[Federal Register Volume 71, Number 14 (Monday, January 23, 2006)]
[Rules and Regulations]
[Pages 3409-3412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-548]


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DEPARTMENT OF AGRICULTURE

Forest Service

36 CFR Part 223

RIN 0596-AC29


Sale and Disposal of National Forest System Timber; Timber Sale 
Contracts; Indices To Determine Market-Related Contract Term Additions

AGENCY: Forest Service, USDA.

ACTION: Final rule.

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SUMMARY: In this final rule, the Forest Service is selecting Producer 
Price Indices (PPI) for use by the Chief of the Forest Service to 
determine whether there has been a drastic reduction in

[[Page 3410]]

wood prices warranting market-related contract term additions. The 
indices selected in this final rule replace certain PPI indices that 
were discontinued by the Bureau of Labor Statistics (BLS) after 
December 2003. An interim final rule and request for comments was 
published in the Federal Register on June 29, 2005 (70 FR 37266). In 
this final rule, the Forest Service makes appropriate changes, 
reflecting public comments and its own analysis of the replacement 
indices. A detailed summary of Forest Service responses to public 
comments is available for review as provided in the Addresses section 
of this notice.

DATES: This final rule is effective January 23, 2006.

ADDRESSES: The Forest Service response to public comments is available 
for public review on the Forest Service World Wide Web/Internet site at 
http://www.fs.fed.us/forestmanagement/infocenter/index.shtml. 
Alternatively, these can be viewed in the office of the Director of 
Forest Management, Third Floor, Southwest Wing, Yates Building, 201 
14th Street, SW., Washington, DC. Visitors are encouraged to call ahead 
to (202) 205-1496 to facilitate entry into the building.

FOR FURTHER INFORMATION CONTACT: Lathrop Smith, Forest Management 
Staff, at (202) 205-0858, or Richard Fitzgerald, Forest Management 
Staff, at (202) 205-1753.

SUPPLEMENTARY INFORMATION:

Background

    In order to protect timber purchasers and the public from severe 
downturns in the wood products industry, the Forest Service has granted 
market-related contract term additions for timber sale contracts when a 
drastic reduction in wood prices has occurred. Applying regulations 
promulgated under the Federal Timber Contract Payment Modification Act 
(16 U.S.C. 618), the Chief of the Forest Service has determined the 
existence of a drastic reduction in prices by using BLS PPI indices for 
certain wood products. However, as of December 2003, BLS discontinued 
three of the four PPI indices contained in the previous iteration of 
this regulation: Hardwood Lumber (SIC 24211), Eastern Softwood Lumber 
(SIC 24213), and Western Softwood Lumber (SIC 24214). BLS also re-
designated Wood Chips (SIC 21215) as (NAICS 3211135). Accordingly, in 
the interim final rule and request for comments, the Forest Service 
selected two replacement indices--Softwood Lumber (0811) and Hardwood 
Lumber (0812)--and adopted the re-designation of the Wood Chips index. 
The Forest Service made no other changes to 36 CFR 223.52.
    Before selecting the foregoing replacement indices in the interim 
final rule, the Forest Service evaluated several possible replacements. 
For example, the Forest Service examined the Random Lengths indices and 
Western Wood Products Association indices. Additionally, the Forest 
Service examined certain regional indices. The Forest Service found 
that indices other than the replacement indices were inadequate for 
determining the existence of a drastic reduction in wood prices. For 
example, regional indices were unsuitable because of variance in their 
timing of publication, collection of information, and processing of 
data. Accordingly, the Forest Service selected the BLS Softwood Lumber 
(0811) and Hardwood Lumber (0812) indices because they represent the 
best-available replacement indices, which most closely replicate the 
historical results of the discontinued indices.
    The three indices contained in this final rule are not seasonally 
adjusted. Each PPI is adjusted to a constant dollar base by dividing it 
by the PPI for All Commodities (00000000) to eliminate changes due to 
inflation and deflation.
    As noted in the interim rule, the Forest Service adopted the 
replacement indices retroactively to January 2004. For purposes of this 
final rule, the indices shall have the same retroactive application.
    The Forest Service received a total of twenty-six replies to the 
interim final rule. Nineteen were unresponsive because they did not 
address MRCTA procedures. Four were statements not requiring a 
response. Three were responsive to the interim rule and proposed 
changes. As noted in the Introduction, a detailed summary of Forest 
Service responses to public comments is available for review, as 
provided in the ADDRESSES section of this notice.
    In response to the relevant comments, the Forest Service has made 
changes to the interim final rule, which are contained in this final 
rule. Based on public comments and its own analysis, the Forest Service 
changed the percentage decrease applied to the replacement indices, 
contained at 36 CFR 223.52(b)(ii)(2), from 15% to 11.5%. The percentage 
change in wood prices is used to balance the public interest in having 
a reasonable term on a timber sale contract and minimizing the risk of 
defaults on timber sale contracts. Setting the percent change in price 
too low could result in unnecessary contract term additions. Setting 
the percent change in price to high could result in contract defaults. 
The 15% decrease in the discontinued indices provided this balance for 
the last two decades. The new replacement indices are broader than the 
discontinued indices and less sensitive to changes in market 
conditions. Internal agency analysis compared the replacement indices 
to the discontinued indices for the years 1981 through 2003. The 
replacement indices only triggered a qualifying quarter about one third 
as often as the discontinued indices when a 15% decrease in wood prices 
was used. Changing the decrease in wood prices to 11.5% better tracks 
the historical results generated under the discontinued indices for the 
purpose of determining qualifying quarters and maintaining the balance 
between extending the term of a timber sale contract and the number of 
defaults on timber sale contracts. Because the Wood Chips index was 
merely re-designated, the Forest Service has retained the 15% value 
applied to that index. Additionally, in response to public comments, 
the Forest Service herein clarifies ambiguity as to the timing of 
qualifying quarters. A qualifying quarter must be a quarter that 
follows the date of the contract award. This change is consistent with 
language in timber sale contracts and with the Forest Service's 
previous application of this rule.

Regulatory Certifications

Regulatory Impact

    This final rule has been reviewed under USDA procedures and 
Executive Order 12866 on Regulatory Planning and Review. It has been 
determined that this rule is not a significant regulatory action and is 
not subject to Office of Management and Budget (``OMB'') review. This 
rule will not have an annual effect of $100 million or more on the 
economy and will not adversely affect the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities. 
This rule will not interfere with an action taken or planned by another 
agency nor raise new legal or policy issues. In short, little or no 
effect on the national economy will result from this regulatory action, 
which consists of necessary, technical changes to the regulation 
governing market-related contract term additions. Using the replacement 
indices and the modified formula contained in this final rule, the 
Forest Service will be able to determine whether a drastic decline in 
wood products prices has occurred. Finally, this action will not alter 
the

[[Page 3411]]

budgetary impact of entitlements, grants, user fees, or loan programs 
or the rights and obligations of recipients of such programs. 
Accordingly, this final rule is not subject to OMB review under 
Executive Order 12866.
    Moreover, this final rule has been considered in light of the 
Regulatory Flexibility Act (5 U.S.C. 610 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. As 
revised in this rule, the formula better corresponds to the historical 
performance of the discontinued indices and allows the Forest Service 
to grant market-related contract term additions to small and large 
purchasers when market conditions warrant. Refining the formula for 
determining when a drastic reduction in wood product prices has 
occurred will have the intended effect of allowing purchasers 
additional time to complete contracts when severe adverse conditions 
have occurred in the wood products market.

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 Forest Service has assessed the effects of this final rule on 
State, local, and tribal governments and the private sector. This rule 
does not compel the expenditure of $100 million or more by any State, 
local, or tribal government or anyone in the private sector. Therefore, 
a statement under section 202 of the act is not required.

Environmental Impact

    This final rule concerns the extension of timber sale contracts 
when warranted by a drastic reduction in wood product prices, and, as 
such, has no direct effect upon the amount, location, or manner of 
timber offered for purchase. 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 Forest Service's 
assessment is that this rule falls within this category of actions and 
that no extraordinary circumstances exist which would require 
preparation of an environmental assessment or environmental impact 
statement.

Controlling Paperwork Burdens on the Public

    This final rule does not contain any recordkeeping or reporting 
requirements or other information collection requirements as defined in 
5 CFR part 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 part 1320 do not apply.

Energy Effects

    This final rule has been reviewed under Executive Order 13211, 
Actions Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. It has been determined that this rule does not 
constitute a significant energy action as defined in the Executive 
order.

Federalism

    The agency has considered this final rule under the requirements of 
Executive Order 13132, Federalism. The agency has made an assessment 
that the rule conforms with the federalism principles set out in this 
Executive Order; would not impose any compliance costs on the States; 
and would not have substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Consultation and Coordination With Indian Tribal Governments

    This final rule does not have tribal implications as defined in 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments, and, therefore, advance consultation with tribes is not 
required.

No Takings Implications

    This final rule has been analyzed in accordance with the principles 
and criteria contained in Executive Order 12630, and it has been 
determined that the rule does not pose the risk of a taking of 
Constitutionally-protected private property.

Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The agency has not identified any State or local 
laws or regulations that are in conflict with this regulation or that 
would impede full implementation of this rule. In any event, after 
adoption of this final rule: (1) All State and local laws or 
regulations that conflict with this rule or that would impede full 
implementation would be preempted; (2) no retroactive effect would be 
given to this final rule, except as described herein; and (3) the final 
rule would not require the use of administrative proceedings before 
parties could file suit in court challenging its provisions.

List of Subjects in 36 CFR Part 223

    Administrative practice and procedure, Exports, Forests and forest 
products, Government contracts, National forests, Reporting and 
recordkeeping requirements.

0
Therefore, for the reasons set forth in the preamble, part 223 of Title 
36 of the Code of Federal Regulations is amended as follows:

PART 223--SALE AND DISPOSAL OF NATIONAL FOREST SYSTEM TIMBER

0
1. The Authority citation for part 223 continues to read as follows:

    Authority: 90 Stat. 2958, 16 U.S.C. 472a; 98 Stat. 2213; 16 
U.S.C. 618, 104 Stat. 714-726, 16 U.S.C. 620-620j, unless otherwise 
noted.

0
2. Revise Sec.  223.52 (b)(2) to read as follows:


Sec.  223.52(b)(2)  Market-related contract term additions.

* * * * *
    (b) * * *
    (2) For PPI index codes 0811 and 0812, the Chief of the Forest 
Service shall determine that a drastic reduction in wood prices has 
occurred when, for any 2 or more consecutive qualifying quarters, the 
applicable adjusted price index is less than 88.5 percent of the 
average of such index for the 4 highest of the 8 calendar quarters 
immediately prior to the qualifying quarter. A qualifying quarter is a 
quarter, following the contract award date, where the applicable 
adjusted index is more than 11.5 percent below the average of such 
index for the 4 highest of the previous 8 calendar quarters. For PPI 
index code 3211135, the Chief of the Forest Service shall determine 
that a drastic reduction in wood prices has occurred when, for any 2 or 
more consecutive qualifying quarters, the adjusted price index is less 
than 85 percent of the average of such index for the 4 highest of the 8 
calendar quarters immediately prior to the qualifying quarter. A 
qualifying quarter is a quarter, following the contract award date, 
where the adjusted index is more than 15 percent below the average of 
such index for the 4 highest of the previous eight calendar quarters. 
Qualifying quarter determinations will be made using the Producer Price 
Indices for the months of March, June, September, and December.
* * * * *


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    Dated: January 13, 2006.
David P. Tenny,
Deputy Under Secretary, Natural Resources and Environment.
[FR Doc. 06-548 Filed 1-20-06; 8:45 am]
BILLING CODE 3410-11-P