Extension of Certain Timber Sale Contracts; Finding of Substantial Overriding Public Interest, 66160-66162 [E6-19102]
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66160
Federal Register / Vol. 71, No. 218 / Monday, November 13, 2006 / Notices
FY 2007 OVERALL BEET/CANE ALLOTMENTS AND ALLOCATIONS—Continued
Initial FY 2007
allotments/
allocations
Distribution
Total ...............................................................................................................................
Signed in Washington, DC, on November 2,
2006.
Teresa C. Lasseter,
Executive Vice President, Commodity Credit
Corporation.
[FR Doc. E6–19077 Filed 11–9–06; 8:45 am]
BILLING CODE 3410–05–P
DEPARTMENT OF AGRICULTURE
Forest Service
Extension of Certain Timber Sale
Contracts; Finding of Substantial
Overriding Public Interest
Forest Service, USDA.
Notice of contract extensions.
AGENCY:
cprice-sewell on PROD1PC66 with NOTICES
ACTION:
SUMMARY: On November 2, 2006, the
Deputy Under Secretary of Agriculture
for Natural Resources and Environment
determined there is substantial
overriding public interest in extending
certain National Forest System timber
sale contracts for up to one year, subject
to a maximum total contract length of 10
years. Pursuant to the November 2,
2006, finding, timber sale contracts
awarded prior to January 1, 2006, are
eligible for extension and deferral of
periodic payment due dates for up to
one year. Contracts that are in breach,
have been or are currently eligible to be
extended under market related contract
term addition contract provisions, or
salvage sale contracts that were sold
with the objective of harvesting
deteriorating timber are not eligible for
extension pursuant to the November 2,
2006, finding. To receive an extension,
purchasers must make a written request
to the appropriate Contracting Officer.
Purchasers also must agree to release the
Forest Service from all claims and
liability if a contract extended pursuant
to the November 2, 2006, finding is
suspended, modified or terminated in
the future.
The intended effect of the substantial
overriding public interest finding and
contract extensions is to minimize
contract defaults, mill closures, and
company bankruptcies. The
Government benefits if defaulted timber
sale contracts, mill closures, and
bankruptcies can be avoided by granting
extensions. Having numerous,
economically viable, timber sale
VerDate Aug<31>2005
15:22 Nov 09, 2006
Jkt 211001
purchasers increases competition for
National Forest System timber sales,
results in higher prices paid for such
timber, and allows the Forest Service to
provide a continuous supply of timber
to the public in accordance with Forest
Service authorizing legislation. See Act
of June 4, 1897 (Ch. 2, 30 Stat. 11 as
amended, 16 U.S.C. 475) (Organic
Administration Act). In addition, by
extending contracts and avoiding
defaults, closures and bankruptcies, the
Government avoids the difficult,
lengthy, expensive, and sometimes
impossible process of collecting default
damages.
DATES: The determination was made on
November 2, 2006, by the Deputy Under
Secretary of Agriculture for Natural
Resources and Environment.
FOR FURTHER INFORMATION CONTACT:
Lathrop Smith, Forest Management
Staff, (202) 205–0858 or Richard
Fitzgerald, Forest Management Staff
(202) 205–1753; 1400 Independence
Ave., SW., Mailstop 1103, Washington,
DC 20250–1103.
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: The Forest
Service sells timber and forest products
from National Forest System lands to
individuals or companies pursuant to
the National Forest Management Act of
1976, 16 U.S.C. 472a (NFMA). Each sale
is formalized by execution of a contract
between the purchaser and the Forest
Service. The contract sets forth the
explicit terms and provisions of the sale,
including such matters as the estimated
volume of timber to be removed, the
period for removal, price to be paid to
the Government, road construction and
logging requirements, and
environmental protection measures to
be taken. The average contract period is
approximately 2–3 years, although a few
contracts have terms of 5 or more years.
Rules at 36 CFR 223.52 (Market
Related Contract Term Additions)
permit contract extensions when the
Chief of the Forest Service determines
that adverse wood product market
conditions have resulted in a drastic
decline in wood product prices. Under
PO 00000
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Fmt 4703
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Changes due
to reassignments
Adjusted initial
FY 2007
allotments/
allocations
318,644
¥47,179
271,465
market-related contract addition
procedures, the Forest Service refers to
the following three producer price
indices maintained by the Bureau of
Labor Statistics: Softwood Lumber
#0811 and Hardwood Lumber #0812 in
the Commodity Series, and Wood Chips
#PCU32113321135 in the Industry
Series.
The softwood and hardwood lumber
indices indicate a major downturn in
those markets began about September
2004 and was still on a downward trend
as of September 2006 with the softwood
lumber index decreasing by about 31%
and the hardwood lumber index
decreasing by about 14% during this
time. While most purchasers holding
contracts with those indices have
received or are eligible to receive market
related contract term additions, an
anomoly in the wood products markets
and indices used in contracts in the lake
States area and some other parts of the
country has left many purchasers
without this remedy.
Section 472a(c) of NFMA provides
that the Secretary of Agriculture shall
not extend any timber sale contract
period with an original term of two
years or more, unless the purchaser has
diligently performed in accordance with
an approved plan of operations or the
‘‘substantial overriding public interest’’
justifies the extension. The authority to
make this determination has been
delegated to the Deputy Under Secretary
of Agriculture for Natural Resources and
Environment at 7 CFR 2.59.
Accordingly, based on a current
study, the Deputy Under Secretary has
made a finding that there is a substantial
overriding public interest in extending
certain sales for up to one year. This
determination does not apply to
contracts that were previously extended
or that are currently eligible to be
extended under market related contract
term addition provisions, to salvage sale
contracts that were sold with the
objective of harvesting deteriorating
timber, or to timber sale contracts that
are in breach. In addition to extending
contracts pursuant to the Deputy Under
Secretary’s finding, periodic payments
will be deferred for up to one year on
the extended sales. To receive an
extension and periodic payment
deferral, purchasers must make a
E:\FR\FM\13NON1.SGM
13NON1
Federal Register / Vol. 71, No. 218 / Monday, November 13, 2006 / Notices
written request to the appropriate
Contracting Officer. Purchasers must
also agree to release the Forest Service
from all claims and liability if a contract
is suspended, modified or terminated,
after the contract is extended pursuant
to the Deputy Under Secretary’s
November 2, 2006 finding. The text of
the finding, as signed by the Deputy
Under Secretary of Agriculture for
Natural Resources and Environment is
set out at the end of this notice.
Dated: November 6, 2006.
Frederick Norbury,
Associate Deputy Chief for NFS.
cprice-sewell on PROD1PC66 with NOTICES
Determination of Substantial Overriding
Public Interest for Extending Certain Timber
Sale Contracts
The National Forest Management Act of
1976 (16 U.S.C. 472a(c) provides that the
Secretary of Agriculture shall not extend any
timber sale contract period with an original
term of two years or more unless he finds
that the purchaser has diligently performed
in accordance with an approved plan of
operations or that the ‘‘substantial overriding
public interest’’ justifies the extension.
As a result of drastic reductions in forest
product prices, there is a substantial
overriding public interest in extending
certain timber sale contracts.
Background
On December 7, 1990, the Forest Service
published a final rule (55 FR 50643)
establishing procedures in 36 CFR 223.52 for
extending contract termination dates in
response to adverse conditions in the timber
markets. These procedures, known as Market
Related Contract Term Additions, authorize
extensions of timber sale contracts up to one
additional year when qualifying market
conditions are met. When the market related
contract term addition procedures were
established, experience indicated that the
type and magnitude of lumber market
declines that would trigger market related
contract term additions generally coincide
with low numbers of housing starts and are
usually indicative of substantial economic
dislocation in the wood products industry.
Such economic distress broadly affects
community stability, the ability of industry to
supply construction lumber and other
products for public use, and threatens
maintaining plant capacity necessary to meet
future demands for wood products from
domestic sources. The Department has
determined that a drastic reduction in wood
product prices can result in a substantial
overriding public interest sufficient to justify
a contract term extension for existing
contracts, as authorized by the National
Forest Management Act of 1976 (16 U.S.C.
472a(c)) and existing regulations at 36 CFR
223.115(b).
Following promulgation of the rule in
1990, the Forest Service began tracking four
producer price indices provided by the
Bureau of Labor Statistics as indicators of a
drastic reduction in wood product prices.
Those indices were the Southern Pine
Dressed, Douglas-fir Dressed, Other Species
VerDate Aug<31>2005
15:22 Nov 09, 2006
Jkt 211001
Dressed, and Hardwood Lumber. Beginning
in the first quarter of 1994 through the first
quarter of 1996 government indices indicated
a major downturn in the lumber markets
throughout the country was occurring but
only the Douglas-fir dressed lumber index,
used in contracts in Washington and Oregon,
dropped sufficiently to trigger market related
contract term additions. Meanwhile,
purchasers in other parts of the country were
facing defaults, mill closures, and
bankruptcies, but were not eligible for market
related contract term additions. To avert
these problems, the Chief of the Forest
Service determined that it was in the
substantial overriding public interest to
extend for a period of up to one year certain
contracts that had not received any market
related contract term adjustments. The Forest
Service also initiated a study of the market
related contract term addition procedures
and indices to determine why they did not
appear to perform as expected. Findings in
that study led the Forest Service to adopt
four different producer price indices from the
Bureau of Labor Statistics in May 1998; 1)
Hardwood Lumber (SIC 24211), 2) Eastern
Softwood Lumber (SIC 24213), 3) Western
Softwood Lumber (SIC 24214), and 4) Wood
Chips (SIC 24215). However, after December
2003, the Bureau of Labor Statistics
discontinued publishing the Western
Softwood Lumber index (SIC 24214), Eastern
Softwood Lumber index (SIC 24213), and
Hardwood Lumber index (SIC 24211). At the
same time the Wood Chips index (SIC 24215)
was renumbered as PCU32113321135. In
January 2006, the Forest Service published a
notice in the Federal Register (71 FR 3409)
adopting the softwood lumber index 0811
and the hardwood lumber index 0812 to
replace the 3 indices that were no longer
supported by the Bureau of Labor Statistics.
The Forest Service continued to rely upon
the Wood Chips index, now numbered
PCU32113321135, to gauge certain market
conditions. The three indices the Forest
Service adopted to gauge most market
conditions, however, are not able to address
market conditions for all forest products e.g.
biomass. Additionally, because the indices
are national in scope, they may fail to
address drastic declines in local markets.
Recent Market Conditions
The softwood lumber index #0811 began
declining after September 2004 and with
adjustments for inflation has declined 47.9
points or 31% as of September 2006. There
have been five consecutive quarters
beginning with the third quarter 2005
through the third quarter 2006 where the
quarterly declines have been large enough to
trigger market related contract term
additions. This is a substantially larger
decline than the one in the period between
1994–1996 when the index declined about 38
points or 21%. The 1994–1996 period also
was the last time there were 5 consecutive
qualifying quarters for market related
contract term additions.
The hardwood lumber index #0812 also
began declining after September 2004, and
with adjustments for inflation has declined
18.6 points or 14% as of September 2006.
There were 3 consecutive quarters beginning
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Fmt 4703
Sfmt 4703
66161
with the third quarter 2005 through the first
quarter 2006 where the quarterly declines
have been large enough to trigger market
related contract term additions equal to one
calendar year plus one normal operating
season. The index has continued to decline
in the second and third quarters of 2006, but
the decline has not been sufficient to trigger
market related contract term additions.
Consequently, if hardwood prices do not
begin to recover soon, or if conditions for
another market related contract term addition
do not trigger, some hardwood purchasers
may begin to face additional hardships as the
market related contract term addition time
they previously obtained expires.
Between September 2004 and January
2006, the wood chips index remained fairly
static but has been on a steady rise since
then. The last time the wood chips index had
a qualifying quarter was the third quarter of
1997.
At this time, the market related contract
term addition procedures on softwood
lumber and hardwood lumber sales are
generally functioning as expected. Additional
contract time that has been made available,
and granted to purchasers who requested it,
has assisted purchasers by allowing more
time to wait for markets to recover or to
spread out harvesting of high priced sales.
But as was the case in 1996, there are
exceptions.
For example, in the lake states area, a
combination of factors has contributed to a
more drastic decline in forest product prices
than is occurring in other parts of the country
and/or the producer price indices are not
triggering market related contract term
adjustments. The predominant forest
products produced in this area are wood
chips used in pulping for paper and oriented
strand board (OSB), hardwood lumber, and a
limited amount of softwood lumber. The
pulp and OSB sales use the wood chips
index which has not had a qualifying quarter
for market related contract term additions
since 1997. National Forest System timber
sales in the lake states area often contain a
diverse mix of forest products which attracts
strong competition leading to relatively high
bid rates. Problems began in 2005, when
wood chip prices and demand declined
sharply in response largely to an increase in
cheap imported chips.
Also, OSB is a building product with
prices that tend to follow lumber market
prices. While lumber market prices have
declined significantly and the market related
contract term addition policy has been
triggered for contracts tied to the lumber
indices, no such trigger has occurred for
many of the sales in the lake states area. That
is because most contracts in the lake states
area are tied to the wood chips index, which
has not declined, so those purchasers have
not been eligible for market related contract
term additions. Concurrently, lake states area
pulp prices have been declining, but since
national wood chip prices have been stable
or increasing, those purchasers have not been
eligible for market related contract term
additions. Due to their location along the
great lakes and Canadian border, competition
from cheaper imported wood chips has also
adversely affected purchasers in this area. As
E:\FR\FM\13NON1.SGM
13NON1
66162
Federal Register / Vol. 71, No. 218 / Monday, November 13, 2006 / Notices
a result of these factors, purchasers in the
lake states area are now faced with high bid
prices on their existing contracts, low
product prices, and no market related
contract term addition to provide additional
time for markets to recover or to mix the
higher priced timber with lower priced
timber for other sources. The market related
contract term addition procedures do not
appear to be functioning as expected here.
In another example the sale of biomass
material has been increasing in recent years
with most of that material utilized for
generating electricity in co-generation
facilities. A reliable index for tracking this
new product has not been found so most
sales of biomass material also use the wood
chips index. But, energy prices can differ
substantially in different parts of the country
and don’t necessarily follow the wood chips
index. Consequently, in areas where energy
prices have drastically declined and
purchasers are holding high price timber sale
contracts, they are not currently eligible to
receive a market related contract term
addition because the wood chips index has
not triggered.
cprice-sewell on PROD1PC66 with NOTICES
Determination of Substantial Overriding
Public Interest
The Government benefits if defaulted
timber sale contracts, mill closures, and
bankruptcies can be avoided by granting
extensions. Having numerous, economically
viable, timber sale purchasers increases
competition for National Forest System
timber sales, results in higher prices paid for
such timber, and allows the Forest Service to
provide a continuous supply of timber to the
public in accordance with the Organic
Administration Act. In addition, by
extending contracts and avoiding defaults,
closures and bankruptcies, the Government
avoids the difficult, lengthy, expensive, and
sometimes impossible, process of collecting
default damages.
Therefore, pursuant to 16 U.S.C. 472a, and
the authority delegated to me at 7 CFR 2.59,
I have determined that it is in the substantial
overriding public interest to extend for up to
one year certain National Forest System
timber sales that were awarded prior to
January 1, 2006. This finding does not apply
to contracts that have been or are currently
eligible to be extended under market related
contract term addition contract provisions, to
salvage sale contracts that were sold with the
objective of harvesting deteriorating timber,
or to contracts that are in breach. Total
contract length shall not exceed 10 years as
a result of this extension. For those contracts
extended pursuant to this finding, periodic
payments due after the date of this
determination will also be deferred for up to
one year. To receive the extension and
periodic payment deferral, purchasers must
make written request and agree to release the
Forest Service from all claims and liability if
a contract extended pursuant to this finding
is suspended, modified or terminated in the
future.
VerDate Aug<31>2005
15:22 Nov 09, 2006
Jkt 211001
Dated: November 2, 2006.
David P. Tenny
Deputy Under Secretary of Agriculture for
Natural Resources and Environment.
[FR Doc. E6–19102 Filed 11–9–06; 8:45 am]
BILLING CODE 3410–11–P
DEPARTMENT OF AGRICULTURE
Forest Service
U.S. Forest Service Open Space
Conservation Strategy and
Implementation Plan
Forest Service, USDA.
Request for public input.
AGENCY:
ACTION:
SUMMARY: The Forest Service is inviting
all interested members of the public to
provide input into the development of
the USDA Forest Service Open Space
Conservation Strategy and
Implementation Plan, which will help
shape the agency’s strategic role in a
national effort to conserve open space.
The Forest Service is interested in
addressing the effects of the loss of open
space on private forests; on the National
Forests and Grasslands and surrounding
landscape; and on forests in cities,
suburbs, and towns. Input for the
Strategy and Implementation Plan
should focus on programs, research,
partnerships, and/or policy
recommendations that could be
developed to conserve open space. See
SUPPLEMENTARY INFORMATION section for
more background on the loss of open
space and the Strategy and
Implementation Plan.
DATES: The Forest Service will review
public input received no later than
December 13, 2006.
ADDRESSES: Send written comments to
Claire Harper, USDA Forest Service,
Cooperative Forestry, Mail Stop Code
1123, 1400 Independence Avenue, SW.,
Washington, DC 20250–1123; via
electronic mail to openspace@fs.fed.us;
or via facsimile to (202) 205–1271. The
agency cannot confirm receipt of
comments. All comments, including
names and addresses when provided,
are placed in the record and are
available for public inspection. The
public may inspect comments during
regular business hours at the office of
the Cooperative Forestry Staff, 4th Floor
SE., Yates Building, 201 14th Street,
SW., Washington, DC. Visitors are
encouraged to call ahead to (202) 205–
1389 to facilitate entry into the building.
FOR FURTHER INFORMATION CONTACT: For
general information about the Open
Space Conservation Strategy and
Implementation Plan and the loss of
open space, contact Claire Harper,
PO 00000
Frm 00007
Fmt 4703
Sfmt 4703
USDA Forest Service, Cooperative
Forestry, by telephone at (202) 205–
1389 or by electronic mail at
openspace@fs.fed.us. For a summary of
the Forest Service’s current research,
programs, and resources available to
facilitate open space conservation,
please review the Forest Service’s
publication entitled ‘‘Cooperating
Across Boundaries: Partnerships to
Conserve Open Space in Rural
America.’’ Electronic copies of this
publication are available at https://
www.fs.fed.us/projects/four-threats/
documents/
cooperatingacrossboundaries.pdf, and
hardcopies are available by contacting
Claire Harper at openspace@fs.fed.us.
SUPPLEMENTARY INFORMATION:
I. Background
In 2003, Forest Service Chief Dale
Bosworth identified the loss of open
space as one of four great threats facing
our nation’s forests and grasslands. Loss
of open space is an issue that affects the
sustainability of both the National
Forests and Grasslands and private
forests. Open space—including public
and private land, wilderness and
working land—provides a multitude of
public benefits and ecosystem services
we all need and enjoy. Three
interrelated trends of conversion,
fragmentation, and parcelization are
jeopardizing the long term health and
function of forests, limiting management
options, and reducing opportunities for
public enjoyment and use. To address
the loss of open space threat, the Forest
Service is building a national strategy to
identify how the agency plans to focus
its efforts on the issue. This strategy will
provide actions and policy
recommendations to conserve open
space, with an emphasis on
partnerships and collaborative
approaches.
II. Open Space Conservation Strategy
and Implementation Plan
The Forest Service recognizes that it
is not the only contributor to open space
conservation; it is only one among
many. The Forest Service also
acknowledges that the agency’s role in
open space conservation is not to
regulate development or land use, but is
to provide expertise, resources,
information, and programs. To help
prioritize and focus the agency’s efforts,
the Forest Service plans to develop and
refine an Open Space Conservation
Strategy and Implementation Plan to
address the loss of open space.
Input for the Strategy and
Implementation Plan should focus on
programs, research, partnerships and/or
policy recommendations that could be
E:\FR\FM\13NON1.SGM
13NON1
]]>Agencies
[Federal Register Volume 71, Number 218 (Monday, November 13, 2006)]
[Notices]
[Pages 66160-66162]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-19102]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Forest Service
Extension of Certain Timber Sale Contracts; Finding of
Substantial Overriding Public Interest
AGENCY: Forest Service, USDA.
ACTION: Notice of contract extensions.
-----------------------------------------------------------------------
SUMMARY: On November 2, 2006, the Deputy Under Secretary of Agriculture
for Natural Resources and Environment determined there is substantial
overriding public interest in extending certain National Forest System
timber sale contracts for up to one year, subject to a maximum total
contract length of 10 years. Pursuant to the November 2, 2006, finding,
timber sale contracts awarded prior to January 1, 2006, are eligible
for extension and deferral of periodic payment due dates for up to one
year. Contracts that are in breach, have been or are currently eligible
to be extended under market related contract term addition contract
provisions, or salvage sale contracts that were sold with the objective
of harvesting deteriorating timber are not eligible for extension
pursuant to the November 2, 2006, finding. To receive an extension,
purchasers must make a written request to the appropriate Contracting
Officer. Purchasers also must agree to release the Forest Service from
all claims and liability if a contract extended pursuant to the
November 2, 2006, finding is suspended, modified or terminated in the
future.
The intended effect of the substantial overriding public interest
finding and contract extensions is to minimize contract defaults, mill
closures, and company bankruptcies. The Government benefits if
defaulted timber sale contracts, mill closures, and bankruptcies can be
avoided by granting extensions. Having numerous, economically viable,
timber sale purchasers increases competition for National Forest System
timber sales, results in higher prices paid for such timber, and allows
the Forest Service to provide a continuous supply of timber to the
public in accordance with Forest Service authorizing legislation. See
Act of June 4, 1897 (Ch. 2, 30 Stat. 11 as amended, 16 U.S.C. 475)
(Organic Administration Act). In addition, by extending contracts and
avoiding defaults, closures and bankruptcies, the Government avoids the
difficult, lengthy, expensive, and sometimes impossible process of
collecting default damages.
DATES: The determination was made on November 2, 2006, by the Deputy
Under Secretary of Agriculture for Natural Resources and Environment.
FOR FURTHER INFORMATION CONTACT: Lathrop Smith, Forest Management
Staff, (202) 205-0858 or Richard Fitzgerald, Forest Management Staff
(202) 205-1753; 1400 Independence Ave., SW., Mailstop 1103, Washington,
DC 20250-1103.
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: The Forest Service sells timber and forest
products from National Forest System lands to individuals or companies
pursuant to the National Forest Management Act of 1976, 16 U.S.C. 472a
(NFMA). Each sale is formalized by execution of a contract between the
purchaser and the Forest Service. The contract sets forth the explicit
terms and provisions of the sale, including such matters as the
estimated volume of timber to be removed, the period for removal, price
to be paid to the Government, road construction and logging
requirements, and environmental protection measures to be taken. The
average contract period is approximately 2-3 years, although a few
contracts have terms of 5 or more years.
Rules at 36 CFR 223.52 (Market Related Contract Term Additions)
permit contract extensions when the Chief of the Forest Service
determines that adverse wood product market conditions have resulted in
a drastic decline in wood product prices. Under market-related contract
addition procedures, the Forest Service refers to the following three
producer price indices maintained by the Bureau of Labor Statistics:
Softwood Lumber 0811 and Hardwood Lumber 0812 in the
Commodity Series, and Wood Chips PCU32113321135 in the
Industry Series.
The softwood and hardwood lumber indices indicate a major downturn
in those markets began about September 2004 and was still on a downward
trend as of September 2006 with the softwood lumber index decreasing by
about 31% and the hardwood lumber index decreasing by about 14% during
this time. While most purchasers holding contracts with those indices
have received or are eligible to receive market related contract term
additions, an anomoly in the wood products markets and indices used in
contracts in the lake States area and some other parts of the country
has left many purchasers without this remedy.
Section 472a(c) of NFMA provides that the Secretary of Agriculture
shall not extend any timber sale contract period with an original term
of two years or more, unless the purchaser has diligently performed in
accordance with an approved plan of operations or the ``substantial
overriding public interest'' justifies the extension. The authority to
make this determination has been delegated to the Deputy Under
Secretary of Agriculture for Natural Resources and Environment at 7 CFR
2.59.
Accordingly, based on a current study, the Deputy Under Secretary
has made a finding that there is a substantial overriding public
interest in extending certain sales for up to one year. This
determination does not apply to contracts that were previously extended
or that are currently eligible to be extended under market related
contract term addition provisions, to salvage sale contracts that were
sold with the objective of harvesting deteriorating timber, or to
timber sale contracts that are in breach. In addition to extending
contracts pursuant to the Deputy Under Secretary's finding, periodic
payments will be deferred for up to one year on the extended sales. To
receive an extension and periodic payment deferral, purchasers must
make a
[[Page 66161]]
written request to the appropriate Contracting Officer. Purchasers must
also agree to release the Forest Service from all claims and liability
if a contract is suspended, modified or terminated, after the contract
is extended pursuant to the Deputy Under Secretary's November 2, 2006
finding. The text of the finding, as signed by the Deputy Under
Secretary of Agriculture for Natural Resources and Environment is set
out at the end of this notice.
Dated: November 6, 2006.
Frederick Norbury,
Associate Deputy Chief for NFS.
Determination of Substantial Overriding Public Interest for Extending
Certain Timber Sale Contracts
The National Forest Management Act of 1976 (16 U.S.C. 472a(c)
provides that the Secretary of Agriculture shall not extend any
timber sale contract period with an original term of two years or
more unless he finds that the purchaser has diligently performed in
accordance with an approved plan of operations or that the
``substantial overriding public interest'' justifies the extension.
As a result of drastic reductions in forest product prices,
there is a substantial overriding public interest in extending
certain timber sale contracts.
Background
On December 7, 1990, the Forest Service published a final rule
(55 FR 50643) establishing procedures in 36 CFR 223.52 for extending
contract termination dates in response to adverse conditions in the
timber markets. These procedures, known as Market Related Contract
Term Additions, authorize extensions of timber sale contracts up to
one additional year when qualifying market conditions are met. When
the market related contract term addition procedures were
established, experience indicated that the type and magnitude of
lumber market declines that would trigger market related contract
term additions generally coincide with low numbers of housing starts
and are usually indicative of substantial economic dislocation in
the wood products industry. Such economic distress broadly affects
community stability, the ability of industry to supply construction
lumber and other products for public use, and threatens maintaining
plant capacity necessary to meet future demands for wood products
from domestic sources. The Department has determined that a drastic
reduction in wood product prices can result in a substantial
overriding public interest sufficient to justify a contract term
extension for existing contracts, as authorized by the National
Forest Management Act of 1976 (16 U.S.C. 472a(c)) and existing
regulations at 36 CFR 223.115(b).
Following promulgation of the rule in 1990, the Forest Service
began tracking four producer price indices provided by the Bureau of
Labor Statistics as indicators of a drastic reduction in wood
product prices. Those indices were the Southern Pine Dressed,
Douglas-fir Dressed, Other Species Dressed, and Hardwood Lumber.
Beginning in the first quarter of 1994 through the first quarter of
1996 government indices indicated a major downturn in the lumber
markets throughout the country was occurring but only the Douglas-
fir dressed lumber index, used in contracts in Washington and
Oregon, dropped sufficiently to trigger market related contract term
additions. Meanwhile, purchasers in other parts of the country were
facing defaults, mill closures, and bankruptcies, but were not
eligible for market related contract term additions. To avert these
problems, the Chief of the Forest Service determined that it was in
the substantial overriding public interest to extend for a period of
up to one year certain contracts that had not received any market
related contract term adjustments. The Forest Service also initiated
a study of the market related contract term addition procedures and
indices to determine why they did not appear to perform as expected.
Findings in that study led the Forest Service to adopt four
different producer price indices from the Bureau of Labor Statistics
in May 1998; 1) Hardwood Lumber (SIC 24211), 2) Eastern Softwood
Lumber (SIC 24213), 3) Western Softwood Lumber (SIC 24214), and 4)
Wood Chips (SIC 24215). However, after December 2003, the Bureau of
Labor Statistics discontinued publishing the Western Softwood Lumber
index (SIC 24214), Eastern Softwood Lumber index (SIC 24213), and
Hardwood Lumber index (SIC 24211). At the same time the Wood Chips
index (SIC 24215) was renumbered as PCU32113321135. In January 2006,
the Forest Service published a notice in the Federal Register (71 FR
3409) adopting the softwood lumber index 0811 and the hardwood
lumber index 0812 to replace the 3 indices that were no longer
supported by the Bureau of Labor Statistics. The Forest Service
continued to rely upon the Wood Chips index, now numbered
PCU32113321135, to gauge certain market conditions. The three
indices the Forest Service adopted to gauge most market conditions,
however, are not able to address market conditions for all forest
products e.g. biomass. Additionally, because the indices are
national in scope, they may fail to address drastic declines in
local markets.
Recent Market Conditions
The softwood lumber index 0811 began declining after
September 2004 and with adjustments for inflation has declined 47.9
points or 31% as of September 2006. There have been five consecutive
quarters beginning with the third quarter 2005 through the third
quarter 2006 where the quarterly declines have been large enough to
trigger market related contract term additions. This is a
substantially larger decline than the one in the period between
1994-1996 when the index declined about 38 points or 21%. The 1994-
1996 period also was the last time there were 5 consecutive
qualifying quarters for market related contract term additions.
The hardwood lumber index 0812 also began declining
after September 2004, and with adjustments for inflation has
declined 18.6 points or 14% as of September 2006. There were 3
consecutive quarters beginning with the third quarter 2005 through
the first quarter 2006 where the quarterly declines have been large
enough to trigger market related contract term additions equal to
one calendar year plus one normal operating season. The index has
continued to decline in the second and third quarters of 2006, but
the decline has not been sufficient to trigger market related
contract term additions. Consequently, if hardwood prices do not
begin to recover soon, or if conditions for another market related
contract term addition do not trigger, some hardwood purchasers may
begin to face additional hardships as the market related contract
term addition time they previously obtained expires.
Between September 2004 and January 2006, the wood chips index
remained fairly static but has been on a steady rise since then. The
last time the wood chips index had a qualifying quarter was the
third quarter of 1997.
At this time, the market related contract term addition
procedures on softwood lumber and hardwood lumber sales are
generally functioning as expected. Additional contract time that has
been made available, and granted to purchasers who requested it, has
assisted purchasers by allowing more time to wait for markets to
recover or to spread out harvesting of high priced sales. But as was
the case in 1996, there are exceptions.
For example, in the lake states area, a combination of factors
has contributed to a more drastic decline in forest product prices
than is occurring in other parts of the country and/or the producer
price indices are not triggering market related contract term
adjustments. The predominant forest products produced in this area
are wood chips used in pulping for paper and oriented strand board
(OSB), hardwood lumber, and a limited amount of softwood lumber. The
pulp and OSB sales use the wood chips index which has not had a
qualifying quarter for market related contract term additions since
1997. National Forest System timber sales in the lake states area
often contain a diverse mix of forest products which attracts strong
competition leading to relatively high bid rates. Problems began in
2005, when wood chip prices and demand declined sharply in response
largely to an increase in cheap imported chips.
Also, OSB is a building product with prices that tend to follow
lumber market prices. While lumber market prices have declined
significantly and the market related contract term addition policy
has been triggered for contracts tied to the lumber indices, no such
trigger has occurred for many of the sales in the lake states area.
That is because most contracts in the lake states area are tied to
the wood chips index, which has not declined, so those purchasers
have not been eligible for market related contract term additions.
Concurrently, lake states area pulp prices have been declining, but
since national wood chip prices have been stable or increasing,
those purchasers have not been eligible for market related contract
term additions. Due to their location along the great lakes and
Canadian border, competition from cheaper imported wood chips has
also adversely affected purchasers in this area. As
[[Page 66162]]
a result of these factors, purchasers in the lake states area are
now faced with high bid prices on their existing contracts, low
product prices, and no market related contract term addition to
provide additional time for markets to recover or to mix the higher
priced timber with lower priced timber for other sources. The market
related contract term addition procedures do not appear to be
functioning as expected here.
In another example the sale of biomass material has been
increasing in recent years with most of that material utilized for
generating electricity in co-generation facilities. A reliable index
for tracking this new product has not been found so most sales of
biomass material also use the wood chips index. But, energy prices
can differ substantially in different parts of the country and don't
necessarily follow the wood chips index. Consequently, in areas
where energy prices have drastically declined and purchasers are
holding high price timber sale contracts, they are not currently
eligible to receive a market related contract term addition because
the wood chips index has not triggered.
Determination of Substantial Overriding Public Interest
The Government benefits if defaulted timber sale contracts, mill
closures, and bankruptcies can be avoided by granting extensions.
Having numerous, economically viable, timber sale purchasers
increases competition for National Forest System timber sales,
results in higher prices paid for such timber, and allows the Forest
Service to provide a continuous supply of timber to the public in
accordance with the Organic Administration Act. In addition, by
extending contracts and avoiding defaults, closures and
bankruptcies, the Government avoids the difficult, lengthy,
expensive, and sometimes impossible, process of collecting default
damages.
Therefore, pursuant to 16 U.S.C. 472a, and the authority
delegated to me at 7 CFR 2.59, I have determined that it is in the
substantial overriding public interest to extend for up to one year
certain National Forest System timber sales that were awarded prior
to January 1, 2006. This finding does not apply to contracts that
have been or are currently eligible to be extended under market
related contract term addition contract provisions, to salvage sale
contracts that were sold with the objective of harvesting
deteriorating timber, or to contracts that are in breach. Total
contract length shall not exceed 10 years as a result of this
extension. For those contracts extended pursuant to this finding,
periodic payments due after the date of this determination will also
be deferred for up to one year. To receive the extension and
periodic payment deferral, purchasers must make written request and
agree to release the Forest Service from all claims and liability if
a contract extended pursuant to this finding is suspended, modified
or terminated in the future.
Dated: November 2, 2006.
David P. Tenny
Deputy Under Secretary of Agriculture for Natural Resources and
Environment.
[FR Doc. E6-19102 Filed 11-9-06; 8:45 am]
BILLING CODE 3410-11-P
