(Cite as: 64 FR 57040, *57063)
believe was relevant to our determination, its conclusion that the information was not relevant, particularly in light of the fact
that Bill 31 is not yet in effect, does not imply that the GOA did not act to the best of its ability and, thus, failed to cooperate. We
also note that when the Department specifically asked parties to submit information regarding Bill 31, the GOA did so. Therefore,
an adverse inference in this instance would not be appropriate when determining the appropriate facts available.
Comment 20: Oil and Gas Compensation and the Adequacy of Remuneration
The petitioner argues that if the Department continues to accept the response of the GOA, the Department should include the
benefit from oil and gas compensation when determining the countervailability of the program. According to the petitioner, the
application of Alberta's Surface Rights Act and Public Lands Act results in lessees of public land profiting from excess
compensation paid by oil and gas companies for access to leased land. In support of its argument, the petitioner cites to the
legislative history of Bill 31 and articles published at the time of its passage. The petitioner argues that the approximately C$40
million of compensation received annually, as cited in the articles, exceeds any actual compensation for damages to lessee
property or disruption suffered from oil and gas operations. Furthermore, the petitioner
(Cite as: 64 FR 57040, *57063)
argues that the GOA has not submitted any evidence that private lessees receive the same amount of compensation as public
lessees. In fact, the petitioner asserts that oil and gas companies compensate public lessees as they would compensate private
landowners, not lessees.
The GOA contends that the petitioner's characterization of the application of Alberta's Surface Rights Act and Public Lands Act,
especially in relation to Bill 31, is misinformed and based on public misperceptions about surface compensation rights in Alberta.
According to the GOA, the Alberta Surface Rights Act gives equal rights to all owners and occupants of both public and private
land to obtain compensation from industrial operators for the damages caused when industrial operations interfere with existing
land use. The GOA contends that public lessees do not have any advantage over private lessees with respect to obtaining
compensation and, thus, no adjustment is necessary when comparing public rates for the leasing of land to private rates for the
leasing of land. The GOA also states that Alberta law does not permit cattle ranchers on public grazing leases to charge access fees
to anyone. Specifically, the GOA notes that the Surface Rights Act reads, "an operator who proposes to exercise a right of entry on
land, other than land owned by the Crown * * * shall pay * * * an entry fee. * * *" The GOA also notes that, under the Surface Rights
Act, any compensation paid to a tenant is for loss of use and other damages to the leasehold operations and does not
(Cite as: 64 FR 57040, *57063)
include any payment for the value of the land itself or for access to that land. Lastly, the GOA argues that there is no basis for
crediting the petitioner's C$40 million figure as fact because none of the many quotations that cite it give a source for the number
and Alberta officials have been unable to find any source for it.
Department's Position: As noted in the program write-up, we found that, under the current application of the Surface Rights Act,
lessees of public land benefit from the provision of the land at less than adequate remuneration. Specifically, public lessees appear
to receive more compensation from oil and gas companies for use and access to the land than they would if leasing the same land
from a private provider. Hence, public land is more valuable to a lessee than private land and this value is not reflected in the rate
charged by the government. Therefore, the government is not adequately remunerated for the provision of the land.
Comment 21: Appropriate Benchmark for Alberta's Public Lease Rates
The petitioner argues that the Department should look to other provinces if the private lease rate data provided for a specific
province is inadequate. In this regard, the petitioner argues that the GOA has not established that the lease rate it reported for
private land is a "full-service" rate that requires
(Cite as: 64 FR 57040, *57063)
an adjustment for development costs, such as fences and water. To the contrary, according to the petitioner, there is evidence
that the private lease rate is not a "full-service" rate. The petitioner notes that the lease rate for private land reported by the GOA is
much lower than the rate for private full-service pasturing reported by the GOC for Manitoba and Saskatchewan.
Moreover, the petitioner contends that the GOA's reported lease rate for private land is based on a limited survey (the Custom
Rates Survey) which could only account for .04 percent of Alberta's cattle population.
The GOA argues that the data from the Whole Farm Data Base, which represents a far larger sample of private leases than the
Custom Rates Survey used in the Preliminary Determination, demonstrate that the private rental rate reported in the Custom
Rates Survey is higher than the norm in Alberta. Regardless of which survey information the Department feels is the most
appropriate, however, the GOA argues that all of the Alberta-specific numbers were generated from longstanding government
surveys and, thus, provide a far more reliable benchmark than any non-Alberta data.
Department's Position: With respect to the two studies reported by the GOA, we note that both the Custom Rates Survey and the
Whole Farm Enterprise Analysis were both conducted prior to the initiation of this investigation and, while limited in the number
of those surveyed, we determine that they are objective and representative of the costs faced by lessees of private and public land
in
(Cite as: 64 FR 57040, *57063)
Alberta. Therefore, we have averaged the lease rates for private land from the Custom Rates Survey and the Whole Farm
Enterprise Analysis for purposes of identifying an appropriate benchmark.
We agree with the petitioner that the lease rate for private land reported by the GOA is lower than the rate for full-service private
pasturing in Manitoba and Saskatchewan, as reported by the GOC. However, we do not believe the comparison is on point. The two
rates which the petitioner has compared are prices for two very different things. The lease rate for private land is a price for the
provision of a specific good: land. The rate for full-service private pasturing is a price for the provision of a type of service:
pasturing. Therefore, the comparison suggested by the petitioner does not undermine the reliability of the lease rate for private
land reported by the GOA.
Comment 22: Appropriate Adjustments to Benchmark for Alberta's Public Lease Rates
The GOA argues that the Department correctly adjusted the benchmark rate for taxes and developmental costs in the Preliminary
Determination, and that both testimony from government experts and the results of the GOA's survey, which was confirmed at
verification, indicate that lease holders of private land do
(Cite as: 64 FR 57040, *57063)
not incur these developmental costs. Thus, in order to develop a fair comparison between public and private leases, the GOA
argues that these adjustments should continue to be made.
In addition, the GOA posits that the Department should make additional adjustments. First, the GOA notes that *57064
(Cite as: 64 FR 57040, *57064)
lessees of public land are only allowed to forage up to 50 percent of the land due to the multiple-use restraints placed on Crown
lands. This requirement means that to get the same amount of forage, the lessees must fence in more land and develop additional
dugouts, all of which contribute to added costs. According to the GOA, this was supported at verification, where it was
demonstrated that lease holders on private land can utilize a far higher percentage of their leased forage for cattle grazing than can
lease holders on public land. To further support its argument, the GOA notes that the Whole Farm Data Base indicated that grazing
leases for public land support fewer AUMs per acre than grazing leases for private land. Second, the GOA argues that the Whole
Farm Data Base also established significant differences between operating costs incurred by lessees of private and public lands.
Again, the GOA argues that an adjustment should be made for this difference as well.
The petitioner argues that the Department should reject the GOA's proposed adjustments in their entirety. First, the petitioner
states that adjustments for multiple-use costs of leasing land are unjustified unless the
(Cite as: 64 FR 57040, *57064)
Department adjusts for multiple-use income such as compensation related to oil and gas exploration and extraction (see
Comment 20: Oil and Gas Compensation and the Adequacy of Remuneration, above). Second, the petitioner contends that the
GOA has not established that a lessee of public land must fence and water at least 50 percent more land to graze the same number
of cattle since the GOA has not established that private lessees are not required to preserve forage for other users as well. Finally,
the petitioner argues that the Department should not adjust for operating and capital costs because, even if grazing lessees on
public land incur more operating and capital costs than private lessees, these costs have not been shown to be directly related to
conditions only on public pasture. According to the petitioner, the cost differences could arise because the lessees of public land
are less adept managers or less prudent buyers than private lessees.
Department's Position: In order to make the comparison required by section 771(5)(E) of the Act, we found it necessary to adjust
the lease rate for private land downward to account for differences between the leases of public and private land. Specifically, we
adjusted for differences in costs associated with the paying of taxes, construction of fences, construction of water dugouts, and a
multiple-use cost for limits on forage. While the respondent has argued that the multiple-use cost adjustment should include
expenses for additional fencing and water facilities, we note that there is no
(Cite as: 64 FR 57040, *57064)
evidence supporting the contention that an additional dugout is necessary other than an anecdotal statement that "cattle will not
travel more than one-half mile for water." However, contrary to the petitioner's claim, there is evidence on the record supporting
the contention that additional acres must be used by a public land lessee to obtain the same amount of forage as a private land
lessee and, thus, additional fencing would be required. Specifically, public land lessees may only forage 50 percent of their land,
which results in fewer AUM being available per acre than a lessee of private land has at his or her disposal.
With respect to additional adjustments for differences in operating and capital costs, while we did make some of these adjustments
in the Preliminary Determination, we have not done so for this final determination. While the GOA was able to quantify them, the
GOA did not provide adequate explanation as to why differences exist for such expense. Nor did the GOA adequately demonstrate
that the difference is solely attributable to the fact that one group of farmers leases public land while another group leases private
land. Therefore, we have not made adjustments for these costs. Finally, as in the Preliminary Determination and as noted above,
we have not made adjustments for costs that the GOA was unable to quantify.
Lastly, with respect to the petitioner's argument that the Department should only make adjustments for multiple-use costs if we
take into account
(Cite as: 64 FR 57040, *57064)
multiple-use income, such as excess compensation from oil and gas companies, as noted in Comment 24, we have taken into
account the application of the Surface Rights Act and the resulting differences in compensation between private and public lessees
when examining the adequacy of remuneration.
Comment 23: Alberta Grazing Reserves
The petitioner argues that the Department should not use the rates charged by privatized reserves as a benchmark for the
full-service rates for Alberta's public grazing reserves. In the petitioner's view, such a comparison would be inappropriate because
the privatized reserve rates may be subsidized through a "sublease." With respect to this "sublease," the petitioner argues that, as
facts available, the Department should compare the average rate charged by the GOA to privatized reserves for government land
to the unadjusted average rate noted above in order to ascertain the subsidy provided to the privatized reserves.
The petitioner also argues that rather than calculating an average rate for full-service public grazing reserves in Alberta, the
Department should calculate five average full-service rates for Alberta's public grazing reserves based upon the four regions of
Alberta's Traditional Community Pasture program and the Special Areas pastures.
(Cite as: 64 FR 57040, *57064)
The GOA argues that evidence on the record demonstrates that Alberta's privatized reserves are charging their clientele lower
prices than the government was charging when the reserves were in government hands. According to the GOA, this evidence
confirms that the government-run reserves have been charging rates consistent with the commercial market. The GOA argues
further that the government's charge to the privatized reserves for use of government land is not subsidized. According to the
GOA the rates qualify as being market-determined because they were developed through arm's-length negotiations and the rates
are also consistent with properly adjusted private grazing lease benchmarks.
Department's Position: We have examined the possibility of whether the rates for private pasturing may be subsidized through the
government's provision of land at less than adequate remuneration to the operators of the privatized reserves. In doing so, we
have looked at the rental fees charged by the government to the privatized reserves (less maintenance fees). The resulting average
rental charge was higher than the adjusted rate for leases on private land derived from our examination of the Alberta Crown
Lands Basic Grazing Program. Therefore, we determine that the government is adequately remunerated for its provision of land to
the privatized reserves.
With respect to the petitioner's argument that we should calculate five separate full-service public pasture rates, we note that such
a task is
(Cite as: 64 FR 57040, *57064)
unnecessary as the range of prices charged by the government for the public pastures are all lower than the private pasturing rate
reported by the GOA.
Comment 24: Specificity of the Provision of Crown Lands in Manitoba and Saskatchewan
Both the GOS and the GOM argue that the provision of Crown lands in the two provinces is neither de jure nor de facto *57065
(Cite as: 64 FR 57040, *57065)
specific. According to the GOM and the GOS, Crown lands are available to all agriculture and objective criteria and conditions are
used to determine agricultural producers' eligibility for the various uses of Crown lands. Both governments note that not all land is
suitable for agriculture and that determinations on suitability are made by professional agrologists. Based on the above, the two
governments contend that the provision of Crown lands is not specific because Crown lands are available to the entire agricultural
sector.
The petitioner argues that the provision of Crown lands in both provinces is specific. With respect to Manitoba, the petitioner
notes that the Manitoba Crown Lands Act expressly limits access to farmers through forage and cropping leases. According to the
petitioner, because forage leases are provided for the grazing of livestock, including cattle, the law expressly limits forage leases
to the livestock industry. Additionally, the petitioner argues that all
(Cite as: 64 FR 57040, *57065)
leases are limited to a group of enterprises or industries in accordance with the Act and the Department's precedent.
With respect to Saskatchewan, the petitioner notes that Saskatchewan's Provincial Lands Act makes leases available only for
purposes of grain farming, cattle grazing, or perennial hay production. As for Saskatchewan's pasture program, the petitioner
notes that the Saskatchewan Provincial Community Pasture Regulations define livestock as cattle or sheep only. Thus, according
to the petitioner, the laws and regulations governing Saskatchewan's Crown lands expressly limit access to grazing leases and
community pastures to the cattle industry specifically, or a group of enterprises or industries, including the cattle industry.
Department's Position: While the respondents have argued that both the Saskatchewan Crown Lands Program and the Manitoba
Crown Lands Program are not specific, we have found otherwise. The programs are limited by law and regulation to certain
subsets of agricultural producers. Moreover, both provinces' programs are specific as a matter of fact in accordance with section
771(5A)(D) of the Act.
The GOS reported that, during the POI, approximately 800,000 acres of Crown lands were leased for cultivation and 5.4 million
acres were leased for grazing. The GOM reported that, during the POI, 21,716 acres of Crown lands were leased for cultivation and
approximately 1.6 million acres were leased for
(Cite as: 64 FR 57040, *57065)
grazing. Based on the above, we find that those industries which utilize grazing leases, livestock industries such as cattle, are
predominant users of both programs and, thus, the programs are de facto specific.
Comment 25: Use of Facts Available With Respect to Manitoba Crown Lands Program
The petitioner argues that while the GOM did submit the underlying data from Manitoba Agriculture's 1997 survey at verification,
it failed to do so prior to verification despite Department requests. The petitioner further argues that, in light of this, the GOM
failed to establish that the Department should make adjustments to the lease rates for private land. Consequently, the petitioner
urges the Department to reject the GOM's response with respect to this program and to rely on alternative lease rates for private
land as "facts otherwise available."
The GOM argues that it fully cooperated with the Department and never withheld information. The GOM contends that it could not
"provide copies of any reports or summaries related to this study" because there were no formal reports and, thus, none were
available to provide. In support of its position, the GOM cites to the Department's verification report which states, "because
results of the survey were never published or distributed, no reports of the
(Cite as: 64 FR 57040, *57065)
data were prepared or published * * *. However, they have the computer tabulated results from the survey and provided a
spreadsheet of those results." Therefore, according to the GOM, nothing was withheld from the Department.
Department's Position: We have found the GOM to be fully cooperative throughout this proceeding. The underlying data, which
supports the lease rates for private land reported by the GOM, was reviewed and taken as an exhibit at verification. The data was
not in the form of a report or a summary related to the study, which is what we asked for in our supplemental questionnaire.
Rather, as noted in the verification report, no reports of the data were prepared or published and, thus, the GOM did not ignore a
request for information when it responded to our supplemental questionnaire.
Comment 26: Appropriate Benchmark for Manitoba's Public Lease Rates
The GOM argues that the Department did not use the correct benchmark in its Preliminary Determination because it blended core
and fringe private lease rates. Instead, the GOM states that the Department should use the lease rate for private fringe lands only.
The GOM notes that at verification, the Department found that the fringe areas are typical of the areas where most (85 percent)
Crown lands are located and, thus, the fringe areas are more directly comparable.
(Cite as: 64 FR 57040, *57065)
If the Department uses the information submitted by the GOM, the petitioner argues that the Department should not accept the
GOM's claim that the rental rate for private fringe land, as reported in the 1997 survey, is more comparable to the rate charged for
Crown lands. According to the petitioner, the claim is an assertion, not supported in the record. Furthermore, the petitioner
contends that the location of the land is immaterial because if Crown lands are located in the fringe area, then the number of AUMs
the Minister could permit to graze on the land would presumably be less than in the core area. Thus, the Department should
continue to use the average lease rate for private land in the fringe and core areas, as was done in the Preliminary Determination.
Department's Position: We agree with the GOM that the majority of Crown lands are located in fringe areas. At verification we
reviewed maps and vegetation inventories that supported the GOM's claim with respect to fringe and core areas. However, we do
not agree that the lease rate for public grazing land should be compared solely to the private fringe area rate because not all of the
GOM's Crown lands are located in fringe areas. Instead, we have used a weighted average lease rate for private land based on both
core and fringe area rates.
Comment 27: Appropriate Adjustments to Benchmark for Manitoba's Public Lease
(Cite as: 64 FR 57040, *57065)
Rates
The petitioner states that the Department should only adjust lease rates for private land downward if the GOM establishes that the
lease rates for private land include additional services that are not covered by lease rates for public land. In the petitioner's view,
the GOM failed to do this. The petitioner notes, for example, that a majority of the private land lessees questioned for the 1997
survey indicated that they are required to pay for fence and water system maintenance and yet, the GOM is requesting an
adjustment for these items.
The GOM responds by noting that the Department reviewed in detail at verification, in three provinces, the various reasons why
lessees are willing to improve public Crown lands available for lease, and why the adjustments made by the Department are
appropriate. The GOM also notes *57066
(Cite as: 64 FR 57040, *57066)
that the 1997 survey asked lessees whether they were required to pay for the repairs and maintenance on the fence and/or
watering system, not the installation of fences or watering systems, which is what the adjustment is attempting to capture.
Department's Position: Based on our review of the information, we are persuaded that it is necessary to adjust the lease rate for
private land downward to account for differences between the leases on private and public land. Lease rates for private land are
generally for land which is fenced, has
(Cite as: 64 FR 57040, *57066)
a water system, and where the owner of the land pays local taxes. Conversely, the lessees of public land are expected to construct
fences and watering systems and pay local taxes. Thus, we adjusted for differences in costs associated with the paying of taxes,
construction of fences and construction of water dugouts. While the petitioner notes that the 1997 survey indicates that lessees of
private land are required to pay for fence and water system maintenance, we agree with the GOM that the claimed adjustment is
for fence and water system construction, not maintenance.
Comment 28: Appropriate Benchmark for Saskatchewan's Public Lease Rates
With respect to Saskatchewan's Crown lands, the petitioner argues that the no- service lease rate for private land reported by the
GOC does not include additional costs such as fencing, water provision, and taxes. Thus, it is inappropriate as a benchmark rate.
Nonetheless, if it is used as a benchmark, it should not be adjusted.
The GOS contends that "no-service" refers only to livestock management and does not mean that rates for leases on private land do
not cover additional costs. The GOS contends that the petitioner is merely attempting to confuse the issue by suggesting that the
Department compare the cost of both renting land and pasturing cattle with the cost of simply renting land.
(Cite as: 64 FR 57040, *57066)
Department's Position: We agree with the GOS that the GOC's survey refers to whether pasture services are provided and not
whether taxes are paid by the landlord or whether some of the land is already fenced with dugouts. Therefore, the no-service rate
is an appropriate benchmark and adjustments for these differences are appropriate.
Comment 29: Appropriate Adjustments to Benchmark for Saskatchewan's Public Lease Rates
The petitioner argues that the adjustments to the lease rate for private grazing land reported by the GOS are unreasonable because
they are higher than the difference between the no-service and full-service pasturing rates in Saskatchewan, and higher than the
estimated adjustment costs in Manitoba. Therefore, according to the petitioner, any adjustment for alleged costs included in lease
rates for private land should be capped at the difference between the no-service and full-service pasturing rates. When comparing
the lease rate for public land to an adjusted full-service lease rate for private pasturing, the petitioner notes that a benefit is found.
The GOS states that because a private no-service lease still includes various responsibilities of the private landlord, which are not
included in a Crown lands lease, adjustments are necessary in order to assure the "comparability"
(Cite as: 64 FR 57040, *57066)
contemplated by the Department's regulations.
Department's Position: We adjusted the lease rate for private land downward to account for costs associated with the paying of
taxes, construction of fences and construction of water dugouts. However, while the respondent has argued that we should make a
full adjustment for these expenses, we note that the no- service rate being relied upon as a benchmark does not always include the
provision of fences. At verification, we learned that no-service "was identified as the simple rental of land, which may or may not
be fenced." See Page Eight of the Memorandum to Susan Kuhbach from James Breeden and Zak Smith, "Verification Report for the
Government of Canada in the Countervailing Duty Investigation of Live Cattle from Canada," dated August 27,
1999. While we acknowledge that the overwhelming evidence in this investigation indicates that leased private land has fences, in
this case, because the rate being relied upon is a "no-service" rate and the record indicates that this particular rate does not always
include the provision of fences, we have not made a full adjustment for fencing costs. Rather, we have made a partial adjustment
by dividing the fence expense in half.
While we agree with the petitioner that the adjustments to the lease rate for private land are greater than the difference between
the no-service private pasturing rate and the full-service private pasturing rate in Saskatchewan, and greater than the claimed
adjustments in Manitoba, we do not agree that this
(Cite as: 64 FR 57040, *57066)
comparison is appropriate. First, the petitioner is comparing pasturing rates and land leasing rates, two different things. Second,
the petitioner is comparing experiences in two different provinces. There is no reason to expect that local tax rates will be similar
across provinces or that the cost of construction materials and/or labor will not vary amongst provinces, especially when there is
evidence to the contrary. In that regard, we note that the information on these adjustments is fully supported by the record
evidence and verification. Specifically, the GOS provided supporting source documentation for each adjustment in the form of
audited financial statements, invoices, and contracts.
Comment 30: Saskatchewan's Community Pastures
The GOS argues that while it previously suggested that full-service private pastures were most similar to the GOS' community
pastures, it now believes that partial-service private pastures provide a better comparison. According to the GOS, Saskatchewan's
community pastures do not offer the same range of services as full-service private pastures and instead more closely resemble
partial-service private pastures which have shared responsibility and work between the customer and the land owner.
The GOS cites to several factors in support of its argument. First, the GOS
(Cite as: 64 FR 57040, *57066)
contends that the full-service rate provided by the PFRA study does not include any commingled herds, while its community
pastures are commingled. Second, the GOS contends that the majority of private pastures used to generate the full- service rate
consist of improved pasture, while community pastures are generally less productive native range. Third, the GOS asserts that
while a full-service pasture will move cattle to more productive land and offer supplemental feed when forage becomes less
productive, such services are not offered by community pastures. Fourth, the GOS states that in full-service private pastures
calves are often weaned early, placed on higher quality feed, and that producers have general control over the breeding program.
According to the GOS, such options are not available on community pastures. Lastly, the GOS argues that, full-service private
pastures allow producers to deliver and pick up cattle at their convenience. According to the GOS such flexibility allows private
users to cull cows (usually ten percent of a herd) which are not bred by mid-summer, a time when culled cows yield a higher price
than at the end of the season. According to the GOS we should adjust for this difference because community pastures require
pickup and delivery on a fixed schedule and do not allow pickup mid-summer. *57067
(Cite as: 64 FR 57040, *57067)
The petitioner argues that the GOS has not established that partial-service pastures are more comparable to community pastures.
According to the petitioner, the GOC survey data, upon which the GOS is relying, does not
(Cite as: 64 FR 57040, *57067)
provide information indicating which rate, if any, includes improved pasture or convenient owner access to herds for the control
of calves, breeding, and removal times. The petitioner contends that because the GOS has failed to establish that full-service
private pastures offer materially different services than the GOS' community pastures, the Department should continue to
compare the full-service private pasture rate to the community pasture rate.
With respect to possible adjustments to the full-service rate, the petitioner argues that the GOS has failed to quantify the value of
the alleged costs associated with commingling and access, failed to establish that on private pastures cows are culled in July
(mid-summer), and has failed to establish that ten percent of cows are culled each year.
Department's Position: We agree with the petitioner that the GOC survey data do not provide information indicating that
partial-service private pasturing is more similar to GOS community pasturing than full-service pasturing. As noted in the
verification report, with respect to the GOC survey, "full-service was identified as situations where the cows are cared for during
the entire season and the customer only needs to drop off his or her cows and pick them up. Partial-service was identified as
shared responsibility and work between the customer and the land owner." Thus, while it may be true that full-service private
pasturing in Saskatchewan offers more services than GOS community pasturing, there is no information on the record that would
indicate that
(Cite as: 64 FR 57040, *57067)
partial-service private pasturing offers a better comparison to the pasturing services offered by the GOS.
We have made certain downward adjustments to the full-service private pasture rate to account for differences between
full-service pasturing offered on private land and public pasturing. Specifically, we adjusted for the difference in costs associated
with the timing of the sale of cull cows. While the GOS argued that this adjustment should be larger, the information on the record
did not fully substantiate the calculations suggested by the GOS. For example, the GOS relied upon the GOC's statement that ten
percent of cows are culled each year to support its argument for making an adjustment to account for differences in access to
those cows which do not become pregnant. However, there is no evidence to support the assumption that the ten percent of cows
culled each year are only those cows which do not become pregnant. Rather, it is reasonable to believe that some of these cows
are culled on the basis of age alone and were never planned to be bred. In that regard, there is no evidence that a patron would
actually pay to have an old cow pastured for a season if the cow was already planned to be culled. Finally, as in the Preliminary
Determination and as noted above, we have not made adjustments for costs that the GOS was unable to quantify.
Other Comments
(Cite as: 64 FR 57040, *57067)
Comment 31: Allocation of Benefits By Total Sales Value Of Cattle
The GOC argues that the Department's regulations require it to distribute the benefits from those programs found to be
countervailable across all products that have received the alleged benefits (19 CFR 351.525). The respondent contends that the
Department's calculation of the denominator in the Preliminary Determination did not comply with this standard because certain
programs that were found to be countervailable and included in the numerator did not correspond to any component included in
the denominator. In support of its argument, the respondent refers to Industrial Phosphoric Acid from Israel, in which the
Department reaffirmed the necessity that the "calculation of a subsidy reflect the same universe of goods. Otherwise, the rate
calculated will either over or understate the subsidy attributable to the subject merchandise." See Industrial Phosphoric Acid
from Israel, 63 FR 13626, 13630 (March 20, 1998). Because the benefits in this investigation have been attributed to five
commercially distinct products (calves, feeder cattle, backgrounded cattle, slaughter cattle, cull cows and bulls), the respondent
argues that the sales value of all five of these products must be included in the denominator for purposes of correctly attributing
benefits to the subject merchandise.
(Cite as: 64 FR 57040, *57067)
The petitioner argues that respondents have not demonstrated that benefits from particular programs impact any one of the
"distinct" cattle production stages it identifies, or should only be allocated to that phase. Furthermore, petitioner explains that the
use of total Canadian cattle sales during the POI will likely count the same animal more than once because cattle are moved
through the different production stages within the same year, thereby capturing multiple sales of the same animal. Therefore, the
sales figures advocated by respondents are inflated. The petitioner contends that the Department should continue to allocate
subsidies over finished cattle or, alternatively, compute the subsidy rate on a production, or volume, basis rather than a value
basis.
Department's Position: Contrary to respondent's assertions, the attribution approach applied in this investigation accurately
measures the countervailable benefits conferred and is consistent with the countervailing duty statute. Although we
recognize that there are distinct commercial segments within the cattle industry, the respondent incorrectly implies that the total
value of the animal is equal to the sum of transactions specific to the animal as it moves through the different stages of the
production cycle, thereby inflating the universe of sales to which the benefits apply. This flaw in the respondent's argument is
illustrated by the petitioner's assertion that using total cattle sales will likely result in the double counting of certain animals due
to the nature of the production cycle. Therefore, in order to
(Cite as: 64 FR 57040, *57067)
avoid overvaluing the denominator, we have continued to apply the methodology used in our Preliminary Determination in
which we calculated total sales value by adding domestic slaughter and international export statistics.
Based on information collected at verification, we have also included an amount for on-farm consumption to this figure. As a
result, we have allocated the countervailable benefits received by cattle at each stage of the production cycle over the sales value
of "finished" cattle, or animals that have completed the production cycle. We believe this attribution method most accurately
captures a comparable universe of goods as discussed in Industrial Phosphoric Acid from Israel.
Comment 32: NISA and Regional Specificity
The petitioner argues that NISA benefits provide a regional subsidy because producers' geographic location determines eligibility
under the program. The petitioner notes that cattle and calves are eligible commodities for NISA benefits in a select number of
provinces and to the extent that a producer is eligible for the NISA program based on its geographic location, the program is
regionally specific. According to the petitioner it is most important to note that, while Alberta cattle are not eligible commodities
under the program, Alberta is the largest provincial *57068
(Cite as: 64 FR 57040, *57068)
producer. Based on this fact, the
(Cite as: 64 FR 57040, *57068)
petitioner contends that NISA is targeted to cattle producers in other regions where cattle production is less intensive. According
to the petitioner, the rationale for why cattle are not eligible commodities in certain provinces is not relevant to an examination
of specificity. Instead, for the petitioner, the key questions is whether ranchers in over half of Canada receive NISA benefits
for their livestock. As this is not the case, the petitioner contends that the Department should recognize the specific nature of the
program.
The GOC argues that the Department's precedent demonstrates that a "program is determined to be regional, and, therefore,
limited only when its funding is specifically authorized by the central government to benefit only some regions within its
jurisdiction.* * *" See Certain Granite Products from Spain, 53 FR 24340 (June 28, 1988). Thus, according to the GOC, only when
the granting authority has excluded certain regions from participating in programs will regional specificity be found. The GOC
notes that, while the petitioner has said that a producer's geographic location determines its eligibility under NISA," NISA
operates in all provinces and no provinces are excluded (noting that Yukon and the Northwest Territories can join if they so
choose).
The GOC further notes that a large number and wide variety of commodities are covered by NISA and the fact that not every
producer commodity group in every province participates in NISA does not transform NISA into a regional subsidy. First, the
GOC argues that farmers in all of the provinces
(Cite as: 64 FR 57040, *57068)
participate and the lack of participation by some provinces as to certain commodities does not alter the fact that all provinces are
eligible and that producers in all provinces receive benefits. With respect to those provinces (Alberta, British Columbia, and
Quebec) for which cattle are not eligible commodities, the GOC notes that other agricultural commodities in each of these
provinces are covered by NISA. Lastly, the GOC argues that to avoid any further re-investigation of NISA, the Department should
make clear in the final determination that the program is non-specific not only to cattle but as to all other agricultural
commodities.
Department's Position: Section 771(5A)(D)(iv) of the Act reads, "where a subsidy is limited to an enterprise or industry located
within a designated geographical region within the jurisdiction of the authority providing the subsidy, the subsidy is specific." We
have found that NISA operates in all Canadian provinces. That is, NISA benefits are not limited to an enterprise or industry
located within a specific geographical region within Canada. First, NISA is a whole-farm program in which any farmer that
produces an eligible commodity can participate. The number of eligible commodities is exhaustive and demonstrates that the
benefits are not limited to a particular enterprise or industry. Furthermore, the eligibility of commodities is dependent on a
particular commodity associations desire to participate. Thus, no commodities are excluded by federal or provincial government
action. Second, the farmers
(Cite as: 64 FR 57040, *57068)
that may participate in NISA are not located within a specific geographical region. Rather, producers in all provinces receive
benefits, regardless of their location. Eligibility for NISA participation is based upon the commodities that a farmer produces, not
his or her geographic location. Therefore, as noted in the Preliminary Determination, benefits provided through the NISA
program are not limited to a particular region. While certain commodities are not eligible for matching funds within certain
provinces, it is because the producers of these commodities choose not to participate, not because the program is limited to an
enterprise or industry located in a particular region.
With respect to the GOC's comment that we should find NISA non- counteravailable for all products, we note that our investigation
of NISA only related to whether cattle receive a counteravailable subsidy. We have not examined whether the program is
counteravailable to other commodities.
Comment 33: Saskatchewan Livestock and Horticultural Facilities Incentives Program
The GOS argues that the Livestock and Horticultural Facilities Incentives Program ("LHFIP") is an adjustment to, and is integrally
linked with, the provincial sales tax. According to the GOS, the provincial sales tax (the
(Cite as: 64 FR 57040, *57068)
Education and Health Tax ("E&H Tax")) offers a standard tax exemption to all agricultural production. Thus, the GOS argues that
LHFIP is not limited only to the livestock and horticultural industries and, therefore, is not counteravailable. The GOS contends
that the LHFIP was introduced as part of a series of adjustments to the E&H Tax, and is intended to put livestock operations on the
same footing as other agricultural operations with respect to the E&H Tax exemption for agricultural inputs and the lack of an
exemption for certain construction materials.
Citing to the New CVD Regulations, the GOS argues that all of the Department's conditions for integral linkage are met. According
to the GOS, the LHFIP has the same purpose and same effective benefit as the E&H Tax legislation and was linked with the E&H Tax
at inception.
Lastly, the GOS notes that the functioning of the LHFIP is analogous to a VAT rebate program that the Department found
noncountervailable in Standard Chrysanthemums From the Netherlands; Final Results of Countervailing Duty
Administrative Reviews, 61 FR 47886 (September 11, 1996).
Department's Position: In examining the legislation and regulations governing both the LHFIP and the E&H Tax, we find that, even
if the two programs were found to be integrally linked under the regulations governing this case, the program would still be
specific, and, thus, countervailable. According to the laws and regulations for the E&H Tax and the GOS itself, although most