(Cite as: 64 FR 57040)
NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-122-834]
Final Negative Countervailing Duty Determination; Live Cattle From Canada
Friday, October 22, 1999
*57040
(Cite as: 64 FR 57040, *57040)
AGENCY: Import Administration, International Trade Administration, U.S. Department of Commerce.
EFFECTIVE DATE: October 22, 1999.
FOR FURTHER INFORMATION CONTACT: Zak Smith, Stephanie Hoffman, James Breeden,
(Cite as: 64 FR 57040, *57040)
or Melani Miller, AD/CVD Enforcement, Group I, Office 1, Import Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-0189, 482-4198, 482-1174, or 482- 0116, respectively.
Final Determination
The Department of Commerce determines that countervailable subsidies are not being provided to producers or exporters of live
cattle in Canada.
Petitioner
The petition in this investigation was filed on November 12, 1998, by the Ranchers-Cattlemen Action Legal Foundation (R-Calf,
referred to hereafter as "the petitioner").
Case History
Since the publication of the preliminary determination in the Federal Register on May 11, 1999 (64 FR 25278) ("Preliminary
Determination"), the following events have occurred:
(Cite as: 64 FR 57040, *57040)
We conducted verification in Canada of the questionnaire responses from the Government of Canada ("GOC"),
Government of Alberta ("GOA"), Government of Manitoba ("GOM"), Government of Ontario ("GOO") and Government of
Saskatchewan ("GOS") from June 16 through June 28 and August 5 through August 13, 1999. We aligned the final determination in
this investigation with the final determination in the companion antidumping investigation (see Countervailing Duty
Investigation of Live Cattle From Canada; Notice of Alignment With Final Antidumping Duty Determination, 64 FR 35127
(June 30, 1999)) and we postponed the final determination of this investigation until October 4, 1999 (see Notice of Postponement
of Final Antidumping Determination: Live Cattle from Canada, 64 FR 40351 (July 26, 1999)). On October 4, 1999, the
deadline for this final determination was set for October 12, 1999. See Memorandum to Richard W. Moreland from Valerie Ellis,
"Clarification and Correction of Extension of Final Determination in the Antidumping Investigation of Live Cattle from
Canada." The petitioner and the respondents filed case briefs on September 3 and we received rebuttal briefs from the
petitioner and the respondents on September 10, 1999. In addition, we invited parties to submit factual information and/or
argumentation regarding the role and amount of compensation received by cattlemen leasing public grazing lands in Alberta from
energy companies leasing oil and gas rights on these lands. We received submissions from both the petitioner and the GOA on
September 17, 1999, and rebuttal
(Cite as: 64 FR 57040, *57040)
comments from each party on September 22, 1999.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are references to the provisions of the Tariff Act of 1930, as amended by the
Uruguay Round Agreements Act ("URAA") effective January 1, 1995 ("the Act"). In addition, all citations to the Department of
Commerce's ("the Department's") regulations are to the current regulations codified at 19 CFR Part 351 (April 1998). Although
Subpart E of 19 CFR Part 351, published on November 25, 1998 (63 FR 65348)("New CVD Regulations") does not apply to this
investigation, Subpart E represents the Department's interpretation of the requirements of the Act. See 19 CFR 351.702(b).
Scope of Investigation
The scope of this investigation covers live cattle from Canada. For purposes of this investigation, the product covered is all
live cattle except imports of (1) bison, (2) dairy cows for the production of milk for human consumption, and (3) purebred cattle
and other cattle specially imported for breeding purposes.
(Cite as: 64 FR 57040, *57040)
The merchandise subject to this investigation is classifiable as statistical reporting numbers under 0102.90.40 of the Harmonized
Tariff Schedule of the United States ("HTSUS"), with the exception of 0102.90.40.10, 0102.90.40.72 and 0102.90.40.74.
Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the
merchandise under investigation is dispositive.
Injury Test
Because Canada is a "Subsidies Agreement Country" within the meaning of section 701(b) of the Act, the *57041
(Cite as: 64 FR 57040, *57041)
International Trade Commission ("ITC") is required to determine whether imports of the subject merchandise from Canada
materially injure, or threaten material injury to, a U.S. industry. See section 701(a)(2) of the Act. On January 25, 1999, the ITC
published its preliminary determination finding that there is a reasonable indication that an industry in the United States is being
materially injured, or threatened with material injury, by reason of imports from Canada of the subject merchandise (see 64
FR 3716).
Period of Investigation
(Cite as: 64 FR 57040, *57041)
The period for which we are measuring subsidies (the "POI") is the GOC's fiscal year, April 1, 1997 through March 31, 1998.
Subsidies Valuation Information
Allocation Period
We have used three years as the allocation period in this investigation. Based on information provided by the petitioner, three
years is the average useful life ("AUL") of productive assets for the Canadian cattle industry. Parties are not contesting this AUL.
Subsidy Rate Calculation
Due to the extremely large number of cattle producers in Canada, we have collected subsidy information on an industry-wide
or "aggregate" basis (i.e., the total amount of benefits provided under a particular program). Moreover, we have limited our
investigation to the four largest cattle producing provinces in Canada. Therefore, unless otherwise noted, for each program
found to be countervailable, we have calculated the ad valorem subsidy rate by dividing the total amount of the benefit attributed
to cattle producers in the
(Cite as: 64 FR 57040, *57041)
four relevant provinces during the POI by the total sales of all cattle in the same four provinces.
Benchmarks for Loans
In our Preliminary Determination, we used a previously verified benchmark interest rate charged by Canadian commercial banks
on loans made to the farming sector for purposes of calculating the countervailable benefits from the provincial and federal loan
guarantee programs and nonrecurring grants. See Live Swine From Canada; Preliminary Results of Countervailing Duty
Administrative Review, 63 FR 23723, 23726 (April 30, 1998) ("Live Swine From Canada 1998").
For this final determination, we have revised the benchmark rates used to evaluate the provincial loan guarantee programs. At
verification, we met with private bank officials in Alberta and Saskatchewan who explained that the cattle associations
participating in the loan guarantee programs receive competitive financing because the association loans are large-scale,
short-term lending arrangements that provide lenders substantial security against default due to the highly structured nature of
the associations. Furthermore, the private bank officials indicated that commercial lending rates obtained by the cattle
associations differ among the provinces due to local economic
(Cite as: 64 FR 57040, *57041)
conditions. See Memorandum to Susan Kuhbach from Zak Smith and James Breeden, "Verification Report for Private Commercial
Banks in the Countervailing Duty Investigation of Live Cattle from Canada," dated August 27, 1999 ("Private
Commercial Bank Verification Report"). Because we believe it is reasonable to assume that the cattle associations will borrow in
their home province, province-specific benchmarks offer the best measure of a comparable commercial loan that the associations
could actually obtain in the market. See section 771(E)(ii) of the Act.
Based on our discussions with the private bank officials, we calculated a benchmark rate for the loan guarantee programs of prime
plus .375 percent and prime plus one percent for Alberta and Saskatchewan, respectively. With respect to Manitoba and Ontario,
we did not collect any province-specific information regarding lending rates to cattle associations and, therefore, we have
averaged the benchmark rates computed for Alberta and Saskatchewan to calculate the loan guarantee benchmark rate for these
provinces.
For the remaining loan programs investigated in this proceeding, we have continued to use the benchmark rate of prime plus 1.5
percent from Live Swine from Canada 1998 because the recipients of these loans are individual livestock producers and,
therefore, the benchmark rate applicable to the cattle associations does not represent a comparable commercial loan. As
discussed in Live Swine from Canada 1998, the Department determined that prime plus 1.5
(Cite as: 64 FR 57040, *57041)
percent represents the national average of the predominant lending rates on comparable long-term, prime-based loans made to
individual livestock producers in Canada. Accordingly, we have applied this benchmark rate for purposes of measuring the
benefit on loans made to individual cattle producers.
We also note that we have continued to use the figures published by the Bank of Canada to calculate the average prime rate
during the POI.
Loan Guarantee Programs
For certain loan guarantee programs that we have found to be countervailable, the respondents were unable to provide the
specific loan information required to perform a precise calculation of the countervailable benefit attributable to cattle producers
during the POI. They were unable to provide the data because of the nature of the underlying loan instrument (i.e., lines of credit
which had no predetermined time frame for the disbursal of principal or set repayment schedule), the extremely large number of
loans provided, and the large number of transactions (withdrawals and payments) conducted pursuant to those loans. Therefore,
for these programs, we have estimated the countervailable benefit by calculating the difference between the interest actually paid
in the POI and the interest that would have been paid on a commercial loan absent a guarantee. See Extruded Rubber Thread
From Malaysia: Final Affirmative
(Cite as: 64 FR 57040, *57041)
Countervailing Duty Determination and Countervailing Duty Order, 57 FR 38472 (August 25, 1992). This approach
does not yield a precise measure of the benefit because the loan instruments being examined are effectively lines of credit with
balances and interest rates varying from month-to-month. Nonetheless, we believe this methodology is reasonable under the
circumstances presented by this investigation.
Also, the respondents reported various fees that borrowers would have paid in connection with the guaranteed loans. However,
the information they presented with respect to fees payable on commercial loans was unclear. So, to avoid a comparison of
nominal benchmark rates with effective interest rates on the government-guaranteed loans, we have generally not included the
fees in calculating the amounts paid under the government-guaranteed loans. Consequently, we are comparing nominal rates to
nominal rates. The one exception to this is the fee specifically paid to FIMCLA for the guarantee, which is an allowable offset under
section 771(6)(A) of the Act.
I. Programs Determined To Be Countervailable
Loan and Loan Guarantee Programs
A. Farm Improvement and Marketing Cooperative Loans Act ("FIMCLA")
(Cite as: 64 FR 57040, *57041)
Under FIMCLA, the GOC provides guarantees on loans extended by private commercial banks and other lending institutions to
farmers across Canada. *57042
(Cite as: 64 FR 57040, *57042)
Created in 1987, the purpose of this program is to increase the availability of loans for the improvement and development of
farms, and the marketing, processing and distribution of farm products by cooperative associations. Pursuant to FIMCLA, any
individual engaged in farming in Canada and any farmer-owned cooperative are eligible to receive loan guarantees covering
95 percent of the debt outstanding for projects that are related to farm improvement or increased farm production. The
maximum amount of money that an individual can borrow under this program is C$250,000. For marketing cooperatives, the
maximum amount is C$3,000,000. The GOC reported that beef and hog farmers, which are categorized as one group by the
FIMCLA administration, received approximately 18 to 27 percent of all guarantees between 1994 and 1998, while other users
such as poultry, fruit and vegetables, and dairy producers received less than ten percent of the guarantees.
A loan guarantee is a financial contribution, as described in section 771(5)(D)(i) of the Act, which provides a benefit to the
recipients equal to the difference between the amount the recipients of the guarantee pay on the guaranteed loans and the amount
the recipients would pay for a comparable commercial loan absent the guarantee, after adjusting for guarantee fees.
(Cite as: 64 FR 57040, *57042)
Because the beef and pork industries received a disproportionate share of benefits between 1994 and 1998, we determine that the
program is specific under section 771(5A)(D)(iii) of the Act. Therefore, we determine that these loan guarantees are
countervailable subsidies to the extent that they lower the cost of borrowing, within the meaning of section 771(5) of the Act.
Because of the large number of guarantees granted under this program, we agreed to use a sample generated by the GOC of loans
guaranteed under the program for beef producers throughout Canada. At verification, we examined the GOC's sampling
methodology and have determined that this sample yields an accurate reflection of all loans provided to beef producers that
receive FIMCLA guarantees.
To calculate the benefit conferred by this program, we used our long- term fixed-rate or variable-rate loan methodology
(depending on the terms of the reported loans) to compute the total benefit on the sampled loans. We then calculated the benefit
per dollar loaned to beef producers. This ratio was multiplied by the total value of guaranteed loans outstanding to beef and hog
producers in the POI to arrive at the total benefit. We then divided the total benefit attributable to the POI by Canada's total
sales of live cattle and hogs during the POI. On this basis, we determine the total subsidy from this program to be 0.04 percent ad
valorem.
(Cite as: 64 FR 57040, *57042)
B. Alberta Feeder Associations Guarantee Program
The Alberta Feeder Associations Guarantee Act was established in 1938 to encourage banks to lend to cattle producers. The
program is administered by the Alberta Department of Agriculture, Food and Rural Development. Under this program, up to 15
percent of the principal amount of commercial loans taken out by feeder associations for the acquisition of cattle is guaranteed.
Eligibility for the guarantees is limited to feeder associations located in Alberta. Sixty-two associations received guarantees on
loans which were outstanding during the POI.
A loan guarantee is a financial contribution, as described in section 771(5)(D)(i) of the Act, which provides a benefit to the
recipients equal to the difference between the amount the recipients of the guarantee pay on the guaranteed loans and the amount
the recipients would pay for a comparable commercial loan absent the guarantee, after adjusting for guarantee fees. Because
eligibility is limited to feeder associations, we determine that the program is specific under section 771(5A)(D)(i) of the Act.
Therefore, we determine that these loan guarantees are countervailable subsidies to the extent that they lower the cost of
borrowing, within the meaning of section 771(5) of the Act.
To calculate the benefit conferred by the loan guarantees, we applied our
(Cite as: 64 FR 57040, *57042)
short-term loan methodology and compared the amount of interest actually paid during the POI by the associations to the
amount that would have been paid at the benchmark rate, as described in the Subsidies Valuation Information section, above. We
then divided the associations' interest savings by the investigated provinces' total sales of live cattle during the POI. On this basis,
we determine the total subsidy from this program to be 0.01 percent ad valorem.
C. Manitoba Cattle Feeder Associations Loan Guarantee Program
The Manitoba Cattle Feeder Associations Loan Guarantee Program was established in 1991 to assist in the diversification of
Manitoba farm operations. The program is currently administered by the Manitoba Agricultural Credit Corporation ("MACC"). The
provincial government, through MACC, guarantees 25 percent of the principal amount of loans for the acquisition of livestock by
feeder associations. Eligibility for the guarantees is limited to feeder associations located in Manitoba. Associations must be
incorporated under the Cooperatives Act of Manitoba, have a minimum of fifteen members, an elected board of directors, and a
registered brand for use on association cattle. Ten associations received guarantees on loans which were outstanding during the
POI.
(Cite as: 64 FR 57040, *57042)
A loan guarantee is a financial contribution, as described in section 771(5)(D)(i) of the Act, which provides a benefit to the
recipients equal to the difference between the amount the recipients of the guarantee pay on the guaranteed loans and the amount
the recipients would pay for a comparable commercial loan absent the guarantee, after adjusting for guarantee fees. Because
eligibility is limited to feeder associations, we determine that the program is specific under section 771(5A)(D)(i) of the Act.
Therefore, we determine that these loan guarantees are countervailable subsidies, to the extent that they lower the cost of
borrowing, within the meaning of section 771(5) of the Act.
To calculate the benefit conferred by the loan guarantees, we applied our short-term loan methodology and compared the amount
of interest actually paid during the POI by the associations to the amount that would have been paid at the benchmark rate, as
described in the Subsidies Valuation Information section, above. We then divided the associations' interest savings by the
investigated provinces' total sales of live cattle during the POI. On this basis, we determine the total subsidy from this program to
be less than 0.01 percent ad valorem.
D. Ontario Feeder Cattle Loan Guarantee Program
(Cite as: 64 FR 57040, *57042)
The Ontario Feeder Cattle Loan Program was established in 1990 to help secure financing for cattle producers. The program is
administered by the Ontario Ministry of Agriculture, Food and Rural Affairs ("OMAFRA"). OMAFRA provides a start-up grant of
$10,000 to new feeder associations and government guarantees covering 25 percent of the amount borrowed by associations for
the purchase and sale of cattle. Eligibility for the guarantees is limited to feeder associations which have at least twenty
individuals who own or rent land in Ontario and are not members of other feeder associations. *57043
(Cite as: 64 FR 57040, *57043)
Eighteen associations received guarantees on loans which were outstanding during the POI.
Loan guarantees and grants are financial contributions, as described in section 771(5)(D)(i) of the Act. Loan guarantees provide a
benefit to the recipients equal to the difference between the amount the recipients of the guarantee pay on the guaranteed loans
and the amount the recipients would pay for a comparable commercial loan absent the guarantee, after adjusting for guarantee
fees. In the case of grants, the benefit to recipients is the amount of the grant. Because eligibility for the loan guarantees and grants
under this program is limited to feeder associations, we determine that the program is specific under section 771(5A)(D)(i) of the
Act. Therefore, we determine that these loan guarantees are countervailable subsidies, to the extent that they lower the cost of
borrowing, within the meaning of section 771(5) of the
(Cite as: 64 FR 57040, *57043)
Act. Also, the grants are countervailable subsidies within the meaning of section 771(5) of the Act.
To calculate the benefit conferred by the loan guarantees, we applied our short-term loan methodology and compared the amount
of interest actually paid during the POI by the associations to the amount that would have been paid at the benchmark rate, as
described in the Subsidies Valuation Information section, above. We then divided the associations' interest savings by the
investigated provinces' total sales during the POI. On this basis, we determine the total subsidy from this program to be 0.01
percent ad valorem.
Additionally, we determine that the grants provided under this program are non-recurring because the recipients could not
expect to receive them on an ongoing basis. However, because the grant amounts were below 0.50 percent of the investigated
provinces' sales in the year of receipt in each of the relevant years, we expensed the benefit from the grants. For the POI, we
divided the grants received during the POI by the investigated provinces' total sales of live cattle during the POI. On this basis we
determine the countervailable subsidy to be less than 0.01 percent ad valorem.
To calculate the total benefit to cattle producers under this program, we summed the benefit calculated for the loan guarantees
and grants. On this basis, we determine the total subsidy from this program to be 0.01 percent ad valorem.
(Cite as: 64 FR 57040, *57043)
E. Saskatchewan Feeder Associations Loan Guarantee Program
The Saskatchewan Feeder Associations Loan Guarantee Program was established in 1984 to facilitate the establishment of cattle
feeder associations in order to promote cattle feeding in Saskatchewan. The program is administered by the Livestock and
Veterinary Operations Branch of the Saskatchewan Agriculture and Food Department. This agency provides a government
guarantee for 25 percent of the principal amount on loans to feeder associations for the purchase of feeder heifers and steers.
Eligibility for the guarantees is limited to feeder associations with at least twenty members over the age of eighteen, who are not
active in other feeder associations. One hundred and sixteen associations received guarantees on loans which were outstanding
during the POI.
A loan guarantee is a financial contribution, as described in section 771(5)(D)(i) of the Act, which provides a benefit to the
recipients equal to the difference between the amount the recipients of the guarantee pay on the guaranteed loans and the amount
the recipients would pay for a comparable commercial loan absent the guarantee, after adjusting for guarantee fees. Because
eligibility for the guarantees is limited to feeder associations, we determine that the program is specific under section
771(5A)(D)(i) of the Act. Therefore, we determine that these loan guarantees are countervailable
(Cite as: 64 FR 57040, *57043)
subsidies, to the extent that they lower the cost of borrowing, within the meaning of section 771(5) of the Act.
To calculate the benefit conferred by the loan guarantees, we applied our short-term loan methodology and compared the amount
of interest actually paid during the POI by the associations to the amount that would have been paid at the benchmark rate, as
described in the Subsidies Valuation Information section, above. We then divided the associations' interest savings by the
investigated provinces' total sales during the POI. On this basis, we determine the total subsidy from this program to be 0.01
percent ad valorem.
Provision of Goods or Services
F. Prairie Farm Rehabilitation Community Pasture Program
The Prairie Farm Rehabilitation Administration ("PFRA") was created in the 1930s to rehabilitate drought and soil drifting areas in
the Provinces of Manitoba, Saskatchewan, and Alberta. The PFRA established the Community Pasture Program to facilitate
improved land use through its rehabilitation, conservation, and management. The goal of the Community Pasture Program is to
utilize the resource primarily for the summer grazing of cattle to encourage long-term production of high quality cattle. In pursuit
of its objectives, the
(Cite as: 64 FR 57040, *57043)
PFRA operates 87 separate pastures encompassing approximately 2.2 million acres. At these pastures, the PFRA offers grazing
privileges and optional breeding services for fees as established by PFRA. The fees are based upon recovery of the costs
associated with the grazing and breeding services.
The provision of a good or service is a financial contribution as described in section 771(5)(D)(iii) of the Act. To determine
whether a benefit is conferred in the provision of the service, it is necessary to examine whether the provider receives adequate
remuneration. According to section 771(5)(E) of the Act, the adequacy of remuneration with respect to a government's provision
of a good or service "* * * shall be determined in relation to prevailing market conditions for the good or service being provided or
the goods being purchased in the country which is subject to the investigation or review. Prevailing market conditions include
price, quality, availability, marketability, transportation, and other conditions of purchase or sale."
To determine whether the GOC received adequate remuneration, we compared the prices charged for public pasture services to
those charged by private providers of pasture services, adjusted as described below. Given the different nature of the services
provided, a simple comparison of the fees charged would not be appropriate. Specifically, we adjusted the private price downward
by deducting costs associated with the timing of the sale of cull cows (these costs arise because on private pastures, users are able
to remove
(Cite as: 64 FR 57040, *57043)
and cull those cows which do not become pregnant earlier in the season when prices are higher. PFRA patrons, however, have less
access to their herds and are only allowed to cull cows at the end of the season when prices are lower.
The GOC argued that there were other differences that should be taken into account for such things as early weaning and timing of
the sale of calves (allegedly, PFRA patrons would prefer to wean and cull calves earlier in the season when prices are higher, but
PFRA access rules only allow them to cull at the end of the season when prices are lower), transportation to the pasture (allegedly,
PFRA patrons live *57044
(Cite as: 64 FR 57040, *57044)
further away from the pastures and, thus, incur greater transportation expenses), and disease associated with commingled
pastures. However, we have not made adjustments for such costs because either the GOC did not establish that such costs were
faced solely by public pasture patrons or because the GOC was unable to quantify them.
Comparing the public pasturing price to the adjusted private pasturing price, we determine that the price for private pastures is
higher than the price for public pastures. This provides a benefit to the recipients equal to the difference between the amount the
recipients pay for public pastures and the amount the recipients would pay for comparable private pasturing.
Because use of Community Pastures is limited to Canadian farmers involved in grazing livestock, we determine that the program is
specific under section 771(5A)(D)(i) of the Act. Therefore, we determine that the provision of public
(Cite as: 64 FR 57040, *57044)
pasture services is a countervailable subsidy within the meaning of section 771(5) of the Act.
To measure the benefit, we calculated the difference between the price for public pasture service and the adjusted price for
privately provided pasture service. This difference was multiplied by the total number of cow/calf pairs serviced by the PFRA
during the POI. We treated the resulting amount as a recurring benefit and divided it by the investigated provinces' total sales
during the POI. On this basis, we determine the countervailable subsidy to be 0.02 percent ad valorem.
H. Saskatchewan Crown Lands Program
Agricultural Crown land managed by Saskatchewan Agriculture and Food ("SAF") is made available to all Saskatchewan
agricultural producers for lease. Activities carried out on the land include: grazing, cultivation, community pastures, and
additional multiple-use activities.
Leases for grazing dispositions range from one to 33-year terms. Beginning in 1997, SAF set rental rates using a formula which
takes account of the average price of cattle marketed over a period in the previous year, the average pounds of beef produced
from one animal unit month ("AUM"), the AUM productivity rating of the land in question, reduced stocking expectations, and a
fair
(Cite as: 64 FR 57040, *57044)
return for the use of the land and resources. AUMs are defined as the amount of forage required to feed one animal for one month
while maintaining the vegetative state of the land in good condition. Lessees are responsible for paying taxes, developing and
maintaining water facilities and fences, and providing for public access to the land.
The provision of a good or service is a financial contribution as described in section 771(5)(D)(iii) of the Act. As discussed above
in connection with the PFRA, a benefit is conferred in the provision of a good or service when the prices charged for
government-provided goods or services are less than the prices charged by private suppliers. In the case of the Saskatchewan
Crown Lands Grazing Program, a simple comparison of the fees charged would not be appropriate because the grazing rights being
offered by the GOS differ from those offered by private suppliers. In this regard, the GOS has provided certain quantifiable
adjustments. Specifically, we adjusted the private price downward by deducting costs for the construction of fences and water
dugouts, and the cost of paying property taxes. Although the GOS argued that there were other differences that should be taken
into account for such things as multiple-use requirements, we have not made adjustments for such costs because the GOS was
unable to quantify them. Comparing the public grazing lease rate to the adjusted private lease rate, we determine that the price for
private leases is higher than the price for a public grazing lease.
(Cite as: 64 FR 57040, *57044)
Because the cattle industry is a predominant user of the Saskatchewan Crown Lands Program, we determine that the program is
specific under section 771(5A)(D)(iii) of the Act. Therefore, we determine that the provision of public grazing rights is a
countervailable subsidy within the meaning of section 771(5) of the Act.
To measure the benefit, we calculated the difference between the price per AUM for a public grazing lease and the adjusted price
per AUM for a private grazing lease. We multiplied this difference by the total AUM provided by SAF. We treated the resulting
amount as a recurring benefit and divided it by the investigated provinces' total sales during the POI. On this basis, we determine
the countervailable subsidy to be 0.02 percent ad valorem.
I. Manitoba Crown Lands Program
Agricultural Crown land is managed by Manitoba Agriculture Crown Lands ("MACL") whose primary objective is to administer the
disposition of Crown lands and to improve the lands' productivity. Crown agricultural land is made available to farmers through
cultivation and grazing leases. Lease holders are required to pay an amount-in-lieu of municipal taxes as well as to construct and
maintain fences and watering facilities. Also, the public has access to Crown lands at all times without prior permission of the
lessee for such
(Cite as: 64 FR 57040, *57044)
activities as wildlife hunting, forestry, winter sports, hiking, and berry picking. During the POI, MACL administered 1.6 million
acres of grazing leases accounting for 707,699 AUMs.
Leases for grazing dispositions range from one to fifty year terms. MACL sets rental rates each year by multiplying the number of
AUMs the leased land is capable of producing in an average year by an annual AUM rental rate. The AUM rental rate is based on
recovering the administrative costs for the program using the previous year's actual costs.
The provision of a good or service is a financial contribution as described in section 771(5)(D)(iii) of the Act. As discussed above
in connection with the PFRA, a benefit is conferred in the provision of a good or service when the prices charged for
government-provided goods or services are less than the prices charged by private suppliers. In the case of the Manitoba Crown
Lands Program, a simple comparison of the fees charged would not be appropriate because the grazing rights being offered by the
GOM differ from those offered by private suppliers. In this regard, the GOM has provided certain quantifiable adjustments.
Specifically, we adjusted the private price downward by deducting costs for the construction of fences and watering facilities, and
the cost of paying an amount-in-lieu of municipal taxes. Although the GOM argued that there were other differences that should be
taken into account for such things as multiple-use requirements, we are not making these adjustments
(Cite as: 64 FR 57040, *57044)
because the GOM was unable to quantify them. Comparing the public grazing lease to the adjusted private lease price, we
determine that the price for private leases is higher than the price for a public grazing lease.
Because livestock industries, including cattle, are predominant users of the Manitoba Crown Lands Program, we determine that
the program is specific under section 771(5A)(D)(iii) of the Act. Therefore, we determine that the provision of public grazing
rights is a countervailable subsidy within the meaning of section 771(5) of the Act.
To measure the benefit, we calculated the difference between the price per AUM for a public grazing lease and the adjusted price
per AUM for a private grazing lease. We multiplied this difference by the total AUM provided by MACL. We treated the resulting
amount as a recurring benefit and divided it by the investigated provinces' total sales *57045
(Cite as: 64 FR 57040, *57045)
during the POI. On this basis, we determine the countervailable subsidy to be less than 0.01 percent ad valorem.
J. Alberta Crown Lands Basic Grazing Program
Over time, Alberta has developed a system for granting grazing rights on public land. Grazing rights began to be issued on public
lands in the early 1930s. Today, through Alberta Agriculture and Municipal Affairs, over 10.5
(Cite as: 64 FR 57040, *57045)
million acres of land are managed by the GOA including a grazing component of approximately two million AUMs.
Leases for grazing rights range from one to twenty year terms, but, in practice, all leases are renewed if the lessee is in good
standing. Alberta's Public Lands Act dictates how rental prices will be set. Specifically, section 107 states that annual rent will be
equal to a percentage of the forage value of the leased land. When determining the forage value of the land, the administering
authority is required to consider the grazing capacity of the land, the average gain in weight of cattle on grass, and the average
price per pound of cattle sold in the principal livestock markets in Alberta during the preceding year. Beyond paying the lease fee,
lessees are also required to construct and maintain capital improvements necessary for livestock and must comply with all
multiple-use and conservation restrictions imposed by the government on the land. Lastly, lessees must pay school and
municipal taxes charged on the land being leased.
As noted above, Crown lands have various multiple-use elements, from recreation to oil and gas operations, which are often in
conflict with one another. The legislation that manages these diverging interests is the Surface Rights Act. Under Alberta law, the
surface of land in the province can be owned by either private entities or the government, but all rights to the subsurface of the
land have been reserved to the government. On occasion, the
(Cite as: 64 FR 57040, *57045)
GOA leases subsurface rights to industrial operators (e.g., oil and gas companies) and the Surface Rights Act lays the ground rules
for resolving differences between those who control the surface rights and those who lease the subsurface rights.
Section 12(1) of the Surface Rights Act reads that, "no operator has a right of entry in respect of the surface of any land* * *until
the operator has obtained the consent of the owner and the occupant of the surface of the land or has become entitled to right of
entry by reason of an order of the Board.* * *" It appears from the record that consent from the owner and occupant is usually
contingent upon a compensation package being agreed upon between the operator and the owner and occupant. That is, the
operator will agree to pay a certain amount of compensation for damages, disruption, access, and other factors to the owner and
occupant. If the operator is unable to reach an agreement with the owner and occupant, the operator can ask the Surface Rights
Board for a right of entry. In such cases, the Surface Rights Board will issue a right of entry and determine the appropriate amount
of compensation. In determining the amount of compensation payable, the Board may consider the market value of the land, the
loss of use by the owner or occupant of the area granted to the operator, the adverse effect of the area granted to the operator on
the remaining land, the nuisance, inconvenience, and noise caused by the operations, damage to the land granted to the operator,
and any
(Cite as: 64 FR 57040, *57045)
other factors the Board considers relevant.
We determine that grazing leases granted under the Albert Crown Lands Basic Grazing Program are being provided to ranchers
grazing livestock, a specific group, within the meaning of section 771(5A)(D)(i). Moreover, we determine that the provision of
grazing leases is a financial contribution as described in section 771(5)(D)(iii) of the Act (provision of a good or service).
Therefore, to determine whether these grazing leases result in a countervailable subsidy it is necessary to examine whether they
confer a benefit on the recipients of the leases.
As discussed above in connection with the PFRA, a benefit is conferred in the provision of a good or service when the government
receives less than adequate remuneration. Normally adequacy of remuneration can be measured by reference to the prices being
charged for the good or service by private suppliers. In the case of grazing rights provided by the GOA, however, a simple price
comparison would not be appropriate.
First, as discussed in connection with the grazing programs of other provinces, certain adjustments must be made to reflect the
different costs imposed on the lessees of private and public land. Specifically, we adjusted the average private price downward by
deducting costs for the construction of fences and water improvements, the cost of paying property taxes, and a multiple-use cost
associated with limitations on forage (we have also taken
(Cite as: 64 FR 57040, *57045)
into account multiple-use income, as noted below). Although the GOA argued that there were other differences that should be
taken into account for such things as differences in operating and capital costs, we have not made adjustments for such costs
because the GOA did not adequately support these claimed adjustments. Comparing the public grazing lease price to the adjusted
private lease price, we determine that the price for private leases is higher than the price for a public grazing lease.
Second, we believe the compensation paid by oil and gas operators to lessees of private and public land to gain access to the oil
and gas resources must be accounted for. In response to our request for information and argumentation about so-called "Bill
31'(which will amend the Public Lands Act and the Surface Rights Act), the GOA pointed to provisions in the Surface Rights Act
that appear to give owners and lessees of private and public land equal rights to compensation. In both cases, the oil and gas
operator is to negotiate compensation agreements with the owners and lessees before gaining access to the land. If agreement
cannot be reached, the operator appeals the matter to the Surface Rights Board. In deciding the amount of compensation to be
awarded to the owners and lessees of private or public land, the Surface Rights Board applies the same rules. Moreover, the GOA
claims, the amount of compensation received by any owner or lessee cannot be considered excessive, because if the owner or
lessee attempts to obtain too large an amount, the oil and gas