[Federal Register Volume 71, Number 116 (Friday, June 16, 2006)]
[Rules and Regulations]
[Pages 34823-34826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-9424]



[[Page 34823]]

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DEPARTMENT OF AGRICULTURE

Forest Service

36 CFR Part 223

RIN 0596-AB70


Sale and Disposal of National Forest System Timber; Modification 
of Timber Sale Contracts in Extraordinary Conditions; Noncompetitive 
Sale of Timber

AGENCY: Forest Service, USDA.

ACTION: Interim final rule; request for comment.

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SUMMARY: This interim final rule revises regulations at Title 36, Code 
of Federal Regulations, part 223, on noncompetitive disposal of timber 
and other forest products based on the Secretary of Agriculture's 
determination that extraordinary conditions exist. The rule will expand 
upon the 1996 interim final rule currently applicable to certain sales 
in Washington and Oregon. The 1996 interim final rule defines 
extraordinary conditions to mean those circumstances where a contract 
must be changed to prevent environmental degradation or resource 
damage, or as the result of administrative appeals, litigation, court 
orders, or catastrophic events and applies throughout the National 
Forest System. This rule permits, without advertisement, timber or 
forest products from outside the area specified in the contract to 
replace material deleted from the contract when such extraordinary 
conditions exist. Replacement material must come from the same national 
forest as the subject contract and the decision to replace must be made 
in compliance with all applicable laws and regulations. The value of 
replacement material may not exceed the value of the material it is 
replacing by more than 10% or $10,000, whichever is less, as determined 
by standard Forest Service appraisal methods. The intended effect of 
this rule is to reduce damage claims by offering replacement material 
of similar volume, quantity, value, access and topography in lieu of 
contract cancellations or partial cancellations.

DATES: Effective Date: This rule is effective June 16, 2006.
    Comment Date: Comments must be received in writing on or before 
August 15, 2006.

ADDRESSES: Send written comments by U.S. Mail to Director of Forest 
Management; USDA Forest Service; 1400 Independence Avenue, SW., 
Mailstop 1103; Washington, DC 20250-1103; by e-mail to 
[email protected]; or by facsimile to (202) 205-1045.
    The public may inspect comments received on this rule in the Office 
of the Director, Forest Management Staff, Forest Service, USDA, 201 
14th Street, SW., Washington, DC 20250. Parties wishing to view 
comments are requested to call ahead (202) 205-1496 to ease entry into 
the building.

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

SUPPLEMENTARY INFORMATION: 

Background

    The National Forest Management Act (NFMA), codified in part at 
Title 16 U.S.C. 472a(d), requires the Secretary of Agriculture to 
advertise all sales of forest products unless the appraised value of 
the sale is less than $10,000, or the Secretary determines that 
extraordinary conditions exist, as defined by regulation. The 
requirement to advertise sales unless extraordinary conditions exist 
applies to the substitution of timber outside a sale contract area.
    District court injunctions in NFRC v. Glickman, (No. 95-6244-HO (D. 
Or.)) required the Forest Service to take immediate action pursuant to 
section 2001(k) of the 1995 Rescissions Act to award and release 
certain timber sales offered or awarded between October 1, 1990 and 
July 27, 1995. Concurrently the Forest Service needed to modify many of 
these sales to meet standards and guidelines of the 1994 Northwest 
Forest Plan Amendment before they were awarded or released. Given the 
duty to comply with the district court's injunction, and the urgent 
need to modify these timber sales to meet standards and guidelines of 
the 1994 Northwest Forest Plan Amendment, in 1996 the Secretary 
promulgated an interim final rule set out at 36 CFR 223.85(b), that 
defined extraordinary conditions for sales released pursuant to section 
2001(k) of the 1995 Rescissions Act (61 FR 14618, April 3, 1996).
    The 1996 interim final rule allows substituting timber from outside 
the sale area specified in the contract, without advertisement, on 
specific timber sales in Washington and Oregon affected by section 
2001(k) of the fiscal year 1995 Rescissions Act (Pub. L. 104-19), that 
were previously subject to section 318 of the fiscal year 1990 Interior 
and Related Agencies Appropriations Act (Pub. L. 101-121, 103 Stat. 
745). One of the primary reasons for promulgating this rule was the 
recognition that the event or situation causing a need for replacement 
timber generally precludes obtaining suitable replacement timber from 
within the original contract area. The 1996 rule does not place any 
restrictions on where outside the contract area of 2001(k) sales 
replacement timber may be obtained. Hence, replacement timber for sales 
in Washington and Oregon could come from any national forest in the 
system.
    Pursuant to the advertising requirements of 16 U.S.C. 472a(d), 
material found outside the contract area must be offered competitively 
to other potential contractors, unless the Secretary of Agriculture 
determines that extraordinary conditions exist. The current rule at 36 
CFR 223.85(b) is limited to 2001(k) sales and does not authorize 
contract modifications that add or replace material from outside the 
contract area of non-2001(k) sales.
    Prior to NFMA, the Government Accountability Office (formerly the 
General Accounting Office) held that substitution of timber outside the 
contract area for timber in the contract area violated the Agency's 
authority to sell timber (Letter to Mr. Secretary, 1973 WL 7905 (Comp. 
Gen.), B-177602 (1973)). Since the passage of NFMA, but in the absence 
of a regulation defining ``extraordinary conditions,'' the Agriculture 
Board of Contract Appeals has decided similarly in several cases. See 
Appeal of Summit Contractors, (1986 WL 19566 (AGBCA), Nos. 81-252-1, 
No. 83-312-1 (Jan. 8, 1986), and Appeal of Jay Rucker, 1980 WL 2345 
(AGBCA) Nos. 79-211A, 79-211B (June 11, 1980). See also, Croman 
Corporation v. United States, 31 Fed. Cl. 741, 746-47 (August 16, 
1994)).
    Developing case law on environmental and related statutes and 
regulations, such as the Endangered Species Act, the Clean Water Act, 
and the Clean Air Act, in conjunction with finding new information on 
the environmental effects and resource impacts of various activities on 
National Forest System land, has led to constantly changing and more 
rigorous management requirements.
    Before authorizing activities on National Forest System lands, the 
Forest Service must ensure compliance with applicable laws and 
regulations and with conditions on the ground at the time of the 
authorization. Even so, after entering into timber sale contracts, 
environmental changes may occur such as the listing of a new species on 
the endangered species list, or a catastrophic event may occur, such as 
a large wildfire resulting in the need to modify the contracts. Also, 
court orders and decisions resulting from environmental litigation may 
require making changes to existing contracts even when those contracts 
are not

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specifically named in the litigation if they are similar to contracts 
that were named. When this occurs, it is essential for Forest Service 
officials to have flexibility to adjust management activities and 
contractual arrangements without incurring enormous financial 
liability. At the time a sale is sold, there is no way to accurately 
predict what future litigation or environmental changes may occur that 
will result in the sale contract needing to be changed. Each occurrence 
is a unique situation that constitutes an extraordinary condition. The 
Forest Service needs the ability to provide replacement timber or 
forest products for contracts that must be modified to prevent 
environmental degradation or resource damage, or as a result of 
administrative appeals, litigation, court orders, or catastrophic 
events that occur after contract award. Thus, the Forest Service is 
revising the regulations on noncompetitive sale of timber and other 
forest products based on the Secretary of Agriculture's determination 
that extraordinary conditions exist whenever a timber or forest 
products contract needs to be modified or canceled to address such 
unexpected changes. This provides contracting officers with an 
opportunity to avert costly claims by providing replacement timber or 
forest products from outside the contract area.

Comments on the 1996 Interim Final Rule at 36 CFR 223.85(b)

    The comment period for the 1996 interim final rule ended May 20, 
1996. Because that interim final rule is similar to this interim final 
rule, those comments are being incorporated as background information 
for this rule. Two respondents submitted comments; one from a timber 
purchaser and one from a Federal agency. One respondent stated that 
this rule should apply agency-wide to provide broad authority to the 
Forest Service to prevent harvesting in areas under contract that are 
found to be environmentally sensitive and to give the Forest Service 
greater ability to negotiate modifications rather than canceling 
contracts and paying large damage claims. The Forest Service concurs 
with this recommendation and has incorporated it in this rule, but with 
limitations addressed in the following paragraph.
    One respondent expressed a need to allow replacement timber to come 
from other districts or other forests if needed to protect fish and 
wildlife resources. The Forest Service agrees in part with this 
recommendation and did that under NFRC v. Glickman on the basis that 
the 1995 Rescissions Act provided the independent authority to provide 
replacement timber in this manner. But the Forest Service found that 
going beyond the boundaries of the administrative unit where the 
original contract was let to find replacement timber often created 
other problems including greater difficulty in finding similar timber 
that could be harvested at comparable prices, increased National 
Environmental Policy Act costs, and interference with timber sale 
programs on other units. Because of those experiences, this interim 
final rule limits substitution to within the boundaries of the national 
forest where the subject contract is found. Confining replacement 
timber to the original national forest has the advantages of allowing 
individual Forest Supervisors to evaluate the pros and cons of 
substituting timber and forest products on their units based on the 
specific circumstances. This would lessen administrative, resource, and 
monetary effects to the purchaser and Forest Service. It also ensures 
accountability to the Forest Service administrative unit which offered 
the original contract.

Good Cause Statement

    This rule is being promulgated as an interim final rule for the 
following reasons: (1) Existing regulations at 36 CFR 223.85(b) already 
permit going outside of a contract area to find replacement timber for 
sales subject to section 2001(k) of the 1995 Rescissions Act. This rule 
expands the existing regulation to more than just those 2001(k) sales; 
(2) This rule is not expected to be controversial. Only two respondents 
provided comments during the comment period for the 1996 interim final 
rule at 36 CFR 223.85(b) that established a foundation for this rule. 
Both of those respondents supported going outside the contract area to 
find replacement timber; (3) Comments received in response to the 
proposed FS-2400-6 and FS-2400-6T timber sale contracts (68 FR 70758), 
and the interim integrated resource contracts FS-2400-13 and FS-2400-
13T (69 FR 59577) supported searching for replacement timber outside 
the contract area as an alternative to contract cancellation or partial 
cancellation. No comments were received opposing seeking replacement 
timber outside of the contract area; (4) Establishing a process for the 
Forest Service to provide replacement timber from outside the contract 
area has been a longstanding issue with timber purchasers and the 
forest products industry. By making this rule effective immediately 
upon publication, the Forest Service can finally resolve this issue by 
incorporating the change in the FS-2400-6 and FS-2400-6T contracts 
which are in the final stages of revision; and (5) By making this rule 
effective immediately upon publication, the Government may be able to 
provide replacement timber in lieu of paying damages on sales that are 
cancelled before notice, comment and publication of a final rule could 
be accomplished. During fiscal years 2004, 2005, and the first quarter 
of 2006, the Forest Service paid a little more than $4.6 million in 
damages associated with litigation and changes in environmental 
conditions affecting existing contracts. The Forest Service currently 
has approximately $60 million in unresolved claims associated with 
litigation and changes in environmental conditions affecting existing 
contracts. Many of these claims may have been averted if replacement 
timber could have been provided from outside the contract area. Some of 
these claims could still be resolved by providing replacement timber 
from outside the contract area in lieu of the Forest Service paying 
monetary damages. This interim final rule helps to reduce payment of 
costly claims and as such, implementation should not be delayed.

Explanation of Revisions to 36 CFR Part 223, Subpart B

    This interim final rule revises the current paragraph (b) at 36 CFR 
223.85 by correcting the reference to ``16 U.S.C. 472(d)'' to ``16 
U.S.C. 472a(d).'' This interim final rule also adds paragraph (c), 
which defines ``extraordinary conditions'' and allows forest officers, 
without advertisement, to make modifications to awarded timber and 
forest products contracts to replace timber or forest products from 
outside the area specified in the contract. But, it does place limits 
on substituting timber or forest products not contained in the 1996 
regulation in that replacement timber or forest products for non-
2001(k) sales must be from the same National Forest as the subject 
contract, must not exceed the value of the material it is replacing by 
more than 10% or $10,000, whichever is less, and must comply with laws 
and regulations applicable to any new timber sale including, but not 
limited to, the National Forest Management Act of 1976 as amended, the 
Endangered Species Act of 1973 as amended, the National Environmental 
Policy Act of 1970 as amended, and the Appeals Reform Act as amended. 
This interim final rule authorizes the Forest Service and the purchaser 
to search for, within the same national forest as the subject sale, 
replacement timber of similar volume, quantity, value, access, and

[[Page 34825]]

topography, and to adjust stumpage prices to account for differences 
between replacement timber and timber deleted. The Forest Service and 
purchaser shall make good faith efforts to identify replacement timber 
within these parameters. When replacement timber or forest products 
agreeable to both parties is identified, the contract will be modified 
to reflect the changes associated with the substitution, including a 
rate redetermination. Concurrently, both parties will sign an agreement 
waiving any future claims for damages associated with the deleted 
timber or forest products except those specifically provided for under 
the contract up to the time of the modification. Either party may opt 
to end the search if satisfactory replacement timber or forest products 
cannot be found. Although the objective will be to replace timber of 
equal quantity and value, exact matches are unlikely and in some cases 
will exceed the value of the timber it is replacing. However, the 
interim final rule specifies that the value of replacement material may 
not exceed the value of the material it is replacing by more than 10% 
or $10,000, whichever is less, as determined by standard Forest Service 
appraisal methods. To the extent that contract cancellations and 
partial cancellations are avoided, the effect of this rule will be to 
allow purchasers to harvest timber as expected when they entered into 
the timber sale contract and will also provide the Forest Service an 
opportunity to mitigate potential damage claims that may arise as the 
result of a cancellation or partial cancellation of the contract.

Regulatory Certifications

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 Agency has assessed the effects of this 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 governments or anyone in the private sector. Therefore, a 
statement under section 202 of the Act is not required.

Regulatory Impact

    This rule has been reviewed under USDA procedures and Executive 
Order 12866, Regulatory Planning and Review. The Office of Management 
and Budget (OMB) has determined that this is not a significant rule. 
This rule 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 rule 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 rule is not subject to OMB review under 
Executive Order 12866.
    Moreover, this rule has been considered in light of Executive Order 
13272 regarding proper consideration of small entities and the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), which 
amended the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). An 
initial small entities flexibility assessment has been made 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 SBREFA. 
The rule has no adverse or special impacts on small business, small 
not-for-profit organizations, or small units of the Government because 
it imposes no additional requirements on the affected public.

Environmental Impact

    This rulemaking action falls within a category of actions excluded 
from documentation in an environmental impact statement or 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 
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 for this rule.

No Takings Implications

    This rule has been analyzed in accordance with the principles and 
criteria contained in Executive Order 12360, and it has been determined 
that the rule will not pose the risk of a taking of private property, 
as the rule is limited to the establishment of administrative 
procedures.

Civil Justice Reform

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. After adoption of this rule, (1) all State and local 
laws and regulations that conflict with this rule or that would impede 
full implementation of this rule will be preempted; (2) no retroactive 
effect will be given to this rule; and (3) this rule would not require 
the use of administrative proceedings before parties could file suit in 
court challenging its provisions.

Federalism

    The Agency has considered this rule under the requirements of 
Executive Order 13132, Federalism. The Agency has made a preliminary 
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. Based on comments received on this 
interim final rule, the Agency will consider if any additional 
consultation will be needed with State and local governments prior to 
adopting a final rule.

Consultation and Coordination With Indian Tribal Governments

    This rule does not have tribal implications as defined by Executive 
Order 13175, Consultation and Coordination with Indian Tribal 
Governments. Therefore, advance consultation with Tribes is not 
required.

Controlling Paperwork Burdens on the Public

    This rule does not require any record keeping 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.

List of Subjects in 36 CFR Part 223

    Exports, Government contracts, National Forest, Reporting and 
record keeping requirements, Timber sales.

0
For the reasons set forth in the preamble, the Forest Service proposes 
to amend part 223 of title 36 of the Code of Federal Regulations as 
follows:

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

Subpart B--Timber Sale Contracts

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


[[Page 34826]]


    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. Amend Sec.  223.85 by revising paragraph (b) and adding paragraph 
(c) to read as follows:


Sec.  223.85  Noncompetitive sale of timber.

* * * * *
    (b) Extraordinary conditions, as provided for in 16 U.S.C. 472a(d), 
are defined to include the potential harm to natural resources, 
including fish and wildlife, and related circumstances arising as a 
result of the award or release of timber sale contracts pursuant to 
section 2001(k) of Public Law 104-19 (109 Stat. 246). Notwithstanding 
the provisions of paragraph (a) of this section or any other regulation 
in this part, for timber sale contracts that have been or will be 
awarded or released pursuant to section 2001(k) of Public Law 104-19 
(109 Stat. 246), the Secretary of Agriculture may allow forest officers 
to, without advertisement, modify those timber sale contracts by 
substituting timber from outside the sale area specified in the 
contract for timber within the timber sale contract area.
    (c) Extraordinary conditions, as provided for in 16 U.S.C. 472a(d), 
includes those conditions under which contracts for the sale or 
exchange of timber or other forest products must be suspended, 
modified, or terminated under the terms of such contracts to prevent 
environmental degradation or resource damage, or as the result of 
administrative appeals, litigation, court orders, or catastrophic 
events. Notwithstanding the provisions of paragraph (a) of this section 
or any other regulation in this part, when such extraordinary 
conditions exist on sales not addressed in paragraph (b) of this 
section, the Secretary of Agriculture may allow forest officers to, 
without advertisement, modify those contracts by substituting timber or 
other forest products from outside the contract area specified in the 
contract for timber or forest products within the area specified in the 
contract. When such extraordinary conditions exist, the Forest Service 
and the purchaser shall make good faith efforts to identify replacement 
timber or forest products of similar volume, quality, value, access, 
and topography. When replacement timber or forest products agreeable to 
both parties is identified, the contract will be modified to reflect 
the changes associated with the substitution, including a rate 
redetermination. Concurrently, both parties will sign an agreement 
waiving any future claims for damages associated with the deleted 
timber or forest products, except those specifically provided for under 
the contract up to the time of the modification. If the Forest Service 
and the purchaser cannot reach agreement on satisfactory replacement 
timber or forest products, or the proper value of such material, either 
party may opt to end the search. Replacement timber or forest products 
must come from the same national forest as the original contract, and 
must meet agency requirements for compliance with applicable laws and 
regulations. Replacement timber or forest products must also come from 
an area included in an approved National Environmental Policy Act 
decision in which the appeals process has been exhausted. The value of 
replacement timber or forest products may not exceed the value of the 
material it is replacing by more than 10% or $10,000, whichever is less 
as determined by standard Forest Service appraisal methods.

    Dated: June 7, 2006.
David P. Tenny,
Deputy Under Secretary, Natural Resources and Environment.
 [FR Doc. E6-9424 Filed 6-15-06; 8:45 am]
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