Extension of Certain Timber Sale Contracts; Finding of Substantial Overriding Public Interest, 64991-64994 [E7-22534]
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Federal Register / Vol. 72, No. 222 / Monday, November 19, 2007 / Notices
Early Notice of Importance of Public
Participation in Subsequent
Environmental Review
DEPARTMENT OF AGRICULTURE
The Forest Service believes, at this
early stage, it is important to give
reviewers notice of several court rulings
related to public participation in the
environmental review process. First,
reviewers of draft environmental impact
statements must structure their
participation in the environmental
review of the proposal so that it is
meaningful and alerts an agency to the
reviewer’s position and contentions.
Vermont Yankee Nuclear Power Corp. v.
NRDC, 435 U.S. 519, 553 (1978). Also,
environmental objections that could be
raised at the draft environmental impact
statement stage but that are not raised
until after completion of the final
environmental impact statement may be
waived or dismissed by the courts. City
of Angoon v. Hodel, 803 F.2d 1016,
1022 (9th Cir. 1986) and Wisconsin
Heritages, Inc. v. Harris, 490 F. Supp.
1334, 1338 (E.D. Wis. 1980). Because of
these court rulings, it is very important
that those interested in this proposed
action participate by the close of the 45
day comment period so that substantive
comments and objections are made
available to the Forest Service at a time
when it can meaningfully consider them
and respond to them in the final
environmental impact statement.
To assist the Forest Service in
identifying and considering issues and
concerns on the proposed action,
comments on the draft environmental
impact statement should be as specific
as possible. It is also helpful if
comments refer to specific pages or
chapters of the draft environmental
impact statement. Comments may also
address the adequacy of the draft
environmental impact statement or the
merits of the alternatives formulated
and discussed in the statement.
Reviewers may wish to refer to the
Council on Environmental Quality
Regulations for implementing the
procedural provisions of the National
Environmental Policy Act at 40 CFR
1503.3 in addressing these points.
Comments received, including the
names and addresses of those who
comment, will be considered part of the
public record on this proposal and will
be available for public inspection.
Extension of Certain Timber Sale
Contracts; Finding of Substantial
Overriding Public Interest
Forest Service
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Authority: 40 CFR 1501.7 and 1508.22;
Forest Service Handbook 1909.15, Section
21.
Dated: November 13, 2007.
Tom Quinn,
Forest Supervisor.
[FR Doc. E7–22571 Filed 11–16–07; 8:45 am]
BILLING CODE 3410–11–P
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Forest Service, USDA.
Notice of contract extensions.
AGENCY:
ACTION:
SUMMARY: On November 2, 2007, the
Chief of the Forest Service 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, 2007,
finding, timber sale contracts awarded
prior to January 1, 2007, are eligible for
extension and deferral of periodic
payment due dates for up to one year.
This finding does not apply to (1)
contracts that have been or are currently
eligible to be extended under market
related contract term addition (MRCTA)
contract provisions, except sales using
the Hardwood Lumber index that were
awarded after December 31, 2005, (2)
salvage sale contracts that were sold
with the objective of harvesting
deteriorating timber, (3) contracts the
Forest Service determines are in urgent
need of harvesting due to deteriorating
timber conditions that have developed
following award of the contract, or (4)
contracts that are in breach. 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,
2007, 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,
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64991
lengthy, expensive, and sometimes
impossible process of collecting default
damages.
DATES: The determination was made on
November 2, 2007, by the Chief of the
Forest Service.
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 two to three years,
although a few contracts have terms of
five or more years.
Rules in 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 following a peak in
September 2004 and was still on a
downward trend as of September 2007,
with the relative Softwood Lumber
index decreasing by about 36 percent
and the Hardwood Lumber index
decreasing by about 19 percent, during
this time. While most purchasers
holding contracts with those indices
have received or are eligible to receive
MRCTA, an anomaly in the wood
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Federal Register / Vol. 72, No. 222 / Monday, November 19, 2007 / Notices
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 in 7 CFR 2.59.
Accordingly, based on current data,
the Chief has made a finding that there
is a Substantial Overriding Public
Interest in extending certain sales for up
to one year. This finding does not apply
to (1) contracts that have been or are
currently eligible to be extended under
MRCTA contract provisions, except
sales using the Hardwood Lumber index
that were awarded after December 31,
2005, (2) salvage sale contracts that were
sold with the objective of harvesting
deteriorating timber, (3) contracts the
Forest Service determines are in urgent
need of harvesting due to deteriorating
timber conditions that have developed
following award of the contract, or (4)
contracts that are in breach. In addition
to extending contracts pursuant to the
Chief’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 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
Chief’s November 2, 2007 finding. The
text of the finding, as signed by the
Chief of the Forest Service is set out at
the end of this notice.
Dated: November 2, 2007.
Joel D. Holtrop,
Deputy Chief for National Forest System.
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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
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that the ‘‘Substantial Overriding Public
Interest’’ justifies the extension.
As a result of continued 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 (MRCTA),
authorize extensions of timber sale
contracts up to one additional year
when qualifying market conditions are
met. When the MRCTA procedures were
established, experience indicated that
the type and magnitude of lumber
market declines that would trigger
MRCTA 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 MRCTA. Meanwhile, purchasers
in other parts of the country were facing
defaults, mill closures, and bankruptcies
but were not eligible for MRCTA. To
avert these problems, the Chief of the
Forest Service determined that it was in
the Substantial Overriding Public
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Interest to extend for a period of up to
one year certain contracts that had not
received any MRTCA. The Forest
Service also initiated a study of the
MRTCA 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 three 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.
Market Conditions Leading to the
November 2006, Determination of
Substantial Overriding Public Interest
To Extend Certain Sales
The Softwood Lumber index #0811
began declining, after peaking in
September 2004, and with adjustments
for inflation the relative index had
declined 47.9 points or 31 percent by
September 2006. Between the third
quarter 2005 and the third quarter 2006,
there were five consecutive calendar
quarters where the declines were large
enough to trigger MRCTA. This was a
substantially larger drop than the one in
the period between 1994–1996, when
the index declined about 38 points or 21
percent. The period from 1994–1996
was also the last time there were five
consecutive qualifying quarters for
MRCTA.
The Hardwood Lumber index #0812
also began declining, after peaking in
September 2004, and with adjustments
for inflation declined 18.6 points or 14
percent as of September 2006. There
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were three consecutive quarters
beginning with the third quarter of 2005
through the first quarter of 2006, where
the quarterly declines were large enough
to trigger MRCTA equal to one calendar
year plus one normal operating season.
The Hardwood Lumber index continued
to decline in the second and third
quarters of 2006, but the decline was not
sufficient to trigger MRCTA.
Consequently, some hardwood
purchasers were expected to begin
facing additional hardships as the
MRCTA time they previously obtained
expired.
Between September 2004 and January
2006, the Wood Chips index remained
fairly static but was on a steady rise
since then. The last time the Wood
Chips index had a qualifying quarter
was the third quarter of 1997.
As of November 2006, the MRCTA
procedures on softwood lumber and
hardwood lumber sales were generally
functioning as expected. Additional
contract time was being offered for
qualifying sale, which 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 were
exceptions.
For example, in the Lake States area,
a combination of factors contributed to
a more drastic decline in forest product
prices than was occurring in other parts
of the country and/or the producer price
indices were not triggering MRCTA. The
predominant forest products produced
in that area are wood chips used in
pulping for paper and oriented strand
board (OSB). Both the pulp and OSB
sales used the Wood Chips index which
had not had a qualifying quarter for
MRCTA since 1997. National Forest
System timber sales in the Lake States
area often contain a diverse mix of forest
products, which attracted strong
competition leading to relatively high
bid rates. Problems began in 2005, when
prices for both pulp and OSB chips
started declining sharply.
OSB is a building product with prices
that tend to follow lumber market
prices. Because lumber market prices
were declining significantly across most
of the country, contracts tied to the
Softwood Lumber index were eligible to
receive MRCTA. But in places, such as
much of the Lake States region, many
purchasers marketing OSB material
were not getting this relief because most
of their contracts were tied to the wood
chips index which had not declined and
was not triggering market related
contract term additions. Concurrently,
while lake states area pulp prices were
declining national wood chip prices
were stable or increasing, so purchasers
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marketing pulp material were not
eligible for market related contract term
additions. The principal cause of this
anomaly was due to the location along
the great lakes and Canadian border,
where competition from cheaper
imported wood chips was driving prices
down. As a result of these factors,
purchasers in the Lake States area were
faced with high bid prices on their
existing contracts, low product prices,
and no MRCTA to provide additional
time for markets to recover or to mix the
higher priced timber with lower priced
timber for other sources. The MRCTA
procedures were not 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 cogeneration 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. 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 MRCTA
because the Wood Chips index has not
triggered.
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, on November 2, 2006, the
Deputy Under Secretary of Agriculture
for Natural Resources and Environment
determined there was a 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, were
eligible for extension and deferral of
periodic payment due dates for up to
one year. Contracts that were in breach,
have been or were currently eligible to
be extended under MRCTA contract
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64993
provisions, or salvage sale contracts that
were sold with the objective of
harvesting deteriorating timber were not
eligible for extension pursuant to the
November 2, 2006, finding. To receive
an extension, purchasers were required
to make a written request to the
appropriate Contracting Officer.
Purchasers were also required to agree
to release the Forest Service from all
claims and liability if a contract
extended pursuant to the November 2,
2006, finding was suspended, modified,
or terminated in the future.
2007 Market Conditions
Market conditions leading to the
November 2, 2006, determination of
Substantial Overriding Public Interest
have continued to decline. Between
September 2006, and September 2007,
the relative Softwood Lumber index
dropped an additional 9.4 points
bringing the total decline since
September 2004 to 57 points or 36.4
percent. Including the third quarter of
calendar year 2007, the Softwood
Lumber index has triggered for MRCTA,
an unprecedented nine consecutive
calendar quarters, which is the longest
sustained decline since the Forest
Service established the MRCTA
procedures in December 1990. Between
September 2006 and September 2007,
the relative Hardwood Lumber index
dropped an additional 7.5 points,
bringing the total decline since
September 2004 to 26.1 points or 19.1
percent. But, although the Hardwood
Lumber index has steadily declined, the
rate of decline has not been sufficient to
trigger MRCTA for sales awarded since
January 1, 2006. Between September
2006 and September 2007, the Wood
Chips index continued an upward
trend. In recognition of the seriousness
of the market problems, the State of
Minnesota and some counties within
Minnesota have provided price relief to
purchasers of their sales. The U.S.
Forest Service has no statutory authority
at this time to provide price relief but
can offer additional contract time based
on a determination of Substantial
Overriding Public Interest.
Determination of Substantial
Overriding Public Interest
The Government benefits if defaulted
timber sale contracts, mill closures, and
bankruptcies can be avoided over large
geographic areas 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
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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 2.60, 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, 2007. This finding does not apply to
(1) contracts that have been or are
currently eligible to be extended under
MRCTA contract provisions, except
sales using the Hardwood Lumber index
that were awarded after December 31,
2005, (2) salvage sale contracts that were
sold with the objective of harvesting
deteriorating timber, (3) contracts the
Forest Service determines are in urgent
need of harvesting due to deteriorating
timber conditions that have developed
following award of the contract, or (4)
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, 2007.
Abigail R. Kimbell,
Chief.
[FR Doc. E7–22534 Filed 11–16–07; 8:45 am]
BILLING CODE 3410–11–P
DEPARTMENT OF AGRICULTURE
Natural Resources Conservation
Service
Paperwork Reduction Act
Notice of Intent To Request Comments
on a Currently Approved Information
Collection.
Natural Resources
Conservation Service, USDA.
ACTION: Notice and request for
comments.
rwilkins on PROD1PC63 with NOTICES
AGENCY:
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In accordance with the Paperwork
Reduction Act of 1995 (Public Law 104–
13), and the Office of Management and
Budget (OMB) regulations at 5 CFR part
1320 (60 FR 44978, August 29, 1995).
Government Paperwork Elimination
Act
SUMMARY: This notice announces the
intention of the Natural Resources
Conservation Service (NRCS) to request
VerDate Aug<31>2005
comments on a currently approved
information collection for which
approval will expire, 0578–0030,
Emergency Watershed Protection
Program.
Public Participation: The NRCS
invites full public participation to
promote open communication and
better decision-making. All persons and
organizations that have an interest in
the Emergency Watershed Protection
(EWP) Program are urged to provide
comments.
Scoping Process: Public participation
is requested throughout the scoping
process. The NRCS is soliciting
comment the public indicating what
issues and impacts the public believes
should be encompassed within the
scope of the EWP Program. Comments
are invited on (a) Whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility, (b) The accuracy of the
agency’s estimate of burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used, (c)
Ways to enhance the quality, utility, and
clarity of the information to be
collected, and (d) Ways to minimize the
burden of the collection of information
on those who are to respond, such as
through the use of appropriate
automated, electronic, mechanical, or
other technologic collection techniques
or other forms of information
technology.
Date Scoping Comments Are Due:
Comments on this notice must be
received by January 18, 2008 to ensure
consideration. Comments may be sent to
Phyllis I. Watkins, Agency OMB
Clearance Officer, U.S. Department of
Agriculture, Natural Resources
Conservation Service, 5601 Sunnyside
Avenue, Mailstop 5460, Beltsville, MD
20705–5000; (301) 504–2170;
phyllis.i.watkins@wdc.usda.gov.
NRCS is committed to compliance
with the Government Paperwork
Elimination Act (GPEA) and the
Freedom to E-File Act, which require
government agencies in general, and
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NRCS in particular, to provide the
option of submitting information or
transacting business electronically to
the maximum extent possible.
FOR FURTHER INFORMATION CONTACT:
Questions and comments should be
directed to Phyllis I. Watkins, Agency
Office of Management and Budget
Clearance Officer, USDA, Natural
Resources Conservation Service, 5602
Sunnyside Avenue, Mailstop 5460,
Beltsville, Maryland 20705–5000;
telephone: (301) 504–2170.
SUPPLEMENTARY INFORMATION:
Title: Emergency Watershed
Protection Program.
OMB Number: 0578–0030.
Expiration Date of Approval: July 31,
2008.
Type of Request: To request
comments on a currently approved
collection for which approval will
expire.
Abstract: The primary objective of the
Natural Resources Conservation Service
(NRCS) is to work in partnership with
the American people and the farming
and ranching community to conserve
and sustain our natural resources. The
purpose of Emergency Watershed
Protection Program (EWP) information
collection is to provide EWP assistance
to sponsors to undertake emergency
measures to retard runoff and prevent
soil erosion to safeguard lives and
property from floods, drought, and the
products of erosion on any watershed
whenever fire, flood, or other natural
disaster is causing or has caused a
sudden impairment of that watershed.
The sponsor’s request is submitted
formally as a letter (now the Appendix
to the NRCS–PDM–20A) to the NRCS
State Conservationist for consideration.
The NRCS–PDM–20, Damage Survey
Report (DSR), is the agency decisionmaking document that includes the
economic, social, and environmental
evaluation and the engineer’s cost
estimate.
This information collection allows the
responsible Federal official to make
EWP Program eligibility determinations
and provide Federal cost-share
contribution to complete the measures.
This request is necessary to implement
the EWP Program for which NRCS has
statutory authority.
The table below lists the forms in this
collection, the uses for each document,
and the applicable programs. These
forms constitute this information
collection and reflect the documents
used by EWP sponsors to request
participation in the recovery program.
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Agencies
[Federal Register Volume 72, Number 222 (Monday, November 19, 2007)]
[Notices]
[Pages 64991-64994]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22534]
-----------------------------------------------------------------------
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, 2007, the Chief of the Forest Service
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, 2007, finding, timber sale contracts awarded prior
to January 1, 2007, are eligible for extension and deferral of periodic
payment due dates for up to one year. This finding does not apply to
(1) contracts that have been or are currently eligible to be extended
under market related contract term addition (MRCTA) contract
provisions, except sales using the Hardwood Lumber index that were
awarded after December 31, 2005, (2) salvage sale contracts that were
sold with the objective of harvesting deteriorating timber, (3)
contracts the Forest Service determines are in urgent need of
harvesting due to deteriorating timber conditions that have developed
following award of the contract, or (4) contracts that are in breach.
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, 2007, 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, 2007, by the Chief of
the Forest Service.
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 two to three years, although a
few contracts have terms of five or more years.
Rules in 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 following a peak in September 2004 and was still
on a downward trend as of September 2007, with the relative Softwood
Lumber index decreasing by about 36 percent and the Hardwood Lumber
index decreasing by about 19 percent, during this time. While most
purchasers holding contracts with those indices have received or are
eligible to receive MRCTA, an anomaly in the wood
[[Page 64992]]
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 in 7 CFR
2.59.
Accordingly, based on current data, the Chief has made a finding
that there is a Substantial Overriding Public Interest in extending
certain sales for up to one year. This finding does not apply to (1)
contracts that have been or are currently eligible to be extended under
MRCTA contract provisions, except sales using the Hardwood Lumber index
that were awarded after December 31, 2005, (2) salvage sale contracts
that were sold with the objective of harvesting deteriorating timber,
(3) contracts the Forest Service determines are in urgent need of
harvesting due to deteriorating timber conditions that have developed
following award of the contract, or (4) contracts that are in breach.
In addition to extending contracts pursuant to the Chief'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 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 Chief's
November 2, 2007 finding. The text of the finding, as signed by the
Chief of the Forest Service is set out at the end of this notice.
Dated: November 2, 2007.
Joel D. Holtrop,
Deputy Chief for National Forest System.
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 continued 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 (MRCTA), authorize extensions of timber sale contracts up to
one additional year when qualifying market conditions are met. When the
MRCTA procedures were established, experience indicated that the type
and magnitude of lumber market declines that would trigger MRCTA
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 MRCTA. Meanwhile, purchasers in other parts of the country were
facing defaults, mill closures, and bankruptcies but were not eligible
for MRCTA. 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 MRTCA. The Forest Service also initiated a study of the
MRTCA 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 three 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.
Market Conditions Leading to the November 2006, Determination of
Substantial Overriding Public Interest To Extend Certain Sales
The Softwood Lumber index 0811 began declining, after
peaking in September 2004, and with adjustments for inflation the
relative index had declined 47.9 points or 31 percent by September
2006. Between the third quarter 2005 and the third quarter 2006, there
were five consecutive calendar quarters where the declines were large
enough to trigger MRCTA. This was a substantially larger drop than the
one in the period between 1994-1996, when the index declined about 38
points or 21 percent. The period from 1994-1996 was also the last time
there were five consecutive qualifying quarters for MRCTA.
The Hardwood Lumber index 0812 also began declining, after
peaking in September 2004, and with adjustments for inflation declined
18.6 points or 14 percent as of September 2006. There
[[Page 64993]]
were three consecutive quarters beginning with the third quarter of
2005 through the first quarter of 2006, where the quarterly declines
were large enough to trigger MRCTA equal to one calendar year plus one
normal operating season. The Hardwood Lumber index continued to decline
in the second and third quarters of 2006, but the decline was not
sufficient to trigger MRCTA. Consequently, some hardwood purchasers
were expected to begin facing additional hardships as the MRCTA time
they previously obtained expired.
Between September 2004 and January 2006, the Wood Chips index
remained fairly static but was on a steady rise since then. The last
time the Wood Chips index had a qualifying quarter was the third
quarter of 1997.
As of November 2006, the MRCTA procedures on softwood lumber and
hardwood lumber sales were generally functioning as expected.
Additional contract time was being offered for qualifying sale, which
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 were exceptions.
For example, in the Lake States area, a combination of factors
contributed to a more drastic decline in forest product prices than was
occurring in other parts of the country and/or the producer price
indices were not triggering MRCTA. The predominant forest products
produced in that area are wood chips used in pulping for paper and
oriented strand board (OSB). Both the pulp and OSB sales used the Wood
Chips index which had not had a qualifying quarter for MRCTA since
1997. National Forest System timber sales in the Lake States area often
contain a diverse mix of forest products, which attracted strong
competition leading to relatively high bid rates. Problems began in
2005, when prices for both pulp and OSB chips started declining
sharply.
OSB is a building product with prices that tend to follow lumber
market prices. Because lumber market prices were declining
significantly across most of the country, contracts tied to the
Softwood Lumber index were eligible to receive MRCTA. But in places,
such as much of the Lake States region, many purchasers marketing OSB
material were not getting this relief because most of their contracts
were tied to the wood chips index which had not declined and was not
triggering market related contract term additions. Concurrently, while
lake states area pulp prices were declining national wood chip prices
were stable or increasing, so purchasers marketing pulp material were
not eligible for market related contract term additions. The principal
cause of this anomaly was due to the location along the great lakes and
Canadian border, where competition from cheaper imported wood chips was
driving prices down. As a result of these factors, purchasers in the
Lake States area were faced with high bid prices on their existing
contracts, low product prices, and no MRCTA to provide additional time
for markets to recover or to mix the higher priced timber with lower
priced timber for other sources. The MRCTA procedures were not
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. 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 MRCTA because the Wood Chips index has not triggered.
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, on November 2, 2006, the Deputy Under Secretary of
Agriculture for Natural Resources and Environment determined there was
a 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,
were eligible for extension and deferral of periodic payment due dates
for up to one year. Contracts that were in breach, have been or were
currently eligible to be extended under MRCTA contract provisions, or
salvage sale contracts that were sold with the objective of harvesting
deteriorating timber were not eligible for extension pursuant to the
November 2, 2006, finding. To receive an extension, purchasers were
required to make a written request to the appropriate Contracting
Officer. Purchasers were also required to agree to release the Forest
Service from all claims and liability if a contract extended pursuant
to the November 2, 2006, finding was suspended, modified, or terminated
in the future.
2007 Market Conditions
Market conditions leading to the November 2, 2006, determination of
Substantial Overriding Public Interest have continued to decline.
Between September 2006, and September 2007, the relative Softwood
Lumber index dropped an additional 9.4 points bringing the total
decline since September 2004 to 57 points or 36.4 percent. Including
the third quarter of calendar year 2007, the Softwood Lumber index has
triggered for MRCTA, an unprecedented nine consecutive calendar
quarters, which is the longest sustained decline since the Forest
Service established the MRCTA procedures in December 1990. Between
September 2006 and September 2007, the relative Hardwood Lumber index
dropped an additional 7.5 points, bringing the total decline since
September 2004 to 26.1 points or 19.1 percent. But, although the
Hardwood Lumber index has steadily declined, the rate of decline has
not been sufficient to trigger MRCTA for sales awarded since January 1,
2006. Between September 2006 and September 2007, the Wood Chips index
continued an upward trend. In recognition of the seriousness of the
market problems, the State of Minnesota and some counties within
Minnesota have provided price relief to purchasers of their sales. The
U.S. Forest Service has no statutory authority at this time to provide
price relief but can offer additional contract time based on a
determination of Substantial Overriding Public Interest.
Determination of Substantial Overriding Public Interest
The Government benefits if defaulted timber sale contracts, mill
closures, and bankruptcies can be avoided over large geographic areas
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
[[Page 64994]]
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 2.60, 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, 2007. This finding does not apply to (1) contracts that have been or
are currently eligible to be extended under MRCTA contract provisions,
except sales using the Hardwood Lumber index that were awarded after
December 31, 2005, (2) salvage sale contracts that were sold with the
objective of harvesting deteriorating timber, (3) contracts the Forest
Service determines are in urgent need of harvesting due to
deteriorating timber conditions that have developed following award of
the contract, or (4) 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, 2007.
Abigail R. Kimbell,
Chief.
[FR Doc. E7-22534 Filed 11-16-07; 8:45 am]
BILLING CODE 3410-11-P