[Federal Register Volume 61, Number 153 (Wednesday, August 7, 1996)]
[Notices]
[Pages 41124-41125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20099]


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DEPARTMENT OF AGRICULTURE
Forest Service


Timber Sale Contracts; Change in Stumpage Rate Adjustment 
Procedure

AGENCY: Forest Service, USDA.

ACTION: Proposed policy; request for comment.

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SUMMARY: The Forest Service is proposing to eliminate the stumpage rate 
adjustment procedure used to adjust timber sale contract tentative 
rates (bid rates) on most timber sales held in the western states, 
except for Alaska. Under current stumpage rate adjustment procedures, 
50 percent of the difference between current and base lumber price 
indices is added to tentative rates during periods of increasing lumber 
prices and 100 percent of the difference is subtracted from tentative 
rates during periods of declining prices. The Forest Service is 
proposing to eliminate the procedure for stumpage rate adjustment 
entirely. The effect of this proposal would be to equalize the risk of 
lumber price fluctuations between purchasers and the Forest Service on 
future timber sale contracts. This proposal will also satisfy Office of 
Inspector General audit recommendations.

DATES: Comments must be received in writing by October 7, 1996.

ADDRESSES: Send written comments to Director, Timber Management Staff 
(2400), Forest Service, USDA, P.O. Box 96090, Washington, DC 20090-
6090.
    The public may inspect comments received on this proposed policy in 
the Office of the Director of Timber Management Staff, 3rd Floor NW, 
Auditor's Building, 14th & Independence, S.W., Washington, DC, between 
the hours of 8:00 AM and 4:00 PM. Those wishing to inspect comments are 
encouraged to call ahead (202) 205-0893 to facilitate entry into the 
building.

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

SUPPLEMENTARY INFORMATION:

Background

    The Forest Service sells timber to private purchasers through 
competitive bidding. The Agency awards the timber sale contract to the 
responsible bidder submitting the highest qualified bid.
    Title 36, Code of Federal Regulations, Part 223 allows for the 
adjustment of contract (stumpage) rates during the term of a timber 
sale contract. These regulations state that:

    Timber may be appraised and sold at a lump-sum value or at a 
rate per unit of measure which rate may be adjusted during the 
period of the contract and as therein specified in accordance with 
formulas or other equivalent specifications for the following 
reasons: (a) Variations in lumber or other product value indices 
between the price index base specified in the contract and the price 
index actually experienced during the cutting of the timber. * * *

    The Western Wood Products Association is the Forest Service's 
contractor to supply the lumber price indices used for stumpage rate 
adjustment.
    In the western states, except Alaska, most timber sales with 
contract terms exceeding 1 year include a provision which allows 
contract rates to be adjusted during the term of the contract by the 
use of lumber price indices. The purpose of the stumpage rate 
adjustment procedure is to allow a timber sale purchaser's stumpage 
payments to follow the price trends of the primary forest product 
(lumber) manufactured from National Forest System timber. This 
procedure helps reduce the risk of loss to a timber purchase holding a 
timber sale contract during periods of declining lumber prices and 
benefits the Government by increasing stumpage receipts during periods 
of rising lumber prices.
    The stumpage rate adjustment procedure was established by the 
Forest Service in the 1950's to reduce the risk, both to industry and 
the Government, of holding long-term timber sale contracts. In the 
1950's and 1960's, timber sale contract periods often exceeded 10 years 
and the procedure was a means to reduce the risk to both parties due to 
price fluctuations in the lumber market. During this era, stumpage 
rates would vary, either up or down, by 50 percent of the change in 
lumber prices.
    In 1971, with the introduction of Forest Service Form 2400-6 Timber 
Sale

[[Page 41125]]

Contract, the initial stumpage rate adjustment procedure was changed to 
the current formula which provides for stumpage prices to increase by 
50 percent of the change in lumber prices when lumber prices are rising 
and to decrease by 100 percent of the change in lumber prices when 
lumber prices are falling. The purpose of this new adjustment was to 
account for increased costs to timber sale purchasers during the course 
of the contract term.
    Originally, the use of the stumpage rate adjustment procedure was 
not used in western Washington and Oregon. On March 31, 1983, it was 
expanded to include western Washington and Oregon, as a means of 
reducing a purchaser's risk from excessive bidding and to adjust for 
decreases in lumber prices during the term of timber sales contracts.
    In September 1991, the Department of Agriculture Office of 
Inspector General, issued a report (Audit Report No. 08099-122-SF dated 
9/91--Stumpage Rate Adjustment on Timber Sales) which states that the 
50 percent upwards and 100 percent downwards stumpage rate adjustment 
procedure lowers the risk of market fluctuations to the purchaser at 
the monetary expense of the Government. The audit recommended either 
eliminating the stumpage rate adjustment procedure or modifying it so 
that adjustments to stumpage are the same percentage for both periods 
of rising and falling lumber prices.
    In response to the Office of Inspector General audit, the Forest 
Service is proposing to eliminate the stumpage rate adjustment 
procedure by amending internal agency direction. Under this proposal, 
timber sale contracts would be advertised and awarded with fixed (flat) 
stumpage rates in the future, and the lumber price indices currently 
used by the Forest Service would not be used after December 31, 1996. 
In accordance with contract provision C(T)3.21--Unavailable Index, 
purchasers with stumpage rate adjustment contracts still in effect when 
the policy is adopted would be offered the opportunity to convert to 
flat rates or to a suitable replacement index for lumber prices 
developed from the Bureau of Labor Statistics' Producer Price Index or 
appropriate trade journals.

Summary

    The Forest Service is seeking comment on the following proposed 
direction that would be issued to agency personnel in chapter 2430 of 
the Forest Service Manual:

    FSM 2431.34-Stumpage Rate Adjustment. Stumpage rate adjustment 
procedures are no longer to be included in Forest Service timber 
sale contracts. Instead, advertise all timber sales on a flat rate 
basis.

    Comments received on this proposed policy will be considered in 
adoption of the final policy, notice of which will be published in the 
Federal Register.

Regulatory Impact

    This proposed policy has been reviewed under USDA procedures and 
Executive Order 12866 on Regulatory Planning and Review. It has been 
determined that this is not a significant policy. This policy will not 
have an annual effect of $100 million or more on the economy nor 
adversely affect productivity, competition, jobs, the environment, 
public health or safety, nor State or local governments. This policy 
will not interfere with an action taken or planned by another agency 
nor raise new legal or policy issues. Finally, this action will not 
alter the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients of such programs. 
Accordingly, this proposed policy is not subject to OMB review under 
Executive Order 12866.
    Moreover, this proposed policy has been considered in light of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.), and it is hereby 
certified that this action will not have a significant economic impact 
on a substantial number of small entities as defined by that act.
    Pursuant to Title II of the Unfunded Mandates Reform Act of 1995, 
which the President signed into law on March 22, 1995, the Department 
has assessed the effects of this policy on State, local, and tribal 
governments and the private sectors. This action does not compel the 
expenditure of $100 million or more by any State, local, or tribal 
governments or anyone in the private sector. Therefore, a statement 
under section 202 of the Act is not required.

Environmental Impact

    This proposed action falls within a category of actions excluded 
from documentation in an Environmental Impact Statement and an 
Environmental Assessment. Section 31.1b of Forest Service Handbook 
1909.15 (57 FR 43180; September 18, 1992) excludes from documentation 
in an environmental assessment or impact statement ``rules, 
regulations, or policies to establish Service-wide administrative 
procedures, program processes, or instructions.'' The agency's 
preliminary assessment is that this policy falls within this category 
of actions and that no extraordinary circumstances exist which would 
require preparation of an environmental assessment or environmental 
impact statement. A final determination will be made upon adoption of 
the final policy.

Controlling Paperwork Burdens on the Public

    The proposed policy does not require any recordkeeping or reporting 
requirements or other information collection requirements as defined in 
5 CFR part 1320 not already approved for use and, therefore, imposes no 
additional paperwork burden on the public.
    Accordingly, the review provisions of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501, et seq.) and implementing regulations at 5 CFR 
part 1320 do not apply.

Comments Invited

    The Forest Service invites written comments on the proposed policy. 
The agency will analyze and consider comments received in adopting the 
final policy. Notice of the final policy, including discussion of 
comments received, will be published in the Federal Register.

    Dated: August 1, 1996.
David G. Unger,
Associate Chief.
[FR Doc. 96-20099 Filed 8-6-96; 8:45 am]
BILLING CODE 3410-11-M