[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] ----------------------------------------------------------------------- DEPARTMENT OF AGRICULTURE Forest Service Timber Sale Contracts; Change in Stumpage Rate Adjustment Procedure AGENCY: Forest Service, USDA. ACTION: Proposed policy; request for comment. ----------------------------------------------------------------------- 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