[Federal Register Volume 73, Number 214 (Tuesday, November 4, 2008)]
[Rules and Regulations]
[Pages 65546-65552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26203]


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DEPARTMENT OF AGRICULTURE

Forest Service

36 CFR Part 223

RIN 0596-AC79


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

AGENCY: Forest Service, USDA.

ACTION: Final rule.

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SUMMARY: The original Market-Related Contract Term Addition (MRCTA) 
regulation was adopted in 1990 to provide financial relief to timber 
sale purchasers during cyclic downturns in forest products markets. 
However, the current drastic reduction in Forest Product markets, which 
began in late 2004, revealed several problems with the existing MRCTA 
regulation. Therefore, this final rule is needed to help ensure that 
the MRCTA regulation functions as originally intended.
    This final rule makes four changes to the MRCTA regulation. First, 
the regulation now allows more than 3 years to be added to a contract's 
term pursuant to MRCTA when there is a drastic reduction in wood 
product prices that lasts for more than 10 out of 12 consecutive 
quarters. Second, the regulation now gives contracting officers the 
flexibility needed to assign the most appropriate Bureau of Labor 
Statistics Producer Price Index (PPI) to a timber sale contract. Third, 
the regulation now prevents any single 3-month MRCTA from extending a 
contract's term by more than 1 year. Finally, the regulation now 
explicitly states what types of sales are ineligible for any MRCTA 
relief.

DATES: This rule is effective December 4, 2008.

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

    In order to encourage the retention of a viable established 
industry capable of supplying the wood fiber needs of the public for 
housing and other products, the Chief of the Forest Service issued a 
final rule (36 CFR 223.52) on December 7, 1990, finding that the 
substantial overriding public interest justifies MRCTAs whenever there 
is a drastic reduction in wood product prices (55 FR 50643). The 
Chief's finding was based on the fact that MRCTAs (1) help purchasers 
avoid severe financial hardship; (2) ensure that the Federal government 
receives payments due from purchasers by reducing the likelihood of 
defaults; and (3) help ensure that receipts to States and counties from 
timber sales are not adversely affected by contract defaults. 
Additionally, MRCTAs help promote stability in the wood products 
industry, which helps promote competition, employment, investment, 
productivity, innovation and the industry infrastructure needed by the 
Forest Service to accomplish land management objectives most 
economically done with timber sales. (73 FR 53817).
    In accordance with the December 7, 1990, final rule, the Forest 
Service uses PPIs to determine when a drastic reduction in wood product 
prices has occurred. The Forest Service currently uses the Softwood 
Lumber Index (WPU0811), the Hardwood Lumber index (WPU0812) and the 
Wood Chips index (PCU3211133211135) to monitor different wood products. 
Except for sales of timber subject to rapid deterioration, each 
contract over 1 year in length is assigned the index that represents 
more than one-half of the advertised volume. When a drastic reduction 
in the assigned index has occurred for two consecutive quarters during 
the contract period, the Forest Service notifies purchasers and, upon a 
purchaser's written request, adds 1 year to the contract term. For each 
additional consecutive quarter a drastic reduction occurs, the Forest 
Service, upon a purchaser's written request, adds an additional 3-month 
period to the normal operating season of the contract.
    Under the current rule, no more than twice the original contract 
length or 3 years, whichever is less, may be added to a contract's term 
by MRCTA. Pursuant to the National Forest Management Act of 1976 (16 
U.S.C. 472a(c)), total contract length cannot exceed 10 years as the 
result of a MRCTA. Further, MRCTA may not be granted for those portions 
of the contracts (1) with a required completion date other than the 
contract termination date, (2) with timber the Forest Service 
determines is in need of urgent removal, or (3) where the Forest 
Service determines timber deterioration or resource damage may result 
from delay.
    Since the MRCTA rule was adopted in 1990, a drastic reduction in 
softwood lumber prices occurred for five quarters in 1994-1995, three 
quarters in 1998, six quarters in 2000-2001, and for 12 quarters 
beginning in September 2005, through June 2008. The hardwood index has 
also shown a drastic reduction for three quarters in 2005-2006 and in 
the first two quarters of 2008. As a result, many purchasers requested 
and received MRCTA for qualifying timber sales.
    The MRCTA regulation's intent is to avert widespread contract 
defaults and attendant adverse economic impacts on industry and 
dependent communities. Using MRCTA to add no more than 3 years to a 
contract's term met that objective during previous drastic reductions. 
However, when a drastic reduction in wood prices continues for more 
than 3 straight years, like the current softwood lumber market,

[[Page 65547]]

purchasers holding high priced sales bid when the markets were stronger 
face severe economic hardship without the ability to rely on additional 
MRCTA for relief.
    To respond to the poor market conditions and associated adverse 
economic impacts on industry and dependent communities, Section 8401 of 
the Food, Conservation, and Energy Act of 2008, Public Law No. 110-246, 
122 Stat. 1651 (June 18, 2008), authorized the Forest Service to use 
MRCTA to add up to 4 years to the original length of contracts awarded 
prior to January 1, 2007. While section 8401 provided immediate relief 
to contracts that had or were about to reach the 3-year limit, the 
committee notes for section 8401 state ``the Managers encourage the 
Forest Service to revise the existing regulations within 90 days of 
enactment of this Act to reflect provisions of this section for future 
market problems.''
    In response, on September 3, 2008, the Forest Service sought public 
comment on proposed amendments to the MRCTA regulation. (73 FR 51388).

Agency Response to Major Public Comments

    The Forest Service received comments responsive to the merits of 
the rule from three respondents. Two of the responses were from timber 
industry associations who supported the intent of the proposed changes. 
However, one of those respondents recommended changes. The third 
response was from an environmental organization that raised several 
issues related to the rule. Agency responses to the public comments are 
as follows:
    Comment: The proposed amended rules would have an overall positive 
effect on the Forest Service timber sale program and are in the best 
interest of the people of the United States. The Forest Service should 
move ahead with amending the regulations to expand the maximum amount 
of additional contract time contracts can receive during prolonged 
periods of market price reductions and to modify the procedure for 
selecting the proper producer price index.
    Response: While these are statements for which no response is 
necessary, it is noted that all three respondents specifically 
supported the proposed changes to establishing the appropriate producer 
price index.
    Comment: We are concerned that the agency has proposed allowing 
additional quarters of MRCTA only after the relevant producer price 
index has triggered for 11 consecutive quarters. This would potentially 
exclude numerous contracts if there is a temporary rebound in the 
market with the longer term decline trend resuming quickly thereafter. 
``We strongly urge the agency to modify the final rule to allow 
additional quarters of MRCTA when the relevant PPI triggers for 6 of 
the 8 previous quarters, allowing MRCTA up to 10 years. At this point, 
a sale may only be extended by a determination of the Chief that doing 
so will lead to better utilization of the forest resources.''
    Response: The comment addresses three issues: (1) The number of 
qualifying quarters needed to trigger additional MRCTA time; (2) the 
proposed requirement that those triggering quarters must be 
consecutive; and (3) the 10-year limit on total contract length 
pursuant to the National Forest Management Act of 1976 (NFMA). These 
issues will be responded to separately as follows:
    (1) Under the old rule, the maximum amount of time that could be 
added to a contract's term by MRCTA was 3 years. The proposed rule was 
designed to only allow MRCTA to extend a contract's term beyond 3 years 
when there is a drastic reduction in forest products markets that lasts 
over 2\1/2\ years, like the current decline and the decline in the 
early 1980s. The Forest Service looked at all the trigger periods for 
the softwood lumber and hardwood lumber PPIs from the late 1970s to the 
present and used the two longest declines as a basis for the proposed 
rule. Table 1 below shows quarters triggering MRCTA for the softwood 
lumber and hardwood lumber PPIs since 1978. Since the MRCTA procedures 
were not adopted until December 1990, and have been amended several 
times since then, the data shows quarters that would have qualified 
using the procedures in the rule being amended. Also, because the 
Bureau of Labor Statistics PPIs are not adjusted for inflation, the 
Forest Service calculates a relative index adjusted for inflation that 
allows comparisons to be made over time on a constant dollar basis. 
Qualifying quarters occur when the relative index is less than 88.5 
percent of the average high of the four highest quarters in the 
previous eight quarters.

                                                      Table 1--Bureau of Labor Statistics PPI Data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Avg. high                                                 Avg. high
                                        Relative     4 of 8    88.5% of                           Relative     4 of 8    88.5% of
                Qtr/yr                  softwood     prior      high 4     Qualifying quarter     hardwood     prior      high 4    Qualifying  quarter
                                          index       qtrs       qtrs                               index       qtrs       qtrs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sep-78...............................       155.8      152.6      135.0  ......................       131.7      123.8      109.5
Dec-78...............................       155.3      154.6      136.9  ......................       130.9      126.7      112.1
Mar-79...............................       154.0      155.3      137.5  ......................       129.9      129.3      114.5
Jun-79...............................       151.5      155.4      137.5  ......................       127.8      130.4      115.4
Sep-79...............................       155.9      155.4      137.5  ......................       122.7      130.4      115.4
Dec-79...............................       134.4      155.2      137.4  Yes...................       118.6      130.4      115.4
Mar-80...............................       128.8      155.2      137.4  Yes...................       112.6      130.4      115.4  Yes.
Jun-80...............................       115.2      155.2      137.4  Yes...................       107.6      130.4      115.4  Yes.
Sep-80...............................       118.4      155.2      137.4  Yes...................       102.9      130.1      115.1  Yes.
Dec-80...............................       117.9      154.2      136.4  Yes...................       101.0      127.9      113.2  Yes.
Mar-81...............................       110.9      148.9      131.8  Yes...................        98.5      124.8      110.4  Yes.
Jun-81...............................       112.7      142.7      126.3  Yes...................        99.0      120.4      106.6  Yes.
Sep-81...............................       105.6      134.4      118.9  Yes...................        99.8      115.4      102.1  Yes.
Dec-81...............................       101.2      124.9      110.5  Yes...................        99.8      110.4       97.7
Mar-82...............................        99.6      120.1      106.3  Yes...................        99.6      106.0       93.8
Jun-82...............................       102.0      116.1      102.7  Yes...................       100.1      102.8       91.0
Sep-82...............................        99.8      115.0      101.8  Yes...................       100.0      101.0       89.3
Dec-82...............................        99.8      111.8       98.9  ......................       100.9      100.2       88.7
Mar-83...............................       114.4      107.8       95.4  ......................       103.1      100.2       88.7
Jun-83...............................       122.5      108.7       96.2  ......................       105.4      101.0       89.4
Sep-83...............................       109.4      111.1       98.3  ......................       109.0      102.4       90.6
Dec-83...............................       109.5      112.1       99.2  ......................       114.1      104.6       92.6

[[Page 65548]]

 
Mar-84...............................       114.5      114.0      100.8  ......................       115.5      107.9       95.5
Jun-84...............................       105.4      115.2      102.0  ......................       119.5      111.0       98.2
Sep-84...............................       101.5      115.2      102.0  Yes...................       119.6      114.5      101.4
Dec-84...............................       102.7      115.2      102.0  ......................       115.8      117.2      103.7
Mar-85...............................       104.8      115.2      102.0  ......................       115.8      117.6      104.1
Jun-85...............................       112.6      114.0      100.9  ......................       113.4      117.7      104.2
Sep-85...............................       102.4      111.5       98.7  ......................       113.0      117.7      104.2
Dec-85...............................        98.5      110.5       97.8  ......................       110.7      117.7      104.2
Mar-86...............................       105.7      109.3       96.8  ......................       116.3      117.7      104.2
Jun-86...............................       108.4      107.1       94.8  ......................       118.2      117.8      104.3
Sep-86...............................       111.8      107.9       95.5  ......................       119.8      117.5      104.0
Dec-86...............................       108.9      109.6       97.0  ......................       121.2      117.5      104.0
Mar-87...............................       112.7      110.4       97.7  ......................       122.7      118.9      105.2
Jun-87...............................       112.5      111.5       98.7  ......................       122.8      120.5      106.6
Sep-87...............................       118.7      111.5       98.7  ......................       123.9      121.6      107.6
Dec-87...............................       112.3      113.9      100.8  ......................       126.1      122.7      108.5
Mar-88...............................       114.6      114.1      100.9  ......................       126.8      123.9      109.6
Jun-88...............................       114.1      114.6      101.5  ......................       124.3      124.9      110.5
Sep-88...............................       110.4      115.0      101.8  ......................       119.2      125.3      110.9
Dec-88...............................       107.2      115.0      101.8  ......................       116.7      125.3      110.9
Mar-89...............................       111.1      115.0      101.8  ......................       114.3      125.3      110.9
Jun-89...............................       116.5      115.0      101.8  ......................       113.9      125.3      110.9
Sep-89...............................       114.9      116.0      102.6  ......................       113.9      125.3      110.9
Dec-89...............................       108.2      115.0      101.8  ......................       114.6      124.1      109.8
Mar-90...............................       112.3      115.0      101.8  ......................       114.6      121.8      107.8
Sep-90...............................       109.9      114.4      101.3  ......................       115.0      118.7      105.1
Sep-90...............................       103.0      113.7      100.6  ......................       111.0      116.4      103.0
Dec-90...............................        97.8      113.7      100.6  Yes...................       109.6      115.2      102.0
Mar-91...............................       100.9      113.7      100.6  ......................       110.9      114.6      101.5
Jun-91...............................       118.7      113.4      100.4  ......................       109.6      114.5      101.4
Sep-91...............................       108.6      114.0      100.8  ......................       110.1      114.5      101.3
Dec-91...............................       111.9      112.4       99.5  ......................       112.6      113.8      100.7
Mar-92...............................       131.7      113.2      100.2  ......................       115.6      113.3      100.3
Jun-92...............................       125.6      118.1      104.5  ......................       118.2      113.5      100.5
Sep-92...............................       124.8      122.0      108.0  ......................       122.7      114.3      101.2
Dec-92...............................       135.7      125.2      110.8  ......................       128.7      117.3      103.8
Mar-93...............................       178.6      129.5      114.6  ......................       133.0      121.3      107.3
Jun-93...............................       155.5      142.9      126.5  ......................       139.2      125.7      111.2
Sep-93...............................       156.6      150.4      133.1  ......................       140.7      130.9      115.8
Dec-93...............................       176.1      156.6      138.6  ......................       140.1      135.4      119.8
Mar-94...............................       175.6      166.7      147.5  ......................       140.3      138.2      122.3
Jun-94...............................       165.8      171.7      152.0  ......................       139.9      140.0      123.9
Sep-94...............................       159.4      174.0      154.0  ......................       139.5      140.2      124.1
Dec-94...............................       154.9      174.0      154.0  ......................       138.7      140.2      124.1
Mar-95...............................       149.6      174.0      154.0  Yes...................       137.2      140.2      124.1
Jun-95...............................       138.6      169.2      149.8  Yes...................       133.4      140.2      124.1
Sep-95...............................       143.7      169.2      149.8  Yes...................       132.2      140.2      124.1
Dec-95...............................       134.7      169.2      149.8  Yes...................       130.0      139.9      123.8
Mar-96...............................       138.1      163.9      145.1  Yes...................       130.1      139.6      123.5
Jun-96...............................       153.8      157.4      139.3  ......................       127.7      138.8      122.9
Sep-96...............................       159.0      154.4      136.7  ......................       127.5      137.2      121.4
Dec-96...............................       156.8      154.3      136.6  ......................       128.6      135.4      119.8
Mar-97...............................       165.4      154.8      137.0  ......................       134.5      133.2      117.9
Jun-97...............................       166.3      158.7      140.5  ......................       136.6      132.5      117.3
Sep-97...............................       158.4      161.9      143.2  ......................       138.7      133.3      118.0
Dec-97...............................       153.6      162.3      143.6  ......................       140.6      135.0      119.5
Mar-98...............................       155.3      162.3      143.6  ......................       144.2      137.6      121.8
Jun-98...............................       141.9      162.3      143.6  Yes...................       143.7      140.0      123.9
Sep-98...............................       141.5      162.3      143.6  Yes...................       143.9      141.8      125.5
Dec-98...............................       142.6      161.7      143.1  Yes...................       143.5      143.1      126.6
Mar-99...............................       157.7      161.3      142.8  ......................       143.5      143.8      127.3
Jun-99...............................       164.5      159.4      141.1  ......................       141.1      143.8      127.3
Sep-99...............................       154.2      159.0      140.7  ......................       138.5      143.8      127.3
Dec-99...............................       150.9      157.9      139.8  ......................       142.6      143.8      127.3
Mar-00...............................       147.6      157.9      139.8  ......................       141.5      143.8      127.3
Jun-00...............................       134.2      156.8      138.8  Yes...................       139.4      143.6      127.1
Sep-00...............................       124.4      156.8      138.8  Yes...................       138.7      143.4      126.9
Dec-00...............................       121.1      156.8      138.8  Yes...................       137.0      142.8      126.4
Mar-01...............................       121.9      156.8      138.8  Yes...................       135.8      142.2      125.8
Jun-01...............................       138.2      154.3      136.5  ......................       133.4      141.1      124.9

[[Page 65549]]

 
Sep-01...............................       130.1      147.7      130.7  Yes...................       134.2      140.6      124.4
Dec-01...............................       125.7      142.7      126.3  Yes...................       138.4      140.6      124.4
Mar-02...............................       137.3      137.5      121.7  ......................       136.4      139.5      123.5
Jun-02...............................       130.0      134.9      119.4  ......................       135.3      138.4      122.5
Sep-02...............................       128.1      133.9      118.5  ......................       135.1      137.6      121.8
Dec-02...............................       124.0      133.9      118.5  ......................       136.0      136.9      121.2
Mar-03...............................       116.5      133.9      118.5  Yes...................       130.9      136.7      120.9
Jun-03...............................       119.5      133.9      118.5  ......................       137.7      136.5      120.8
Sep-03...............................       132.7      131.4      116.3  ......................       137.9      137.1      121.4
Dec-03...............................       128.0      132.0      116.9  ......................       138.8      137.6      121.8
Mar-04...............................       143.0      132.0      116.9  ......................       138.2      137.7      121.9
Jun-04...............................       148.5      133.5      118.1  ......................       135.7      138.1      122.3
Sep-04...............................       156.5      138.1      122.2  ......................       136.3      138.1      122.3
Dec-04...............................       130.6      145.2      128.5  ......................       132.8      138.1      122.3
Mar-05...............................       140.0      145.2      128.5  ......................       128.0      138.1      122.3
Jun-05...............................       135.8      147.0      130.1  ......................       126.7      138.1      122.3
Sep-05...............................       124.8      147.0      130.1  Yes...................       121.0      137.8      121.9  Yes.
Dec-05...............................       119.8      147.0      130.1  Yes...................       120.9      137.2      121.4  Yes.
Mar-06...............................       127.4      147.0      130.1  Yes...................       120.5      135.7      120.1  Yes.
Jun-06...............................       117.1      145.2      128.5  Yes...................       117.8      133.2      117.9  No.
Sep-06...............................       108.9      140.7      124.5  Yes...................       117.7      130.9      115.9
Dec-06...............................       100.1      133.4      118.1  Yes...................       117.9      127.1      112.5
Mar-07...............................       103.2      132.0      116.8  Yes...................       114.0      124.1      109.9
Jun-07...............................       100.3      127.0      112.4  Yes...................       111.0      122.2      108.2
Sep-07...............................        97.7      122.3      108.2  Yes...................       110.8      120.0      106.2
Dec-07...............................        89.0      118.3      104.7  Yes...................       106.8      119.3      105.5
Mar-08...............................        80.6      114.2      101.0  Yes...................       100.3      118.5      104.8  Yes.
Jun-08...............................        83.4      107.4       95.1  Yes...................        92.5      116.8      103.4  Yes.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The situation described by the commenter of a brief break in 
triggering MRCTA followed by a continuation of a long term decline has 
merit. Table 1 shows the current decline with the softwood index 
triggering for 12 consecutive quarters beginning with the 3rd quarter 
2005. Even though it was a qualifying quarter, the index showed a 
slight rebound in the 1st quarter of 2006. If that rebound had been 
high enough to prevent that single quarter from triggering, instead of 
having 12 consecutive qualifying quarters, only eleven of the previous 
12 quarters would have been qualifying quarters and the longest 
consecutive string of qualifying quarters would have been nine. That 
minor break would not have been sufficient to change the need for 
additional contract time provided by the 2008 Farm Bill and the final 
rule. Table 1 contains another example pertinent to this issue. The 
softwood lumber index triggered for four consecutive quarters beginning 
with the 2nd quarter 2000; didn't trigger in the 2nd quarter 2001, and 
then triggered for two additional quarters. Using the old rule, a sale 
awarded prior to April 1, 2000, could have its contract term extended 
by 1 year for the first two qualifying quarters, plus 3 months of 
normal operating season time for each of the second two qualifying 
quarters, and 1 year for the last two qualifying quarters following the 
break. Depending on the length of the normal operating season, the 
sale's term would have been extended by 2\1/2\ to 3 years. Using the 
above example, the commenter's suggestion of allowing additional MRCTA 
when the PPI triggers for 6 of the previous 8 quarters, could result in 
the sale being extended by more than 3 years. However, while the Forest 
Service agrees that requiring 11 consecutive qualifying quarters before 
triggering additional MRCTA is overly limiting, the commenter's 
suggestion is unacceptable because it could trigger additional MRCTA in 
a market decline as short as 1\1/2\ years. Accordingly the rule has 
been revised to allow more than 3 years to be added to a contract's 
term pursuant to MRCTA when there is a drastic reduction in wood 
product prices that lasts for more than 10 out of 12 consecutive 
quarters.
    The Forest Service chose at least 10 of the previous 12 quarters as 
the trigger point because most contracts are already eligible to have 
their terms extended by 3 years pursuant to MRCTA. The Forest Service 
does not believe that there is a need to allow MRCTA to extend a 
contract's term by more than 3 years unless there is a drastic 
reduction in the market that lasts more than 2\1/2\ years (10 
quarters). The rationale for allowing 3 years of MRCTA for a 2\1/2\ 
year market decline is that after recovery begins purchasers need a 
reasonable amount of time to conclude operations where they are were 
working and then move back to sales that were receiving MRCTA. Up to 6 
months is considered reasonable. The final rule has been revised 
accordingly.
    (2) The commenter also recommended allowing up to 10 years of 
MRCTA. Following that recommendation would allow contracts to exceed 10 
years in total length as the result of MRCTA. For example, 3-or 4-year 
contracts could become 13 or 14 year contracts. Section 472a(c) of NFMA 
provides, in part, as follows: ``Unless there is a finding by the 
Secretary of Agriculture that better utilization of the various forest 
resources (consistent with the provisions of the Multiple-Use, 
Sustained-Yield Act of 1960) will result, sales contracts shall be for 
a period not to exceed ten years.'' Considering the language in NFMA, 
the Forest Service believes the decision to extend any timber sale or 
group of timber sales beyond 10 years in total length should be made on 
a case-by-case basis. No change will be made in the final rule relative 
to the 10-year limit on total contract length.
    Comment: ``We are extremely concerned and strongly opposed to the 
proposed change to the regulation

[[Page 65550]]

which would disqualify any contract for which all advertised species 
reach base rates from receiving additional MRCTA.''
    Response: The commenter noted that many sales at base rates may 
include high associated charges for such things as brush disposal or 
the base rates may have been increased substantially for essential 
regeneration. In addition, a sale at base rates may have high 
operational costs for such things as helicopter logging or road 
construction. As a result, even though the stumpage rates for one or 
more species included in a sale are set at the lowest rate the Forest 
Service may accept for the timber, the costs of operating the sale may 
still be very high, especially during a depressed market period. The 
Forest Service agrees with the commenter and has revised the final rule 
accordingly.
    Comment: One respondent believed that additional analysis and 
direction should be included before issuing a final rule. The 
respondent disagreed with the Agency's conclusion that the rule has no 
direct effect upon the amount, location, or manner of timber offered 
for purchase. The respondent believed extensions of timber sale 
contracts may have a significant effect on the environment by delaying 
needed vegetative and habitat management work such that adverse effects 
to habitat, species, or people could accrue. The respondent suggested 
making changes in sections of the Forest Service Handbook and Manual, 
and agency National Environmental Policy Act (NEPA) procedures as a 
better way to accomplish Forest Service management objectives while 
responding to agency and industry concerns regarding market conditions. 
The respondent also noted that the citation to the categorical 
exclusion was out of date.
    Response: The Forest Service agrees that contract extensions might 
in some instances have environmental consequences. However, this rule 
is not self-executing and does not by itself cause contract extensions 
to occur. Further, this rule is categorically excluded from 
documentation in an environmental assessment or an environmental impact 
statement.
    The Forest Service disagrees that its NEPA policies and procedures 
should be changed to ``better accomplish Forest Service management 
objectives while responding to agency and industry concerns regarding 
market conditions.'' However, the Forest Service agrees that additional 
NEPA analysis might be necessary when a project is authorized or when a 
contract receives additional time under this rule. The determination of 
whether such analysis is necessary will be made by the responsible 
official in full accordance with the law. The Forest Service's NEPA 
policies and procedures currently provide for such situations and do 
not need to be changed. This notice's regulatory certification section 
now correctly refers to 36 CFR 220.6(d)(2).
    Comment: We cannot find any definition for ``urgent removal'' in 36 
CFR part 223. It is unclear how the agency maintains consistency in the 
application of this term and how the lack of clarity would affect 
market related extensions.
    Response: The commenter is correct that the term ``urgent removal'' 
is not specifically defined in 36 CFR part 223. However, Sec.  
223.53(b) and Forest Service Handbook (FSH) 2409.18, chapter 50, 
section 55.21, addresses sales in urgent need of harvesting, as dead 
and dying timber subject to rapid deterioration as the result of 
catastrophic events such as fire, disease or weather-related damage. 
Other examples of timber in need for urgent removal are addressed in 
the following comment/response. Ultimately, the determination of 
whether timber in a specific sale or project is in need of urgent 
removal is a decision the Forest Service makes on a case-by-case basis.
    Comment: If fuel reduction and/or HFRA projects are considered 
urgent, then the regulations at 36 CFR part 223 should explicitly state 
so to eliminate any confusion as to whether they are eligible for an 
extension. The same type of specificity should apply to projects 
proposing to use commercial timber sales to accomplish needed 
endangered or threatened species habitat work under the Endangered 
Species Act.
    Response: Section 223.52(c)(1) of the old rule specifies that 
additional contract time may not be granted for those portions of the 
contract which have a required completion date, or for those portions 
where the Forest Service determines that the timber is in need of 
urgent removal, or that timber deterioration or resource damage will 
result from delay. While this appears to address the concerns raised in 
the comment, Sec.  223.52(c)(1) only pertains to portions of the sale 
area. Addressing the sale as a whole, Sec.  223.52(a)(3) in the old 
rule specifies that a market-related contract term addition provision 
shall not be included in contracts where the sale has a primary 
objective of harvesting timber subject to rapid deterioration. The 
Forest Service agrees that many sales, in addition to those where the 
timber is subject to rapid deterioration, have timing needs that if not 
met may jeopardize the purpose and intended objective of the project. 
Examples include treating hazardous fuels in a wildland-urban interface 
area, removing hazardous trees adjacent to developed sites such as 
roads and campgrounds, and sales where trees are designated by diameter 
and delay could change the treatment as the result of trees either 
growing into or out of the diameter range specified for treatment. But 
to attempt to list specific classes of sales such as HFRA projects as 
the respondent suggests runs the risk of being too exclusive. In order 
to provide resource managers with the flexibility to determine which 
sales should be excluded from receiving MRCTA, Sec.  223.52(a)(3) has 
been amended in the final rule to state that a market-related contract 
term addition provision shall not be included in contracts where 
fulfilling the primary objective is dependent upon timely completion of 
harvest. The final rule also requires notifying purchasers in the 
prospectus when a sale is precluded from receiving a MRCTA.

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 final rule is not a significant regulatory action 
and is not subject to Office of Management and Budget (OMB) review. 
This final 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 final rule will not interfere with an action taken or planned by 
another agency nor raise new legal or policy issues. 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 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

[[Page 65551]]

will not have a significant economic impact on a substantial number of 
small entities as defined by that act. As revised in this final rule, 
the Forest Service will be able to grant additional market-related 
contract term additions to small and large purchasers when there is a 
prolonged drastic reduction in wood product prices. This will have the 
intended effect of averting massive defaults and attendant adverse 
economic impacts on industry and dependent communities by providing 
purchasers additional contract time until markets improve.

Proper Consideration of Small Entities

    This final 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.). The 
Forest Service has determined that this action will not have a 
significant economic impact on a substantial number of small entities 
as defined by SBREFA.
    To the extent that the final rule imposes additional requirements 
on small entities, these requirements are the minimum necessary to 
protect the public interest, are not administratively burdensome or 
costly to meet, and are well within the capability of small entities to 
perform.

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 final 
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. Code of Federal Regulations at 36 CFR 
220.6(d)(2) 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.

Controlling Paperwork Burdens on the Public

    This final rule includes information collection requirements as 
defined in 5 CFR part 1320. 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 apply. The Office of 
Management and Budget (OMB) has approved the collection of this 
information under OMB control number 0596-0212.

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 final 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 final 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. In Sec.  223.52 revise paragraphs (a)(2), (a)(3), (c)(1) through 
(c)(4) and add a new paragraph (c)(5) to read as follows:


Sec.  223.52  Market-related contract term additions.

    (a) * * *
    (2) The contract term addition provision of the contract must 
specify the index to be applied to each sale. The Forest Supervisor 
shall determine and select from paragraph (b) of this section, the 
index to be used for each sale based on the species and product 
characteristics, by volume, being harvested on the sale. The index 
specified shall represent more than one-half of the advertised volume. 
If none of the indices in paragraph (b) of this section represent more 
than one-half of the advertised volume, the index specified shall 
represent the species product combination representing the highest 
percentage of volume for which there is an index. When the Forest 
Supervisor determines that the species and potential product 
characteristics are such that more than one index could be used, the 
prospectus will state that the Contracting Officer may, upon the 
purchaser's written request, select an alternative index from paragraph 
(b) of this section, and may modify the contract by mutual agreement, 
at time of contract execution, to include an alternative index that the 
Contracting Officer has determined represents the

[[Page 65552]]

highest percentage of products the purchaser intends to produce or have 
produced from the sale. Purchasers seeking a change of index at time of 
award must substantiate the need for an alternative index by providing 
the Contracting Officer with a written request that includes a list of 
products by volume the purchaser intends to produce or expects will be 
produced from the timber on that sale. In the event a mutual agreement 
to modify a contract to include an alternative index is not reached at 
time of contract execution, the index specified in the sample contract 
shall apply.
    (3) A market-related contract term addition provision shall not be 
included in contracts where the primary management objective requires 
prompt removal of the timber, such as, timber is subject to rapid 
deterioration, timber is in a wildland-urban interface area, or hazard 
trees adjacent to developed sites.
* * * * *
    (c) * * *
    (1) Additional contract time may not be granted for those portions 
of the contract:
    (i) With a required completion date;
    (ii) Where the Forest Service determines that the timber is in need 
of urgent removal;
    (iii) Where timber deterioration or resource damage may result from 
delay; or
    (iv) Where included timber is designated by diameter and delay may 
change the treatment as a result of trees growing into or out of the 
specified diameter range(s).
    (2) For each additional consecutive quarter in which a contract 
qualifies for market-related contract term addition, the Forest Service 
will, upon the purchaser's written request, add an additional 3 months 
during the normal operating season to the contract, except that no 
single 3-month addition shall extend the term of a contract by more 
than 1 year.
    (3) No more than 3 years shall be added to a contract's term by 
market-related contract term addition unless the following conditions 
are met:
    (i) The sale was awarded after December 31, 2006;
    (ii) A drastic reduction in wood product prices occurred in at 
least ten of twelve consecutive quarters during the contract term, but 
not including the quarter in which the contract was awarded; and
    (4) For each qualifying quarter meeting the criteria in paragraph 
(c)(3)(ii) of this section, the Forest Service will, upon the 
purchaser's written request, add an additional 3 months during the 
normal operating season to the contract, except no single 3-month 
addition shall extend the term of a contract by more than 1 year.
    (5) In no event shall a revised contract term exceed 10 years as a 
result of market-related contract term addition.
* * * * *

    Dated: October 24, 2008.
 Mark Rey,
 Under Secretary, Natural Resources and Environment.
[FR Doc. E8-26203 Filed 11-3-08; 8:45 am]
BILLING CODE 3410-11-P