Proposed Rule
Background

    The Compact Commission was established under authority of the
Northeast Interstate Dairy Compact (Compact). The Compact was enacted
into law by each of the six participating New England states as
follows: Connecticut--Pub. L. 93-370; Maine--Pub. L. 89-437, as
amended, Pub. L. 93-320; Massachusetts--Pub. L. 93-370; New Hampshire--
Pub. L. 93-184-A; Rhode Island--Pub. L. 93-336; Vermont--Pub. L. 89-95,
as amended, 93-97. Consistent with Article I, Section 10 of the United
States Constitution, Congress consented to the Compact in Pub. L. 104-
127 (FAIR ACT), Section 147, codified at 7 U.S.C. Sec. 7256.
Subsequently the United States Secretary of Agriculture, pursuant to
the FAIR ACT, authorized implementation of the Compact.
    Section 8 of the Compact empowers the Compact Commission to engage
in a broad range of activities that are designed to ``promote
regulatory uniformity, simplicity and interstate cooperation.'' For
example, the Compact authorizes the Compact Commission to engage in a
range of investigations of the existing milk programs of both the
participating states and the federal milk marketing system, to make
recommendations to participating states, and to improve industry
relations as a whole. See Compact, Art. IV, Sec. 8.
    In addition to the powers conferred by Section 8, the Compact also
authorizes the Compact Commission to consider adopting a compact over-
order price regulation. See Compact, Art., IV, Sec. 9. A ``compact
over-order price'' is defined as:

    A minimum price required to be paid to producers for Class I
milk established by the Commission in regulations adopted pursuant
to sections nine and ten of this compact, which is above the price
established in federal marketing orders or by state farm price
regulation in the regulated area. Such price may apply throughout
the region or in any part or parts thereof as defined in the
regulations of the commission.

See Compact, Art. II, Sec. 2(8); see also Compact, Art. IV, Sec. 9
(``The Commission is hereby empowered to establish the minimum price
for milk to be paid by pool plants, partially regulated plants and all
other handlers receiving milk from producers located in a regulated
area.'')
    Such price regulation establishes the minimum procurement price to
be paid by fluid milk processors to farmers used for New England fluid
milk consumption. The regulated price established by the Compact
Commission is actually an incremental amount above, or ``over-order''
(Federal Order #1) the minimum price for the same milk established by
Federal Milk Market Order.
    Section 11 of the Compact specifically delineates the procedures
that the Commission must employ in the event it wishes to promulgate an
over-order price regulation.

    Before promulgation of any regulations establishing a compact
over-order price or commission marketing order, including any
provision with respect to milk supply under subsection 9(f), or
amendment thereof, as provided in Article IV, the commission shall
conduct an informal rulemaking proceeding to provide interested
persons with an opportunity to present data and views. Such
rulemaking proceeding shall be governed by section four of the
Federal Administrative Procedures Act, as amended (5 U.S.C.
Sec. 553). In addition, the commission shall, to the extend
practicable, publish notice of rulemaking proceedings in the
official register of each participating state. Before the initial
adoption of regulations establishing a compact over-order price or a
commission marketing order and thereafter before any amendment with
regard to prices or assessments, the commission shall hold a public
meeting. The commission may commence a rulemaking proceeding on its
own initiative or may in its sole discretion act upon the petition
of any person including individual milk producers, any organization
of milk producers or handlers, general farm organizations, consumer
or public interest groups, and local, state or federal officials.

    Pursuant to Sec. 11 of the Compact, the Compact Commission issued a
Notice of Hearing on December 13, 1996, and held public hearings on
December 17 and 19, 1996. The Notice also invited the public to submit
written comments through January 2, 1997. Following the close of this
comment period, the Commission met on January 16, 1997 and established
three working groups to consider the testimony and data submitted. The
Commission issued a Notice of Additional Comment Period on March 14,
1997. This comment period closed on March 31, 1997; the reply comment
period closed April 9, 1997.