[Federal Register Volume 77, Number 53 (Monday, March 19, 2012)]
[Rules and Regulations]
[Pages 15933-15939]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6558]


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

DEPARTMENT OF AGRICULTURE

Farm Service Agency

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

RIN 0560-AI04


Conservation Loan Program

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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

SUMMARY: In September 2010, the Farm Service Agency (FSA) implemented 
the new Conservation Loan (CL) Program authorized by the Food, 
Conservation, and Energy Act of 2008 (the 2008 Farm Bill). FSA added 
the CL Program provisions to the existing direct and guaranteed loan 
regulations. The provisions provide CL program eligibility and 
servicing options for the direct and guaranteed loans made through the 
CL Program. FSA is amending the Farm Loan Programs (FLP) direct and 
guaranteed loan regulations for the CL Program based on public comments 
received on the interim rule.

DATES: Effective Date: This rule is effective May 18, 2012.

FOR FURTHER INFORMATION CONTACT: Connie Holman; telephone: (202) 690-
0756. Persons with disabilities who require alternative means for 
communication (Braille, large print, audio tape, etc.) should contact 
the USDA Target Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    Section 5002 of the 2008 Farm Bill (Pub. L. 110-246) authorized the 
establishment of the CL Program by amending section 304 of the 
Consolidated Farm and Rural Development Act (CONACT, 7 U.S.C. 1924). CL 
loan funds may be used to finance the cost of carrying out a qualified 
conservation project. FSA published an interim rule (75 FR 54005-54016) 
on September 3, 2010, to add CL loan making and servicing provisions to 
the existing direct and guaranteed loan regulations. The regulations in 
7 CFR parts 761, 762, 764, 765, and 766 were amended. Those changes to 
the regulation were effective on September 3, 2010.
    Subsequently, on May 13, 2011, FSA published a notice in the 
Federal Register (76 FR 27986) announcing that FSA was no longer 
accepting direct or guaranteed applications for the CL Program because 
of a lack of funding. On March 7, 2012, FSA published another notice in 
the Federal Register (77 FR 13530-13531) announcing that we are now 
accepting guaranteed loan applications. However, due to a lack of 
program funding, direct CL applications are not being accepted at this 
time.
    In this final rule, FSA addresses the comments received on the 
interim rule and the changes being made in response to those comments. 
The amended regulations will be used to service outstanding direct and 
guaranteed CLs and to process any new loan applications, subject to the 
availability of funding.
    Fifteen commenters submitted comments on the interim rule during 
the 60-day comment period. Comments were received from the Independent 
Community Bankers of America, National Sustainable Agriculture 
Coalition, Forestry Service Division of Oklahoma Department of 
Agriculture Food and Forestry, Natural Resources Conservation Service 
(NRCS), American Farmland Trust, the general public, and FSA employees. 
This rule was also included in the Joint Regional Tribal Consultation 
Strategy facilitated by USDA in seven regional consultation meetings 
from November 2010 through January 2011.
    The comments addressed multiple provisions of the rule. Many of the 
comments received during the comment period were supportive. The 
commenters supported many of the CL provisions such as the eligible 
uses for CL loan funds, the requirement for applicants to obtain an 
approved NRCS conservation plan, the exemption of ``test for credit'' 
and ``graduation'' requirements from the program, loan limits, the 
streamlined CL application process, and the targeting of direct and 
guaranteed loan funds for certain producer types.
    A number of issues raised in the comments resulted in changes to 
the regulations. The overall changes are summarized below followed by a 
discussion of the individual comment issues and the responses.

Summary of Amendments to the Regulations

    Part 761 provides the general and administrative regulations for 
both direct and guaranteed loans. The regulation in 7 CFR part 762 
specifies requirements and procedures that apply to making and 
servicing Guaranteed Loans. The regulation in 7 CFR part 763 specifies 
the requirements and procedures for direct loan making. FSA is making 
several amendments to these regulations based on the comments.
    FSA is making a minor amendment to the definition of ``Conservation 
Practice'' to coincide with the definition in NRCS regulations. FSA 
will add a definition of ``Forest Stewardship Management Plan,'' make a 
minor amendment to the definition of ``Conservation Project'' to add a 
provision to allow conservation

[[Page 15934]]

measures that are included in a Forest Stewardship Management Plan 
approved by the USDA Forest Service to be considered eligible uses of 
CL loan funds. Also, FSA is making conforming changes to the 
regulations to allow for the inclusion of a Forest Stewardship 
Management Plan.
    FSA is changing the length of the repayment period to specify that 
guaranteed CLs may be scheduled over a repayment period not to exceed 
30 years. This is a change from the interim rule, which limited the 
repayment term of guaranteed CLs to 20 years, the same repayment term 
as direct CLs making guaranteed CLs slightly more advantageous than 
direct CLs and thus reducing the potential competition between 
commercial lenders and FSA.
    FSA is also clarifying the guaranteed loan restructuring 
requirement to state that lenders must ensure that the borrower remains 
in compliance with the approved conservation plan or the Forest 
Stewardship Management Plan.
    FSA is making a change to specify that CLs made to purchase 
equipment or for real estate purposes of $25,000 or less may be secured 
by a lien on chattels. This is a change from the interim rule that 
required FSA to take real estate as security, regardless of the loan 
purpose or amount, as first priority if real estate security was 
available. FSA further specifies that FSA may accept the best lien 
obtainable on real estate, without title clearance or legal service, on 
loans of $25,000 or less. However, if FSA is uncertain of the record 
owner or debts against real estate, a title search will be required. 
This change reflects the reduced risk of loss with these small loans.

Discussion of Comments and Responses

    The following provides a summary of the comments received and FSA's 
response, including changes we are making to the regulations based on 
the comments.

Definitions

    Comment: FSA should acknowledge the role of Forest Stewardship 
Management Plans in the CL Program to clarify that Nonindustrial 
Private Forest (NIPF) landowners are excluded from eligibility, even 
though forestry practices are included in 7 CFR 762.121 and 764.231 as 
an authorized loan purpose or use. FSA should include a specific 
reference to NIPF landowners.
    Response: FSA is amending the regulations by adding a definition in 
Sec.  761.2 of ``Forest Stewardship Management Plan'' and providing 
that any conservation practice included in the Forest Stewardship 
Management Plan will be an eligible use of CL funds under Sec. Sec.  
762.121 and 764.131.
    Comment: The definition of ``Conservation Practice'' should be 
amended to coincide with the definition in NRCS regulations.
    Response: FSA is amending the definition in Sec.  761.2(b) of 
``Conservation Practice'' based on the NRCS regulation.

Eligibility, Graduation, and Market Placement

    Comment: Regardless of Section 304 of the CONACT, special notice 
must be made of the exception of the test for credit, family farm, and 
graduation requirements for the CL Program. FSA is straying from their 
original purpose of providing credit to those who are unable to obtain 
credit through other sources.
    Response: FSA disagrees with the comment. Section 304 of the CONACT 
explicitly eliminates the test for credit and does not require that a 
family sized farm be involved to qualify for the CL Program. By 
eliminating these requirements it is evident that the objective of the 
CL Program is to encourage all farmers to implement conservation 
practices and not for the program to serve as a safety net for farmers 
who cannot obtain credit elsewhere. No changes have been made in 
response to this comment.
    Comment: FSA did not have a sufficient excuse to implement a new 
program that will benefit farmers beyond the traditional FSA customer 
base.
    Response: Inclusion of the CL Program in the CONACT and the 
subsequent allotment of funds by Congress clearly demonstrates 
Congressional intent to have this program implemented as authorized in 
the legislation.
    Comment: Direct loans should only be made to family sized farms. 
This would maximize the number of participants in the CL Program.
    Response: Section 304 of the CONTACT does not limit direct loans 
based on the size of the farm; therefore, no change is being made to 
this policy.
    Comment: Add the following statement from the interim rule preamble 
that ``This will facilitate timely implementation of conservation 
practices that would otherwise be postponed due to lack of monetary 
resources'' to the final rule eligibility requirements requiring that 
applicants ``must demonstrate to the satisfaction of the Agency that 
the CL is needed to facilitate the timely implementation of 
conservation activities that would otherwise be postponed due to lack 
of monetary resources.''
    Response: The purpose of the CL Program is to enhance the 
environment by facilitating implementation of conservation measures. 
Section 304 of the CONACT explicitly eliminates the test for credit and 
does not require a family sized farm for the CL Program. By excluding 
these requirements from the qualifications for a CL, it is clear that 
the CL Program is to serve as an inducement for implementation of 
conservation practices. Requiring every applicant to demonstrate need 
would undermine the intended purpose of the CL Program and be in 
conflict with the authorizing statute. Therefore, FSA is not making 
this change.
    Comment: The blanket exemption that allows CL funds to be used to 
support non-eligible enterprises is a mismatch, enabling non-farm 
facilities to qualify for a conservation loan without a conservation 
plan approved by a competent official.
    Response: The intent of the CL Program is to provide loans to allow 
farmers to address conservation needs on their land. In the interim 
rule, in Sec.  764.232, FSA included language that requires CL Program 
participants who operate non-eligible enterprises to also be involved 
in agricultural production in order to be qualified for the CL Program. 
Program provisions also require that CL Program participants have an 
NRCS approved conservation plan or Forest Stewardship Management Plan 
to meet eligibility requirements. This eliminates the possibility of 
non-farm facilities without an approved conservation plan or Forest 
Stewardship Management Plan qualifying for the CL Program. Therefore, 
FSA is not making a change in response to this comment.
    Comment: FSA should limit the number of CLs awarded to applicants 
who are eligible for, and able to obtain, credit from a production 
credit association, a Federal Land Bank, or other cooperative or 
private sources.
    Response: FSA is not making the suggested change. As authorized, 
the purpose of the CL Program is to encourage farmers to implement 
conservation measures and does not include the traditional Farm Loan 
Programs provision that limits eligibility to those farmers who cannot 
obtain credit from commercial lenders. If FSA limited the number of CLs 
awarded, FSA would undermine the intent of the CL provisions and 
purpose of the CL Program, which is to fund conservation projects.
    Comment: In the absence of the family-farm eligibility requirement, 
FSA should require that non-family farm applicants have at least 75 
percent of their assets involved in agricultural

[[Page 15935]]

production and earn at least 75 percent of their income from 
agricultural activities.
    Response: The exclusion of the test for credit and family farm size 
as eligibility requirement for the CL Program demonstrates that the 
purpose of the program is to fund conservation practices. Establishing 
a minimum asset or income level requirement would impose restrictions 
that are not authorized because it could be seen as a test for credit 
that does not apply to the CL Program. Therefore, FSA is not making the 
change.
    Comment: Do not amend 7 CFR 762.110 to specify that market 
placement will not be applicable to the CL Program.
    Response: Market placement is used to assist qualified existing 
direct loan borrowers and new direct loan applicants in obtaining a 
guaranteed farm loan from a commercial lender. Utilization of the 
Market Placement Program means the borrower or applicant may be able to 
obtain credit elsewhere. The CONACT exempts CL Program from the 
``credit elsewhere'' requirement. Because FSA will not be making a 
``credit elsewhere'' eligibility determination, there would be no 
reason to determine if a CL applicant or existing CL borrower should be 
considered for market placement. Therefore, FSA is not making the 
change.
    Comment: FSA should not have changed the ``graduation'' definition 
in the interim rule because the 2008 Farm Bill does not prohibit FSA 
from requesting CL borrowers to graduate, but rather only prohibits FSA 
from requiring CL borrowers to refinance. Remove the change from the 
regulation and make all necessary conforming changes.
    Response: FSA will not be making the change. Section 304(g) of the 
CONACT exempts the CL Program from graduation requirements established 
in section 333(3) of the CONACT. A CL borrower does not have to agree 
to obtain a loan from a commercial lender; therefore, graduation does 
not apply to the CL Program. Prior to the interim rule, FSA's 
definition of graduation encompassed all FLP loans. To implement this 
exemption, CL had to be excluded from the definition. However, 
excluding CL from the graduation definition does not prohibit a CL 
borrower from paying the loan in full prior to the maturity date.

Funding

    Comment: The final rule should make clear that CL funding is 
provided to FSA separately and that funds for the CL Program will not 
attach to funding for other FLP programs as the other FLP programs are 
solely aimed at farmers and ranchers who cannot obtain credit elsewhere 
and who are no larger than family sized farms.
    Response: No change will be made for this comment. Each year funds 
are appropriated to each specific loan program. Previous appropriations 
bills have been worded such that funds can be transferred between 
programs with the Secretary's approval and Congressional notification. 
While this has been done in the past, it has only been done towards the 
end of the fiscal year and only in cases where resources will be unused 
and where there are shortfalls in other programs.
    Comment: FSA should target 50 percent of direct and guaranteed CL 
funds for beginning and socially disadvantaged farmers, owner or 
tenants who use loans to convert to sustainable or organic agriculture 
production systems, and producers who use loans to build conservation 
structures or establish conservation practices to comply with highly 
erodible land conservation exemptions.
    Response: FSA will not make this change. FSA is targeting 35 
percent of direct and guaranteed CL funds to the priorities listed in 7 
CFR 761.210, which includes all the groups listed in the comment. An 
additional 15 percent of direct CL funds are targeted for SDA 
participation rates in accordance with section 355 of the CONACT. The 
15 percent is based on an estimated national average of the county wide 
percentages. The allocation is being kept at a national level given the 
small amount of funding for the Program. This gives a total of 50 
percent of CL funding targeted to the various groups as specified by 
the 2008 Farm Bill and section 304 of the CONACT.
    Comment: Given ``limited funding,'' a determination should be 
required that the conservation practice(s) would not be able to be 
completed without the CL loan being extended.
    Response: FSA is not making the suggested change. Implementing 
eligibility restrictions on the financial condition of an operation is 
in contradiction to the intent of the CL Program, which is to encourage 
all farmers to implement beneficial conservation practices.
    Comment: As part of FSA's effort to prioritize CL funding for 
beginning farmers, FSA should send CL Program informational materials 
to producers enrolled in the Conservation Reserve Program Transition 
Incentives Program.
    Response: This is an outreach issue, and it is not necessary to 
make a change in the final rule. FSA will continue to utilize all 
available opportunities to market the CL Program.

Application Requirements

    Comment: Amend 7 CFR 761.210 to require that the conservation plan 
demonstrate NRCS Field Office Technical Guide quality criteria for at 
least three resource concerns are or will be exceeded. The language in 
7 CFR 761.210 establishing the priority for CL funding is ambiguous and 
highly problematic and the requirements for priority funding should be 
more explicit.
    Response: The conservation plan on which the priority funding 
determination is based on is a product of NRCS. FSA recognizes the 
expertise of NRCS in this area and believes that NRCS is better 
equipped to make the determination as to whether the conservation 
practices being implemented constitute ``moving toward'' sustainable 
agriculture. FSA will, therefore, not be making the change.

Terms

    Comment: There is nothing to distinguish or explain why or when a 
borrower would seek a guaranteed loan versus a direct loan and FSA 
should allow a longer term for guaranteed loans than for direct loans.
    Response: FSA will make a change to the rule in Sec. Sec.  762.124 
and 762.145 to allow guaranteed CLs to be scheduled for repayment over 
a period not to exceed 30 years from the date of the note or a shorter 
period if necessary to assure that the loan will be adequately secured. 
The change will make guaranteed CLs slightly more advantageous and 
thereby reduce the potential competition between commercial lenders and 
FSA.

Streamlined CLs

    Comment: The USDA Economic Research Service (ERS) reported that 
farm business' debt-to-asset ratio was expected to decline to 11.2 
percent and debt-to-equity was expected to decline to 12.5 percent. 
FSA's 40 percent debt-to-asset ratio is too high and FSA should be more 
flexible and reserve the 40 percent ratio for family sized farms while 
requiring a lower ratio for larger than family sized farms.
    Response: The 11.2 percent debt to asset ratio (D/A) mentioned in 
the comment represents all US farm debt divided by all US farm assets 
and is not a true representation of the median US farm's D/A ratio. A 
University of Minnesota study showed that 39 percent of Minnesota farms 
had a D/A ratio of

[[Page 15936]]

greater than 60 percent. ERS defines a favorable financial position as 
positive cash flow with D/A less than or equal to 40 percent and 
marginal solvency as positive cash flow with D/A of greater than 40 
percent, making 40 percent a reasonable parameter. FSA believes that by 
tying D/A ratio to the size of the farm could increase confusion and 
present more instances for inconsistency in interpretation. Since the 
40 percent D/A ratio discussed is simply the threshold permitting 
reduced loan application paperwork and not for loan qualification, FSA 
is not making the change.
    Comment: For streamlined CL eligibility, FSA should require not 
only a majority of the members of an entity have a FICO score of 700, 
but that those members represent a majority of the ownership of the 
entity. This would ensure that these members would be the individuals 
truly responsible for key decision making for the entity and could be 
the ones making the important decisions regarding repayment of the 
loan.
    Response: FSA will not make this change. Members with the majority 
ownership of the entity are not always the decision makers, and there 
is no way to insure that in every case the decision makers of the 
entity are also the members that have the required FICO score. Tying 
FICO scores to the percentage of ownership could increase confusion and 
present more instances for inconsistency in interpretation.

Direct CLs

    Comment: FSA should consider adding a requirement that an applicant 
for a direct loan must provide evidence that they cannot complete the 
conservation practice with a guaranteed loan in lieu of a direct loan.
    Response: Section 304(g) of the CONACT explicitly exempts the 
program in FSA from the requirement of ``credit elsewhere.'' By 
excluding this requirement from the qualifications for a CL, Congress 
clearly signaled the intent that the CL Program serves as an inducement 
for implementation of conservation practices. Adopting this suggestion 
would undermine the purpose of the CL Program, so FSA will not make the 
change.
    Comment: If the CL funding is being awarded to a project for which 
Federal, State, or local permits must be obtained, then FSA should not 
release CL funding until the applicant has secured all necessary 
permits.
    Response: This change is not necessary. FSA regulation 7 CFR 
1940.309 deals with environmental due diligence and addresses the 
requirement for applicants to obtain permits when required by local and 
State laws. In addition, 7 CFR 761.10(c)(2) requires that applicants 
obtain required State and local construction approvals and permits 
prior to loan closing when developing real estate.

Guaranteed CLs

    Comment: The guarantee to lenders should be 90 percent because 
otherwise there would be diminishing incentives to utilize the 
guaranteed loan program and greater incentives to utilize the 
government funded direct loan program.
    Response: FSA will not make this change since Section 304(e) of the 
CONACT mandates the 75 percent guarantee.
    Comment: The requirement that lenders certify that a CL borrower is 
in compliance with the conservation plan when restructuring should be 
modified to require ``the lender or appropriate USDA office at the 
discretion of the lender.'' USDA officials may be in the best position 
to determine compliance with conservation plans. Also, USDA officials 
should be required to make the determination in an expedited manner.
    Response: FSA reworded the text in Sec.  762.145 to provide that 
for CLs the lender will ``ensure that the borrower is maintaining the 
practice for which the CL was made,'' rather than ``certify'' the 
borrower is in compliance with the approved conservation or Forest 
Stewardship Management Plan. This also will be included in the FSA 
administrative handbook to clarify the requirement.

Security and Title Clearance

    Comment: As published in the interim rule, 7 CFR 764.235 was added 
to provide that direct CLs will be secured in accordance with 7 CFR 
764.103 through 764.106. Furthermore, CLs are required to be secured 
first by a lien on real estate, if available and then by chattels if 
determined acceptable by FSA. The requirement to require real estate as 
security priority is too restrictive when the loan funds will be used 
to purchase chattels or for lower loan amounts. The requirement of 
taking real estate as priority also increases the closing cost expenses 
to borrowers when the loan amount may be relatively small and 
consideration should be given to the fact that many of these loans will 
receive significant cost share payments from NRCS that will result in 
very small net loan amounts. Security requirements could be met by 
either real estate or chattels depending on the use of loan funds much 
like FSA's direct Operating Loan (OL). Loans up to $25,000 should be 
secured first by chattels, with real estate taken as additional 
security if available.
    Response: FSA will make changes to this security requirement in 
Sec.  764.235 based on this comment. A lien on chattel security will be 
acceptable for all loans made to purchase equipment or for loans of 
less than $25,000. A lien on real estate will still be required for all 
loans of $25,000 or greater when funds are used for real estate 
purposes.
    Comment: For CLs of $25,000 or less, FSA should be able to accept 
the best lien obtainable without title clearance or legal service.
    Response: FSA will make the change in Sec.  764.235 to provide that 
for CLs of $25,000 or less, when real estate is taken as security only 
a certification of ownership in real estate is required. For loans 
greater than $25,000 title clearance will still be required. As a 
result, real estate title clearance requirements for CLs will mirror 
that of the Emergency Loan Program.

General Program

    Comment: FSA should work with NRCS to ensure that producers seeking 
assistance for implementing conservation projects are fully aware of 
the availability of the funds through FSA's CL Program.
    Response: FSA is presently working with NRCS to market the CL 
Program and will continue to utilize all available opportunities to 
market the CL Program.
    Comment: There is no need to establish a new program. FSA should 
simply revise the existing Farm Ownership (FO) regulations to add 
projects eligible to be financed with FO funds.
    Response: While both FO and Farm Operating (OL) loan funds may be 
used for conservations purposes, the requirements for these programs 
are more restrictive than those authorized for the CL Program. FO and 
OL eligibility require that applicants be unable to obtain sufficient 
credit elsewhere at reasonable rates and terms and be the operator of a 
family farm after the loan is closed. Furthermore, recipients of FO and 
OL direct loan assistance must agree to graduate when credit is 
available from other sources at reasonable rates and terms. Revising 
the existing FO or OL regulations would eliminate the accessibility to 
credit for conservation projects for FSA's non-traditional customers 
and, therefore, undermine the purpose of the CL Program. FSA is not 
making this change.
    Comment: FSA should have issued the rule as a proposed rule instead 
of an interim rule. The objective of the CL Program did not necessitate 
an interim

[[Page 15937]]

rule implementing the program immediately in lieu of a proposed rule.
    Response: Many farmers who need and want to implement conservation 
measures on their land, often do not have the ``up front'' funds 
available to pay out-of-pocket costs not covered by many USDA 
conservation programs that provide only cost share assistance after the 
project is completed. While these conservation projects are 
environmentally valuable, they often contribute very little to the 
economic productivity of the farming operation providing little 
incentive for private sector lending institutions to provide financing. 
This often means implementation of vital conservation measures must be 
postponed. This is particularly true for farmers in the livestock 
sector who often experience dramatic swings in profitability but may 
also have the most critical need to implement conservation practices. 
In keeping with the Presidential initiatives such as ``A 21st Century 
Strategy for America's Great Outdoors,'' USDA determined that there was 
good cause to announce the new Conservation Loan and Loan Guarantee 
Program by publishing an interim rule that became effective immediately 
upon publication to allow FSA to make loans with fiscal year 2010 
funds. By implementing the CL and Loan Guarantee Program this way FSA 
allowed the public the opportunity to comment and was also able to fund 
several conservation projects with fiscal year 2010 funds.

Executive Order 12866 and 13563

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasized the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility.
    The Office of Management and Budget (OMB) designated this rule as 
not significant under Executive Order 12866 and, therefore, OMB was not 
required to review this final rule.

Environmental Evaluation

    The requirements found in 7 CFR part 1940, subpart G, must be met 
for the CL Program consistent with the existing direct and guaranteed 
loan regulations.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials. The 
objectives of the Executive Order are to foster an intergovernmental 
partnership and a strengthened Federalism, by relying on State and 
local processes for State and local government coordination and review 
of proposed Federal Financial assistance and direct Federal 
development. For reasons set forth in the Notice to 7 CFR part 3015, 
subpart V (48 FR 29115, June 24, 1983), the programs and activities 
within this rule are excluded from the scope of Executive Order 12372.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, ``Civil Justice Reform.'' This rule preempts State and local 
laws, regulations, or policies that are in conflict with this rule. 
This rule will not have retroactive effect. Before any judicial action 
may be brought regarding the provisions of this rule, all 
administrative remedies in accordance with 7 CFR parts 11 and 780 must 
be exhausted.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule do not have any 
substantial direct effect on States, the relationship between the 
Federal government and the States, or the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Executive Order 13175

    This rule has been reviewed for compliance with Executive Order 
13175, ``Consultation and Coordination with Indian Tribal 
Governments.'' This Executive Order imposes requirements on the 
development of regulatory policies that have tribal implications or 
preempt tribal laws. The USDA Office of Tribal Relations has concluded 
that the policies contained in this rule do not have Tribal 
implications that preempt Tribal law. This rule was included in the 
Joint Regional Consultation Strategy facilitated by USDA from November 
2010 through January 2011. This consolidated consultation efforts of 70 
rules from the 2008 Farm Bill. USDA sent senior level agency staff to 
seven regional locations and consulted with Tribal leadership in each 
region on the rules. Once consultation meetings were completed, USDA 
analyzed the feedback and incorporated any appropriate changes into the 
regulations through rulemaking procedures. There were no comments about 
this rulemaking during the Tribal Consultation.
    USDA will respond in a timely and meaningful manner to all Tribal 
government requests for consultation concerning this rule and will 
provide additional venues, such as webinars and teleconferences, to 
periodically host collaborative conversations with Tribal leaders and 
their representatives concerning ways to improve this rule in Indian 
country.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, or Tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit analysis, for final rules with Federal 
mandates that may result in expenditures of $100 million or more in any 
1 year for State, local, or Tribal governments, in the aggregate, or to 
the private sector. UMRA generally requires agencies to consider 
alternatives and adopt the more cost effective or least burdensome 
alternative that achieves the objective of the rule. This rule contains 
no Federal mandates as defined by Title II of UMRA for State, local, or 
Tribal governments or for the private sector. Therefore, this rule is 
not subject to the requirements of sections 202 and 205 of UMRA.

Federal Assistance Programs

    The changes in this rule affect the following FSA program as listed 
in the Catalog of Federal Domestic Assistance:

10.099 Conservation Loans

Paperwork Reduction Act

    This final rule requires no changes or adds new collection to the 
currently approved information collections by OMB under the control 
numbers of 0560-0155, 0560-0233, 0560-0236, 0560-0237, 0560-0238, and 
0560-0230.

E-Government Act Compliance

    FSA is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

[[Page 15938]]

List of Subjects

7 CFR Part 761

    Loan programs-Agriculture.

7 CFR Part 762

    Agriculture, Credit, Loan programs-Agriculture.

7 CFR Part 764

    Agriculture, Credit, Loan programs-Agriculture.

7 CFR Part 765

    Agriculture, Credit, Loan programs-Agriculture.

7 CFR Part 766

    Agriculture, Agricultural commodities, Credit, Livestock, Loan 
programs -Agriculture.

    Accordingly, the interim rule amending 7 CFR parts 761, 762, 764, 
765, and 766, which was published at 75 FR 54005-54016 on September 3, 
2010, is adopted as a final rule with the following changes:

PART 761--FARM LOAN PROGRAMS; GENERAL PROGRAM ADMINISTRATION

0
1. The authority citation for part 761 continues to read as follows:

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


0
2. Amend Sec.  761.2(b) as follows:
0
a. Revise the definitions of ``conservation practice'' and 
``conservation project'' to read as set forth below, and
0
b. Add the definition, in alphabetical order, for ``Forest Stewardship 
Management Plan'' to read as set forth below.


Sec.  761.2  Abbreviations and definitions.

* * * * *
    (b) * * *
    Conservation practice means a specific treatment, such as a 
structural or vegetative measure, or management technique, commonly 
used to meet specific needs in planning and implementing conservation, 
for which standards and specifications have been developed. 
Conservation practices are contained in the appropriate NRCS Field 
Office Technical Guide (FOTG), which is based on the National Handbook 
of Conservation Practices (NHCP).
    Conservation project means conservation measures that address 
provisions of a conservation plan or Forest Stewardship Management 
Plan.
* * * * *
    Forest Stewardship Management Plan means a property-specific, long-
term, multi-resource plan that addresses private landowner objectives 
while recommending a set and schedule of management practices designed 
to achieve a desired future forest condition developed and approved 
through the USDA Forest Service or its agent.
* * * * *

PART 762--GUARANTEED FARM LOANS

0
3. The authority citation for part 762 continues to read as follows:

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

0
4. Revise Sec.  762.110(a)(1)(vii) and (c)(3) to read as follows:


Sec.  762.110  Loan application.

    (a) * * *
    (1) * * *
    (vii) For CL guarantees, a copy of the conservation plan or Forest 
Stewardship Management Plan;
* * * * *
    (c) * * *
    (3) For CL guarantees, a copy of the conservation plan or Forest 
Stewardship Management Plan;
* * * * *

0
5. Revise Sec.  762.121(c) introductory text to read as follows:


Sec.  762.121  Loan purposes.

* * * * *
    (c) CL purposes. Loan funds disbursed under a CL guarantee may be 
used for any conservation activities included in a conservation plan or 
Forestry Stewardship Management Plan including, but not limited to:
* * * * *

0
6. Revise Sec.  762.124(d) to read as follows:


Sec.  762.124  Interest rates, terms, charges, and fees.

* * * * *
    (d) CL terms. Each loan must be scheduled for repayment over a 
period not to exceed 30 years from the date of the note or such shorter 
period as may be necessary to assure that the loan will be adequately 
secured, taking into account the probable depreciation of the security.
* * * * *

0
7. Amend Sec.  762.145 as follows:
0
a. Revise paragraph (b)(10) to read as set forth below, and
0
b. Revise the second sentence of paragraph (c)(1)(iii) to read as set 
forth below.


Sec.  762.145  Restructuring guaranteed loans.

* * * * *
    (b) * * *
    (10) For CL, the lender must ensure that the borrower is 
maintaining the practice for which the CL was made.
    (c) * * *
    (1) * * *
    (iii) * * * The maturity date cannot exceed 30 years from the date 
of the original note.
* * * * *

PART 764--DIRECT LOAN MAKING

0
8. The authority citation for part 764 continues to read as follows:

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


0
9. Revise Sec.  764.51(b)(15) to read as follows:


Sec.  764.51  Loan application.

* * * * *
    (b) * * *
    (15) For CL only, a conservation plan or Forest Stewardship 
Management Plan as defined in Sec.  761.2 of this chapter; and
* * * * *

0
10. Revise Sec.  764.231(a) introductory text to read as follows:


Sec.  764.231  Conservation loan uses.

    (a) CL funds may be used for any conservation activities included 
in a conservation or Forestry Service Stewardship Management Plan, 
including but not limited to:
* * * * *

0
11. Revise Sec.  764.235 to read as follows:


Sec.  764.235  Security requirements.

    (a) The loan must be secured in accordance with requirements 
established in Sec. Sec.  764.103 through 764.106.
    (b) Loans to purchase chattels will be secured by a first lien on 
chattels purchased with loan funds. Real estate may be taken as 
additional security if needed.
    (c) Loans of $25,000 of less for real estate purposes will be 
secured in the following order of priority:
    (1) By a lien on chattels determined acceptable by the Agency, and 
then
    (2) By a lien on real estate, if available and necessary. When real 
estate is taken as security a certification of ownership in real estate 
is required. Certification of ownership may be in the form of an 
affidavit that is signed by the applicant, names all of the record 
owners of the real estate in question and lists the balances due on all 
known debts against the real estate. Whenever the Agency is uncertain 
of the record owner or debts against the real estate security, a tile 
search is required.
    (d) Loans greater than $25,000 for real estate purposes will be 
secured in the following order of priority:

[[Page 15939]]

    (1) By a lien on real estate, if available, and then
    (2) By a lien on chattels, if needed and determined acceptable by 
the Agency.
    (e) For loans greater than $25,000 title clearance is required when 
real estate is taken as security.

0
12. Revise Sec.  764.402(d)(1)(ii) to read as follows:


Sec.  764.402  Loan closing.

* * * * *
    (d) * * *
    (1) * * *
    (ii) As provided in Sec.  764.235 for CLs and Sec.  764.355 for 
EMs;
* * * * *

    Signed on March 12, 2012.
Carolyn B. Cooksie,
Acting Administrator, Farm Service Agency.
[FR Doc. 2012-6558 Filed 3-16-12; 8:45 am]
BILLING CODE 3410-05-P