[Federal Register Volume 72, Number 202 (Friday, October 19, 2007)]
[Rules and Regulations]
[Pages 59187-59190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-20625]


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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: Final rule.

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SUMMARY: This 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. A notice with 
request for comment on an interim final rule was published in the 
Federal Register on June 16, 2006. The Forest Service made appropriate 
changes to the rule in response to the public comments.

DATE: This rule is effective November 19, 2007.

ADDRESSES: The public may inspect comments received at Office of the 
Director, Forest Management Staff, Forest Service, USDA, 201 14th 
Street, SW., Washington, DC 20250. Visitors are encouraged to call 
ahead to (202) 205-1496 to facilitate entry to the building.

FOR FURTHER INFORMATION CONTACT: Forest Management Staff personnel, 
Lathrop Smith (202) 205-0858, or Richard Fitzgerald (202) 205-1753.
    Individuals who use telecommunication devices for the deaf (TDD) 
may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 
between 8 a.m. and 8 p.m., Eastern Standard Time, Monday through 
Friday.

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.
    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.\1\ 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.\2\
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    \1\ Letter to Mr. Secretary, 1973 WL 7905 (Comp. Gen.), B-177602 
(1973).
    \2\ 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).
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    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 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 associated with unilateral modifications or contract 
cancellations.
    At the time a sale is sold, there is no way to 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 promulgated an interim 
final rule, published June 16, 2006 (71 FR 34823), 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 benefits the 
Government by providing contracting officers with an opportunity to 
avert costly claims by providing replacement timber or forest products 
from outside the contract area when replacement timber is not available 
within the contract area. Replacement timber also helps maintain the 
industry infrastructure, which in turn will maintain forest management 
options.

Response to Comments

    A 60-day comment period on the interim final rule was initiated on 
June 16, 2006, (71 FR 34823). Only two respondents replied. One 
respondent is an individual and the other respondent is a timber 
industry association.
    Comment 1: The constraints 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, are too restrictive and will hamper 
implementation and use of this valuable tool. On small amounts of 
replacement timber, 10% may represent a very small amount of money, and 
on large volumes the $10,000 may represent a small percentage of value. 
If one or both of these numbers has some basis in law and cannot be 
removed, the only fair way to deal with this situation is to have these 
be upper and lower limits.
    Response 1: The limitations were intended to reduce potential 
impacts to other purchasers while making the purchaser of a sale that 
must be modified or terminated whole. Replacement timber from outside 
the sale area will most likely come from some other sale that would 
otherwise be offered competitively on the open market. Offering 
substantially more replacement timber than the amount or value being 
deleted by a unilateral termination goes beyond making a purchaser 
whole, circumvents fair and open competition and could have detrimental 
consequences to other purchasers, the public, and Forest Service 
program objectives. For the following reasons the Forest Service agrees 
that the 10% limit is unnecessary but disagrees that the $10,000 limit 
is overly restrictive.
    The National Forest Management Act (NFMA) requires advertising 
sales greater than $10,000 in appraised value unless the Secretary 
determines, as

[[Page 59188]]

defined by regulation, that extraordinary conditions exist (16 U.S.C. 
472a(d)). The intent of this rule is to establish the Secretary's 
determination of extraordinary conditions so that replacement timber of 
similar quantity and value can be obtained from outside the sale area 
without advertisement, even when its total value is greater than 
$10,000. The Forest Service recognizes, however, that exact matches 
with the original contract value, quantity and quality are unlikely and 
that a defined measure of acceptable deviation is necessary. The Forest 
Service believes that providing replacement timber volume with an 
appraised value of no more than $10,000 over the original contract 
value is an acceptable amount of deviation. The premise for this is 
that the original value of the timber being replaced was established 
after advertisement and the opportunity for competitive bidding in 
accordance with the advertisement and competition requirements of NFMA 
and its implementing regulations. Therefore, only the value of 
replacement timber exceeding the value of the original timber volume 
being replaced was not previously subject to advertisement and 
competition requirements. Advertisement and competition of the excess 
replacement timber is not required by NFMA or the regulations so long 
as the excess value remains at or below $10,000.
    The rules at 36 CFR 223.112 require that contract modifications 
must not be done in a manner that would be injurious to the United 
States. For the reasons stated above, the Forest Service believes that 
replacement timber valued at no more than $10,000 over the original 
contract value adequately accounts for differences in contract and 
replacement timber value and ensures that contracts are not modified in 
a manner that would be injurious to the United States. Imposing the 
$10,000 upper limit on the value of replacement timber establishes a 
reasonable and acceptable measure of deviation, prevents a purchaser 
from getting a potential windfall, and eliminates the need for the 
Forest Service to determine, on a case-by-case basis, the level of 
acceptable deviation that may result in a modification that is not 
injurious to the United States. The Forest Service does not believe 
this upper limit is overly restrictive and will retain it in the final 
rule. The Forest Service agrees, however, that the 10% limit imposed in 
the interim final rule is not necessary for determining an acceptable 
level of deviation, and for that reason, it will be eliminated from the 
final rule.
    The respondent suggested that if there was an upper limit there 
should be a corresponding lower limit on the value of replacement 
timber. For example, if $50,000 of replacement timber is needed, 
applying the $10,000 limit addressed above would require the value of 
replacement timber to be no less than $40,000. The Forest Service 
disagrees as this would have the effect of guaranteeing replacement 
timber which is simply an alternative remedy, when it is available, to 
liquidated damages addressed in the contracts. Although the rule 
provides broad authority for authorizing replacement timber for a 
variety of reasons, neither the rule nor the contracts require the 
Forest Service to provide, or the purchaser to agree to replacement 
timber. No changes are made in response to this portion of the comment.
    Comment 2: The Forest Service should clarify the standard used to 
determine what volume will be removed from a contract because of 
wildfire or similar catastrophic event.
    Response 2: The reference to catastrophic events in the interim 
final rule has led to confusion with some interpreting this to mean 
that the Forest Service would replace catastrophically damaged timber 
with comparable undamaged timber. This was not the intent. Replacement 
timber is only a remedy for a contract termination or partial 
termination under subsection B/BT8.34 Contract Termination. Replacement 
timber is not a remedy for a contract termination or partial 
termination under subsection B/BT8.22 Termination for Catastrophe. 
However, a single sale could be terminated under both B/BT8.22 and B/
BT8.34.
    For example, a fire catastrophically damages 60% of a sale area 
including several uncut units and timber between those units. Pursuant 
to B/BT8.32 Modification for Catastrophe, the Forest Service and 
Purchaser try, but cannot reach agreement on a modification for 
harvesting the catastrophically affected timber, and elect termination 
under B/BT8.22. The remaining 40% of the sale was not damaged, includes 
``green'' units that the purchaser wants to cut, and pursuant to B/
BT8.32 Modification for Catastrophe the parties agree could be logged 
separately from the catastrophically damaged timber. But, the Forest 
Service determines that because of the changed conditions caused by the 
fire, harvesting the remaining green units will cause environmental 
degradation and starts the process to terminate that portion of the 
contract pursuant to B/BT8.34. Replacement timber from outside the sale 
area could be considered for the undamaged timber included under the B/
BT8.34 termination but not for the damaged timber included under the B/
BT8.22 termination. Although the catastrophic event caused the 
situation leading to a decision to terminate the undamaged portions of 
the sale, the actual reason to terminate is to prevent environmental 
degradation. Referencing catastrophic events in the rule is unnecessary 
and because the reference can be misinterpreted it has been eliminated 
in the final rule.
    Contracts awarded prior to the April 2004 version of the Timber 
Sale Contract do not contain references to replacement timber in event 
of a termination but the rule potentially could be applied to those 
contracts as well via a contract modification. The Forest Service 
agrees that more clarification of how the rule could be applied to 
those contracts would help and will do that with an amendment to the 
Timber Sale Administration Handbook FSH 2409.15. But no changes to the 
rule are needed to address this situation.
    Comment 3: Offering substitute timber outside the sale area 
specified in the contract is a common sense approach to meeting 
contractual obligations and maintaining an equitable balance of risk. 
Replacement timber will help maintain the industry infrastructure which 
will maintain forest management options.
    Response 3: The Forest Service agrees. No changes are made in 
response to this comment.
    Comment 4: The respondent opposed the determination of 
``extraordinary conditions'' likening it to an environmental assault 
emanating from the U.S. Department of Agriculture and suggesting that 
the determination is based on the desires of lobbyists working for the 
timber industry in corrupt Washington.
    Response 4: The Forest Service disagrees that the determination of 
extraordinary conditions is made based on the desires of timber 
industry lobbyists. The determination has precedent supporting it. 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 rule has reduced claims by allowing timber 
from outside the sale area specified in the contract to be substituted, 
without advertisement, on specific timber sales in Washington and 
Oregon affected by the 1995 Rescissions Act. A similar result is 
anticipated with this rule. The only impact of this determination is to 
allow replacement timber or other forest

[[Page 59189]]

products without advertisement. The Forest Service may consider only 
such timber or forest products for replacement purposes for which the 
agency has completed the appropriate environmental analysis and made a 
decision to authorize its harvest. Additionally, any applicable 
comment, appeal, or objection process for the harvest must have been 
completed. No changes are made in response to this comment.
    Comment 5: Respondent supported the concept of replacement timber 
in lieu of contract cancellations noting that this will benefit the 
public by encouraging on-the-ground resource management while 
minimizing taxpayer burdens associated with damage claims.
    Response 5: The Forest Service agrees. No changes are made in 
response to this comment.
    Comment 6: Replacement timber will help maintain the industry 
infrastructure, which will in turn maintain forest management options.
    Response 6: The Forest Service agrees. No changes are made in 
response to this comment.

Explanation of Revisions to 36 CFR Part 223, Subpart B

    The interim final rule in Sec.  223.85(c), specified that 
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. The reference to catastrophic events in the interim final rule 
led to confusion with some interpreting this to mean that the Forest 
Service would replace catastrophically damaged timber with comparable 
undamaged timber. The intent was to address situations where harvesting 
the remaining green timber on a catastrophically damaged sale would 
result in environmental degradation or resource damage. In those 
situations, replacement timber would be an alternative to harvesting 
the remaining green timber or canceling the contract. The intent of the 
rule was not to replace catastrophically damaged timber with undamaged 
timber. The reference to catastrophically damaged timber has been 
removed in this final rule.
    Section 223.85(c), of the interim final rule specified that 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. 
Based on comments received on the interim final rule, and further 
evaluation by the Forest Service, the 10% limit has been removed in the 
final rule.
    Section 223.85(c), of the interim final rule specified that the 
replacement timber or forest products must come from the same National 
Forest as the original contract. In some cases, several proclaimed 
National Forests have been combined under one Forest Supervisor for 
administration purposes. The term National Forest in this paragraph 
refers to an administrative unit headed by a single Forest Supervisor. 
This distinction has been added to the final rule.

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, as amended by E.O. 13422 
on January 23, 2007. 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.). A final 
regulatory 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

    Section 31.12 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 Servicewide 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, 
and therefore, the preparation of an environmental assessment or 
environmental impact statement for this rule is not required.

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 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.

[[Page 59190]]

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

    Administrative practice and procedures, Forests and forest 
products, Exports, Government contracts, National forests, Reporting 
and record keeping requirements.

0
For the reasons set forth in the preamble, the Forest Service is 
amending part 223 of title 36 of the Code of Federal Regulations 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.

Subpart B--Timber Sale Contracts

0
2. Revise Sec.  223.85(c) to read as follows:


Sec.  223.85  Noncompetitive sale of timber.

* * * * *
    (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, or court orders. 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. The term 
National Forest in this paragraph refers to an administrative unit 
headed by a single Forest Supervisor. Only timber or forest products 
for which a decision authorizing its harvest has been made and for 
which any applicable appeals or objection process has been completed 
may be considered for replacement pursuant to this paragraph. The value 
of replacement timber or forest products may not exceed the value of 
the material it is replacing by more than $10,000, as determined by 
standard Forest Service appraisal methods.

    Dated: October 12, 2007.
Mark Rey,
Under Secretary, Natural Resources and Environment.
 [FR Doc. E7-20625 Filed 10-18-07; 8:45 am]
BILLING CODE 3410-11-P