[Federal Register Volume 61, Number 151 (Monday, August 5, 1996)]
[Notices]
[Pages 40602-40603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19915]


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 Notices
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains documents other than rules 
 or proposed rules that are applicable to the public. Notices of hearings 
 and investigations, committee meetings, agency decisions and rulings, 
 delegations of authority, filing of petitions and applications and agency 
 statements of organization and functions are examples of documents 
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  Federal Register / Vol. 61, No. 151 / Monday, August 5, 1996 / 
Notices  

[[Page 40602]]



DEPARTMENT OF AGRICULTURE

Forest Service


Extension of Certain Timber Sale Contracts; Finding of 
Substantial Public Interest

AGENCY: Forest Service, USDA.

ACTION: Notice of additional extension.

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SUMMARY: Government indices indicate a major downtown in the lumber 
market during 1994 and 1995. While many National Forest System timber 
sale contracts contain provisions to extend termination dates during 
severely declining markets, the mechanisms used in some areas of the 
country to measure severely declining markets do not appear to measure 
the softwood lumber market. Accordingly, on April 2, 1996, the Under 
Secretary of Agriculture determined that it was in the substantial 
overriding public interest to extend for 120 days certain National 
Forest System timber sale contracts which were awarded prior to January 
1, 1995j, in order to evaluate alternatives to existing market-related 
contract term addition rules for both existing and new contracts. The 
study indicates that contract extension is the best alternative to 
address existing contracts. Accordingly, the Chief of the Forest 
Service is now granting an additional extension of 1 year for contracts 
awarded prior to January 1, 1995, except for salvage sales and sales in 
western Washington and western Oregon. The intended effect is to 
minimize contract defaults, mill closures, and company bankruptcies.

DATES: The Chief's new determination was made on July 31, 1996.

FOR FURTHER INFORMATION CONTACT: Rex Baumback, Timber Management Staff, 
Forest Service, USDA, (202) 205-0855.

SUPPLEMENTARY INFORMATION: The Forest Service sells timber from 
National Forest System lands to individuals or companies. Each sale is 
formalized by execution of a contract between the purchaser and the 
Forest Service. The contract sets forth the explicit terms and 
provisions of the sale, including such matters as the estimated volume 
of timber to be removed, period for removal, price to be paid to the 
Government, road construction and logging requirements, and 
environmental protection measures to be taken. The average contract 
period is approximately 3 years, while a few contracts have terms of 7 
or 8 years.
    The National Forest Management Act of 1976 (16 U.S.C. 472a(c)) 
provides that the Secretary of Agriculture shall not extend any timber 
sale contract period with an original term of 2 years or more, unless 
the purchaser has diligently performed in accordance with an approved 
plan of operations or the ``substantial overriding public interest'' 
justifies the extension. The authority to make this determination has 
been delegated to the Chief of the Forest Service (7 CFR 2.60).
    Government indices indicate a major downturn in the softwood lumber 
market occurred during 1994 and 1995. During this period, price indices 
have declined approximately 25 percent. Rules at 36 CFR 223.52 permit 
extensions when Forest Service officials determine that adverse wood 
product market conditions have resulted in a drastic decline in wood 
product prices. Under contract procedures, the Douglas fir dressed 
lumber price index (commodity code 081101) used to measure severe 
market declines in western Oregon and western Washington has reflected 
the market decrease. Timber sale purchasers in this area have received 
1 year of additional contract time, if requested. However, the indices 
used to measure severe market declines in other parts of the country do 
not appear to be as predictable an indicator of market declines as the 
index used in the Pacific Northwest. As a result, timer sale purchasers 
outside of the Pacific Northwest have not received any additional time 
to complete their contracts, and some of these purchasers are facing 
contract default, mill closure, and bankruptcy. It has been determined 
that additional contract time will assist these purchasers by giving 
them more time in which the market may improve or in which they can mix 
their high-priced sales with lower priced sales.
    Accordingly, based on a study of alternatives and current rules at 
36 CFR 223.115, the Chief of the Forest Service has made a finding that 
there is a substantial overriding public interest in extending sales 
for 1 year. This determination does not apply to contracts that were 
previously extended under market-related contract term addition 
contract provisions or to salvage sale contracts that were sold with 
the objective of harvesting deteriorating timber. In addition to 
extending contracts pursuant to the Chief's finding, periodic payments 
will be deferred for 1 year on the extended sales. To receive the 
extension and periodic payment deferral, purchasers must request the 
extension in writing and agree to release the Forest Service from 
damages for the replacement cost of timber if the contract is canceled 
in the future. The text of the finding, as signed by the Chief, is set 
out at the end of this notice.

    Dated: July 31, 1996.
Gray F. Reynolds,
Acting Chief.

Determination of Substantial Overriding Public Interest for Extending 
Certain Timber Sale Contracts

    Government indices indicate a major downturn in the lumber market 
has occurred during 1994 and 1995. While many Forest Service timber 
sale contracts contain provisions to extend termination dates during 
severely declining markets, the mechanisms used in some areas of the 
country to measure severely declining markets do not appear to measure 
the softwood lumber market.
    Periodically, lumber markets may experience severe declines in 
prices. Based on Bureau of Labor Statistics producer price indices, the 
lumber market peaked in January 1994. During 1994 and 1995, price 
indices have declined approximately 25 percent. The Douglas fir dressed 
lumber price index (commodity code 081101) used to measure severe 
market declines in western Oregon and western Washington has reflected 
the market decrease. Timber sale purchasers in this area have received 
1 year of additional contract time, if requested. However, the indices 
used to measure severe market declines in other parts of the country do 
not appear to measure the softwood

[[Page 40603]]

lumber market as well as the index used in the Pacific Northwest.
    Until April 2, when the Under Secretary of Agriculture extended 
their contracts for 120 days, timber sale purchasers outside of the 
Pacific Northwest had not received any additional time to complete 
their contracts. Some of these timber sale purchasers are still facing 
contract default, mill closure, and bankruptcy. A contract extension 
would assist these purchasers by giving additional time in which the 
market may improve or in which they could mix their high-priced sales 
with lower-priced sales.
    The Government benefits if defaulted timber sale contracts, mill 
closures, and bankruptcies can be avoided by granting contract 
extensions, because having numerous, economically viable timber sale 
purchasers both maintains market opportunities and increases 
competition for National Forest System timber sales. These factors 
result in higher prices paid for such timber. In addition, the 
Government would avoid the difficult and expensive process of 
collection contract default damages.
    Therefore, pursuant to 16 U.S.C. 472a, 36 CFR 223.115, and the 
authority delegated to the Chief at 7 CFR 2.60, I have determined that 
it is in the substantial overriding public interest to extend for 1 
year National Forest System timber sale contracts that were awarded 
prior to January 1, 1995. This finding does not apply to contracts in 
western Washington and western Oregon that have been previously 
extended under market-related contract term addition contract 
provisions or to salvage sale contracts that were sold with the 
objective of harvesting deteriorating timber. For those contracts 
extended pursuant to this finding, periodic payments also will be 
deferred for 1 year. To receive the extension and periodic payment 
deferral, purchasers must make written request and agree to release the 
Forest Service from damages for the replacement cost of timber if the 
contract is canceled in the future.

    Dated: July 31, 1996.
Gray F. Reynolds,
Acting Chief.
[FR Doc. 96-19915 Filed 8-1-96; 2:36 pm]
BILLING CODE 3410-11-M