[Federal Register Volume 65, Number 141 (Friday, July 21, 2000)]
[Notices]
[Pages 45354-45357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18482]


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DEPARTMENT OF AGRICULTURE

Forest Service


Small Business Timber Sale Set-Aside Program Share Recomputation

AGENCY: Forest Service, USDA.

ACTION: Notice of final policy.

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SUMMARY: This final policy revises the formula used for calculating 
timber sale set-aside market shares. The recomputation formula has been 
revised to use only purchased timber sale volume data. Purchased timber 
sale data from the past 5-year period is to be used to determine the 
shares for the next 5-year period. This change is needed to make the 
recomputation process as fair, accurate, and simple as possible.

DATES: This policy is effective August 7, 2000.

FOR FURTHER INFORMATION CONTACT: Rod Sallee, Small Business Timber Sale 
Set-aside Program Manager, Forest Management Staff, by telephone at 
(202) 205-1766 or by internet at [email protected].

SUPPLEMENTARY INFORMATION: Developed in cooperation with the Small 
Business Administration, the Forest Service Small Business Timber Sale 
Set-aside Program is designed to ensure that qualifying small business 
timber purchasers have the opportunity to purchase a fair proportion of 
National Forest System timber offered for sale. The current Small 
Business Timber Sale

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Set-aside Program was adopted July 26, 1990 (55 FR 30485). Direction 
that guides Forest Service employees in administering the Small 
Business Timber Sale Set-aside Program is issued in the Forest Service 
Manual, Chapter 2430, and in Chapter 90 of the Forest Service Timber 
Sale Preparation Handbook (FSH 2409.18).
    According to the guidelines of the set-aside program, the Forest 
Service recomputes the shares of timber sales to be set aside for 
qualifying small businesses every 5 years. The share percentage is 
based on the actual volume of sawtimber that has been purchased and/or 
harvested by small businesses. In addition to the 5-year requirement, 
shares must be recomputed whenever manufacturing capability changes, 
purchaser class size changes, or when certain purchasers discontinue 
operations. On May 28, 1999, the agency published in the Federal 
Register (64 FR 28969) a proposed policy to modify several provisions 
of the recomputation procedures.

Response to Comments Received

    Twenty-six responses were received on the proposed policy. Comments 
were received from 22 purchasers, 3 organizations representing member 
companies and log processing facilities, and the Small Business 
Administration. A summary of the comments and the agency's response 
follows.

Comments Specific to the Proposed Policy

    Remove the harvest volume from the recomputation formula. The 
proposal to remove the harvest volume would affect recomputations of 
shares for the upcoming and future 5-year recomputations of the small 
business share of timber sales as well as recalculation of shares after 
a structural change occurs. The volume purchased would be the 
measurement used in the formula for the recomputations.
    Comment. Twenty-one of the respondents, including the U.S. Small 
Business Administration, supported dropping the harvest volume and 
using only the volume purchased. Most of these respondents indicated 
that dropping the harvest volume would serve both the forest products 
industry and the agencies by eliminating unnecessary record keeping and 
undue complexities in the calculation procedures.
    One respondent also noted that the Forest Service would be able to 
achieve a much higher degree of accuracy in calculating normal and 
structural recomputations. That respondent claimed that most errors 
found in 5-year recomputations were made by Forest Service field 
officers in keeping and interpreting harvest records.
    The respondents, favoring the change, also indicated that the 
purchase/harvest ratio was developed to respond to a situation that no 
longer exists, that is, to prevent purchasers from buying and holding 
volume to artificially drive a recomputation to a desired outcome. They 
noted that the Forest Service is now selling so little timber that 
purchasers are unable to accumulate large federal portfolios and seldom 
are able to hold their sale volume longer than 3 years. They concluded 
that it is nearly impossible for a purchaser to purchase and hold a 
sufficient quantity of volume long enough to affect the Small Business 
Timber Sale Set-aside Program share recomputations. Furthermore, they 
noted that the shift away from scaled sales and the inability of the 
recomputation process to deal with under runs further reduced the need 
for the purchase/harvest ratio. One respondent also supported dropping 
the harvest volume from the calculation because of the uncertainty of 
harvest scheduling, which is interrupted by consultation and litigation 
concerning threatened, endangered and sensitive species, making it 
impossible for any small business to match harvest levels to sale 
purchase in a given time period. Another respondent noted that the term 
of the timber sale contract is shorter now than in the past, which 
reduces the importance of accounting for harvest volume in the formula.
    Three respondents, including one organization that represents large 
forest product companies in the West, expressed opposition to dropping 
the harvest data from the formula for calculating shares. One 
respondent commented that a period of unstable timber supply and 
markets is simply a poor time to make changes in a long established 
criteria used in calculating shares for the set-aside program. They 
noted that the proposed change seemed to allow small businesses to have 
an unfair ability to manipulate the program in their favor by carrying 
excess share volumes of unharvested timber into the next 5-year period. 
Similarly, another respondent felt that the proposed change would allow 
small businesses to purchase and hoard excessive amounts of unharvested 
volumes into the future 5-year periods.
    One respondent commented that an aggressive, relatively large, 
small business sawmill owner would have an unfair advantage over the 
smallest size operator. This respondent also expressed a belief that 
this unfair advantage would lead to fewer operations and could hurt the 
economic viability of the smallest owners. This respondent stated that 
there would be no reason for a qualifying small sawmill to use federal 
timber in a timely manner without the purchase-to-harvest ratio 
minimum. In addition, using only the purchased timber sale data would 
tie up resource areas for longer time periods and lead to the 
displacement of the smallest ``Mom and Pop'' sawmills by the larger 
mills, even though the larger mills still qualified as small 
businesses.
    Response. The arguments for dropping the harvest volumes from the 
recomputation formula are persuasive. Available data concerning timber 
volume under contract does not provide evidence of the hoarding of 
large amounts of timber under contract. The competition for federal 
timber, as well as increasing prices for quality timber, indicate an 
increased demand for timber sales from federal lands. Furthermore, 
since July 1991, timber sale contracts require periodic payments, which 
discourages the hoarding of any timber under contract and provides an 
incentive for prompt harvest. Including harvest data in the formula is 
no longer necessary, given the current size of the timber program, the 
length of the timber sale contracts, and new timber sale contract 
provisions. The agency agrees with the argument that dropping the 
harvest volume from the formula would serve both the forest products 
industry and the agencies by eliminating unnecessary recordkeeping and 
undue complexities in the calculation procedures.
    Finally, the Small Business Administration, which administers the 
Small Business Set-aside Program cooperatively with the Forest Service, 
supports this formula change. Therefore, the formula included in the 
final policy reflects the removal of the harvest volume from the 
recomputation of shares and relies, instead, only on the amount of 
timber purchased. This change is reflected in the revised instructions 
given in Chapter 90 of the Forest Service Timber Sale Preparation 
Handbook (FSH 2409.18).
    Change the time period for a structural change recomputation from 
36 months to 18 months. The proposed policy asked for comment on 
reducing the implementation time of a structural change from 36 months 
to 18 months.
    Comments. Three respondents supported the proposal to shorten the 
timeframe for a structural change recomputation; one was a large 
business and the other two were small businesses. One respondent stated 
that since the rate of change in business, in

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general, and in the timber industry, in particular, seemed to be 
continually accelerating, the proposed change would allow for share 
changes to be better-timed following business changes.
    One respondent, who supported the proposal, noted that because of 
the drastic changes in the industry in the last 2 years, many companies 
were getting out of the sawmill business. The respondent stated that if 
a structural change was not made quickly, an imbalance in the 
marketplace would occur. Likewise, another respondent felt that the 18-
month period would allow the Forest Service to be more responsive to 
the needs of small businesses in an ever-changing market situation.
    Twenty-three respondents, including the Small Business 
Administration, opposed this proposal to shorten the time period for a 
structural change recomputation. These respondents included two 
organizations representing small businesses and one organization 
representing large businesses. The other 19 respondents were individual 
small businesses.
    The Small Business Administration noted that structural changes are 
rapidly occurring in market areas where the number and volume of sales 
have decreased dramatically over the past few years. They stated that 
only by retaining the 36-month analysis period would there be adequate 
time to allow the small business set-aside share percentage to reflect 
the actual purchase patterns that would develop after a major purchaser 
has discontinued operations or changed its business size status. They 
suggested that it might be more effective to revise the qualified 
purchased volume amount that is needed to meet the definition for 
structural change. A respondent stated that a structural change should 
not be implemented until the entire small business set-aside program is 
analyzed in accordance with current market conditions.
    One of the respondents opposed the proposed reduction in time 
stating that 18 months is not long enough time to yield an appropriate 
number of sales or amount of timber volume on which to make an accurate 
recomputation. This respondent provided examples where the proposal 
would not work; such as, when a forest went for more than 18 months 
without selling a qualifying timber sale or when forests offered large 
salvage sales with logging requirements that effectively precluded 
smaller companies form bidding on the sales. The respondent also noted 
that since current regulations on structural change recomputation allow 
the set-aside share to vary between the original share level and 80 
percent of the original, there are too many instances where one or two 
large salvage sales, which have expensive logging system requirements, 
are the only sales sold in a market area during a recomputation period. 
The respondent noted that this situation is unfair to smaller 
purchasers because they have no legitimate opportunity to purchase the 
volume needed to maintain the set-aside share.
    Similarly, another respondent representing small businesses, 
provided a chart of 18 national forests in Oregon and Washington, 
depicting low sale volumes and an erratic timber sale program from 1995 
to 1998. The respondent suggested that under an 18-month base period, 
one or two sales on those example forests often constituted 50 to 75 
percent of the entire sale program during that period. The respondent 
noted that shortening the recomputation time period created 
opportunities to manipulate the program and, as such, would be a 
substantial risk to small businesses.
    One respondent commented that the joint circumstances of only a few 
timber sales making it through the gauntlet of litigation and the more 
traditional type of timber sale program changing to include the vastly 
different types of ``sales,'' such as salvage, stewardship, and forest 
health, make the proposed change to an 18-month period a poor choice. 
Another respondent noted that if the 18-month proposal was adopted only 
six sales likely would be offered in their area in 18 months. The 
respondent stated that the proposed timeframe simply is not long enough 
to yield an appropriate number of sales or an amount of timber volume 
with which to make an accurate recomputation.
    Another respondent, opposed to the reduced timeframe, noted that 
because the timber program is erratic, the reduction in time might 
produce some unintended results. This respondent suggested that the 
agency consider extending the base period from 36 months to a full 5-
year period. Another a stated that the time reduction would be adverse 
to the interests of small businesses and suggested that the structural 
recomputation procedure be eliminated completely.
    The remaining respondents, opposed to the reduction of the 
structural change time period to 18 months, identified the same reasons 
previously noted by the other respondents. Most indicated that the 
timber sale program is too erratic and that too few sales would be 
offered in the 18-month period for a fair recomputation of small 
business shares.
    Response. The arguments against proceeding with the proposal to 
reduce the time period for recomputing the shares and the evidence 
presented by the as are sufficient to convince the agency that there 
are too many negative factors to proceed with implementation of this 
part of the proposed policy. The negative factors that were especially 
noteworthy include Small Business Administration's concern that there 
needs to be adequate time to provide the opportunity for the share 
percentage to reflect the actual purchase patterns that develop after a 
major purchaser has discontinued operations or changed size status and 
the fact that most of the respondents expressed opposition to the 
proposal to reduce the time period. Respondents noted that the reduced 
number of sales in most market areas would be an inadequate 
representation of the timber sale program. The agency agrees that this 
could be a negative factor in the structural change consideration. 
Also, the agency is especially concerned about the potential impact of 
changing the time period on small businesses and the potential for 
manipulation of the share computation under a 18-month base timeframe. 
A 18-month base time period may not give small businesses adequate 
opportunity to show interest in a sale. Therefore, the proposal to 
reduce the recomputation period from 36 months to 18 months will not be 
adopted.
    Other structural change related proposals suggested by the 
respondents, such as, revising the qualified purchased volume amount 
needed to trigger a structural change, dropping the structural change 
procedure completely, or changing the period to 5 years, are not being 
pursued at this time. However, the agency continues to monitor the 
effects of structural changes and to work with the Small Business 
Administration to determine what future policy changes may be needed to 
provide fair adjustments for both small and large timber businesses.
    Other Comments. A number of the respondents commented on what they 
thought was a part of the agency's proposal, that is, to change the 
small business set-aside policy to allow only the timber sales sold on 
a tree measurement basis to be counted in the set-aside program.
    Response. While the proposal, as presented in the May 1999, Federal 
Register notice, could be interpreted to suggest that the agency was 
proposing to allow only timber sales sold on a tree measurement basis 
to be counted in the set-aside program, this was not the intention of 
the agency. As one of the respondents noted, a recent study,

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required by Congress to assess whether scaled or tree measurement sales 
provided the best results concluded that a mix of these methods was the 
most appropriate procedure. The agency will continue to allow sales 
from both tree measurement and scaled sales to be included.

Summary

    The formula to be used for the recomputation of the small business 
shares of the timber sale set-aside program has been modified to remove 
the harvest volume data from the recomputation of shares. The 
recomputation formula will now use only the amount of timber purchased. 
This change is reflected in the revised instructions given in Chapter 
90 of the Forest Service Timber Sale Preparation Handbook (FSH 
2409.18). No other substantive policy changes were made to this chapter 
of the handbook. Copies may be obtained from the Forest Service website 
at Directives under the Administration pull-down menu at the worldwide 
web at fs.fed.us or by contacting the person listed under the For 
Further Information Contact section of this notice.

Regulatory Impact

    This final policy has been reviewed under USDA procedures and 
Executive Order 12866 on Regulatory and Review. It has been determined 
that this is not a significant policy. This final 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 final 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 final policy is not subject to OMB review under 
Executive Order 12866.
    Moreover, this final policy has been considered in light of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.), and it has been 
determined that this action will not have a significant economic impact 
on a substantial number of small entities as defined by that Act. The 
agency received comments primarily from small businesses and complied 
with most of the suggestions made by those entities.

Environmental Impact

    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 assessment is that this final 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.

Unfunded Mandates Reform

    Pursuant to Title II of the Unfunded Mandates Reform Act of 1995 (2 
U.S.C. 1531-1538), which the President signed into law on March 22, 
1995, the Department has assessed the effects of this final policy on 
state, local, and tribal governments and the private sector. This final 
policy 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.

Controlling Paperwork Burdens on the Public

    This final policy does not contain any record keeping or reporting 
requirements or other information collection requirements as defined in 
5 CFR 1320 and, therefore, imposes no 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 
1320 do not apply.

    Dated: June 22, 2000.
Mike Dombeck,
Chief.
[FR Doc. 00-18482 Filed 7-20-00; 8:45 am]
BILLING CODE 3410-11-M