent practicable, the quantitative or qualitative 
goals for achieving the participant's conservation, natural resource, 
and environmental objectives;
    (3) A description of one or more conservation practices in the 
conservation management system, including conservation planning, 
design, or installation activities, to be implemented to achieve the 
conservation and environmental objectives;
    (4) A description of the schedule for implementing the conservation 
practices, including timing, sequence, operation, and maintenance; and
    (5) Information that will enable evaluation of the effectiveness of 
the plan in achieving the environmental objectives.
    (d) If an EQIP plan of operations includes an animal waste storage 
or

[[Page 2313]]

treatment facility, the participant must agree to develop and implement 
a CNMP or demonstrate to the satisfaction of the designated 
conservationist that a CNMP has been implemented.
    (e) If an EQIP plan of operations addresses forestland, the 
participant must develop and implement a forest management plan.
    (f) A participant may receive assistance to implement an EQIP plan 
of operations for water conservation only if the assistance will 
facilitate a reduction in ground and surface water use on the 
agricultural operation, unless the producer is participating in a 
watershed-wide project, as approved by the State Conservationist, which 
will effectively conserve water in accordance with Sec.  1466.20.

0
3. In subpart B, Sec. Sec.  1466.10 through 1466.26 are revised to read 
as follows.
Subpart B--Contracts and Payments
Sec.
1466.10 Conservation practices.
1466.11 Technical services provided by qualified personnel not 
affiliated with USDA.
1466.20 Application for contracts and selecting applications.
1466.21 Contracts requirements.
1466.22 Conservation practice operation and maintenance.
1466.23 Payment rates.
1466.24 EQIP payments.
1466.25 Contract modifications and transfers of land.
1466.26 Contract violations and terminations.
* * * * *


Sec.  1466.10  Conservation practices.

    (a) NRCS will determine the conservation practices for which 
participants may receive program payments. A list of eligible practices 
will be available to the public.
    (b) Payments will not be made to a participant for a conservation 
practice that either the applicant or another producer has applied 
prior to application for the program. Payments will not be made for a 
conservation practice that has been initiated or implemented prior to 
contract approval, unless a waiver was granted by the State 
Conservationist or designated conservationist prior to the practice 
implementation.
    (c) A participant will be eligible for payments for water 
conservation and irrigation related conservation practices only on land 
that has been irrigated for two of the last five years prior to 
application for assistance.
    (d) Where new technologies or management approaches that provide a 
high potential for optimizing environmental benefits have been 
developed, NRCS may approve interim conservation practice standards 
that incorporate the new technologies and provide financial assistance 
for pilot work to evaluate and assess the performance, efficiency, and 
effectiveness of the new technology or management approach.


Sec.  1466.11  Technical services provided by qualified personnel not 
affiliated with USDA.

    (a) NRCS may use the services of qualified TSPs in performing its 
responsibilities for technical assistance.
    (b) Participants may use technical services from qualified 
personnel of other Federal, State, and local agencies, Indian Tribes, 
or individuals who are certified as TSPs by NRCS.
    (c) Technical services provided by qualified personnel not 
affiliated with USDA may include, but are not limited to: conservation 
planning; conservation practice survey, layout, design, installation, 
and certification; and information; education; and training for 
producers.
    (d) NRCS retains approval authority of work done by non-NRCS 
personnel for the purpose of approving EQIP payments.


Sec.  1466.20  Application for contracts and selecting applications.

    (a) In evaluating EQIP applications, the State Conservationist or 
designated conservationist, with advice from the State Technical 
Committee or local working group, takes into account the following 
guidelines:
    (1) Any producer who has eligible land may submit an application 
for participation in EQIP. Applications are accepted throughout the 
year. Producers who are members of a joint operation may file a single 
application for the joint operation.
    (2) The State Conservationist, to the greatest extent practicable, 
will group applications of similar crop, forestry, and livestock 
operations for evaluation purposes.
    (3) The State Conservationist will evaluate applications within 
each established grouping.
    (b) In selecting EQIP applications, the State Conservationist or 
designated conservationist, with advice from the State Technical 
Committee or local working group, may establish ranking pools to 
address a specific resource concern, geographic area, or agricultural 
operation type or develop a ranking process to prioritize applications 
for funding that address national, State, and local priority resource 
concerns, taking into account the following guidelines:
    (1) The State Conservationist or designated conservationist will 
periodically select the highest ranked applications for funding based 
on applicant eligibility, fund availability, and the NRCS ranking 
process. The State Conservationist or designated conservationist will 
rank all applications according to the following factors:
    (i) The degree of cost-effectiveness of the proposed conservation 
practices;
    (ii) The magnitude of the expected environmental benefits resulting 
from the conservation treatment and the priority of the resource 
concerns that have been identified at the local, State, and national 
levels;
    (iii) How effectively and comprehensively the project addresses the 
designated resource concern or resource concerns;
    (iv) Use of conservation practices that provide long-term 
environmental enhancements;
    (v) Compliance with Federal, State, Tribal, or local regulatory 
requirements concerning soil, water and air quality; wildlife habitat; 
and ground and surface water conservation;
    (vi) Willingness of the applicant to complete all conservation 
practices in an expedited manner;
    (vii) The ability to improve existing conservation practices or 
systems, which are in place at the time the application is accepted, or 
that complete a conservation system;
    (viii) Other locally defined pertinent factors, such as the 
location of the conservation practice, the extent of natural resource 
degradation, and the degree of cooperation by local producers to 
achieve environmental improvements.
    (2) For applications that include water conservation or irrigation 
efficiency practices, the State Conservationist will give priority to 
those applications where:
    (i) Consistent with State law in which the producer's eligible land 
is located, there is a reduction in water use in the agricultural 
operation, or where the producer agrees not to use any associated water 
savings to bring new land under irrigation production, other than 
incidental land needed for efficient operations.
    (ii) A producer who brings new land under irrigated production may 
be excluded from this latter condition if the producer is participating 
in a watershed-wide project that will effectively conserve water. The 
State Conservationist will designate eligible watershed-wide projects 
that effectively conserve water, using the following criteria:

[[Page 2314]]

    (A) The project area has a current, comprehensive water resource 
assessment;
    (B) The project plan has demonstrated effective water conservation 
management strategies; and
    (C) The project sponsors have consulted relevant State and local 
agencies.
    (3) If the State Conservationist determines that the environmental 
values of two or more applications for payments are comparable, the 
State Conservationist will not assign a higher priority to the 
application solely because it would present the least cost to the 
program.
    (4) The ranking will not give preferential treatment to 
applications based on size of the operation.
    (5) The ranking process will determine the order in which 
applications will be selected for funding. The approving authority for 
EQIP contracts will be the State Conservationist or designee, except 
that the approving authority for any EQIP contract greater than 
$150,000 and up to $300,000 will be the appropriate NRCS Regional 
Assistant Chief.
    (6) The State Conservationist will make available to the public all 
information regarding priority resource concerns, the list of eligible 
practices, payment rates, and how the EQIP program is implemented in 
the State.


Sec.  1466.21  Contract requirements.

    (a) In order for a participant to receive payments, the participant 
must enter into a contract agreeing to implement one or more 
conservation practices. Technical services may be included in the 
contract.
    (b) An EQIP contract will:
    (1) Identify all conservation practices to be implemented, the 
timing of practice installation, the operation and maintenance 
requirements for the practices, and applicable payments allocated to 
the practices under the contract;
    (2) Be for a minimum duration of one year after completion of the 
last practice, but not more than 10 years;
    (3) Incorporate all provisions as required by law or statute, 
including requirements that the participant will:
    (i) Not implement any practices within the agricultural or forestry 
operation that would defeat the program's purposes;
    (ii) Refund any program payments received with interest, and 
forfeit any future payments under the program, on the violation of a 
term or condition of the contract, consistent with the provisions of 
Sec.  1466.26;
    (iii) Refund all program payments received on the transfer of the 
right and interest of the producer in land subject to the contract, 
unless the transferee of the right and interest agrees to assume all 
obligations, including operation and maintenance of the EQIP contract's 
conservation practices, consistent with the provisions of Sec.  
1466.25;
    (iv) Implement a comprehensive nutrient management plan when the 
EQIP contract includes an animal waste management facility;
    (v) Implement a forest management plan when the EQIP plan of 
operations addresses nonindustrial private forest land;
    (vi) Supply information as may be required by NRCS to determine 
compliance with the contract and program requirements;
    (vii) Specify the participant's responsibilities for operation and 
maintenance of the applied conservation practices, consistent with the 
provisions of Sec.  1466.22; and
    (4) Specify any other provision determined necessary or appropriate 
by NRCS.
    (c) The participant must start at least one financially assisted 
practice within the first 12 months of signing a contract. If a 
participant, for reasons beyond their control, is unable to start 
conservation practice within the first year of the contract, the 
participant can request a waiver from the State Conservationist.
    (d) Each contract will be limited to no more than $300,000. The 
Chief may waive this contract limitation to allow up to $450,000 for 
projects of special environmental significance that include methane 
digesters, other innovative technologies, and projects that will result 
in significant environmental improvements. Projects of special 
environmental significance must meet the following criteria, as 
determined by the Chief:
    (1) Site-specific evaluation documents have been completed, 
documenting that the project will have substantial positive impacts on 
critical resources in or near the project area (e.g., impaired water 
bodies, at-risk species, drinking water supplies, or air quality 
attainment);
    (2) The project clearly addresses a national priority and State, 
Tribal, or local priority resource concerns, as applicable; and
    (3) The project assists the participant in complying with Federal, 
State, and local regulatory requirements.


Sec.  1466.22  Conservation practice operation and maintenance.

    (a) The contract will incorporate the O&M agreement that addresses 
the operation and maintenance of conservation practices applied under 
the contract.
    (b) NRCS expects the participant to operate and maintain each 
conservation practice installed under the contract for its intended 
purpose for the conservation practice lifespan as specified in the O&M 
agreement.
    (c) Conservation practices installed before the contract execution, 
but included in the contract to obtain the environmental benefits 
agreed upon, must be operated and maintained as specified in the 
contract and O&M agreement.
    (d) NRCS may periodically inspect the conservation practice during 
the contract duration as specified in the O&M agreement to ensure that 
operation and maintenance requirements are being carried out, and that 
the conservation practice is fulfilling its intended objectives.
    (e) If NRCS finds during the contract that a participant is not 
operating and maintaining practices in an appropriate manner, NRCS may 
terminate and request a refund of payments made for that conservation 
practice under the contract.


Sec.  1466.23  Payment rates.

    (a) The State Conservationist or designated conservationist will 
develop a list of conservation practices, eligible for payment under 
the program, which considers:
    (1) The conservation practice cost-effectiveness, implementation 
efficiency, and innovation,
    (2) The degree and effectiveness in treating priority resource 
concerns,
    (3) The number of resource concerns the practice will address,
    (4) The longevity of the practice's environmental benefits,
    (5) The conservation practice's ability to assist producers in 
meeting regulatory requirements, and
    (6) Other pertinent local considerations.
    (b) Payment rates will be established by the State Conservationist 
or designated conservationist, with advice from the State Technical 
Committee and local working groups.
    (c) Determining payment rates. (1) A payment to a producer for 
performing a practice may not exceed, as determined by the State or 
designated conservationist:
    (i) 75 percent of the estimated costs incurred by implementing the 
conservation practice;
    (ii) 100 percent of the estimated income foregone; or
    (iii) Both conditions in paragraphs (c)(1)(i) and (ii) of this 
section, where a producer incurs costs in implementing a conservation 
practice and foregoes income related to that practice implementation.

[[Page 2315]]

    (iv) When determining payments for income foregone, the State 
Conservationist may give higher priority to the following conservation 
practices:
    (A) Residue management;
    (B) Nutrient management;
    (C) Air quality management;
    (D) Invasive species management;
    (E) Pollinator habitat development or improvement;
    (F) Animal carcass management technology; or
    (G) Pest management.
    (2) Notwithstanding paragraph (c)(1)(ii) of this section, a farmer 
or rancher meeting the historically underserved producer designation in 
Sec.  1466.3 may be awarded the applicable payment rate and an 
additional rate that is not less than 25 percent above the applicable 
rate, provided this increase does not exceed 90 percent of the incurred 
costs estimated for the conservation practice.
    (3) The payments to a participant will be reduced proportionately 
below the rate established by the State Conservationist or designated 
conservationist, to the extent that total financial contributions for a 
conservation practice from other sources exceed 100 percent of the 
estimated costs incurred for implementing or performing the 
conservation practice.
    (4) The State Conservationist shall provide payments for 
conservation practices on some or all of the operations of a producer 
related to organic production and the transition to organic production. 
Payments may not be made to cover the costs associated with organic 
certification or for practices that are eligible for cost-share 
payments under the National Organic Program (7 U.S.C. 6523).
    (d) Practice payment rates greater than 50 percent for estimated 
costs incurred, excluding those described in paragraph (c)(2) of this 
section, are to be approved by the Chief.
    (e) Subject to fund availability, the payment rates for 
conservation practices scheduled after the year of contract obligation 
may be adjusted to reflect increased costs.


Sec.  1466.24  EQIP payments.

    (a) Except for contracts entered into prior to October 1, 2008, or 
as provided in paragraph (b) of this section, the total amount of 
payments paid to a person, joint operation, or legal entity under this 
part may not exceed an aggregate of $300,000, directly or indirectly, 
for all contracts, including prior year contracts, entered into during 
any 6-year period. For purpose of applying this requirement, the 6-year 
period will include those payments made in fiscal years 2009-2014. 
Payments received for technical assistance shall be excluded from this 
limitation.
    (b) The Chief may waive the $300,000 payment limitation, allowing 
up to $450,000 per person, joint operation, or legal entity for 
projects of special environmental significance, as defined in Sec.  
1466.21(d).
    (c) Payments for conservation practices related to organic 
production to a person, joint operation, or legal entity, directly or 
indirectly, may not exceed in aggregate $20,000 per year or $80,000 
during any 6-year period. Payments received for technical assistance 
shall be excluded from this limitation.
    (d) To determine eligibility for payments, NRCS will use the 
following criteria:
    (1) The provisions in part 1400 of this chapter, Payment Limitation 
and Payment Eligibility, subparts A and G.
    (2) States, political subdivisions, and entities thereof will not 
be considered to be persons or legal entities eligible for payment.
    (3) To be eligible to receive an EQIP payment, all legal entities 
or persons applying, either alone or as part of a joint operation, must 
provide a tax identification number and percentage interest in the 
legal entity. In accordance with 7 CFR 1400, an applicant applying as a 
joint operation or legal entity must provide a list of all members of 
the legal entity and joint operation and associated embedded entities, 
along with the members' social security numbers and percentage interest 
in the joint operation or legal entity. Where applicable, American 
Indians, Alaska Natives, and Pacific Islanders may use another unique 
identification number for each individual eligible for payment.
    (4) With regard to contracts with Indian tribes or Indians 
represented by BIA, payments exceeding the payment limitation may be 
made to the Tribal participant if a BIA or Tribal official certifies in 
writing that no one individual, directly or indirectly, will receive 
more than the payment limitation. The Tribal entity must also provide, 
annually, a listing of individuals and payments made, by social 
security or tax identification number or other unique identification 
number, during the previous year for calculation of overall payment 
limitations. The BIA or Tribal entity must also produce, at the request 
of NRCS, proof of payments made to the person or legal entity that 
incurred costs or sacrificed income related to conservation practice 
implementation.
    (5) Any cooperative association of producers that markets 
commodities for producers will not be considered to be a person 
eligible for payment.
    (6) Eligibility for payments in accordance with part 1400, subpart 
G of this chapter, average adjusted gross income limitation, will be 
determined prior to contract approval.
    (7) To be eligible for payments for conservation practices related 
to organic production or the transition to organic production, a 
participant will develop and implement an organic system plan as 
defined in Sec.  1466.3.
    (8) Eligibility for higher payments in accordance with paragraph 
(b) of this section will be determined at the time of contract 
approval.
    (9) Any participant that utilizes a unique identification number as 
an alternative to a tax identification number will utilize only that 
identifier for any and all other EQIP contracts to which the 
participant is a party. Violators will be considered to have provided 
fraudulent representation and be subject to full penalties of Sec.  
1466.35.
    (10) A participant will not be eligible for payments for 
conservation practices on eligible land if the participant receives 
payments or other benefits for the same practice on the same land under 
any other conservation program administered by USDA.
    (11) The State Conservationist may issue advance payments to 
historically underserved producers up to 30 percent of the anticipated 
amount of the costs incurred for the purpose of purchasing materials or 
services to implement a conservation practice.
    (12) Before NRCS will approve and issue final payment, the 
participant must certify that the conservation practice has been 
completed in accordance with the contract, and NRCS, or an approved 
TSP, must certify that the practice has been carried out in accordance 
with the applicable NRCS technical guidance.


Sec.  1466.25  Contract modifications and transfers of land.

    (a) The participant and NRCS may modify a contract if both parties 
agree to the contract modification, the EQIP plan of operations is 
revised in accordance with NRCS requirements, and the contract is 
approved by the designated conservationist.
    (b) It is the participant's responsibility to notify NRCS when he/
she either anticipates the voluntary or involuntary loss of control of 
the land covered by an EQIP contract.
    (c) The participant and NRCS may agree to transfer a contract to 
another party.

[[Page 2316]]

    (1) To receive an EQIP payment, the transferee must be determined 
by NRCS to be eligible to participate in EQIP and must assume full 
responsibility under the contract, including the O&M agreement for 
those conservation practices already installed and those conservation 
practices to be installed as a condition of the contract.
    (2) If the transferee is ineligible or refuses to accept future 
payments, NRCS will terminate the contract and may require the 
transferor to refund and/or forfeit all payments received.
    (d) NRCS may require a participant to refund all or a portion of 
any financial assistance earned under EQIP if the participant sells or 
loses control of the land covered by an EQIP contract and the new owner 
or controller is not eligible to participate in the program or refuses 
to assume responsibility under the contract.
    (e) In the event a conservation practice fails through no fault of 
the participant, the State Conservationist may issue payments to re-
establish the practice, at the rates established in accordance with 
Sec.  1466.23, provided such payments do not exceed the payment 
limitation requirements as set forth Sec.  1466.24.


Sec.  1466.26  Contract violations and terminations.

    (a) The State Conservationist may terminate, or by mutual consent 
with the parties, terminate the contract where:
    (1) The parties to the contract are unable to comply with the terms 
of the contract as the result of conditions beyond their control;
    (2) Termination of the contract would, as determined by the State 
Conservationist, be in the public interest; or
    (3) A participant fails to correct a contract violation within the 
time period defined by NRCS.
    (b) If a contract is terminated in accordance with the provisions 
of paragraphs (a)(1) and (a)(2) of this section, the State 
Conservationist may allow the participant to retain a portion of any 
payments received appropriate to the effort the participant has made to 
comply with the contract, or, in cases of hardship, where forces beyond 
the participant's control prevented compliance with the contract. If a 
participant claims hardship, such claims must be clearly documented and 
cannot have existed when the applicant applied for participation in the 
program.
    (c) If NRCS determines that a participant is in violation of the 
terms of a contract, O&M agreement, or documents incorporated by 
reference into the contract, NRCS shall give the participant a period 
of time, as determined by NRCS, to correct the violation and comply 
with the terms of the contract and attachments thereto. If a 
participant continues in violation, NRCS may terminate the EQIP 
contract in accordance with Sec.  1466.26(e).
    (d) Notwithstanding the provisions of paragraph (c) of this 
section, a contract termination shall be effective immediately upon a 
determination by NRCS that the participant has submitted false 
information or filed a false claim, or engaged in any act, scheme, or 
device for which a finding of ineligibility for payments is permitted 
under the provisions of Sec.  1466.35, or in a case in which the 
actions of the party involved are deemed to be sufficiently purposeful 
or negligent to warrant a termination without delay.
    (e) If NRCS terminates a contract due to breach of contract, the 
participant will forfeit all rights to future payments under the 
contract, pay liquidated damages, and refund all or part of the 
payments received, plus interest. Participants violating EQIP contracts 
may be determined ineligible for future NRCS-administered conservation 
program funding.
    (1) NRCS may require a participant to provide only a partial refund 
of the payments received if a previously installed conservation 
practice can function independently, is not adversely affected by the 
violation or the absence of other conservation practices that would 
have been installed under the contract.
    (2) The State Conservationist will have the option to reduce or 
waive the liquidated damages, depending upon the circumstances of the 
case.
    (i) When terminating a contract, NRCS may reduce the amount of 
money owed by the participant by a proportion that reflects the good 
faith effort of the participant to comply with the contract or the 
existence of hardships beyond the participant's control that have 
prevented compliance with the contract. If a participant claims 
hardship, that claim must be well documented and cannot have existed 
when the applicant applied for participation in the program.
    (ii) In carrying out its role in this section, NRCS may consult 
with the local conservation district.
    (f) The State Conservationist, in consultation with the State 
Technical Committee, may terminate a contract whereby a producer is 
receiving payments for conservation practices related to organic 
production, if the designated conservationist determines that the 
producer is not pursuing organic certification, or has been 
decertified.

0
4. In subpart B, Sec.  1466.27 is amended by revising paragraph (c)(4) 
to read as follows:


Sec.  1466.27  Conservation Innovation Grants (CIG).

* * * * *
    (c) * * *
    (4) There are some costs that grantees may not cover using CIG 
funds, such as costs incurred prior to the effective date of the grant, 
entertainment costs, any indirect cost exceeding fifteen percent, or 
renovation or refurbishment of facilities. A detailed list of costs not 
allowed will be published in the Request for Proposals.
* * * * *

0
5. Subpart C, consisting of Sec. Sec.  1466.30 through 1466.36, is 
revised to read as follows:
Subpart C--General Administration
Sec.
1466.30 Appeals.
1466.31 Compliance with regulatory measures.
1466.32 Access to operating unit.
1466.33 Equitable relief.
1466.34 Offsets and assignments.
1466.35 Misrepresentation and scheme and device.
1466.36 Environmental credits for conservation improvements.

Subpart C--General Administration


Sec.  1466.30  Appeals.

    A participant may obtain administrative review of an adverse 
decision under EQIP in accordance with parts 11 and 614 of this title. 
Determination in matters of general applicability, such as payment 
rates, payment limits, the designation of identified priority resource 
concerns, and eligible conservation practices are not subject to 
appeal.


Sec.  1466.31  Compliance with regulatory measures.

    Participants who carry out conservation practices shall be 
responsible for obtaining the authorities, rights, easements, permits, 
or other approvals necessary for the implementation, operation, and 
maintenance of the conservation practices in keeping with applicable 
laws and regulations. Participants shall be responsible for compliance 
with all laws and for all effects or actions resulting from the 
participant's performance under the contract.


Sec.  1466.32  Access to operating unit.

    Any authorized NRCS representative shall have the right to enter an 
agricultural operation or tract for the

[[Page 2317]]

purposes of determining eligibility and for ascertaining the accuracy 
of any representations related to contract performance. Access shall 
include the right to provide technical assistance, determine 
eligibility, inspect any work undertaken under the contract, and 
collect information necessary to evaluate the conservation practice 
performance, specified in the contract. The NRCS representative shall 
make an effort to contact the participant prior to the exercising this 
provision.


Sec.  1466.33  Equitable relief.

    (a) If a participant relied upon the advice or action of any 
authorized NRCS representative and did not know, or have reason to 
know, that the action or advice was improper or erroneous, NRCS may 
accept the advice or action as meeting program requirements and may 
grant relief, to the extent it is deemed desirable by NRCS, to provide 
a fair and equitable treatment because of the good-faith reliance on 
the part of the participant. The financial or technical liability for 
any action by a participant that was taken based on the advice of a 
NRCS certified non-USDA TSP is the responsibility of the certified TSP 
and will not be assumed by NRCS when NRCS authorizes payment. Where a 
participant believes that detrimental reliance on the advice or action 
of a NRCS representative resulted in an ineligibility or program 
violation, but the participant believes that a good faith effort to 
comply was made, the participant may request equitable relief under 
Sec.  635.3 in chapter VI of this title.
    (b) If, during the term of an EQIP contract, a participant has been 
found in violation of a provision of the EQIP contract, the O&M 
agreement, or any document incorporated by reference through failure to 
fully comply with that provision, the participant may be eligible for 
equitable relief under Sec.  635.4 in chapter VI of this title.


Sec.  1466.34  Offsets and assignments.

    (a) Except as provided in paragraph (b) of this section, any 
payment or portion thereof to any person, joint venture, legal entity 
or tribe shall be made without regard to questions of title under State 
law and without regard to any claim or lien against the crop, or 
proceeds thereof, in favor of the owner or any other creditor except 
agencies of the U.S. Government. The regulations governing offsets and 
withholdings found at part 1403 of this chapter shall be applicable to 
contract payments.
    (b) EQIP participants may assign any payments in accordance with 
part 1404 of this chapter.


Sec.  1466.35  Misrepresentation and scheme or device.

    (a) A person, joint venture, legal entity or tribe that is 
determined to have erroneously represented any fact affecting a program 
determination made in accordance with this Part shall not be entitled 
to contract payments and must refund to NRCS all payments, plus 
interest determined in accordance with part 1403 of this chapter.
    (b) A producer who is determined to have knowingly:
    (1) Adopted any scheme or device that tends to defeat the purpose 
of the program;
    (2) Made any fraudulent representation;
    (3) Adopted any scheme or device for the purpose of depriving any 
tenant or sharecropper of the payments to which such person would 
otherwise be entitled under the program; or
    (4) Misrepresented any fact affecting a program determination, 
shall refund to NRCS all payments, plus interest determined in 
accordance with 7 CFR 1403, received by such producer with respect to 
all contracts. The producer's interest in all contracts shall be 
terminated.
    (c) In accordance with Sec.  1466.26(e), NRCS may determine the 
producer ineligible for future conservation programs funding.


Sec.  1466.36  Environmental credits for conservation improvements.

    NRCS recognizes that environmental benefits will be achieved by 
implementing conservation practices funded through EQIP, and 
environmental credits may be gained as a result of implementing 
activities compatible with the purposes of an EQIP contract. NRCS 
asserts no direct or indirect interest on these credits. However, NRCS 
retains the authority to ensure that operation and maintenance (O&M) 
requirements for EQIP-funded improvements are met, consistent with 
Sec. Sec.  1466.21 and 1466.22. Where activities may impact the land 
under an EQIP contract, participants are highly encouraged to request 
an O&M compatibility determination from NRCS prior to entering into any 
credit agreements.

    Signed in Washington, DC, on January 8, 2009.
Arlen L. Lancaster,
Vice President, Commodity Credit Corporation and Chief, Natural 
Resources Conservation Service.
[FR Doc. E9-530 Filed 1-14-09; 8:45 am]
BILLING CODE 3410-16-P


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