[Federal Register Volume 61, Number 153 (Wednesday, August 7, 1996)]
[Notices]
[Pages 41124-41125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20099]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Forest Service
Timber Sale Contracts; Change in Stumpage Rate Adjustment
Procedure
AGENCY: Forest Service, USDA.
ACTION: Proposed policy; request for comment.
-----------------------------------------------------------------------
SUMMARY: The Forest Service is proposing to eliminate the stumpage rate
adjustment procedure used to adjust timber sale contract tentative
rates (bid rates) on most timber sales held in the western states,
except for Alaska. Under current stumpage rate adjustment procedures,
50 percent of the difference between current and base lumber price
indices is added to tentative rates during periods of increasing lumber
prices and 100 percent of the difference is subtracted from tentative
rates during periods of declining prices. The Forest Service is
proposing to eliminate the procedure for stumpage rate adjustment
entirely. The effect of this proposal would be to equalize the risk of
lumber price fluctuations between purchasers and the Forest Service on
future timber sale contracts. This proposal will also satisfy Office of
Inspector General audit recommendations.
DATES: Comments must be received in writing by October 7, 1996.
ADDRESSES: Send written comments to Director, Timber Management Staff
(2400), Forest Service, USDA, P.O. Box 96090, Washington, DC 20090-
6090.
The public may inspect comments received on this proposed policy in
the Office of the Director of Timber Management Staff, 3rd Floor NW,
Auditor's Building, 14th & Independence, S.W., Washington, DC, between
the hours of 8:00 AM and 4:00 PM. Those wishing to inspect comments are
encouraged to call ahead (202) 205-0893 to facilitate entry into the
building.
FOR FURTHER INFORMATION CONTACT:
Rex Baumback, Timber Management Staff, (202) 205-0855,
SUPPLEMENTARY INFORMATION:
Background
The Forest Service sells timber to private purchasers through
competitive bidding. The Agency awards the timber sale contract to the
responsible bidder submitting the highest qualified bid.
Title 36, Code of Federal Regulations, Part 223 allows for the
adjustment of contract (stumpage) rates during the term of a timber
sale contract. These regulations state that:
Timber may be appraised and sold at a lump-sum value or at a
rate per unit of measure which rate may be adjusted during the
period of the contract and as therein specified in accordance with
formulas or other equivalent specifications for the following
reasons: (a) Variations in lumber or other product value indices
between the price index base specified in the contract and the price
index actually experienced during the cutting of the timber. * * *
The Western Wood Products Association is the Forest Service's
contractor to supply the lumber price indices used for stumpage rate
adjustment.
In the western states, except Alaska, most timber sales with
contract terms exceeding 1 year include a provision which allows
contract rates to be adjusted during the term of the contract by the
use of lumber price indices. The purpose of the stumpage rate
adjustment procedure is to allow a timber sale purchaser's stumpage
payments to follow the price trends of the primary forest product
(lumber) manufactured from National Forest System timber. This
procedure helps reduce the risk of loss to a timber purchase holding a
timber sale contract during periods of declining lumber prices and
benefits the Government by increasing stumpage receipts during periods
of rising lumber prices.
The stumpage rate adjustment procedure was established by the
Forest Service in the 1950's to reduce the risk, both to industry and
the Government, of holding long-term timber sale contracts. In the
1950's and 1960's, timber sale contract periods often exceeded 10 years
and the procedure was a means to reduce the risk to both parties due to
price fluctuations in the lumber market. During this era, stumpage
rates would vary, either up or down, by 50 percent of the change in
lumber prices.
In 1971, with the introduction of Forest Service Form 2400-6 Timber
Sale
[[Page 41125]]
Contract, the initial stumpage rate adjustment procedure was changed to
the current formula which provides for stumpage prices to increase by
50 percent of the change in lumber prices when lumber prices are rising
and to decrease by 100 percent of the change in lumber prices when
lumber prices are falling. The purpose of this new adjustment was to
account for increased costs to timber sale purchasers during the course
of the contract term.
Originally, the use of the stumpage rate adjustment procedure was
not used in western Washington and Oregon. On March 31, 1983, it was
expanded to include western Washington and Oregon, as a means of
reducing a purchaser's risk from excessive bidding and to adjust for
decreases in lumber prices during the term of timber sales contracts.
In September 1991, the Department of Agriculture Office of
Inspector General, issued a report (Audit Report No. 08099-122-SF dated
9/91--Stumpage Rate Adjustment on Timber Sales) which states that the
50 percent upwards and 100 percent downwards stumpage rate adjustment
procedure lowers the risk of market fluctuations to the purchaser at
the monetary expense of the Government. The audit recommended either
eliminating the stumpage rate adjustment procedure or modifying it so
that adjustments to stumpage are the same percentage for both periods
of rising and falling lumber prices.
In response to the Office of Inspector General audit, the Forest
Service is proposing to eliminate the stumpage rate adjustment
procedure by amending internal agency direction. Under this proposal,
timber sale contracts would be advertised and awarded with fixed (flat)
stumpage rates in the future, and the lumber price indices currently
used by the Forest Service would not be used after December 31, 1996.
In accordance with contract provision C(T)3.21--Unavailable Index,
purchasers with stumpage rate adjustment contracts still in effect when
the policy is adopted would be offered the opportunity to convert to
flat rates or to a suitable replacement index for lumber prices
developed from the Bureau of Labor Statistics' Producer Price Index or
appropriate trade journals.
Summary
The Forest Service is seeking comment on the following proposed
direction that would be issued to agency personnel in chapter 2430 of
the Forest Service Manual:
FSM 2431.34-Stumpage Rate Adjustment. Stumpage rate adjustment
procedures are no longer to be included in Forest Service timber
sale contracts. Instead, advertise all timber sales on a flat rate
basis.
Comments received on this proposed policy will be considered in
adoption of the final policy, notice of which will be published in the
Federal Register.
Regulatory Impact
This proposed policy has been reviewed under USDA procedures and
Executive Order 12866 on Regulatory Planning and Review. It has been
determined that this is not a significant policy. This policy will not
have an annual effect of $100 million or more on the economy nor
adversely affect productivity, competition, jobs, the environment,
public health or safety, nor State or local governments. This policy
will not interfere with an action taken or planned by another agency
nor raise new legal or policy issues. Finally, this action will not
alter the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients of such programs.
Accordingly, this proposed policy is not subject to OMB review under
Executive Order 12866.
Moreover, this proposed policy has been considered in light of the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.), and it is hereby
certified that this action will not have a significant economic impact
on a substantial number of small entities as defined by that act.
Pursuant to Title II of the Unfunded Mandates Reform Act of 1995,
which the President signed into law on March 22, 1995, the Department
has assessed the effects of this policy on State, local, and tribal
governments and the private sectors. This action 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.
Environmental Impact
This proposed action falls within a category of actions excluded
from documentation in an Environmental Impact Statement and 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
preliminary assessment is that this policy falls within this category
of actions and that no extraordinary circumstances exist which would
require preparation of an environmental assessment or environmental
impact statement. A final determination will be made upon adoption of
the final policy.
Controlling Paperwork Burdens on the Public
The proposed policy does not require any recordkeeping 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.
Comments Invited
The Forest Service invites written comments on the proposed policy.
The agency will analyze and consider comments received in adopting the
final policy. Notice of the final policy, including discussion of
comments received, will be published in the Federal Register.
Dated: August 1, 1996.
David G. Unger,
Associate Chief.
[FR Doc. 96-20099 Filed 8-6-96; 8:45 am]
BILLING CODE 3410-11-M
