This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

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

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

4607

Vol. 66, No. 12

Thursday, January 18, 2001

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1436

RIN 0560–AG00

Farm Storage Facility Loan Program

AGENCY: Commodity Credit Corporation,

USDA.

ACTION: Final rule.

SUMMARY: This rule finalizes an interim

rule implementing the Commodity

Credit Corporation’s (CCC) Farm Storage

Facility Loan Program (FSFLP). The

program provides financing for

producers to build or upgrade farm

storage and handling facilities. On the

basis of the comments and suggestions

received, CCC is making several changes

to the program provisions in the interim

rule and is adding other provisions.

DATES: This rule is effective January 18,

2001.

ADDRESSES: Copies of the regulation are

available from Price Support Division,

Farm Service Agency, 1400

Independence Avenue, SW., STOP

0512, Washington., DC 20250–0512.

FOR FURTHER INFORMATION CONTACT:

Chris Kyer, (202) 720–7935 or e-mail

chris_kyer@wdc.fsa.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule is issued in conformance

with Executive Order 12866 and has

been determined to be economically

significant and has been reviewed by

the Office of Management and Budget.

The Cost/Benefit Assessment is

summarized below.

Regulatory Flexibility Act

It has been determined that the

Regulatory Flexibility Act is not

applicable to this rule because the Farm

Service Agency is not required by 5

U.S.C. 553 or any other provision of law

to publish a notice of proposed

rulemaking with respect to the subject

matter of this rule.

Small Business Regulatory Enforcement

Fairness Act of 1996 (SBREFA) (Chapter

8 of the Administrative Procedures Act)

The SBREFA generally requires that

major rules be submitted to Congress for

a 60-day review period before they may

be made effective. This rule is

considered major. However, section 808

of SBREFA (5 U.S.C. 808) provides that

if good cause exists and public notice is

impracticable, unnecessary, or contrary

to the public purpose, a rule may be

made effective immediately. CCC finds

that because this rule affects the

incomes of a large number of

agricultural producers that it would be

contrary to the public interest to delay

this rule. Therefore, this rule is issued

as final, effective immediately.

Environmental Evaluation

It has been determined by an

environmental evaluation that this

program, as a whole, will have no

significant impact on the quality of the

human environment. Therefore, neither

an environmental assessment nor an

environmental impact statement for the

program is needed. However, because it

is possible that individual projects may

have limited impacts on the local

environment, environmental

evaluations for each project will be

conducted to determine the need for

environmental assessment and/or

mitigation.

Executive Order 12988

This rule has been reviewed in

accordance with Executive Order 12988.

The provisions of this rule preempt

State laws to the extent such laws are

inconsistent with the provisions of this

rule. Before any legal action may be

brought regarding this rule, the

administrative appeal provisions set

forth at 7 CFR part 780 must be

exhausted.

Executive Order 12372

This program is not subject to the

provisions of Executive Order 12372,

which require intergovernmental

consultation with State and local

officials. See the notice related to 7 CFR

part 3014, subpart V, published at 48 FR

29115 (June 24, 1983).

The Unfunded Mandates Reform Act of

1995

This rule contains no Federal

mandates under the regulatory

provisions of Title II of the Unfunded

Mandates Reform Act of 1995 (UMRA)

for State, local, and tribal governments

or the private sector. Thus, this rule is

not subject to the requirements of

sections 202 and 205 of the UMRA.

Paperwork Reduction Act of 1995

A notice with request for comments

on the information collection was part

of the interim rule. An emergency

information collection package has been

approved by OMB and assigned OMB

control number 0560–204. No

comments were received from the

public during the 60-day comment

period regarding the information

collection. A regular information

collection package will be submitted to

OMB.

Executive Order 12612

It has been determined that this rule

does not have sufficient Federalism

implications to warrant the preparation

of a Federalism Assessment. The

provisions contained in this rule will

not have a substantial direct effect on

States or their political subdivisions, or

on the distribution of power and

responsibilities among the various

levels of government.

Cost-Benefit Assessment Summary

U.S. grain storage capacity steadily

declined from 1987 to 1997. Storage

capacity has increased modestly since

its low in 1997, but not sufficiently to

keep pace with growing production.

Despite persistent harvest-time storage

capacity shortfalls and the advantages of

on-farm storage for producers, low

commodity prices and reduced farm

income will limit the ability of

producers to significantly expand their

on-farm storage. The FSFLP will

encourage the construction of grain

storage capacity in deficit areas and

help farmers adapt to identity-preserved

storage and handling requirements for

genetically enhanced production. The

program will also assist dairy and

livestock feeders who need new or

additional silage or green-chop storage.

For these producers, additional storage

capacity increases their ability to

manage feed inventories and control

feed costs. One direct benefit to

4608 Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations

producers from the program will be

reduced financing costs on facility

construction. Interest savings for a grain

farmer on the construction of a 15,000-

bushel grain bin could total as much as

$5,417 under the program when

compared with financing through some

commercial banks. Interest savings for a

dairy or livestock feeder could be as

much as $6,139 on a 2,000-ton bunkertype silage storage facility. Grain

producers would also benefit from the

potential for higher market returns on

their crops because on-farm storage

capacity creates pricing and hedging

opportunities that can significantly

increase marketing returns. The program

is expected to expand on-farm grain

storage by 746 million bushels and onfarm silage storage by 4.75 million tons

over the next 5 years.

Background

The interim rule published in the

Federal Register on May 11, 2000 (65

FR 30345) set out regulations to allow

for loans to be made to assist producers

in providing storage for certain

agricultural commodities. The back

ground provisions of that rule

described, in addition, the statutory

underpinnings of the program, those

being provisions of the Commodity

Credit Corporation Charter Act. One of

those provisions is 15 U.S.C. 714c(b)

(section 5(b) of that Act), which

authorizes CCC to use its general powers

to make available material and facilities

required in connection with the

production and marketing of

agricultural commodities. Another is 15

U.S.C. 714b(h) (section 4(h) of the Act),

which was incorrectly identified as

section ‘‘4(f)’’ in the interim rule. The

latter provides that the Corporation may

make loans to grain producers needing

storage facilities.

Comments regarding the provisions of

the program were accepted until June

12, 2000. Comments were received from

272 entities or persons: 40 agricultural

associations, six banks, one

Commissioner of Agriculture, 19 FSA

county committee members, 109 private

agricultural companies or corporations

representing storage structure

manufacturers, distributors and

construction contractors, one United

States Senator, five grain storage

elevator companies or cooperatives, 57

farmers, and 34 FSA State committee

members or representatives.

Most of the comments addressed

particular provisions in the interim rule.

These are discussed below on a sectionby-section basis, along with the changes

that have been made to the interim rule.

Changes to each section based on the

experience of operating the program

under the interim rule are also

discussed on a section-by-section basis.

Background section of the interim rule

There were 63 comments regarding

the background section of the interim

rule. Within the background section of

the interim rule it was stated that

section 5(b) of the CCC Charter Act gives

CCC broad authority to make available

materials and facilities required in

connection with the production and

marketing of agricultural commodities.

Thus, it was stated that CCC would

explore making available facility loans

for the storage of commodities harvested

as other than grain such as silage,

alternative types of storage

arrangements such as ‘‘condominium

storage’’, or storage facilities for other

agricultural products.

There were 15 comments from

elevators, agricultural associations, and

cooperatives supporting a program to

finance condominium-type storage

arrangements. There were two

respondents who did not favor such a

program for on-farm type condominium

storage because in their States, Ohio and

Iowa, on-farm condominium storage

would be subject to licensing

requirements for public warehouses.

Another respondent was against offfarm condominium storage because, in

their opinion, on-farm storage works

better for segregation of speciality crops.

Condominium-type grain storage is

generally viewed as commercial off-farm

storage offered by private companies or

cooperatives where farmers can lease or

purchase a set amount of shared storage

space for a period of time. Farmers pay

a set time purchase or lease fee for the

storage and may subsequently pay an

annual fee to cover the costs associated

with the maintenance of the structure

and grain maintenance and handling. In

some cases, the condominium storage

on a per-bushel basis may be less than

the cost of constructing and owning onfarm grain storage structures. During

years when the owner of the

condominium storage may not use the

entire quantity that is allocated to him,

the storage owner may sublease or sell

the space to another producer. This

arrangement can result in giving

condominium storage a value, which

may be used by lenders as collateral to

secure loans on condominium storage

agreements. Condominium storage may

allow the producer to market grain

without further transportation or

handling costs, and relief from the costs

of owning and maintaining on-farm

storage. Also a respondent pointed out

that condominium storage loans if made

to cooperatives could allow for a

lessening of the administrative burden

of operating the program by allowing

the storage needs of multiple producers

to be dealt with in one large loan rather

than in many small loans.

The primary disadvantage of

condominium storage expressed by

some farmers is the waiting time to

deliver their grain to the elevator when

they should be in the field harvesting

grain because the condition of the crop

and ideal harvesting conditions are

always time sensitive. On-farm storage

provides that flexibility. Also, farmers

indicate that once grain is delivered to

the elevator, they may lose marketing

flexibility because to sell grain that is in

elevator storage they may be required to

pay additional handling fees. Despite

the comments received supporting a

loan program for condominium storage,

the respondents provided little

information as to how FSA should

operate such a program. Inasmuch as

the primary focus of the program was

on-farm storage and helping producers

cope with their restricted storage

capacity, condominium storage might

not mitigate the storage problem and

might ultimately only benefit

commercial facilities who already have

alternate financing at their disposal.

Because a program including

condominium storage would differ

considerably from the on-farm storage

program, at issue are program

provisions such as the term of the loan;

loan security requirements; who should

be the borrower, (the elevator or

individual farmers); eligible types of

storage structures and handling

equipment; applicant eligibility

requirements; the maximum loan

amount; environmental law compliance

for large commercial storage structures;

and loan servicing provisions such as

loan assumptions, foreclosure

procedures, loan deferments and

extensions. CCC has not prepared a cost

benefit assessment regarding off-farm

condominium storage and must do so to

consider implementing such a program.

Also, it should be pointed out that

farmers wishing to receive loans for

shared, on-farm storage may do so under

the present program as long as they

otherwise meet all of the eligibility and

security requirements. Accordingly, for

these reasons, CCC will not implement

loans for condominium type storage at

this time.

There were nine comments regarding

the timeliness of the program

announcement. Generally, the

announcement of the program on May

11 was regarded as being too late to

allow producers to apply, obtain

approval, and to finish construction in

time to store crops that will be

harvested for the 2000 crop year. To

Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations 4609

assist producers who took purchase

actions based on the announcement of

the program in the press on February 2,

2000, CCC provided that producers who

made purchase decisions between

February 2 and May 30, 2000, could

apply and be approved for loans, if all

other eligibility requirements were met.

Furthermore, citing a critical need for

storage in 19 States and recognizing the

need to implement the program as soon

as possible, CCC implemented the

program under the interim rule effective

on May 11, 2000. Additional relief in

this regard would not be consistent with

the nature of this program, which is

designed to provide incentives rather

than to make payments for past actions.

There were eight comments regarding

the need for a program to finance the

construction of storage for other

agricultural products such as dry peas,

lentils, peaches, cherries, pears, berries,

vegetables, apples (including necessary

cold storage equipment and cold storage

supplies such as nitrogen), cotton seed,

dry beans, straw, nuts, peanuts, rye,

wood, wool, seed potatoes, grass seed,

rice straw, livestock feed such as

processed feed, cake, purchased feed,

millet, and sugar. There were 16

comments supporting loans for

structures to store dry hay. While CCC

recognizes the support for such a

program, CCC will not implement a

program because of the lack of any

USDA study indicating a critical need

for a program to finance such storage for

these commodities.

There were 130 comments regarding

the provision to restrict the program to

specified facility loan commodities

harvested as whole grain as set out, and

specified, in the interim rule. Under that

rule, eligible facility loan commodities

were limited to wheat, rice, soybeans,

sunflower seed, canola, rapeseed,

safflower, flaxseed, mustard seed,

crambe, other oilseeds as determined

and announced by CCC, corn, grain

sorghum, oats, or barley harvested as

whole grain. These commodities are the

same commodities on which farmers

can obtain CCC marketing assistance

loans and loan deficiency payments.

Generally, the respondents favored the

financing of structures to store corn

silage and other facility loan

commodities that are commonly

harvested as other than whole grain

citing that dairy farmers are expanding

their herds and need more upright silos

for grains and forage to feed their

animals, many farmers have been using

temporary storage, and that it is more

economical to store high moisture

ground ear corn, high moisture shell

corn, or corn silage to save on the cost

of fuels for drying. Also, comments were

received concerning the provisions in

the interim rule that limited financing to

certain kinds of facilities—certain cribs

or bins designed for whole grain storage,

certain upright silo-type structures

designed for whole grain storage and

flat-type storage structures for which the

primary use is to store whole grain

commodities. Some respondents favored

extending financing also to other

structures such as upright silos and

bunker-type storage structures that are

horizontal and generally constructed of

concrete. Bunker-type silos are generally

easier and cheaper to construct than

upright silos because they are usually

constructed from precast reinforced

concrete panels and may have more

recovery value than poured cement

structures.

The interim rule specifically sought

comments on extending the program

beyond whole grain storage. Given

CCC’s broad authority, under the CCC

Charter Act, to make available materials

and facilities in the production and

marketing of ‘‘agricultural

commodities’’ and the overwhelming

sense of the comments received, it has

been determined that CCC will extend

the program beyond facilities designed

only for whole grain storage.

Accordingly, eligible ‘‘facility loan

commodities’’ (that is, the kind of

commodities for which the building of

a storage facility can be allowed under

the rule) will be extended to also

include corn, grain sorghum, wheat,

oats or barley that is harvested for nonwhole-grain use. Accordingly, the rule

will also be amended to specifically

provide for financing structures that are

designed for that purpose. Other

commodities will not at this time be

folded into the program definition of

‘‘facility loan commodities’’ so as to

expand the program further. Such an

expansion would at a minimum involve

a large-scale increase in the complexity

of the program given that many

commodities can have special needs

such as refrigeration. Thus, the

administrative difficulties of the

program would increase dramatically.

Moreover, and more importantly, the

storage crisis mentioned in the interim

rule was a crisis in the storage of grain

(and certain related) crops and an

expansion of the program beyond those

would disperse the effect of the program

unless there was to be a much greater

commitment of funds to the program. At

this time, there does not appear to be a

justification for that kind of additional

expenditure. On the other hand, the

limited expansion, for silage, will allow

farmers who grow the covered crops to

have the flexibility of addressing their

storage needs for all harvesting of their

crop. This modest expansion should be

workable, which, accordingly, closes the

circle of storage needs for certain

producers, does so without undue

difficulty and should allow program

expense to remain within reasonable

bounds. Also, to the extent that silage

facilities are available, such availability

could remove the pressure that might

otherwise exist in particular cases to

make use of the storage available for

whole grain harvesting of the same crop.

In that sense, the expansion of eligibility

will also tend to further the goals of the

original interim rule. Further, this

limitation of the program is also in

accord with the special emphasis given

in the Charter Act on grain crops as

evidenced by Section 4(h) of that Act.

Also for the sake of cohesiveness, the

provisions in the rule dealing with

eligible structures have also been

amended to allow for bunker-silo type

structures, in accord with the

comments. Still further, certain

clarifying changes have been made in

the rules as regards pre-owned and

manufactured structures.

There were six comments from banks

regarding the need to implement a

guaranteed farm storage facility loan

program with an interest rate buy-down

provision in addition to the direct loan

program. Respondents cited the

advantages of a guaranteed loan

program such as easing the program

administrative burden on already

overburdened FSA employees, better

use of taxpayer dollars, assisting more

producers, and the level of good

experience with banks that already

participate in FSA’s guaranteed loan

program for FSA ownership and farm

operating loans. While CCC recognizes

the support for such a program, none of

the respondents provided any

information as to how CCC should

operate such a program and an interest

rate buy-down provision could prove to

be very costly compared to the current

program. Accordingly, CCC will not

implement a guaranteed loan program at

this time.

Section 1436.3 of the Interim Rule

There were no comments on this

section, but the reference to a consent,

disclaimer and subordination agreement

was deleted and the definition of a

severance agreement, and a

subordination agreement were added to

further clarify definitions. A definition

of unsatisfactory credit history was

added to provide guidance on eligibility

determinations to approving county

committees. The term ‘‘tribal venture’’

was added to the definition of a person

to clarify that such ventures are eligible

4610 Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations

for the program. Finally, a definition of

the calculation for computing the

storage need requirement was added to

provide further clarification.

Section 1436.4 of the Interim Rule

In order to clarify what actions

applicants may take before a loan can be

approved, section 1436.4(b) was

amended by identifying the actual

actions producers may take.

Furthermore, the provision allowing

producers who took actions between

February 2, 2000 and May 30, 2000 to

be considered for loans was removed

because those producers should have

been accommodated during the time the

program was operated under the interim

rule. That provision is, thus, no longer

needed but its removal will not affect

prior loans.

Section 1436.5 of the Interim Rule

There were five comments regarding

the provision in section 1436.5(a)(5) that

requires an eligible borrower to provide

proof of crop insurance. Generally, the

respondents, three farmers, one FSA

State Executive Director, and the

American Farm Bureau Federation,

questioned the value of crop insurance

in furthering an applicant’s repayment

ability when crop losses occur, the

additional cost an applicant may incur

just to obtain a farm storage facility loan

and the subsequent costs to maintain

the insurance during the term of the

loan. CCC will not change the

requirement except that, based on the

comments, we will not require

insurance on crops that are determined

to be economically insignificant by CCC.

A definition for a crop of economic

significance was added to the

definitions section 1436.3 and the

provision was clarified in 1436.5(a)(5).

There was one comment regarding the

requirement for applicant compliance

with the Debt Collection Improvement

Act of 1996. Because this is a statutory

requirement, CCC cannot change the

requirement. Section 1436.5(a)(2) was

amended, however, to further clarify the

provision dealing with compliance with

the Debt Collection Improvement Act.

There were several comments

regarding section 1436.5(a)(4), which

requires that in order for an applicant to

be eligible for a loan, the applicant must

demonstrate a need for an increase in

storage capacity. This does not allow

farmers with adequate existing capacity

to be eligible for a loan to add or replace

handling and drying equipment or to

upgrade existing storage space. Based on

this comment, and because CCC

encourages the proper handling and

maintenance of stored commodities,

section 1436.5(a)(4) and section

1436.6(b)(1) have been amended to

allow loans for handling and drying

equipment, and for loans to upgrade

existing storage capacity without

increasing storage capacity. We also

amended section 1436.5(a)(1) to make

reference to the definition of satisfactory

credit history and to make reference to

a current financial statement. Finally,

section 1436.5(a)(10) was added to

require that borrowers may not have

been convicted under Federal or State

law of certain controlled substance

violations in order to conform to the

rule according to 7 CFR Part 718.

Section 1436.6 of the Interim Rule

A comment from the Pennsylvania

FSA State committee questioned the

definition of commercial purpose.

Commercial purpose is defined as the

storage and handling of grain, whether

paid or unpaid, for persons other than

the applicant. According to the

respondent and other State offices, this

definition hinders family operations

where family members store their

commodities together. Recognizing this

problem, CCC amended the definition of

a commercial operation in section

1436.3 to exempt immediate family

members from this requirement.

Two respondents questioned the

requirement that the program only

allows loans to be made on new storage

structures. One stated that pre-owned

equipment should be considered to be

eligible if CCC’s interest is protected.

Another suggested that 1436.6(a)(2) be

changed to ‘‘new oxygen limiting or

used oxygen limiting storage built to

original manufacturer’s design

specifications using original

manufacturer’s rebuild kits, and other

upright silo type structures, designed for

whole grain storage and having a useful

life of at least 10 years.’’ Based on this

comment, as indicated, CCC amended

section 1436.6 to allow for loans on

remanufactured structures, built to

original manufacturer’s design

specifications using original

manufacturer’s rebuild kits. Section

1436.6(b)(2) was amended to clarify that

CCC may require safety equipment

meeting OSHA standards. Section

1436.6(e) was added to provide that new

storage and handling components of

purchased pre-owned structures may be

eligible for loan.

Section 1436.7 of the Interim Rule

There were several comments

regarding the term of the loan, which is

7 years. It was suggested that the term

be flexible at 7, 10, or 15 years

depending on repayment ability. CCC

will not change the term of the loan

because at 7 years the term is longer

than most commercial banks will offer

and should be of sufficient length to

allow the program goals to be met

without jeopardizing repayment because

of changed circumstances.

Section 1436.8 of the Interim Rule

There were 25 comments regarding

this section, which provides for security

for loans. Respondents generally cited a

concern with the requirement in section

1436.8(b) that a lien on the real estate

on which the farm storage facility is

located will be required on all loans in

the form of a real estate mortgage, deed

of trust, or other security instrument

approved by the CCC. Respondents were

concerned that the requirement for what

could be considered to be small loans

was excessive and would create an

unnecessary burden on loan applicants.

CCC has responded to this concern by

generally dropping the real estate lien

requirement for loans with a principal

amount less than $50,000. It was also

recommended that all facility loans be

cross collateralized when the facility is

constructed on real estate where there is

a direct FSA farm loan program

mortgage in existence. Accordingly,

section 1436.8(b) was amended to

provide that a real estate lien will not

be required for loans of $50,000 or less

unless CCC determines through analysis

of the applicant’s financial condition

that additional security in the form of a

lien on real estate is necessary to protect

CCC’s interest in the collateral. Also,

section 1436.8(b) has been clarified to

provide that for loans exceeding

$50,000, a junior lien position on the

entire real estate parcel underlying the

storage facility may be acceptable as

long as CCC’s security interest is

sufficiently protected. Also section

1436.8(b) was amended to define when

a loan is considered to be adequately

secured and to specify that a title

opinion or title insurance is required for

loans exceeding $50,000. Section

1436.8(g) was amended to clarify fees

that shall be paid by CCC or the

applicant in connection with

completing the loan transaction.

Section 1436.9 of the Interim Rule

There were 12 comments regarding

this section, which explains how the

amount of the loan is determined.

Generally, the respondents cited a

concern with the maximum amount of

the loan, which is $100,000 per loan

and the maximum aggregate outstanding

loan balance, which is $100,000 per

borrower. Respondents told FSA that

$100,000 is not enough in many cases

to finance the storage structures and

handling equipment needed by some

farmers to adequately store facility loan

Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations 4611

commodities. One respondent stated

that, ‘‘Facilities and equipment can cost

$500,000 or greater.’’ An example of

farm operations that may be adversely

affected by this requirement are large

family-run operations that have formed

family partnerships. The family

conducts business as a general

partnership; however, generally, FSA

recognizes for commodity programs that

each member of the partnership can be

a separate ‘‘person’’ for program

payment purposes so long as certain

conditions are met. For the purposes of

the farm storage facility loan program

under the interim rule, however, CCC

limited the loan at $100,000 to the

partnership since the loan limit was

$100,000 per loan in all cases. As this

limit may adversely impact some

farmers contrary to normal principles

that guide farm programs, section

1436.9 has been amended to change the

maximum loan to $100,000 for each

eligible borrower signing the loan note

and security agreement and remove the

limit of one loan per borrower per fiscal

year. This will also allow more than one

farmer to enter into a joint loan to share

a storage structure with another and to

receive a larger loan than one farmer

acting alone. Section 1436.9 was also

amended to remove the limit of one loan

per borrower per fiscal year because the

loan amount limit of $100,000

accomplishes the same thing as a limit

on the number of loans a borrower may

obtain.

Section 1436.10 of the Interim Rule

There were 13 comments regarding

section 1436.10, which set out the down

payment requirements for the program.

The down payment amount is 25

percent of the total cost of the items

eligible for loan. Respondents think that

25 percent is too high and that the

requirement places undue burden on

loan applicants to provide cash at a time

when grain prices are low and cash flow

problems exist. CCC recognizes this

burden and has changed the

requirement to 15 percent of the cost of

the items eligible for loan. Also, CCC

will allow fees such as attorney fees and

archaeological study fees to be

considered as an eligible net cost item

(items that may be figured into the

calculation of the total amount for

which the loan may be made) and

amended section 1436.9(b) to reflect the

change. Finally, section 1436.10(b) was

amended to clarify that farmers may

obtain a loan for the down payment

amount from another lending source.

Section 1436.11 of the Interim Rule

This section provides generally that

the loan will be disbursed when all

construction is complete, final cost data

has been submitted, and the facility has

been inspected and determined to be

satisfactory by CCC. Four respondents

addressed this portion of the rule and in

one case the respondent suggested that

the monies should be dispersed upon

loan approval. Another suggested that

the monies be dispersed upon delivery

of the materials and a completion of the

labor. Others suggested that the loan

disbursements should always be jointly

payable to both the borrower and the

contractor or supplier, and that, in any

event, CCC should always obtain a

written release of liability from the

contractor or supplier. The rule will

continue allow the checks to be made

payable to the borrower alone in certain

cases as there does appear to be

circumstance in which such payments

could be made in that manner with

sufficient security. However, the rule

has been amended, in accord with the

comments, to specify that in all cases a

written release of liability from the

contractors or suppliers involved will be

required before loan funds are

disbursed. These provisions should

allow sufficient flexibility to handle all

circumstances as might arise. Also, a

provision was added to this section to

specify that loan proceeds cannot be

assigned. This will also reduce program

complexity and allow for certainty in

program administration.

Section 1436.12 of the Interim Rule

There were five comments regarding

the interest rate for loans, which is the

rate in effect on the date the loan is

approved that is equivalent to Treasury

securities of comparable maturity.

Generally, respondents thought that the

interest rate should be the lowest rate in

effect at the time of application,

approval, or disbursement. The rate

allowed by the interim rule appears be

to a fair rate, which will allow the

accomplishment of the program goals

and the terms of the rule, as provided

for in the interim rule, will allow for

certainty in the administration of loans.

In the event that a applicant is

dissatisfied with the rate, the applicant

can withdraw from the program.

Section 1436.13 of the Interim Rule

There were five comments regarding

section 1436.13, which provides

provisions regarding repayment of the

loan. Four comments focused on the

term of the loan while one comment

suggested discontinuance of the

requirement to offset commodity loan or

LDP proceeds towards facility loan

installments before the installment is

due or the borrower is delinquent. CCC

will discontinue that requirement and

amended section 1436.13(d)

accordingly. Section 1436.13(c) was

further amended to set out procedures

that will be used in the event an

installment is not paid.

Section 1436.15 of the Interim Rule

There was one comment regarding

section 1436.15, which provides

maintenance provisions for a program

loan. The respondent suggested

removing the requirement for an annual

check by CCC of the loan collateral

because FSA salary funds do not allow

for ‘‘extreme’’ expenditures. CCC feels

the requirement is reasonable and can

be fulfilled with available resources.

Section 1436.16 of the Interim Rule

There were no comments regarding

this section, but provisions have been

added to this section for foreclosure,

liquidation, and bankruptcy actions to

help insure accomplishment of the goals

of the program.

Section 1436.17 of the Interim Rule

There were two comments regarding

the provision to require compliance

with the National Environmental Policy

Act. The provision requires that an

environmental evaluation be conducted

by CCC for each loan application. In

most cases, this will require a farm visit

to assess the impact of the proposed

storage construction project on the

environment and on historic and

archaeological resources. Respondents

generally indicated that the

environmental assessment goes far

beyond the intent and scope of a

program designed to benefit farmers

hard-pressed for storage capacity and in

need of additional opportunities to

enhance marketing returns.

Respondents also pointed out that the

requirement for compliance with local

land use laws should be adequate for

environmental compliance as well and

that the interim rule states that the

program as a whole will have no

significant impact on the quality of the

human environment. While CCC

recognizes that the environmental

review may delay loan approvals, this

provision should help assure the

maximum overall benefit from the

expenditures to be made in this

important program in conjunction with

other programs, including conservation

programs, operated by the participant.

Section 1436.18

Section 1436.18 was added to provide

appeal provisions.

Additional editorial changes have also

been made.

4612 Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations

List of Subjects in 7 CFR Part 1436

Administrative practice and

procedure, Loan programs—agriculture,

Reporting and recordkeeping

requirements.

Accordingly, for the reasons set forth

in the preamble, 7 CFR part 1436 is

revised to read as follows:

PART 1436—FARM STORAGE

FACILITY LOAN PROGRAM

REGULATIONS

Sec.

1436.1 Applicability

1436.2 Administration

1436.3 Definitions

1436.4 Availability of loans

1436.5 Eligible borrowers

1436.6 Eligible storage or handling

equipment

1436.7 Term of loan

1436.8 Security for loan

1436.9 Loan amount and loan application

approvals

1436.10 Down payment

1436.11 Disbursements and assignments

1436.12 Interest and fees

1436.13 Loan installments, delinquency,

and acceleration of maturity date

1436.14 Taxes

1436.15 Maintenance, liability, insurance,

and inspections

1436.16 Foreclosure, liquidation,

assumptions, sale or conveyance,

bankruptcy

1436.17 Environmental compliance

1436.18 Appeals

Authority: 15 U.S.C. 714 et seq.

PART 1436—FARM STORAGE

FACILITY LOAN PROGRAM

REGULATIONS

§ 1436.1 Applicability.

The regulations of this part provide

the terms and conditions under which

CCC may provide low-cost financing for

producers to build or upgrade on-farm

storage and handling facilities. Because

liens and security interests related to

this activity may be governed by state

law, CCC may adapt certain procedures

relating to those issues that may vary

between States.

§ 1436.2 Administration.

(a) The Farm Storage Facility Loan

Program shall be administered under

the general supervision of the Executive

Vice President, CCC or designee and

shall be carried out in the field by FSA

State committees, FSA county

committees and FSA employees.

(b) FSA State committees, FSA county

committees and FSA employees, do not

have the authority to modify or waive

any of the provisions of the regulations

of this part.

(c) The FSA State committee shall

take any action required by these

regulations that has not been taken by

the county committee. The FSA State

committee shall also:

(1) Correct, or require the FSA county

committee to correct, any action taken

by such FSA county committee that is

not in accordance with the regulations

of this part; and

(2) Require the FSA county committee

to withhold taking any action that is not

in accordance with the regulations of

this part.

(d) No provision or delegation herein

to a State or FSA county committee

shall preclude the Executive Vice

President, CCC, or a designee, or the

Administrator, FSA, or a designee, from

determining any question arising under

the program or from reversing or

modifying any determination made by

the State or FSA county committee.

(e) The Deputy Administrator, Farm

Programs, FSA, may authorize State and

FSA county committees to waive or

modify deadlines and other program

requirements in cases where lateness or

failure to meet such other requirements

does not adversely affect the operation

of the Farm Storage Facility Loan

Program.

(f) A representative of CCC may

execute Farm Storage Facility Loan

Program applications and related

documents only under the terms and

conditions determined and announced

by CCC. Any such document that is not

executed in accordance with such terms

and conditions, including any

purported execution prior to the date

authorized by CCC, shall be void.

(g) The Deputy Administrator may

suspend this program at any time when

it appears that there is no shortage of

storage that needs to be addressed or

where some other reason shall arise for

which it appears that the program goals

can be achieved more efficiently in a

manner different from that provided for

in this rule.

§ 1436.3 Definitions.

The following definitions shall be

applicable to the program authorized by

this part and will be used in all aspects

of administering this program:

Aggregate outstanding balance means

the sum of the outstanding balances of

all loans disbursed under this part to

each borrower signing the note and

security agreement.

Assumption means the act or

agreement by which one borrower takes

over or assumes the debt of another

borrower.

Collateral means the storage structure,

drying equipment or handling

equipment securing the loan.

Crop of economic significance means

any insurable facility loan commodity

that contributes 10 percent or more of

the total expected value of all crops

grown by the loan applicant except if

the expected liability under the

catastrophic level of crop insurance for

a crop is equal to or less than the

administrative fee for the crop, that crop

shall not be economically significant.

Facility loan commodity means

wheat, rice, soybeans, sunflower seed,

canola, rapeseed, safflower, flaxseed,

mustard seed, crambe, other oilseeds as

determined and announced by CCC,

corn, grain sorghum, oats, or barley

harvested as whole grain except that

corn, grain sorghum, oats, wheat, or

barley shall be included whether

harvested as whole grain or other than

whole grain.

Financing statement means the

appropriate document that gives legal

notice of a security interest in personal

property when properly filed or

recorded.

Non-movable or non-salable collateral

means either collateral the county

committee determines cannot be sold

and moved to a new location because of

the type of construction involved or

because the collateral has deteriorated

to the point that it has no sale recovery

value.

Person means any individual, group

of individuals, partnership, corporation,

estate, trust, association, cooperative,

tribal venture, or other business

enterprise, or other legal entity who is,

or whose members are, a citizen or

citizens of the United States, or a legal

resident alien.

Satisfactory credit history means a

history of repaying debts as they came

due unless the failure to repay or

tardiness in payment was due to

circumstance beyond the applicant’s

control as determined by CCC upon

proof submitted by the applicant.

Severance agreement means an

agreement under which a party may

consent to the security interest of

another in property thereby allowing the

severance of a fixture from the real

estate.

Storage need requirement means the

result of up to the average of the most

recent 3 years available planted acreage

from the applicant’s share of the

applicable farm operation for each

facility loan commodity requiring

storage at the proposed storage location

multiplied by the applicable crop yield

as determined reasonable by the county

committee, multiplied by two, and less

the available existing storage capacity. If

there is no acreage data available,

including prevented planted acres, or

the data is not applicable relative to the

storage need, a reasonable acreage

projection may be made for newly

Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations 4613

acquired farms, changes in cropping

operations, or for facility loan

commodity crops being grown for the

first time.

Subordination agreement means any

agreement under which a party may

subordinate a security interest in

property to the interest of another party.

Uniform Commercial Code means the

laws generally known by that name

covering commercial transactions such

as sales, negotiable instruments, and

secured transactions.

§ 1436.4 Availability of loans.

(a) An application for a loan shall be

submitted to the administrative county

office that maintains the records of the

farm or farms to which the application

applies. With State office approval,

loans may be made or serviced by a

county office other than the

administrative county office. Upon

request, the applicant shall furnish

information and documents as the State

or county committee deems reasonably

necessary to support the application.

This may include financial statements,

receipted bills, invoices, purchase

orders, specifications, drawings, plats,

or written authorization of access.

(b) Producers who authorize delivery,

site preparation, or construction actions

without an approved loan, do so at their

own risk and without creating any

liability on behalf of CCC.

§ 1436.5 Eligible borrowers.

(a) The term ‘‘eligible borrower’’

means any person who, as landowner,

landlord, operator, producer, tenant,

leaseholder, or sharecropper:

(1) Has a satisfactory credit history

according to the definition in § 1436.3

and as recommended to the approving

committee by a FSA employee with FSA

loan approval authority;

(2) Demonstrates an ability to repay

the debt arising under this program

using a financial statement acceptable to

CCC prepared within 90 days of the date

of application, as recommended to the

approving committee by a FSA

employee with FSA loan approval

authority;

(3) Has no disqualifying delinquent

Federal debt under the Debt Collection

Improvement Act of 1996;

(4) Is a producer of a facility loan

commodity by CCC;

(5) Demonstrates a need for increased

storage capacity as determined by CCC

if the applicant is applying for a loan for

a storage structure;

(6) Provides proof of crop insurance

offered under the Federal Crop

Insurance Program for insurable crops of

economic significance on all farms

operated by the borrower in the county

where the storage facility is located;

(6) Is in compliance with USDA

provisions for highly erodible land and

wetlands conservation provisions

according to 7 CFR part 12;

(7) Demonstrates compliance with any

applicable local zoning, land use, and

building codes for the applicable farm

storage facility structures;

(8) Annually provides proof of flood

insurance if CCC determines such

insurance is necessary to protect the

interests of CCC, and annually provides

proof that the structures for which the

loan is made has all peril structural

insurance;

(9) Demonstrates compliance with the

National Environmental Policy Act

regulations at 40 CFR parts 1500–1508;

and

(10) Has not been convicted under

Federal or State law of a disqualifying

controlled substance violation under 7

CFR part 718.

§ 1436.6 Eligible storage or handling

equipment.

(a) Loans may be made only for the

purchase and installation of eligible

storage facilities and permanently

affixed drying and handling equipment,

for the remodeling of existing storage

facilities, or for permanently affixed

drying and handling equipment as

provided in this section. Eligible storage

and handling facilities shall include the

following:

(1) New conventional-type cribs or

bins designed and engineered for whole

grain storage and having a useful life of

at least 10 years;

(2) New oxygen-limiting storage

structures or remanufactured oxygenlimiting storage structures built to the

original manufacturer’s design

specifications using original

manufacturer’s rebuild kits, and other

upright silo-type structures designed for

whole grain storage or other than whole

grain storage and having a useful life of

at least 10 years; and

(3) New flat-type storage structures

including a permanent concrete floor,

designed for and primarily used to store

facility loan commodities for the term of

the loan and having a useful life of at

least 10 years; and

(4) New structures that are bunkertype, horizontal, or open silo structures

designed for whole grain storage or

other than whole grain storage and

having a useful life of at least 10 years.

(b) The calculation of the loan amount

may include costs associated with

building, improving, or renovating an

eligible storage or handling facility,

including:

(1) Permanently affixed grain

handling equipment and grain drying

equipment, including perforated floors

determined by the approving committee

to be needed and essential to the proper

functioning of the grain storage system;

(2) Safety equipment as required by

CCC and meeting OSHA requirements

such as lighting, and inside and outside

ladders;

(3) Equipment to improve, maintain,

or monitor the quality of stored grain,

such as cleaners, moisture testers, and

heat detectors;

(4) Electrical equipment, including

labor and materials for installation, such

as lighting, motors, and wiring integral

to the proper operation of the grain

storage and handling equipment; and

(5) Concrete foundations, aprons, pits,

and pads (including site preparation,

labor and materials) essential to the

proper operation of the grain storage

and handling equipment.

(c) Storage and handling equipment

with respect to which no loans for

installation or related costs shall be

disbursed under this part include:

(1) Portable grain drying equipment,

portable handling equipment and

portable augers;

(2) Structures of a temporary nature

that require the weight or bulk of the

stored commodity to maintain its shape

(such as fences or bags);

(3) Used structures or handling

equipment;

(4) Structures that are not suitable for

storing the facility loan commodities for

which a need is determined;

(5) Storage structures to be used for

commercial purposes. Commercial

purpose is defined as the storage and

handling of grain, whether paid or

unpaid, for persons other than the loan

applicant, except for family members as

defined in 7 CFR Part 718, and tenants

or landlords sharing in the crop

requiring storage. Any facility that is in

working proximity to any commercial

storage operation shall be considered to

be part of a commercial storage

operation; and

(6) Portable or permanent weigh

scales.

(d) Loans may be approved for

financing additions to or modifications

of an existing storage facility with an

expected useful life of at least 10 years

if the county committee determines

there is a need for the capacity of the

structure, but not for the sole

replacement of worn out items such as

motors, fans, or wiring.

(e) Loans may be approved for new

storage and handling components of a

pre-owned structure provided the

completed facility has a useful life of at

least 10 years. The pre-owned structure

must be purchased and moved to a new

storage location. Eligible items for such

a loan include costs such as new bin

4614 Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations

rings or roof panels needed to make a

purchased pre-owned structure useable,

new aeration systems, site preparation,

construction off-farm paid labor cost,

foundation material and off-farm paid

labor. Ineligible items for such a loan

include the cost of purchasing and

moving the used structure.

§ 1436.7 Term of loan.

The maximum term of the loan shall

be 7 years from the date of execution of

a promissory note and security

agreement. No extensions of the loan

term will be granted. The loan balance

and all attendant costs are due 7 years

from the date of the execution of the

promissory note and security agreement.

§ 1436.8 Security for loan.

(a) Except as agreed to by CCC, all

loans shall be secured by a promissory

note and security agreement covering

the farm storage facility. The promissory

note and security agreement shall grant

CCC a security interest in the collateral

and shall be perfected in the manner

specified in the laws of the state where

the collateral is located. CCC’s security

interest in the collateral shall constitute

the sole security interest in such

collateral except for prior liens on the

underlying realty that by operation of

law attach to the collateral if it is or will

become a fixture. If any such prior lien

on the realty will attach to the collateral,

a severance agreement must be obtained

in writing from each holder of such a

lien, including all government or USDA

agencies. No additional liens or

encumbrances may be placed on the

storage facility after the loan is

approved unless CCC approves

otherwise in writing.

(b) For loan amounts exceeding

$50,000, or where the aggregate

outstanding loan balance will exceed

$50,000 or for loans where the

approving committee determines as a

result of financial analysis that

additional security is required, a lien on

the real estate parcel on which the farm

storage facility is located will be

required in the form of a real estate

mortgage, deed of trust, or other security

instrument approved by the United

States Department of Agriculture’s

Office of General Counsel. CCC’s

interest in the real estate shall be

superior to all other liens and is the first

lien that secures the amount of the loan.

A loan will be considered to be

adequately secured when the real estate

security for the loan is at least equal to

the loan amount. If the real estate is

covered by a prior lien, a lien waiver

may be obtained by means of a

subordination agreement approved for

use in the State by USDA’s Office of

General Counsel. CCC will not require

such an agreement from any agency of

the Department of Agriculture. Loans

may be secured by a junior lien on real

estate when the loan is adequately

secured and a severance agreement is

obtained from prior lien holders.

(c) Title insurance or a title opinion

is required for loans secured by real

estate.

(d) Real estate liens may cover land

separate from the collateral if a lien on

the underlying real estate is not feasible

and if:

(1) The borrower owns the separate

acreage; and

(2) the acreage has sufficient value

based on the fair market value of the

acreage at the time of the application as

determined by the county committee, to

insure repayment of the loan.

(e) Notwithstanding the preceding

subsections of this section, a borrower,

in lieu of such liens as are otherwise

required by those subsections, may

provide a letter of credit, bond, or other

form of security, as approved by CCC.

(f) If an existing structure is

remodeled and an addition becomes an

attached, integral part of the existing

storage structure, CCC’s security interest

shall include the existing storage

structure.

(g) The cost of loan closings by

attorneys, title opinions, title insurance,

title searches, filing and recording all

real estate liens, fixture filings and later

subordinations will be paid by the

borrower. CCC shall pay such costs

relating to credit reports, collateral lien

searches, and filing and recording

financing statements for the collateral.

§ 1436.9 Loan amount and loan application

approvals.

(a) The cost on which the loan shall

be based is the net cost of the eligible

facility, accessories, and services to the

applicant after discounts and rebates,

not to exceed a maximum per-bushel

cost established by the FSA State

committee.

(b) The net cost for storage facilities

and handling equipment may include

the following: all real estate lien related

fees paid by the borrower, including

attorney fees, except for filing fees,

environmental and historic review fees

including archaeological study fees, the

facility purchase price, sales tax,

shipping, delivery charges, site

preparation costs, installation cost,

material and labor for concrete pads and

foundations, material and labor for

electrical wiring, electrical motors, offfarm paid labor, on farm site preparation

and construction equipment costs not to

exceed commercial rates approved by

the county committee, and new on-farm

material approved by the county

committee. The net cost shall not

include secondhand material or any

other item that is determined by the

approving authority to be ineligible for

loan.

(c) The maximum principal amount of

any farm storage facility loan shall be 85

percent of the net cost of the applicant’s

needed storage or handling equipment

not to exceed $100,000 for each

borrower signing the note and security

agreement. Unless otherwise approved

by CCC, borrowers shall be considered

to be separate persons or borrowers for

purposes of applying the preceding

sentence only to the extent that they

would normally be considered a

separate person under the rules set out

in 7 CFR part 1400.

(d) The aggregate outstanding balance

of all facility loans for any one borrower

signing the note and security agreement

may not exceed $100,000.

(e) When a storage structure has a

larger capacity than the applicant’s

needed capacity, as determined by CCC,

the net cost eligible for a loan shall be

prorated. Only costs associated with the

applicant’s needed storage capacity will

be considered eligible for loan under

this part.

(f) When a flat storage structure has

space that is not used primarily for

facility loan commodity storage, such as

office space, the loan amount shall be

adjusted for the ineligible space as

determined by CCC.

(g) The FSA county committee may

approve applications, if loan funds are

available, up to the maximum approval

amount unless the FSA State committee

establishes a lower limit for county

committee approval authority.

(h) Loan approvals will expire 4

months after the date of approval unless

extended in writing for an additional 4

months by the FSA State Committee.

(i) CCC may at any time refuse to

make new loans.

§ 1436.10 Down payment.

(a) A minimum down payment

representing the difference between the

net cost of the storage facility and the

amount of the loan determined in

accordance with § 1436.9 shall be made

by the loan applicant to the supplier or

contractor before the loan is disbursed.

(b) The down payment shall be in

cash unless some other form of payment

is approved by CCC. The down payment

may be obtained by the borrower from

another lending source.

(c) The down payment may not

include any trade-in, discount, rebate,

credit, deferred payment, post-dated

check, or promissory note to the

supplier or contractor.

Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations 4615

§ 1436.11 Disbursement and assignments.

(a) Disbursement of the loan by CCC

will be made after the farm storage

facility has been delivered, erected,

constructed, assembled, or installed and

a CCC representative has inspected and

approved such facility.

(b) Disbursement will be made only if

the borrower furnishes satisfactory

evidence of the total cost of the facility

and payment of all debts on the facility

in excess of the amount of the loan.

(c) Disbursement may be made jointly

to the borrower and the contractor or

supplier, except disbursement may be

made to the borrower only if CCC

determines the borrower has paid the

contractor or supplier all amounts that

are due and owing with respect to the

facility and that all applicable liens,

security interests, or other

encumbrances have been released.

(d) A release of liability will be

required from contractors and suppliers

providing goods and services to the loan

applicant.

(e) Loan proceeds cannot be assigned.

§ 1436.12 Interest and fees.

(a) Loans shall bear interest at the rate

equivalent, as determined by CCC, to

the rate of interest charged on Treasury

securities of comparable maturity on the

date the loan is approved.

(b) The interest rate for each loan will

remain in effect for the term of the loan.

(c) The loan applicant shall pay a

non-refundable application fee in such

amount determined appropriate by CCC,

which fee may not in any case be less

then $45.

§ 1436.13 Loan installments, delinquency,

and acceleration of maturity date.

(a) Equal installments of principal

plus interest will be amortized over the

loan term for purposes of setting a

payment schedule. Installments are due

and payable not later than the last day

of each 12-month period of the loan,

until the principal plus interest has

been paid in full.

(b) Each installment may be paid in

cash, money order, wire transfer, or by

personal, certified, or cashier’s check.

Repayment shall be applied first to

accrued interest and then to principal.

(c) The following actions will be taken

when installments are not paid on the

due date: A demand for payment shall

be mailed to the debtor after the due

date has passed. If the installment is not

paid within 30 days of the due date or

if a new due date acceptable to CCC has

not been established based on a

financial plan submitted by the debtor,

the initial demand may be followed by

two subsequent written demands at

approximately 30-day intervals unless

other action is needed to protect the

interests of CCC. If the debtor files an

appeal according to § 1436.18 of this

part, collection action shall cease until

the appeal process is complete,

however, any payments due the debtor

may be withheld and, depending on the

outcome of the appeal, may later be

offset and applied to reduce the

indebtedness. In lieu of a foreclosure on

the collateral in the case of a

delinquency, CCC may permit a

rescheduling of the debt or other

measures consistent with the collection

of other debts under the provisions of

Part 1403. Alternately, CCC may

implement such other collection

procedures as it deems appropriate.

(d) A claim shall be established

against a borrower for any amounts

remaining due after liquidation of the

loan.

(e) CCC may declare the entire

indebtedness immediately due and

payable if the borrower violates any of

the terms and conditions of this part,

fails to pay any installment on time, or

breaches any of the terms and

conditions of any of the instruments

executed in connection with the loan, or

if , during the life of the loan, the

collateral is used in connection with or

by any unauthorized commercial

operation including, but not limited to,

elevators, warehouses, dryers or

processing plants.

(f) Any action authorized by the

provisions of this section may be taken:

(1) Against a debtor’s pro rata share of

payments due any entity that the

borrower participates in, either directly

or indirectly, as determined by CCC.

(2) Against related persons or entities,

irrespective of the debtors share, when

CCC determines that the debtor has

established an entity, or reorganized,

transferred ownership of, or changed in

some other manner, their operation, for

the purpose of avoiding the payment of

the debt.

(g) The loan may be paid in full or in

part without penalty at any time before

maturity.

(h) Upon payment of a loan, CCC shall

release CCC’s security interest in the

collateral.

§ 1436.14 Taxes.

The borrower must pay, when due, all

real and personal property taxes that

may affect CCC’s security interest in all

collateral securing the note evidencing

the loan. To protect its interests, CCC

may pay any unpaid taxes with respect

to the collateral securing a loan made in

accordance with this part, and if CCC

does so, the borrower shall reimburse

CCC for such payment, and if unpaid by

the borrower, such debt shall become

due immediately.

§ 1436.15 Maintenance, liability, insurance,

and inspections.

(a) The borrower must maintain the

loan collateral in a condition suitable

for the storage of one or more of the

facility loan commodities. For purpose

of this section the term ‘‘loan collateral’’

shall mean any property of any kind

that was built or improved, or acquired

using a loan made under this part.

(b) Until the loan has been repaid, the

borrower shall be liable for all damages

to or destruction of the loan collateral.

CCC shall not assume any loss of the

loan collateral.

(c) CCC may conduct annual collateral

inspections to insure compliance with

this part. The borrower must consent to

such inspection as a term of the loan

and failure to supply such access shall

put the borrower into default.

(d) Structures must be insured against

all perils in all cases and must also be

insured against flooding if the structure

is located in a flood plain, as

determined by CCC. Proof of flood

insurance, if required, and proof of all

peril structural insurance, must be

provided to CCC annually. CCC must be

listed as a loss payee on all peril and

flood insurance policies.

(e) CCC shall have rights of ingress

and egress where the facility is located.

Failure of the borrower to secure such

access will render a borrower ineligible

for the loan and, if a loan has already

been made shall constitute a loan

default for which the remaining balance

of the loan shall become immediately

due and payable.

§ 1436.16 Foreclosure, liquidation,

assumptions, sale or conveyance,

bankruptcy.

(a) The collateral or land securing a

loan may be sold by CCC whenever CCC

has declared the entire indebtedness

immediately due and payable under this

part as follows:

(1) If a demand for payment is not

received by the due date acceptable to

CCC, CCC may call the loan and initiate

foreclosure proceedings by issuing a

liquidation letter to the borrower.

(2) The debtor may voluntarily agree

to allow removal of the collateral to

facilitate sale by signing an agreement

for sale. If the debtor objects to removal

of collateral, the law of the state where

the collateral exists will be used to

foreclose on the property.

(3) For loans with movable collateral

and no real estate lien, CCC may sell the

collateral for the best price obtainable.

Sales proceeds shall be distributed in

the following order:

4616 Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Rules and Regulations

(i) To CCC to satisfy the debtor’s

indebtedness including all costs

associated with selling the collateral.

(ii) Payment to junior lien holders if

approved by USDA’s Office of the

General Counsel and then to the

borrower or other persons as determined

appropriate by that office.

(4) For loans with nonmovable

collateral, as determined by CCC, and

no real estate lien, CCC may establish a

claim according to 7 CFR part 1403.

(5) For loans secured with a real estate

lien, CCC may obtain an appraisal of the

property. Sales proceeds shall be

distributed in the following order:

(i) To CCC to satisfy the debtor’s

indebtedness including all costs

associated with selling the collateral

and the appraisal.

(ii) To junior lien holders if approved

by USDA’s Office of the General

Counsel; or

(iii) To the borrower or other persons

as determined appropriate by that office.

(b) Assumption by another borrower

of a farm storage facility loan is

permitted subject to county committee

approval and the subsequent borrower’s

ability to show a satisfactory credit

history. An assumption of the loan may

be approved when the collateral is sold

by CCC to an otherwise eligible

borrower, the current borrower will

convey the collateral or property

securing the loan to another eligible

borrower, or the borrower is dead,

incompetent, or missing and an eligible

borrower wants to assume the loan.

(1) Requests for approval of

assumptions shall be made to the

county committee by the borrower, the

borrower’s successors, or

representatives of the borrower. If

approval is granted, the borrower’s

successors or representatives shall

execute a new farm storage facility note

and security agreement for the balance

of the term of the loan.

(2) The principal amount of the loan

shall include the unpaid amount of the

loan, interest computed to the date of

assumption, all past due installments,

and any other charges that may be

required.

(c) The borrower may voluntarily

convey the collateral to CCC before

repaying the loan. Before a borrower

sells or conveys the facilities or other

property securing a loan without

repaying the loan in full, the borrower

shall obtain approval for the sale or

conveyance from the FSA county

committee with the understanding that

sale proceeds shall be paid to satisfy the

borrowers indebtedness to CCC.

(d) Remedies provided for in this

section shall, unless CCC determines

otherwise, be subject to the

administrative appeals provided for

elsewhere in this part, including those

that are found at § 1436.13.

§ 1436.17 Environmental compliance.

(a) Except as otherwise specified in

this section, prior to approval of any

farm storage facility loan, an

environmental evaluation will be

completed to determine if the proposed

action will have any adverse impacts on

the environment and cultural resources.

(b) If it is determined that a proposed

action or group of proposed actions will

not result in any adverse impact, the

action will be considered as being

categorically excluded for the purpose

of compliance with the National

Environmental Policy Act (NEPA), 40

CFR parts 1500–1508.

(c)(1) If adverse environmental

impacts (either direct or indirect) are

identified, an environmental assessment

will be completed in accordance with

the Council on Environmental Quality’s

Regulations for Implementing the

Procedural Provisions of NEPA.

(2) The environmental assessment

will be used to develop an action that

results in no significant environmental

impact on the human environment or

cultural resources.

(3) No action will be approved that

has been determined to have significant

impacts on the human environment or

cultural resources.

(d)(1) In order to minimize the

exposure to environmental liabilities

from the presence of contamination on

real estate collateral, an evaluation will

be made of the economic and

environmental risks to the real estate

collateral posed by the presence of

hazardous substances and petroleum

products.

(2) If the evaluation made under

paragraph (d)(1) of this section reveals

that the collateral is or may be

contaminated, then the applicant will be

notified and given an option of offering

as collateral other real estate that is free

from contamination or remediating the

contamination on the original site

offered as collateral.

§ 1436.18 Appeals.

The appeal, reconsideration, or

review of all determinations made

under this part, except for provisions for

which there are no appeal rights

because they are determined rules of

general applicability, must be in

accordance with parts 11 and 780 of this

title.

Signed at Washington, DC, on January 10,

2001.

George Arredondo,

Acting Executive Vice President, Commodity

Credit Corporation.

[FR Doc. 01–1332 Filed 1–17–01; 8:45 am]

BILLING CODE 3410–05–P

DEPARTMENT OF ENERGY

10 CFR Part 719

48 CFR Parts 931 and 970

RIN 1990–AA27

Contractor Legal Management

Requirements; Department of Energy

Acquisition Regulation

AGENCY: Department of Energy.

ACTION: Notice of final rulemaking.

SUMMARY: The Department of Energy

(Department) is establishing new

regulations covering contractor legal

management requirements. Conforming

amendments are also made to the

Department of Energy Acquisition

Regulation (DEAR). The new regulation

covers legal costs to be reimbursed by

the Department to its contractors at

government owned or leased facilities

with contracts exceeding $100,000,000.

An Appendix to the regulation provides

additional guidance to contractors.

EFFECTIVE DATE: This final rule is

effective February 20, 2001.

FOR FURTHER INFORMATION CONTACT:

Laura Fullerton at (202) 586–3420

(Laura.Fullerton@hq.doe.gov) or Anne

Broker at (202) 586–5060

(Anne.Broker@hq.doe.gov).

SUPPLEMENTARY INFORMATION:

I. Background.

II. Disposition of Comments.

III. Procedural Requirements.

A. Review Under Executive Order 12866.

B. Review Under Executive Order 12988.

C. Review Under the Regulatory Flexibility

Act.

D. Review Under the Paperwork Reduction

Act.

E. Review Under the National

Environmental Policy Act.

F. Review Under Executive Order 13132.

G. Review Under the Unfunded Mandates

Reform Act of 1995.

H. Review Under the Treasury and General

Government Appropriations Act of 1999.

I. Congressional Notification.

I. Background

This final rulemaking creates a new

part 719, in Chapter 10 of the Code of

Federal Regulations, establishing

regulations to monitor and control legal

costs and to provide guidance to aid

contractors and Department personnel

in making determinations regarding the