Department of Agriculture, Farm Service Agency: Amendments to the Peanut Poundage Quota Regulations

Published by the Government Accountability Office on 1997-05-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Office of the General Counsel


      May 30, 1997

      The Honorable Richard G. Lugar
      The Honorable Tom Harkin
      Ranking Minority Member
      Committee on Agriculture, Nutrition, and Forestry
      United States Senate

      The Honorable Bob Smith
      The Honorable Charles W. Stenholm
      Ranking Minority Member
      Committee on Agriculture
      House of Representatives

      Subject:   Department of Agriculture, Farm Service Agency: Amendments to the
                 Peanut Poundage Quota Regulations

      Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on
      a major rule promulgated by the Department of Agriculture, Farm Service Agency
      (FSA), entitled "Amendments to the Peanut Poundage Quota Regulations" (RIN:
      0560-AE82). We received the rule on May 6, 1997. It was published in the Federal
      Register as a final rule on May 9, 1997. 62 Fed. Reg. 25433.

      When FSA submitted the rule to us it classified it as a non-major rule; we only
      recently identified it as a major rule. The Office of Management and Budget (OMB)
      agrees with that classification; it determined that this final rule was a major rule on
      April 28, 1997.

      The rule implements the provisions of the Agricultural Market Transition Act of
      1996 (7 U.S.C. § 7271) regarding the federal farm peanut poundage quotas for the
      1996 through 2002 crops of peanuts.

      The amendments adopted in this final rule principally involve: (1) eliminating the
      national poundage quota floor; (2) eliminating the undermarketing carryover
      provisions; (3) establishing temporary seed quota allocations; (4) establishing the

ineligibility of certain farms for quota allocation; (5) authorizing the intercounty
transfer of farm poundage quotas in all states, subject to certain limitations in some
states; (6) eliminating the special allocations of increased quotas for certain Texas
counties; (7) establishing new provisions for "considered produced" credit with
respect to a farm whose quota has been transferred; and (8) other minor clarifying
and technical changes.

Section 801(a)(3) of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. § 801(a)(3)) generally requires that a major rule take effect no earlier
than 60 days after the later of congressional receipt of the rule or publication in the
Federal Register. The Administrator of FSA invoked the "good cause" exception
contained in section 808 of the Act and made the rule effective upon publication in
the Federal Register. This exception provides that "any rule which an agency for
good cause finds . . . that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest" may take effect when the
promulgating agency determines (5 U.S.C. § 808(2)).

In this case, section 161(d) of the Agricultural Market Transition Act of 1996
(7 U.S.C. § 7281(d)) required FSA to issue implementing peanut poundage quota
regulations within 90 days, and specifically exempted FSA from notice and
comment procedures for those regulations. FSA did not use notice and comment
procedures. It published an interim final rule on July 16, 1996 (61 Fed. Reg. 36997),
and the rule published on May 9, 1997, amended that original regulation. A strong
argument can be made that, based on the text of 7 U.S.C. § 161(d), the exemption
from notice and comment procedures applied only to the initial rule and not
subsequent amendments. If so, this provision would not constitute "good cause" for
avoiding the required delay in the effective date. Perhaps for this reason, the
agency stated that it invoked the "good cause" exception because any further delay
would make it impossible for changes to be effective in time to give the producers
interested in planting peanuts a proper understanding of the rules for quota
distributions and forfeitures. In view of the fact that the period for submitting
comments on the interim rule expired on August 15, 1996, and the agency had more
than 9 months to promulgate these modifications to the interim rule, we believe that
the bare assertion of the section 808 exemption does not constitute "good cause" for
avoiding the 60-day delay before implementation.

Enclosed is our assessment of the FSA's procedural steps required by
section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. Other
than misclassifying the rule when filing with the General Accounting Office (GAO)
and failing to issue the modifications in time to permit the 60-day delay for
congressional review, our review indicates that FSA complied with the applicable

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If you have any questions about this report, please contact Kathleen E. Wannisky,
Associate General Counsel for Operations, at (202) 512-5207. The official
responsible for GAO evaluation work relating to the Department of Agriculture,
Farm Service Agency is Robert Robinson, Director for Food and Agriculture Issues.
Mr. Robinson can be reached at (202) 512-5138.

Robert P. Murphy
General Counsel


cc: Bruce R. Weber
    Acting Administrator
    Farm Service Agency
    Department of Agriculture

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       ANALYSIS UNDER 5 U.S.C. § 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE
                                ISSUED BY
                             (RIN: 0560-AE82)

(i) Cost-benefit analysis

The Farm Service Agency summarized the economic impacts of the peanut program
provisions of the Agricultural Market Transition Act of 1996 (1996 Act) in the
supplemental information published with the final rule. It also provided us with a
copy of the complete cost-benefit assessment. FSA's cost-benefit assessment
describes why this regulation is needed. The assessment discusses the alternative
options considered (2.15 billion pounds and 2.23 billion pounds) when determining
the national poundage quota and provides an explanation of why the current quota
of 2.2 billion pounds was selected. According to FSA's analysis, that figure
represented the figure most likely to achieve production equal to domestic edible
and related use.

FSA estimates that producers' revenue will be reduced by $1.25 billion from 1996 to
2002 and that taxpayers will benefit by avoiding costs of $0.5 billion compared with
the FY 1997 baseline. First buyers will benefit from lower prices, part of which,
FSA predicts, will be passed on to consumers.

FSA expects quota holders to experience a loss of about $40 million annually
because of lower leasing rates resulting from the reduced peanut price support.
FSA also expects the capitalized value of quotas to decline by $200 to $300 million,
which could result in reduced land values and tax bases for rural communities.

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. §§ 603-605,
607 and 609

FSA has determined that the Regulatory Flexibility Act does not apply to this final
rule because it believes the notice and comment requirements of section 553 of the
Administrative Procedure Act (5 U.S.C. §§ 551 et seq.) do not apply to this rule.

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform
Act of 1995, 2 U.S.C. §§ 1532-1535

According to FSA, this rule contains no federal mandates under title II of the
Unfunded Mandates Reform Act of 1995.

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

FSA asserts that the Agricultural Market Transition Act of 1996 (7 U.S.C. 7281(d))
specifically directs that FSA issue this final rule without regard to the notice and
comment provisions of the Administrative Procedure Act (5 U.S.C. § 553).

Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520

The regulations set forth in this final rule contain an information collection
requirement. The new form necessary to implement the peanut poundage quota
program has been developed, and a notice and request for comments for revising a
currently approved information collection was issued in the Federal Register on
December 14, 1996 (61 Fed. Reg. 67767). Because the information collection is
needed before the agency can forward its regular submission for the Office of
Management and Budget's approval, it has sent to OMB an addendum to the
approved information collection (OMB control number 0560-0006) and has
requested emergency processing by OMB.

Executive Order No. 12866

This final rule was determined to be "economically significant" and was reviewed by
OMB under the standards set forth in this executive order. The economic impacts
of the peanut program provisions of the 1996 Act are discussed in the cost-benefit
analysis section of this report.

Executive Order 12372

FSA reports that this program is not subject to the provisions of Executive Order
12372, which require intergovernmental consultation with state and local officials.

Executive Order 12988

FSA reviewed this final rule under Executive Order 12988, Civil Justice Reform, and
determined that the provisions of the rule would not preempt any state or local
laws, regulations, or policies unless they present an irreconcilable conflict with this
rule. Before any legal action is brought regarding determinations made under this
rule, the administrative procedures set forth at 7 CFR Parts 11 and 780 must be

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Environmental Evaluation

FSA determined that this rule will have no significant impact on the environment
and, therefore, prepared neither an Environmental Assessment nor an
Environmental Impact Statement.

Statutory authorization for the rule

FSA cites as statutory authority for this rule 7 U.S.C. 1301, 1357 et seq., 1372, 1373,
1375, and 7271.

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