(a) Conservation practices. NRCS will develop a list of conservation practices eligible for payment under the program, which considers:

(1) The conservation practice cost-effectiveness, implementation efficiency, and innovation;

(2) The degree and effectiveness in treating priority resource concerns;

(3) The number of resource concerns the practice addresses;

(4) The longevity of the practice's conservation benefit;

(5) The conservation practice's ability to assist producers in meeting regulatory requirements; and

(6) Other pertinent local considerations.

(b) Payment schedules. The Chief will determine the process and methodology used for development, review, and approval of payment schedules to support accurate and cost-effective delivery of program benefits, including determination of estimated incurred costs and income foregone associated with implementation of all financially-supported conservation practices or activities.

(1) Payment to a participant for performing a practice may not exceed, as determined by NRCS, the maximum payment percentages in paragraphs (b)(1)(i) through (iii) of this section:

(i) Seventy-five percent of the estimated costs incurred by implementing the conservation practice,

(ii) One hundred percent of the estimated income foregone, or

(iii) Both conditions in paragraphs (b)(1)(i) and (ii) of this section, where a producer incurs costs in implementing a conservation practice and foregoes income related to that practice implementation.

(2) In determining the amount and rate of estimated income foregone, NRCS may assign higher significance to conservation practices which promote—

(i) Soil health;

(ii) Water quality and quantity improvement;

(iii) Nutrient management;

(iv) Pest management;

(v) Air quality improvement;

(vi) Wildlife habitat development, including pollinator habitat;

(vii) Invasive species management; or

(viii) Other natural resource concerns of regional or national significance, as determined by NRCS.

(3) Notwithstanding paragraph (b)(1) of this section, a participant that meets the definition of a historically underserved producer under §1466.3 may be awarded the applicable payment rate and an additional rate that is not less than 25 percent above the applicable rate, provided this increase does not exceed 90 percent of the estimated costs incurred for implementing the conservation practice.

(4) NRCS shall reduce the payments to a participant through EQIP proportionately below the contracted payment rate established by the Chief, so that the total combined payments for a conservation practice from EQIP and other USDA sources does not exceed 100 percent of the estimated costs incurred for implementing or performing the conservation practice.

(5) When NRCS enters into a formal agreement with partners who provide financial support to help implement program initiatives, the Chief shall adjust NRCS program payment percentages to provide practice payment rates to an amount such that the total financial assistance to the participant from NRCS and the partner does not exceed the amount needed to encourage voluntary adoption of the practice. The formal agreement must be approved by NRCS prior to announcement of the program initiative and adjusted payment rates.

(6) NRCS may provide payments for conservation practices on some or all of the operations of a participant related to organic production and the transition to organic production. Payments may not be provided for any costs associated with organic certification, enterprise costs associated with transition to organic production, or for practices or activities that are eligible for financial assistance under the National Organic Program (7 U.S.C. 6523).

(c) High priority practices.

(1) NRCS, with input from the State Technical Committee, may designate not more than 10 practices to be eligible for increased payments under paragraph (c)(2) of this section, on the condition that the practice, as determined by NRCS—

(i) Addresses specific causes of impairment relating to excessive nutrients in ground or surface water;

(ii) Addresses the conservation of water, to advance drought mitigation and declining aquifers;

(iii) Meets other environmental priorities and other priority resource concerns identified in habitat or other area restoration plans; or

(iv) Is geographically targeted to address a natural resource concern in a specific watershed.

(2) Notwithstanding paragraph (b) of this section, in the case of a practice designated as high priority under paragraph (c)(1) of this section a participant may receive an increased amount provided the payment does not exceed 90 percent of the incurred costs estimated for the conservation practice.

(d) Source water protection practices. Notwithstanding paragraph (b) of this section, in the case of a practice that is a source water protection practice as identified by the Chief, a participant may receive an increased amount provided the payment does not exceed 90 percent of the incurred costs estimated for the practice.