To amend the Food Security Act of 1985 to require the Secretary of Agriculture to establish a carbon sequestration program to permit owners and operators of land to enroll the land in the program to increase the sequestration of carbon, and for other purposes.

To amend the Food Security Act of 1985 to require the Secretary of Agriculture to establish a carbon sequestration program to permit owners and operators of land to enroll the land in the program to increase the sequestration of carbon, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Carbon Conservation Incentive Act'.

SEC. 2. ESTABLISHMENT.

Subtitle D of title XII of the Food Security Act of 1985 (16 U.S.C. 3830 et seq.) is amended by inserting after chapter 1 the following:

`CHAPTER 2--CARBON SEQUESTRATION PROGRAM

`SEC. 1238. CARBON SEQUESTRATION PROGRAM.

`(a) IN GENERAL- Effective beginning with the 2002 calendar year, the Secretary, acting through the Chief of the Natural Resources Conservation Service, shall establish a carbon sequestration program to permit owners and operators of land located in the United States to enroll the land in the program to increase the sequestration of carbon.

`(b) ELIGIBLE LAND-

`(1) IN GENERAL- Except as provided in paragraph (2), the Secretary may include in the program established under this chapter any land, as determined by the Secretary.

`(2) CONSERVATION RESERVE LAND AND WETLANDS RESERVE LAND- The Secretary may include in the carbon sequestration program land that is enrolled in the conservation reserve program or the wetlands reserve program established under subchapters B and C, respectively, of chapter 1, if the owner or operator of the land has not received any payments under the program for the implementation of carbon sequestration measures on the land.

`(c) MAXIMUM ENROLLMENT- The Secretary may maintain up to 20,000,000 acres of land in the United States in the carbon sequestration program at any 1 time during a calendar year.

`(d) DURATION OF CONTRACT-

`(1) IN GENERAL- For the purpose of carrying out this chapter, the Secretary shall enter into contracts of not less than 10 years.

`(2) CERTAIN LAND- In the case of land devoted to hardwood trees, shelterbelts, windbreaks, or wildlife corridors under a contract entered into under this chapter, the owner or operator of the land may, within the limitations prescribed under this section, specify the duration of the contract.

`SEC. 1238A. CARBON SEQUESTRATION PRACTICES.

`(a) ADVISORY PANEL-

`(1) ESTABLISHMENT- The Secretary shall establish an advisory panel to assist the Secretary in carrying out this chapter.

`(2) COMPOSITION- The advisory panel shall consist of--

`(A) the Chief of the Forest Service;

`(B) the Secretary of State;

`(C) the Secretary of Energy; and

`(D) representatives of nongovernmental organizations who have an expertise and experience in carbon sequestration practices, appointed by the Secretary.

`(b) CRITERIA FOR EVALUATING CARBON SEQUESTRATION PRACTICES-

`(1) IN GENERAL- The advisory panel shall develop, and propose to the Secretary, criteria for determining the acceptability of, and evaluating, practices by owners and operators that will increase the sequestration of carbon for the purposes of determining the acceptability of contract offers made by the owners and operators.

`(2) CONTENT- The criteria shall address--

`(A) forest preservation and restoration and afforestation;

`(B) biodiversity enhancement;

`(C) the use of acreage to produce high-storage crops;

`(D) soil erosion management;

`(E) soil fertility restoration;

`(F) wetland restoration;

`(G) no-till farming practices;

`(H) conservation buffers;

`(I) improved cropping systems with winter cover crops; and

`(J) any other conservation practices that the Secretary determines to be appropriate for increasing carbon sequestration.

`(3) REGULATIONS- The Secretary, acting through the Chief of the Natural Resources Conservation Service and the Chief of the Forest Service, by regulation, shall establish criteria described in paragraphs (1) and (2).

`(c) ESTIMATES OF CARBON SEQUESTRATION RATES-

`(1) IN GENERAL- The advisory panel shall develop, and propose to the Secretary, estimates of the rates of carbon sequestration for various plants, agricultural commodities, and agricultural practices for the purposes of determining the acceptability of contract offers made by owners and operators.

`(2) BASIS- In developing the estimates, the advisory panel shall--

`(A) consult with representatives of the Consortium for Agricultural Soils Mitigation of Greenhouse Gases; and

`(B) use information reported to the Secretary of Energy from projects carried out

`(d) ACCEPTABILITY OF CARBON SEQUESTRATION PRACTICES-

`(1) IN GENERAL- As part of a contract offer accepted under this chapter, the owner or operator shall agree to carry out on land enrolled in the program established under this chapter carbon sequestration practices proposed by the owner or operator that (as determined by the Secretary)--

`(A) provide for additional sequestration beyond that which would be provided in the absence of enrollment of the land in the program; and

`(B) contribute to a positive reduction of greenhouse gases in the atmosphere through sequestration over at least a 10-year period.

`(2) MAXIMUM SEQUESTRATION BENEFITS- In determining the acceptability of contract offers, the Secretary shall take into consideration the extent to which enrollment of the land that is the subject of the contract offer would provide the maximum sequestration benefits under the criteria developed under subsection (b).

`(e) COMPLIANCE WITH CARBON SEQUESTRATION CONTRACTS-

`(1) IN GENERAL- As part of a contract offer accepted under this chapter, an owner or operator of land shall permit the Secretary to verify that the owner or operator is implementing practices that sequester carbon in accordance with the contract, including an actual verification of the practices at least once every 5 years and such random inspections as are necessary.

`(2) FRAUD OR FALSE STATEMENTS- Section 1001 of title 18, United States Code, shall apply to a statement, representation, writing, or document provided by an owner or operator under this subsection.

`(3) CONFIDENTIALITY- Information provided by an owner or operator under this subsection shall be considered to be confidential information for the purposes of section 552(b)(4) of title 5, United States Code.

`(f) REPORTING-

`(1) ADVISORY PANEL- The advisory panel established under subsection (a) shall periodically report to the Administrator of the Energy Information Administration on--

`(A) sequestration improvements made as a result of this chapter; and

`(B) sequestration practices carried out under this chapter.

`(2) SECRETARY- The Secretary, in consultation with the Administrator of the Energy Information Administration, shall--

`(A) develop forms to monitor sequestration improvements made as a result of the program established this chapter and distribute the forms to owners and operators of land enrolled in the program; and

`(B) at least once every 5 years, report to Congress and the public on the program, including--

`(i) sequestration improvements made as a result of the program;

`(ii) sequestration practices on land enrolled in the program; and

`(iii) compliance with contracts entered into under this chapter.

`(g) EDUCATIONAL OUTREACH- In consultation with the Consortium for Agricultural Soils Mitigation of Greenhouse Gases, the Secretary, acting through the Extension Service, shall conduct an educational outreach program to collect and disseminate to owners and operators of land research-based information on agricultural practices that will increase the sequestration of carbon, while preserving the social and economic well-being of the owners and operators.

`SEC. 1238B. DUTIES OF OWNERS AND OPERATORS.

`(a) IN GENERAL- Under the terms of a contract entered into under this chapter, during the term of the contract, an owner or operator of a farm or ranch shall agree--

`(1) to implement a plan approved by the Secretary for carrying out on land subject to the contract practices that will increase the sequestration of carbon, substantially in accordance with a schedule, covering a period of not less than 10 years, that is outlined in the plan;

`(2) to place land subject to the contract in the carbon sequestration program established under this chapter;

`(3) in addition to the remedies provided under section 1238F(d), on the violation of a term or condition of the contract at any time at which the owner or operator has control of the land--

`(A) to forfeit all rights to receive rental payments and cost-sharing payments under the

`(B) to refund to the Secretary, or accept adjustments to, the rental payments and cost-sharing payments provided to the owner or operator, as the Secretary considers appropriate, if the Secretary determines that the violation does not warrant termination of the contract;

`(4) on the transfer of the right and interest of the owner or operator in land subject to the contract--

`(A)(i) to forfeit all rights to rental payments and cost-sharing payments under the contract; and

`(ii) to refund to the United States all rental payments and cost-sharing payments received by the owner or operator, or accept such payment adjustments or make such refunds as

`(B)(i) the transferee of the land agrees with the Secretary to assume all obligations of the contract;

`(ii) the land is purchased by or for the United States Fish and Wildlife Service; or

`(iii) the transferee and the Secretary agree to modifications to the contract that are consistent with the objectives of the program, as determined by the Secretary;

`(5) not to adopt any practice specified by the Secretary in the contract as a practice that would tend to defeat the purposes of this chapter; and

`(6) to comply with such additional provisions as the Secretary determines are desirable and are included in the contract to carry out this chapter or to facilitate the practical administration of this chapter.

`(b) PLAN- The plan referred to in subsection (a)(1)--

`(1) shall specify the carbon sequestration practices to be carried out by the owner or operator during the term of the contract; and

`(2) may provide for the permanent retirement of any existing cropland base and allotment history for the land.

`(c) FORECLOSURE-

`(1) IN GENERAL- Notwithstanding any other provision of law, an owner or operator that is a party to a contract entered into under this chapter may not be required to make repayments to the Secretary of amounts received under the contract if--

`(A) the land that is subject to the contract has been foreclosed on; and

`(B) the Secretary determines that forgiving the repayments is appropriate in order to provide fair and equitable treatment.

`(2) RESUMPTION OF CONTROL-

`(A) IN GENERAL- This subsection shall not void the responsibilities of such an owner or operator under the contract if the owner or operator resumes control over the land that is subject to the contract within the period specified in the contract.

`(B) CONTRACT APPLICABILITY- On the resumption of the control over the land by the owner or operator, the provisions of the contract in effect on the date of the foreclosure shall apply.

`SEC. 1238C. DUTIES OF THE SECRETARY.

`In return for a contract entered into by an owner or operator under section 1238B, the Secretary shall--

`(1) share the cost of carrying out on the land carbon sequestration practices specified in the contract for which the Secretary determines that cost sharing is appropriate and in the public interest;

`(2) for a period of years not in excess of the term of the contract, pay an annual rental payment in an amount necessary to compensate for--

`(A) the use of carbon sequestration practices on the land; and

`(B) the retirement of any cropland base and allotment history that the owner or operator agrees to retire permanently; and

`(3) provide conservation technical assistance to assist the owner or operator in carrying out the contract.

`SEC. 1238D. PAYMENTS.

`(a) TIME OF PAYMENT- The Secretary shall provide payment for obligations incurred by the Secretary under a contract entered into under this chapter--

`(1) with respect to any cost-sharing payment obligation incurred by the Secretary, as soon as practicable after the obligation is incurred; and

`(2) with respect to any annual rental payment obligation incurred by the Secretary--

`(A) as soon as practicable after October 1 of each calendar year; or

`(B) at the option of the Secretary, at any time before that date during the year in which the obligation is incurred.

`(b) COST-SHARING PAYMENTS-

`(1) IN GENERAL- In making cost-sharing payments to an owner or operator under a contract entered into under this chapter, the Secretary shall pay not more than 50 percent of the cost of carrying out carbon sequestration practices required under the contract for which the Secretary determines that cost-sharing is appropriate and in the public interest.

`(2) MAXIMUM AMOUNT- The Secretary shall not make any payment under this chapter to the extent that the total amount of cost-sharing payments provided to an owner or operator for carbon sequestration practices from all sources would exceed 100

`(3) OTHER FEDERAL ASSISTANCE- An owner or operator shall not be eligible to receive or retain cost-share assistance for land under this subsection if the owner or operator receives any other Federal cost-share assistance under this Act with respect to the land under any other provision of law.

`(c) RENTAL PAYMENTS-

`(1) IN GENERAL- In determining the amount of annual rental payments to be paid to owners and operators for carrying out carbon sequestration practices, the Secretary may consider, among other factors, the amount necessary to encourage owners or operators of land to participate in the program established by this chapter.

`(2) BIDS OR OTHER MEANS- The amounts payable to owners or operators in the form of rental payments under contracts entered into under this chapter may be determined through--

`(A) the submission of bids for such contracts by owners and operators in such manner as the Secretary may prescribe; or

`(B) such other means as the Secretary determines are appropriate.

`(3) FACTORS- In determining the acceptability of contract offers, the Secretary--

`(A) shall take into consideration the extent to which enrollment of the land that is the subject of the contract offer would increase the sequestration of carbon in accordance with section 1238A;

`(B) may take into consideration the extent to which enrollment of the land that is the subject of the contract offer would improve soil resources, water quality, or wildlife habitat, or provide other environmental benefits; and

`(C) may establish different criteria in various States and regions of the United States based on the extent to which the sequestration of carbon, water quality, or wildlife habitat may be improved or erosion may be abated.

`(d) FORM OF PAYMENT-

`(1) IN GENERAL- Except as otherwise provided in this section, payments under this chapter--

`(A) shall be made in cash or in the form of in-kind commodities in such amount and on such time schedule as is agreed on by the owner or operator and specified in the contract; and

`(B) may be made in advance of determination of performance.

`(2) IN-KIND COMMODITIES- If the payment is made with in-kind commodities, the payment shall be made by the Commodity Credit Corporation--

`(A) by delivery of the commodity involved to the owner or operator at a warehouse or other similar facility located in the county in which the land subject to the contract is located or at such other location as is agreed to by the Secretary and the owner or operator;

`(B) by the transfer of negotiable warehouse receipts; or

`(C) by such other method, including the sale of the commodity in commercial markets, as is determined by the Secretary to be appropriate to enable the owner or operator to receive efficient and expeditious possession of the commodity.

`(3) SUBSTITUTION IN CASH- If stocks of a commodity acquired by the Commodity Credit Corporation are not readily available to make full payment in kind to the owner or operator, the Secretary may substitute full or partial payment in cash for payment in kind.

`(4) STATE CARBON SEQUESTRATION PROGRAM- Payments to an owner or operator under a special carbon sequestration program described in subsection (f)(4) shall be in the form of cash only.

`(e) PAYMENT TO OTHERS- If an owner or operator that is entitled to a payment under a contract entered into under this chapter dies, becomes incompetent, is otherwise unable to receive a payment under this chapter, or is succeeded by another person that renders or completes the required performance, the Secretary shall make the payment, in accordance with regulations promulgated by the Secretary and without regard to any other provision of law, in such manner as the Secretary determines is fair and reasonable in light of all the circumstances.

`(f) PAYMENT LIMITATIONS-

`(1) TOTAL AMOUNT- The total amount of rental payments, including rental payments made in the form of in-kind commodities, made to a person under this chapter for any fiscal year may not exceed $50,000.

`(2) AMOUNT PER ACRE- The amount of rental payments made to a person under this chapter for any fiscal year may not exceed $20 per acre.

`(3) REGULATIONS-

`(A) IN GENERAL- The Secretary shall issue regulations--

`(i) defining the term `person' as used in this subsection; and

`(ii) prescribing such rules as the Secretary determines are necessary to ensure a fair and reasonable application of the limitation contained in this subsection.

`(B) CORPORATIONS- The regulations issued by the Secretary on December 18, 1970, under section 101 of the Agricultural Act of 1970 (7 U.S.C. 1307) shall be used to determine whether corporations and their stockholders may be considered to be separate persons under this subsection.

`(4) OTHER PAYMENTS- Rental payments received by an owner or operator shall be in addition to, and shall not affect, the total amount of payments that the owner or operator is otherwise eligible to receive under--

`(A) the Federal Agriculture Improvement and Reform Act of 1996 (Public Law 104-127), including the Agricultural Market Transition Act (7 U.S.C. 7201 et seq.);

`(B) the Food, Agriculture, Conservation, and Trade Act of 1990 (Public Law 101-624); or

`(C) the Agricultural Act of 1949 (7 U.S.C. 1421 et seq.).

`(5) STATE CARBON SEQUESTRATION PROGRAM-

`(A) IN GENERAL- This subsection and section 1305(f) of the Agricultural Reconciliation Act of 1987 (7 U.S.C. 1308 note; Public Law 100-203) shall not be applicable to payments received by a State, political subdivision, or agency of a State or political subdivision in connection with agreements entered into under a special carbon sequestration program carried out by that entity that has been approved by the Secretary.

`(B) PAYMENTS TO STATES AND POLITICAL SUBDIVISIONS- The Secretary may enter into such agreements for payments to States, political subdivisions, or agencies of States or political subdivisions as the Secretary determines will advance the purposes of this chapter.

`(g) EXEMPTION FROM AUTOMATIC SEQUESTER- Notwithstanding any other provision of law, no order

`(h) OTHER ASSISTANCE- In addition to any payment under this chapter, an owner or operator may receive cost-share assistance, rental payments, or tax benefits from a State or political subdivision of a State for enrolling land in the carbon sequestration program.

`(i) TREATMENT OF PAYMENTS- Payments received by an owner or operator under this chapter shall be considered rentals from real estate for the purposes of section 1402(a)(1) of the Internal Revenue Code of 1986.

`SEC. 1238E. CHANGES IN OWNERSHIP; MODIFICATION OR TERMINATION OF CONTRACTS.

`(a) CHANGES IN OWNERSHIP-

`(1) IN GENERAL- Subject to paragraphs (2) and (3), no contract shall be entered into under this chapter concerning land with respect to which the ownership has changed in the 1-year period preceding the first year of the contract period unless--

`(A) the new ownership was acquired by will or succession as a result of the death of the previous owner;

`(B) the new ownership was acquired before April 1, 2001;

`(C) the Secretary determines that the land was acquired under circumstances that give adequate assurances that the land was not acquired for the purpose of enrolling the land in the carbon sequestration program; or

`(D) the ownership change occurred because of foreclosure on the land and the owner of the land immediately before the foreclosure exercises a right of redemption from the mortgage holder in accordance with State law.

`(2) LIMITATIONS- Paragraph (1) shall not--

`(A) prohibit the continuation of an agreement by a new owner after an agreement has been entered into under this chapter; or

`(B) require a person to own the land as a condition of eligibility for entering into the contract if the person--

`(i) has operated the land to be covered by a contract under this section for at least 1 year preceding the later of--

`(I) the date of the contract; or

`(II) April 1, 2001; and

`(ii) controls the land for the contract period.

`(3) OPTIONS FOR NEW OWNER OR OPERATOR- If, during the term of a contract entered into under this chapter, an owner or operator of land subject to the contract sells or otherwise transfers the ownership or right of occupancy of the land, the new owner or operator of the land may--

`(A) continue the contract under the same terms or conditions;

`(B) enter into a new contract in accordance with this chapter; or

`(C) elect not to participate in the program established by this chapter.

`(b) MODIFICATION OF CONTRACTS- The Secretary may modify a contract entered into with an owner or operator under this chapter if--

`(1) the owner or operator agrees to the modification; and

`(2) the Secretary determines that the modification is desirable--

`(A) to carry out this chapter;

`(B) to facilitate the practical administration of this chapter; or

`(C) to achieve such other goals as the Secretary determines are appropriate, consistent with this chapter.

`(c) TERMINATION OF CONTRACTS-

`(1) IN GENERAL- The Secretary may terminate a contract entered into with an owner or operator under this chapter if--

`(A) the owner or operator agrees to the termination; and

`(B) the Secretary determines that the termination would be in the public interest.

`(2) CONGRESSIONAL NOTICE- Not later than 90 days before taking any action to terminate under paragraph (1) a contract entered into under this chapter, the Secretary shall provide to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate written notice of the action.

`SEC. 1238F. BASE HISTORY.

`(a) IN GENERAL- A reduction, based on a ratio between the total cropland acreage on the farm and the acreage placed in the carbon sequestration program authorized by this chapter, as determined by the Secretary, shall be made during the period of the contract, in the aggregate, in crop bases, quotas, and allotments on the farm with respect to crops for which there is a production adjustment program.

`(b) PRESERVATION OF BASE AND ALLOTMENT HISTORY- Notwithstanding sections 1211 and 1221, the Secretary, by regulation, may provide for preservation of cropland base and allotment history applicable to acreage on which carbon sequestration practices are carried out under this section, for the purpose of any Federal program under which the history is used as a basis for participation in the program or for an allotment or other limitation in the program, unless the owner and operator agree under the contract to retire permanently that cropland base and allotment history.

`(c) EXTENSION OF BASE AND ALLOTMENT HISTORY-

`(1) IN GENERAL- The Secretary shall offer the owner or operator of a farm or ranch an opportunity to extend the preservation of cropland base and allotment history under subsection (b) for such time as the Secretary determines is appropriate after the expiration date of a contract under this chapter at the request of the owner or operator.

`(2) CONDITIONS- In return for the extension, the owner or operator shall agree to continue to

`(d) VIOLATION OF CONTRACTS- In addition to any other remedy prescribed by law, the Secretary may reduce or terminate the quantity of cropland base and allotment history preserved under this section for acreage with respect to which there has occurred a violation of a term or condition of a contract entered into under this chapter.

`SEC. 1238G. CARBON MONITORING PILOT PROGRAMS.

`(a) ESTABLISHMENT-

`(1) IN GENERAL- The Secretary, in cooperation with the Consortium for Agricultural Soils Mitigation of Greenhouse Gases, shall carry out 4 or more pilot programs to develop, demonstrate, and verify the best management practices for carbon monitoring on agricultural land.

`(2) CRITERIA- The Secretary shall select pilot programs based on--

`(A) the merit of the proposed program; and

`(B) the diversity of soil sequestration types available at the site of the proposed program.

`(b) REQUIREMENTS- Pilot programs carried out under this section shall--

`(1) involve agricultural producers in the development and verification of best management practices for carbon monitoring on agricultural land;

`(2) involve research and testing of the best management practices in various soil types and climactic zones;

`(3) analyze the effects of the adoption of the best management practices on watershed levels; and

`(4) use the results of the research conducted under the program to--

`(A) encourage agricultural producers to adopt the best management practices;

`(B) analyze the economic impact of the best management practices; and

`(C) develop the best management practices on a regional basis for watersheds and States not participating in the pilot programs.

`SEC. 1238H. FUNDING.

`The Secretary shall use to carry out this chapter (including to pay administrative costs incurred by the Natural Resources Conservation Service in carrying out this chapter)--

`(1) funds of the Commodity Credit Corporation made available under section 1241(a)(3); and

`(2) at the option of, and transfer by, another Federal agency, funds of the agency that are available to the agency for climate change initiatives or greenhouse gas emission reductions.'.

SEC. 3. FUNDING.

Section 1241(a)(3) of the Food Security Act of 1985 (16 U.S.C. 3841(a)(3)) is amended by striking `chapter 4' and inserting `chapters 2 and 4'.

SEC. 4. REGULATIONS.

(a) PROPOSED REGULATIONS- Not later than 180 days after the date of enactment of this Act, the Secretary of Agriculture shall publish in the Federal Register proposed regulations for carrying out this Act and the amendments made by this Act.

(b) FINAL REGULATIONS- Not later than 60 days after the date of publication of the proposed regulations, the Secretary shall promulgate final regulations for carrying out this Act and the amendments made by this Act.

SEC. 5. EFFECTIVE DATES.

(a) IN GENERAL- Except as provided in subsection (b), this Act and the amendments made by this Act take effect on January 1, 2002.

(b) REGULATIONS- Section 4 takes effect on the date of enactment of this Act.