[Federal Register Volume 74, Number 155 (Thursday, August 13, 2009)]
[Rules and Regulations]
[Pages 40736-40744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19372]
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DEPARTMENT OF AGRICULTURE
Forest Service
36 CFR Part 223
RIN 0596-AC80
Sale and Disposal of National Forest System Timber; Downpayment
and Periodic Payments
AGENCY: Forest Service, USDA.
ACTION: Final rule.
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SUMMARY: This final rule revises the Forest Service's downpayment and
periodic payment regulations to reflect changes in contracting
procedures and authorities since these regulations were adopted in
1991. The changes remove obsolete references and procedures; make
downpayments and periodic payments optional for stewardship contracts;
allow downpayment and periodic payment amounts to be recalculated when
contracts receive rate redeterminations; revise procedures for
releasing downpayments; and allow downpayments to be temporarily
reduced for certain delays, interruptions, or extensions. This final
rule protects the Government's financial security, reduces speculative
bidding, and encourages purchasers to harvest timber in a timely
manner. In addition, the rule provides financial relief to timber
purchasers when forest product prices drastically decline or purchasers
receive additional contract time and are not expected to operate.
DATES: This final rule is effective September 14, 2009.
FOR FURTHER INFORMATION CONTACT: Lathrop Smith, Forest Management
staff, at (202) 205-0858, or Richard Fitzgerald, Forest Management
staff, at (202) 205-1753. Individuals who use telecommunication devices
for the deaf (TDD) may call the Federal Information Relay Service
(FIRS) at 1-800-877-8339 between 8 a.m. and 8 p.m., Eastern Standard
Time, Monday through Friday.
SUPPLEMENTARY INFORMATION:
Background
The downpayment regulation (36 CFR 223.49) and periodic payments
regulation (36 CFR 223.50) were adopted on July 31, 1991, (56 FR 36099)
to protect the Government's financial security, reduce speculative
bidding, encourage purchasers to harvest timber in a timely manner and
to comply with section 2d of the Federal Timber Contract Payment
Modification Act (Pub. L. 98-478, 98 Stat 2213; 16 U.S.C. 618) (Buy-out
Act).\1\
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\1\ Section 2(d) provides that ``[e]ffective January 1, 1985, in
any contract for the sale of timber from the National Forests, the
Secretary of Agriculture shall require a cash down-payment at the
time the contract is executed and periodic payments to be made over
the remaining period of the contract.''
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The downpayment regulation requires purchasers to make a cash
deposit in the timber sale account at the time of sale award equal to
10 percent of the sale's total advertised value plus 20 percent of the
bid premium. This cash is held by the Forest Service and cannot be used
by the purchaser until (i) on scaled sales, stumpage representing 25
percent of the total bid value has been charged and paid for, or (ii)
on tree measurement sales, stumpage representing 25 percent of the
total bid value is shown on the timber sale statement of account to
have been cut, removed, and paid for. (36 CFR 223.49(d).)
This final rule revises 36 CFR 223.49 by: (1) Removing obsolete
definitions, references and procedures; (2) making downpayments
optional for stewardship contracts; (3) adding procedures to
recalculate downpayments when contracts receive rate redeterminations;
(4) revising procedures for releasing downpayments; and (5) adding
procedures to temporarily reduce downpayments when the Forest Service
authorizes or orders certain contract delays, interruptions, or
extensions.
Section 223.49(b) is revised to make downpayments optional for
stewardship contracts. Stewardship contracts are awarded on a best
value basis, which virtually eliminates the potential for speculative
bidding because factors other than price determine best value. Further,
section 323 of the Department of the Interior and Related Agencies
Appropriations Act of 2003 (as contained in division F of Public Law
108-7; 16 U.S.C. 2104 Note) authorizes the Forest Service to apply the
value of timber or other forest products removed under a stewardship
project as an offset against the cost of service work. Doing so
provides financial security to the Government and incentivizes
contractors to harvest timber and perform service work in a timely
manner. Stewardship contracts require contractors to make cash deposits
equal in value to timber they plan to cut before performing service
work. To get these cash deposits back, contractors must perform the
service work. Alternatively, if a contractor performs the service work
first, the Government uses the value of timber the contractor harvests
to offset the service work's cost. For these reasons, most stewardship
contracts do not need a downpayment.
However, there can be exceptions. For example, if the value of the
timber greatly exceeds the cost of services under a contract, a
downpayment may be needed to provide financial security. Therefore,
this final rule allows contracting officers to require downpayments on
stewardship contracts when needed to ensure the Government's financial
security.
This rule also revises Sec. 223.49(c) to allow downpayments to be
recalculated when contracts receive rate redeterminations. The initial
downpayment amount deemed necessary to protect the Government's
financial security and encourage purchasers to timely harvest timber in
is based on a percentage of a contract's value at time of award.
However, timber sale contracts contain procedures to redetermine
stumpage rates for (1)
[[Page 40737]]
environmental modification; (2) catastrophic damage; (3) Forest Service
ordered suspension or delay; and (4) emergency rate redeterminations.
Redetermined rates can change a contract's total value. While many
contracts already provide that required deposits can be redetermined
when contract rates are redetermined, the practice has not been to
adjust downpayments. This final rule clarifies that downpayments should
be recaclulated when rates are redetermined. Allowing downpayment
redeterminations maintains the government's financial security because
the same percentage of downpayment to total contract value deemed
necessary under Sec. 223.49 is retained under this final rule.
In addition, this rule revises Sec. 223.49(d) to allow
downpayments to be released when they equal or exceed the value of a
sale's remaining timber. Section 223.49(d)(1) was added for scaled
sales and Sec. 223.49(d)(2) was added for tree measurement sales. This
change was made to prevent situations where prices on sales subject to
stumpage rate adjustments decline so much that the downpayment exceeds
the value of remaining timber without triggering the downpayment's
release. The Forest Service never intended to hold downpayments greater
than the value of remaining timber.
Finally, this rule adds Sec. 223.49(k), which allows downpayments
to be temporarily reduced when the Forest Service authorizes or orders
certain contract delays, interruptions, or extensions. The Forest
Service has determined that it is not necessary to require full cash
downpayments when the scenarios identified in Sec. 223.49(k) occur.
Periodic payments are ``amounts specified in a contract that a
purchaser must pay by the periodic payment determination date(s) unless
reduced by amounts paid as stumpage for volume removed.'' (36 CFR
223.50(a)(4).) The initial periodic payment is equal to 35 percent of
the total contract value or 50 percent of the bid premium, whichever is
greater. Where an additional periodic payment is required by the
contract, 75 percent of the total contract value at time of award must
be paid by the second periodic payment determination date. The periodic
payment(s) amount is reduced when payment would result in the
purchaser's credit balance for timber charges exceeding the current
contract value (36 CFR 223.50(c)). Many purchasers never receive a
periodic payment bill because their stumpage payments for volume
removed stay ahead of periodic payment amounts. For purchasers that are
billed, or are about to be billed, the periodic payment is an economic
incentive to resume or accelerate harvesting.
This final rule revises 36 CFR 223.50 by: (1) Amending paragraph
(b) to clarify that periodic payments are not required for stewardship
contracts and (2) amending paragraph (f) to add procedures to
recalculate periodic payment(s) amounts after contractual rate
redeterminations and to remove obsolete procedures. These changes were
made for the same reasons as the corresponding changes made to section
223.49.
Amendments to the Downpayment Requirements
Section 223.49 is amended as follows:
In paragraph (a)(2), the definition of ineffective purchaser credit
is removed and paragraphs (3)-(5) are renumbered (2)-(4). Section 329
of the Department of the Interior and Related Agencies Appropriations
Act, 1999 (as contained in section 101(e) of division A of Public Law
105-277; 16 U.S.C. 535a) directed, among other things, that the
``purchaser credit'' procedure be eliminated no later than April 1,
1999. The use of purchaser credit was discontinued in timber sales
advertised after March 31, 1999, by making changes in timber sale
contract provisions (File code 2450 letter to Regional Foresters dated
February 19, 1999). As of March 30, 2008, only $6,000 worth of
purchaser credit was being used to cover downpayment requirements.
Because no additional purchaser credit is being earned, references to
ineffective purchaser credit in the downpayment regulation are obsolete
and unnecessary.
In paragraph (b), the option of using effective purchaser credit is
eliminated for the same reasons cited above. A sentence has also been
added making downpayments optional for stewardship contracts unless
needed to ensure the Government's financial security.
In paragraph (c), obsolete references to converting units of
measure other than board feet to board feet have been removed. The
downpayment amount is calculated as a percentage of sale value without
regard to unit of measure. Paragraph (c) is further amended to include
procedures to recalculate downpayments when contract rates are
redetermined.
Paragraph (d) is amended to allow downpayments to be released when
the estimated value of remaining timber is less than the downpayment.
Paragraph (d)(1) is added for scaled sales and paragraph (d)(2) is
added for tree measurement sales.
Paragraph (g) is amended to allow contracts subject to paragraph
(e)'s higher downpayment requirement to have their downpayments
recalculated when stumpage rates are redetermined. This change was made
for the same reasons as the changes to paragraph (c). In addition,
paragraphs (g)(1) and (2) are removed to eliminate obsolete references
to ineffective purchaser credit and converting units of measure other
than board feet to board feet. The removal of those paragraphs was made
for the same reasons as the deletions made in paragraph (a)(2).
Paragraph (j) is amended to specify that the Chief of the Forest
Service may preclude temporary downpayment reductions under paragraph
(k)(2) and (3) to deter speculation.
Paragraph (k) is added to allow temporary downpayment reductions
when a contractor is not cutting or removing timber because its
scheduled operations were delayed, interrupted, or extended for 30
consecutive days or more for any of the following reasons: (1) Forest
Service requested or ordered delay or interruption of operations for
reasons other than breach; (2) a contract term addition pursuant to
contractor shifting operations to a sale designated by the Forest
Service as in urgent need of harvesting; or (3) a contract term
extension authorized upon a determination of substantial overriding
public interest, including a market-related contract term addition, or
urgent removal contract term extension under 36 CFR 223.53.
Paragraph (l) is added to allow downpayments to be reduced to the
greater of $1,000 or two percent of the amount stated in the contract
during qualifying periods of delay, interruption, or extension under
paragraph (k), unless the purchaser is cutting or removing timber.
Purchasers cannot cut or remove a contract's timber until the
downpayment stated in the contract is restored.
Amendments to the Periodic Payment Requirements
Section 223.50 is amended as follows:
Paragraph (b)(3) is added to clarify that not all stewardship
contracts require periodic payments. Paragraph (f) is amended to remove
obsolete contract modification procedures and add procedures to
recalculate periodic payment(s) amounts following a contract rate
redetermination authorized. The obsolete procedures being removed
required pre-1991 contract purchasers to make a written request by 1991
to receive market-related contract term additions.
[[Page 40738]]
Agency Response to Major Public Comments
On October 29, 2008, the Forest Service published a notice of
proposed rule and request for comment on revisions to 36 CFR 223.49 and
223.50 in the Federal Register (73 FR 64288). During the comment
period, which ended December 29, 2008, the Forest Service received 4
comments responsive to the rule's merits and 2 non-responsive comments.
The four responsive comments were from the Federal Timber Purchasers
Committee, Westek Forest, Ltd., New Hampshire Timber Owners
Association, and the Wilderness Society. Following are the Forest
Service's responses to those comments.
Comment 1: We believe the proposed changes to the downpayment
regulation are well designed and will help timber purchasers with cash
management in these difficult markets.
Response 1: This is a statement for which no response is necessary.
Comment 2: We urge you to act expeditiously to give timber
purchasers as much relief as possible in order to keep them viable and
preserve options for the management of the National Forests.
Response 2: This is a statement for which no response is necessary.
Comment 3: I agree with the proposed rule change. This change will
give contractors better flexibility to complete stewardship contracts.
Response 3: This is a statement for which no response is necessary.
Comment 4: Nationwide, the forest products industry is undergoing
extreme stress due to reduced demand for forest products, lower prices,
and increased costs of production. It does the American people no good
to force wood producers into bankruptcy or to deal with timber sale
contracts that cannot be operated profitably under current market
conditions. If these sale contracts are cancelled and the timber
reoffered, it would not sell or would only bring greatly reduced
prices. This process would be expensive and yield no positive results.
We have reviewed the proposed rules and agree that they would have an
overall positive effect on the Forest Service timber sale program and
are in the best interest of the people of the United States.
Response 4: These are statements for which no response is
necessary.
The remaining comments were from a single respondent prefaced by
the statements that (1) significant information necessary to fully
understand the proposed rule and prepare informed comments is missing
and (2) the Federal Register notice proposes significant changes in the
amount and requirements for downpayments and periodic payments yet the
basic facts and conditions that have caused the agency to pursue these
rule changes are undisclosed. Unless otherwise noted, no changes were
made in response to the following comments.
Comment 5: The Forest Service states a desire to lower the risk of
timber contract default. This would not be proposed unless default was
a significant problem. What is the rate and percentage of default in
the last five or ten years and over the past 12 months? What is the
projected rate of default based on current market conditions?
Response 5: The Forest Service does not track defaults so it can
not calculate a percentage of defaults over a five or ten year period.
Although snapshots of the timber sale accounting system can be taken to
determine the number of contracts coded as defaulted on specific dates,
the system can not tally the number of defaults over a period of time.
On March 31, 2009, the Forest Service had 1,972 open contracts on
forms FS-2400-6 and FS-2400-6T. Twenty-three of those contracts or 1.2
percent were coded in the timber sale accounting system as defaulted.
On March 31, 2008, there were 1,961 open contracts on those same forms;
24 or 1.2 percent were coded as defaulted. Sales on other contract
forms were not included in these calculations because the Forest
Service is not aware of any other types of open contracts subject to
this final rule.
A projected default rate based on current market conditions would
only be an unsubstantiated estimate subject to dispute. However, it is
reasonable to predict that when purchasers are forced to cease
operating due to adverse market conditions, uncompleted contracts are
at an increased risk of default. An objective of the final rule is to
lower default risk by adjusting downpayments to reflect drastic
declines in contract values and temporarily reducing downpayments when
appropriate. These changes are expected to help purchaser cash flow,
which may help them continue operating and/or purchasing contracts.
Comment 6: The Forest Service recently described over 1,000 agency
timber sales as eligible for market-related contract term additions
(MRCTA). All would then be eligible for downpayment and periodic
payment redeterminations.
Response 6: The MRCTA procedures do not include a mechanism for
redetermining contract rates Therefore, a sale's eligibility for MRCTA
does not mean it will receive a rate or periodic payment
redetermination. On March 31, 2009, the Forest Service had
approximately 615 sales eligible for downpayment and periodic payment
redeterminations under this rule. Of those 615 sales, only 199 still
had downpayments on deposit, for a total value of $6.8 million. Without
looking at the statement of account for each one of those contracts, it
is not possible to assess each contract's periodic payment status.
Comment 7: How many sales would be eligible for redetermination
under the three clauses (environmental modification, catastrophic
damage and emergency rate determination)? What percentage of sales does
this represent? How often do these cases occur?
Response 7: The commenter is asking the Forest Service to quantify
where and when unpredictable events such as natural disasters may occur
in the future. Any attempt to do so would be purely speculative.
However, we do know that on March 31, 2009, there were 1,972 open sales
and 615 or 31 percent were potentially eligible for emergency rate
redeterminations. Of those 615 sales, only 199 still had downpayments
on deposit in the amount of $6.8 million.
Comment 8: The Forest Service retains authority to set larger
downpayment amounts and proposes to limit redeterminations in
geographic areas where speculation has or could occur. Where has the
agency set larger downpayments in the past? How does the agency
recognize when speculation is occurring?
Response 8: The Forest Service uses appraisal performance reports,
Forest Service Manual (FSM) 2422, and Bid Monitoring Reports, FSM
2432.52, to identify speculative bidding. The agency has not increased
downpayments pursuant to the authority in 36 CFR 223.49(c).
Comment 9: The agency states: ``Further, the Forest Service has
determined that the benefits of temporarily reducing downpayments under
223.49(k) outweigh the potential increased risks to the government's
financial security.'' Federal Register, Volume 73, No. 210, page
64,290. Please provide a copy of the analysis that led to this
determination.
Response 9: The Forest Service has closely monitored the drastic
decline in forest product markets since late 2004. As the market
decline deepened, reports in the national press, trade bulletins, (such
as Random Lengths, TDC Stumpage Price Report, WWPA
[[Page 40739]]
Barometer and others), as well as discussions with individual
purchasers and representatives from industry associations, provided
information about falling prices and a growing number of mill closures.
Despite the current decline's severity, the default rate on open sales
has been less than 1.25 percent over the last two years. The Forest
Service believes this relatively low default rate, in the face of
extreme market turmoil, is the result of several successful proactive
measures it has taken to avoid the widespread defaults seen in the
1980s. These measures include (1) market-related contract term
additions; (2) additional contract time authorized under the November
2006, November 2007, and September 2008 findings of substantial
overriding public interest; (3) emergency rate redeterminations; and
(5) contract cancellations, rate redeterminations, and extensions
authorized by the 2008 Farm Bill. Despite the apparent success of these
measures, forest product makets have continued to worsen, leading the
Forest Service to conclude that this rule is needed to further reduce
the risk of defaults. After careful consideration, the Forest Service
determined that the benefits of further reducing potential defaults and
their associated costs outweigh any potential increased risks to the
government's financial security created by this rule.
This determination was made based on extensive oral discussions
among the Washington Office's Forest Management staff. The Forest
Management staff considered the following factors: (a) Deteriorating
market conditions; (b) procedures to temporarily reduce downpayments
when the Forest Service orders a delay or interruption for
environmental reasons are already part of all post-April 2004
contracts; (c) existing administrative authority to change the rule to
achieve its intended effect; (d) concern that these changes are needed
to prevent the loss of industry infrastructure; (e) concern that costs
to the government of treating vegetation under service contracts
exceeds the costs of doing so under timber sale contracts; (f) general
knowledge that most defaults occur after the downpayment has been
released; (g) general knowledge that cash flow is critical to sustained
operations for timber purchasers, and tying up money in downpayments on
sales the Forest Service is not expecting purchasers to operate until
market conditions improve obligates cash that may be needed elsewhere;
(h) general knowledge that purchasers' fixed costs, including payments
on equipment, continue even if a purchaser isn't operating; (i)
industry requests; and (j) in the event a contract defaults while the
downpayment has been temporarily reduced, the government can still
apply the performance bond to damages.
Since the analysis of market conditions that led to the proposed
rule, the Forest Service has learned that housing starts in April 2009
hit a record low down almost 80 percent from the peak in January 2006;
greatly exceeding the 46 percent decline during the 1981 downturn and
the 60 percent decline in the 1986-1991 period.\2\ U.S. Census Bureau
data shows privately-owned housing starts in April were at a seasonally
adjusted annual rate of 458,000 which is 12.8 percent below the revised
March estimate of 525,000 and is 54.2 percent below the revised April
2008 rate of 1,001,000.\3\ Adding to this dismal picture, a Western
Wood Products Association (WWPA) March 24, 2009, news release predicted
that the poor economy and a weak housing market are expected to reduce
demand for lumber in the U.S to the lowest level in modern history.\4\
The article notes that since reaching an all-time high of 64.3 billion
board feet in 2005, U.S. demand for lumber has dropped by more than 55
percent representing the steepest decline in the history of the
industry. While home construction which accounts for about 45 percent
of the lumber used each year is predicted to increase slightly in 2010
to a little over a half million, WWPA does not expect housing starts to
exceed 1 million units until 2012.
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\2\ USA Today, May 20, 2009, Record-low housing starts in April
cast pall over market, by Julie Schmidt.
\3\ NEW RESIDENTIAL CONSTRUCTION IN APRIL 2009, U.S. Census
Bureau News, Joint Release, U.S. Department of Housing and Urban
Development, May 19, 2009; http://www.census.gov/const/newresconst.
\4\ Western Wood Products Association, news release, Robert
Bernhardt, Jr. Information Services Director, March 24, 2009.
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Another measure of the drastic decline in lumber prices is the
Bureau of Labor Statistics index for softwood lumber. The Forest
Service monitors this index to determine when drastic declines in
forest products prices sufficient to trigger granting Market-Related
Contract Term Additions pursuant to 36 CFR 223.52 occur. The softwood
lumber index began declining in the 3rd calendar quarter of 2004 and
beginning with the 3rd quarter of 2005 began triggering Market-Related
Contract Term Additions. Through the first quarter of calendar year
2009 the softwood index, after adjustments to a constant dollar basis,
has lost about 49 percent of its value and has triggered Market-Related
Contract Term Additions an unprecedented 15 consecutive quarters. The
previous greatest decline of the softwood lumber index was in the early
1980s when it lost about 36 percent of its value and would have
triggered 12 consecutive quarters of Market-Related Contract Term
Additions if the procedure had been in place at that time. The softwood
lumber index hit its lowest point yet in March 2009, and showed a
slight increase in April 2009, but it is too early to tell if the April
increase marks the beginning of a recovery.
The data and predictions indicate that while the decline in demand
for lumber may be at or near bottoming out, the recovery will be long
and gradual. Meanwhile the agency has been routinely receiving reports
of sawmills curtaining operations or permanently closing. The Forest
Service accomplishes many of its vegetation management objectives
through timber sale contracts, which enables the Forest Service to
achieve its objectives while generating revenues. A large pool of
timber sale purchasers allows the Forest Service to accomplish these
objectives in a more cost-effective manner by increasing competition
for National Forest System timber sales, which can result in higher
contract prices. Absent a viable industry infrastructure capable of
purchasing and processing Forest Service timber, the Forest Service
would have to pay service contractors to perform certain vegetative
management objectives currently achieved by selling timber. This would
substantially reduce the Agency's ability to accomplish important
management objectives such as reducing hazardous fuels in wildland
urban interface areas where much of the work must be perfomed by
mechanical means and can often be done with timber sales.
Temporarily reducing downpayments is unlikely to prevent or reduce
defaults by itself. However, in conjunction with other relief measures,
it is expected to provide short-term relief that will help reduce the
number of defaults and loss of industry infrastructure that might occur
in its absence. Specifically it will free up cash purchasers need for a
variety of reasons including (1) harvesting sales that are operable in
this economic climate, (2) storing increasing inventories of lumber
until demand picks up, (3) making payments on equipment, and (4)
maintaining bonds on existing sales.
On March 31, 2009, the Forest Service had 1,972 open contracts on
forms FS-2400-6 and FS-2400-6T. Twenty-three of those contracts or 1.2
percent were coded in the timber sale accounting
[[Page 40740]]
system as defaulted. Only five of the default sales still had
downpayments on deposit, which totaled $101,300; less than 1 percent of
the $26.1 million total value of downpayments on deposit. One year
earlier, on March 31, 2008, there were 1,961 open contracts of which 24
or 1.2 percent were coded as defaulted; 5 of the defaults still had
downpayments on deposit in the amount of $100,600.
Considering the above-referenced factors, the Forest Service
determined that the benefits of temporarily reducing downpayments under
223.49(k) outweigh the potential increased risks to the government's
financial security.
Comment 10: This and previous Federal Register notices on market-
related contract term additions and substantial overriding public
interest (SOPI) determinations describe the government's reasons for
wanting to maintain numerous economically viable timber sale
purchasers. These include having a pool of contractors in situations
where the Forest Service determines that timber is in need of urgent
removal. But the definition of ``urgent removal'' at 36 CFR 223.53
applies only to private and other non-National Forest System (NFS)
lands. The context for the term here and in the market-related contract
term addition/substantial overriding public interest (SOPI) Federal
Register notices imply that the term refers to NFS lands. Please
provide the regulatory cite that allows the Forest Service to shift
contract operations to a NFS sale in urgent need of harvesting as
described on page 64,290 of the Federal Register notice.
Response 10: The authority is in 36 CFR 223.112, Modification of
contracts. Implementation procedures are documented in Forest Service
Handbook 2409.18, section 55.21. In addition, please see the response
to comment 11.
Comment 11: It is unclear how exactly the agency defines ``urgent''
projects in each context, the conditions under which it is applied or
how the Forest Service maintains consistency in the application of this
term throughout the national forest system (NFS). This lack of clarity
would then affect who is potentially eligible for downpayment and
periodic payment redeterminations. The term and its application here
should be defined.
Response 11: The determination of whether timber in a specific sale
or project is in urgent need of removal is a decision the Forest
Service makes on a case-by-case basis after considering the relative
conditions on the ground. Indicators of a sale in urgent need of
removal include, but are not limited to situations where:
1. Dead or dying timber is subject to rapid deterioration;
2. Failure to harvest the timber promptly could threaten public
safety. For example, removing hazardous trees along public roads.
3. Failure to harvest the timber promptly could create an insect
disease epidemic on National Forest system lands or other lands or
resources.
The Forest Service is currenty drafting an amendment to chapter 50
of the sale preparation handbook, FSH 2409.18, that will provide land
managers with more specific guidance to determine when a sale contains
timber in urgent need of removal.
Comment 12: The proposed rule language at 36 CFR 223.49(c)(4) and
223.49(g)(4) lists ``an emergency rate redetermination'' as a reason
for contract downpayment redetermination. But we can find no definition
of the term ``emergency rate redetermination.''
Response 12: Emergency rate redetermination is a procedure
addressed in standard timber sale contract provisions (B/BT3.34) and
standard integrated resource timber contract clauses (D/DT.3.4) for
adjusting rates when the Bureau of Labor Statistics Producer Price
Index stated in the contract declines by 25% or more after the contract
award date.
Comment 13: If the Forest Service is referring to ``urgent
removal'' (as defined at 36 CFR 223.53) in its use of the emergency
rate redetermination clause, then it should clearly state so and
disclose to the public that downpayment and periodic payment reductions
would be granted to allow timber companies to pursue harvest on private
and non-National Forest System (NFS) lands.
Response 13: Prior to authorizing urgent removal contract
extensions pursuant to 36 CFR 223.53, a Regional Forester must make a
determination that there is a substantial overriding public interest in
extending National Forest System timber sale contracts for undamaged
(green) timber not requiring expeditious removal in order to facilitate
the rapid harvest of catastrophically damaged timber requiring
expeditious removal on private and other non-National Forest System
lands. Similarly Forest Service policy is to grant contract term
adjustments on certain timber sale contracts for undamaged (green)
timber not requiring expeditious removal in order to facilitate the
rapid harvest of other National Forest System timber in urgent need of
harvesting (FSH 2409.18, Sec. 55.21).
Contract provision B/BT3.34 does not permit emergency rate
redeterminations for contracts receiving contract term extensions
pursuant to 36 CFR 223.53 The contract permits, however, emergency rate
redeterminations to facilitate the rapid harvest of National Forest
System timber and the urgent removal harvesting. This is done pursuant
to provision B/BT8.21. However, the Forest Service may modify timber
sale contracts in accordance with 36 CFR 223.112. In response to the
severity of the current market conditions, and in the interest of
preventing further erosion of the timber industry infrastructure, the
Forest Service is currently modifying rates on contracts extended
pursuant to 36 CFR 223.53 to allow emergency rate redetermination
procedures when requested by purchasers. Contracting Officers should
not modify contracts that are in breach and shall seek Washington
Office advice prior to modifying contracts that are determined to be at
high risk for default. For much the same reason this rule allows
temporary reductions in downpayments when a timber purchaser receives
additional time to harvest timber in urgent need of removal on non-NFS
lands pursuant to 36 CFR 223.53.
This rule does not modify emergency rate redetermination
procedures.
Comment 14: We believe the Forest Service should make concurrent
changes in its National Environmental Policy Act (NEPA) procedures in
order to reduce the need for downpayment and periodic payment
redeterminations and ensure that important resource management goals
are being met.
Response 14: Changes to NEPA procedures recommended by the
commenter are not responsive to the merits of the rule.
Comment 15: Stating that the proposed rule only changes the amount
of the downpayment is the wrong lens through which to view
environmental impacts. While downpayments may have been required for
many years, the proposed reductions to just 2% of the downpayment or
$1000.00 whichever is greater while still holding the contract is
significant and unprecedented. This would expose the Federal government
to significant financial risk. The agency states their belief that this
will not result in an increase in speculative bidding and that the
benefits will outweigh the potential increased risks to the
government's financial security. No evidence for these assertions is
presented.
Response 15: This comment pertains to the rule's procedures to
temporarily reduce downpayments when contracts
[[Page 40741]]
are delayed, interrupted or extended for reasons listed in Sec.
223.49(k). Contrary to the commenter's assertion that this is
significant and unprecedented, timber sale contract forms FS-2400-6 and
FS-2400-6T dated April 2004 and later already allow temporary
downpayment reductions when the Forest Service orders certain delays or
interruptions. This rule expands this existing process to include
situations where the downpayment's economic inducement to operate is
not warranted.
The agency believes these temporary reductions will not increase
speculative bidding because nothing in the final rule removes the
downpayment requirement at time of award. Once deposited, the
downpayment can not be temporarily reduced unless one of the three
conditions specified in the rule occurs. Therefore, speculative bidders
must speculate that the market will rise above overbids and that at
least one of the conditions allowing temporary downpayment reductions
will occur. Even if that happened, the downpayment still has to be
reestablised before the sale can be operated. Considering these
safeguards, the Forest Service concluded the rule was unlikely to
increase speculative bidding.
Nevertheless, the Forest Service will continue to monitor bidding
patterns and the agency will deny temporary downpayment reductions
where speculative bidding is occurring. In response to this comment,
the final rule has been revised to clarify that requests for temporary
downpayment reductions may be denied in market areas where the Chief
determines speculative bidding is occurring.
Comment 16: For the reasons cited in our response, we believe the
Forest Service has failed to follow proper procedures in proposing this
rule without analysis under the National Environmental Policy Act
(NEPA). We believe that changes in the Forest Service Handbook (FSH),
Forest Service Manual (FSM) and agency NEPA analysis of economic
effects as we detailed would fulfill agency requirements for this
proposed rule under NEPA. We urge the agency to consider them in
completing the required regulatory certification of environmental
impact for the proposed rule.
Response 16: The changes in the FSH, FSM and agency NEPA analysis
of economic effects provided by the commenter are not responsive to the
merits of the rule. Furthermore, this final rule is categorically
excluded under 36 CFR 220.6.
Comment 17: Because commercial sales are now most often regarded as
a tool to meet management objectives and not the objective or purpose
and need itself, the effect of possible contract extensions (and
subsequent downpayment and periodic payment redeterminations) must be
analyzed under NEPA in determining the ability of commercial sales (for
each alternative that uses this tool) to meet the purpose and need. We
do not think this would entail undue burden on the agency given current
and suggested procedures.
Response 17: Please see the response to comment 16.
Comment 18: Commenter presented a series of comments questioning
agency NEPA procedures for forest management projects and proposing
changes to those procedures.
Response 18: These comments are beyond the final rule's scope and
are nonresponsive to its merits.
Comment 19: National Forest System (NFS) lands supply a very small
percentage of the U.S. timber supply (< 4% according to recent
estimates). A seemingly small percentage of Forest Service timber sale
contracts (eligible for downpayment and/or periodic payment
redetermination) multiplied by a small percentage of the timber supply
means a very small percentage of the U.S. timber supply would be
affected by this proposed rule. As described above, the Forest Service
should disclose the total number of timber sale contracts eligible for
downpayment and periodic payment redeterminations in order to assess
the full impact of the proposed rule and its financial (and other)
effects. The notion that failure to enact this change will affect the
U.S. timber industry is not credible--the amount or value of timber
involved simply is not large enough to be important.
Response 19: On March 31, 2009, the Forest Service had 1,972 sales
on contract forms FS-2400-6 and FS-2400-6T. The remaining value of
those sales was $249.1 million. Of those sales, 615 or 31 percent were
potentially eligible for emergency rate redeterminations. Only 199 of
those 615 still had downpayments on deposit, in the amount of $6.8
million. Although the data base could not be queried to show how many
sales eligible for emergency rate redeterminations are also eligible
for periodic payment redeterminations, it would be less than 615.
The commenter is correct that the number of Forest Service
contracts eligible for downpayment and periodic payment
redeterminations is small and failure to enact the rule is unlikely to
significantly affect the U.S. timber industry. However, the rule's
effect may be significant for individual purchasers on the brink of
closure; with unemployment rates continuing to increase at alarming
rates, preventing or reducing job losses is a national issue.
One respondent commenting on this rule wrote that the forest
products industry sector of New Hampshire's economy is vibrant and is
the third largest sector of manufacturing in the Granite State,
employing over 9,500 people directly with an annual payroll over $320
million. The respondent also stated that high quality timber from the
White Mountain National Forest provides an important raw material
source.
Further, a June 2008 report by the University of Minnesota-Deluth
Labovitz School's Bureau of Business and Economic Research addressed
the economic impact of declines in forestry-related industries in
Minnesota, Wisconsin and Michigan. (https://lsbe.d.umn.edu/departments/bber/bber_projects.php). The report documented that, in 2006, forestry
related industries in the study area employed over 58,000 workers and
estimated that for every worker laid off another 2.2 jobs were lost in
the economy. The collapsing timber industry in this three State region
provided the impetus in the 2008 Farm Bill, Section 8401 of the Food,
Conservation, and Energy Act of 2008, Public Law 110-246,122 Stat.
1651, granting additional contract time and price relief to qualifying
contracts. While the National Forest System's contribution to the
national timber supply may not be significant, it is an important
component and in some areas it is the primary source.
Comment 20: The terms of the proposed rule would allow companies to
bid on and hold National Forest System timber sales for future harvest
while receiving most of their downpayment back for a number of loosely
defined reasons.
Response 20: As noted previously, this final rule requires
purchasers to make downpayments at time of award and only allows
temporary reductions when the conditions specified in section 223.49(k)
are met. Once those conditions cease to exist, purchasers must restore
their downpayments.
Comment 21: The proposed rule change has been justified in part on
the basis of community stability and economic health. This is dubious
at best. It is questionable whether this rule will make a difference
even in local or regional markets. It has been clear for years that
supplying timber to local mills is an ineffective (at best) strategy
[[Page 40742]]
for supporting sustainable local economic development. (Rasker, R.,
Gorte, J. F., and Alkire, C. 1996. Logging National Forests to Create
Jobs: An Unworkable Covenant, Washington, DC: The Wilderness Society.)
The Forest Service should analyze the socio-economic costs associated
with an historic emphasis on resource extraction, which has resulted in
repetitious cycles of socio-economic distress for rural communities.
The extractive industries, including the timber industry, represent an
ever smaller portion of the total jobs and income in rural counties.
The relative importance of these industries compared to expanding
industries in the professional and service sectors and those which
depend on non-labor income must be acknowledged.
Response 21: The Forest Service agrees that communities with a
broad economic base tend to be more stable than those dependent on a
single business. But a socio-economic analysis isn't needed to
demonstrate that the loss of jobs has adverse economic effects,
especially in small rural communities. With rising unemployment rates,
any loss of jobs, regardless of business sector or community size, has
a negative effect on communities where lost jobs are located. Arguing
that the Forest Service program is insignificant when looking at the
industry or the country as a whole and downplaying the importance of
jobs in extractive industries ignores the significance of those jobs to
affected individuals and communities. To the extent that this rule
reduces defaults, it is also expected to help reduce job losses.
Comment 22: What is not fully discussed or disclosed is the extent
of possible financial risk and exposure accruing to the Federal
government, and to taxpayers, from these proposed changes, especially
during extensive market downturn as is the case today.
Response 22: Any estimate or prediction of future defaults or
specific damage amounts associated with them would be highly
speculative and subject to challenge. The October 29, 2008, Federal
Register notice (73 FR 64288) discussed the financial risks of the
proposed changes in relative terms. In addition, data pulled from the
timber sale accounting system on March 31, 2009, showed 1,972 open
contracts, of which 23 were coded as defaulted. The defaulted contracts
had a remaining value of $18.3 million and performance bonds totaling
about $2.5 million. Only five of the defaults still had downpayments on
deposit when they defaulted, in the amount of $101,300. By comparison,
on March 31, 2008, there were 1,961 open contracts of which 24 or 1.2
percent were coded as defaulted. The 24 defaulted sales had performance
bonds totaling about $4.4 million; only 5 still had downpayments on
deposit in the amount of $100,600. Had this final rule been in effect
when those contracts defaulted, the potential loss to the government of
reduced downpayments could have equaled the reduced downpayment
amounts. However, that estimate is a worst-case scenario based on the
assumption that every defaulting contractor had (1) a temporarily
reduced downpayment, (2) insufficient bonding to cover default damages,
and (3) an inability to pay applicable damages, including those ordered
by a Federal court. Such an outcome is unlikely.
Although the Government may potentially lose some financial
security under this rule, the Forest Service believes this risk is
outweighed by the benefits associated with averting potential defaults.
Given the above data, the factors addressed in response 9, and default
costs to the Forest Service, industry, and timber-dependent
communities, the agency believes the potential risks associated with
this rule are justified.
Comment 23: Citing the ability of potential contractors to bid on
yet more Federal (and private) sales would only seem to increase
Federal exposure to risk. Continued market downturn would result in
continued downpayment and periodic payment redetermination. Examining
the need for timber sales in the first place and other possible methods
to accomplish the purpose and need for vegetation management projects
would seem a more prudent and less fiscally risky approach.
Response 23: Contracting officers are required under 36 CFR 223.101
to make an affirmative determination of a purchaser's responsibility
prior to awarding a contract. When conducting a responsibility
determination, consideration is given to the purchaser's financial
ability to complete the contract while taking into account all of the
purchaser's commercial and governmental business commitments. This
process limts the government's risk.
When proposing vegetation management projects, the Forest Service
considers alternatives to timber sale contracts for accomplishing the
necessary work, including stewardship contracts, procurement contracts,
agreements, and using its own employees.
Comment 24: The commenter presented a series of comments pertaining
to questions of the effect of the proposed rule on other costs
associated with timber harvest and suggested that there is research
providing compelling evidence for maintaining lands in their protected
state and/or for treating vegetation with methods other than timber
sales.
Response 24: These comments are beyond the scope of this rule and
were deemed nonresponsive to the rule's merits.
Conclusion
This final rule revises the Forest Service's downpayment and
periodic payment regulations to reflect changes in contracting
procedures and authorities since these regulations were adopted in
1991. The rule will protect the Government's financial security, reduce
speculative bidding, and encourage purchasers to harvest timber in a
timely manner. In addition, the rule provides financial relief to
timber purchasers when forest product prices drastically decline or
purchasers receive additional contract time and are not expected to
operate.
Regulatory Certifications
Regulatory Impact
This final rule has been reviewed under USDA procedures and
Executive Order 12866 on Regulatory Planning and Review. The Office of
Management and Budget (OMB) has determined that this is not a
significant regulatory action and is not subject to OMB review. This
rule will not have an annual effect of $100 million or more on the
economy nor adversely affect productivity, competition, jobs, the
environment, public health or safety, nor State or local Governments.
This rule will not interfere with an action taken or planned by another
agency nor raise new legal or policy issues. This rule consists of
technical administrative changes to regulations affecting the
administration of commercial timber sales on National Forest lands.
Finally, this action will not alter the budgetary impact of
entitlements, grants, user fees, or loan programs or the rights and
obligations of recipients of such programs. Accordingly, this final
rule is not subject to OMB review under Executive Order 12866.
Regulatory Flexibility Act
This final rule has been considered in light of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.), and it is hereby certified that
this rule will not have a significant economic impact on a substantial
number of small entities. This rule makes only technical administrative
changes to existing
[[Page 40743]]
regulations affecting the administration of certain commercial timber
sales on National Forest System land. The final rule imposes minimal
additional requirements on all timber purchasers while providing
economic relief from current market conditions. The information
required is easily within the capability of small entities to produce.
Unfunded Mandates Reform
Pursuant to Title II of the Unfunded Mandates Reform Act of 1995,
which the President signed into law on March 22, 1995, the Department
has assessed the effects of this rule on State, local, and Tribal
Governments and the private sector. This final rule does not compel the
expenditure of $100 million or more by any State, local, or Tribal
Government or anyone in the private sector. Therefore, a statement
under section 202 of the Act is not required.
Environmental Impact
The agency's preliminary assessment is that this rule falls within
36 CFR 220.6, which excludes from documentation in an environmental
assessment or impact statement ``rules, regulations, or policies to
establish Service-wide administrative procedures, program processes, or
instructions'' that do not significantly affect the quality of the
human environment. This final rule establishes uniform criteria to
temporarily reduce or change timber sale downpayments and periodic
payments. This rule does not change the longstanding requirement that
timber sale contracts include downpayments and periodic payments.
Implementation of this rule will be controlled at the local level by
the Timber Sale Contracting Officer. This final rule falls under 36 CFR
220.6(d)(2), which excludes from documentation in an environmental
assessment or impact statement ``rules, regulations, or policies to
establish Service-wide administrative procedures, program processes, or
instructions'' that do not significantly affect the quality of the
human environment.
No Takings Implications
This final rule has been analyzed in accordance with the principles
and criteria contained in Executive Order 12630. It has been determined
that the rule does not pose the risk of a taking of private property.
There are no private property rights to be affected because the rule
applies to commercial timber sale on National Forest lands.
Civil Justice Reform Act
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. If this rule were adopted, (1) all State and
local laws and regulations that are in conflict with this rule or which
would impede its full implementation would be preempted; (2) no
retroactive effect may be given to this rule; and (3) it would not
require administrative proceedings before parties may file suit in
court challenging its provisions.
Controlling Paperwork Burdens on the Public
This final rule does not contain any record-keeping or reporting
requirements or other information collection requirement as defined in
5 CFR Part 1320, Controlling Paperwork Burdens on the Public.
Accordingly, the review provisions of the Paperwork Reduction Act of
1995 (44 U.S.C. 3501 et seq.) and its implementing regulations at 5 CFR
part 1320 do not apply.
List of Subjects in 36 CFR Part 223
Administrative practice and procedures, Exports, Forests and forest
products, Government contracts, National Forests, Reporting and
recordkeeping requirements.
0
For the reasons set forth in the preamble, Part 223 of Title 36 of the
Code of Federal Regulations is amended as follows:
PART 223--SALE AND DISPOSAL OF NATIONAL FOREST SYSTEM TIMBER
0
1. The Authority citation for Part 223 continues to read as follows:
Authority: 90 Stat. 2958, 16 U.S.C. 472a; 98 Stat. 2213; 16
U.S.C. 618, 104 Stat. 714-726, 16 U.S.C. 620-620j, unless otherwise
noted.
Subpart B--Timber Sale Contracts
0
2. Revise Sec. 223.49 to read as follows:
Sec. 223.49 Downpayments.
(a) For the purposes of this section, the terms listed in this
paragraph shall have the following meaning:
(1) Total bid value is the sum of the products obtained by
multiplying the rate the purchaser bid for each species by the
estimated volume listed in the contract.
(2) Bid premium is the amount in excess of the advertised value
that a purchaser bids for timber offered.
(3) Lump sum timber sales are premeasured sales where the entire
value of the sale is paid in one payment at time of release for
cutting.
(4) Affiliate. Concerns or individuals are affiliates if directly
or indirectly, either one controls or has the power to control the
other, or a third party controls or has the power to control both. In
determining whether or not affiliation exists, the Forest Service shall
consider all appropriate factors, including, but not limited to, common
ownership, common management, and contractual relationships.
(b) Timber sale contracts shall include provisions that require
purchasers to make a downpayment in cash at the time a timber sale
contract is executed, except that a downpayment is not required for
stewardship contracts unless the contracting officer determines that a
downpayment is needed to ensure the government's financial security.
(c) The minimum downpayment shall be equivalent to 10 percent of
the total advertised value of each sale, plus 20 percent of the bid
premium, except in those geographic areas where the Chief of the Forest
Service determines that it is necessary to increase the amount of the
downpayment in order to deter speculation. The amount of the
downpayment shall be redetermined when contract rates for timber are
redetermined under the terms of the contract for environmental
modification; catastrophic damage; market change; or an emergency rate
redetermination. For the purpose of recalculating the minimum
downpayment, total advertised value shall be replaced with total
redetermined value.
(d) A purchaser cannot apply the amount deposited as a downpayment
to cover other obligations due on that sale until:
(1) On scaled sales, stumpage value representing 25 percent of the
total bid value of the sale has been charged and paid for, or the
estimated value of unscaled timber is equal to or less than the amount
of the downpayment; or
(2) On tree measurement sales, stumpage value representing 25
percent of the total bid value of the sale is shown on the timber sale
statement of account to have been cut, removed, and paid for, or the
estimated value of timber remaining to be cut, removed and paid for as
shown on the timber sale statement of account is equal to or less than
the amount of the downpayment. On lump sum sales, the downpayment
amount may be applied to payment for release of the single payment
unit.
(e) A purchaser or any affiliate of that purchaser awarded a Forest
Service timber sale contract must meet the additional downpayment
requirements of paragraph (g) of this section under the following
circumstances:
(1) The purchaser or its affiliate after September 29, 1988, has
failed to perform in accordance with the terms of a Forest Service or
Bureau of Land
[[Page 40744]]
Management timber sale contract and is notified by a Contracting
Officer that a contract has expired uncompleted or is terminated for
cause; and
(2) The estimated value of the unscaled timber on scaled sales, or
the estimated value of the timber outstanding on tree measurement
sales, included in those terminated or expired contracts exceeds
$100,000; and
(3) Unpaid damages claimed by the Government remain outstanding
prior to award of the new sale at issue and corrective action has not
been taken to avoid future deficient performance.
(f) A subsequent final determination by the Contracting Officer or
by a court of competent jurisdiction that a contract was improperly
classified under the criteria in paragraph (e) of this section will
result in the refund or credit of any unobligated portion of the amount
of downpayment exceeding that required by paragraphs (c) and (d) of
this section and the limitations of paragraph (h) of this section on
application of downpayment shall no longer apply.
(g) Notwithstanding the provisions of paragraphs (c) and (d) of
this section, a purchaser meeting the criteria of paragraph (e) of this
section must make a minimum downpayment equal to 20 percent of the
total advertised value of that sale, plus 40 percent of the total bid
premium. This higher downpayment requirement applies throughout the
National Forest System, except in those areas where the Chief of the
Forest Service determines, before advertisement of the sale, that
another downpayment rate is necessary to achieve the management
objectives of the National Forest System. The amount of the downpayment
shall be redetermined in accordance with this paragraph when contract
rates for timber are redetermined under the terms of the contract for
environmental modification; catastrophic damage; market change; or an
emergency rate redetermination. For the purpose of redetermining the
downpayment, total advertised value shall be replaced with total
redetermined value.
(h) A purchaser subject to the additional downpayment requirements
of paragraph (g) of this section cannot apply the amount deposited as a
downpayment to other uses until:
(1) On scaled sales, the estimated value of the unscaled timber is
equal to or less than the amount of the downpayment; or
(2) On tree measurement sales, the estimated value remaining to be
cut and removed as shown on the timber sale statement of account is
equal to or less than the amount of the downpayment.
(i) For the purpose of releasing funds deposited as downpayment by
a purchaser subject to paragraph (f) of this section, the Forest
Service shall compute the estimated value of timber as follows:
(1) On scaled sales, the estimated value of the unscaled timber is
the sum of the products obtained by multiplying the current contract
rate for each species by the difference between the advertised volume
and the volume that has been scaled of that species.
(2) On tree measurement sales, the estimated value of the timber
outstanding (i.e., not shown on the timber sale statement of account as
cut and removed) is the sum of the products obtained by multiplying the
current contract rate for each species by the difference between the
advertised volume and the volume that has been shown on the timber sale
statement to have been cut and removed of the species. The current
contract rate for each species is that specified in the Forest Service
timber sale contract.
(j) In order to deter speculation, the Chief of the Forest Service
may increase the period for retention of the downpayment and/or
preclude temporary reduction of the downpayment under paragraphs (k)(2)
and (k)(3) of this section for future contracts subject to such
criteria as the Chief may adopt after giving the public notice and
opportunity to comment.
(k) The Forest Service may temporarily reduce the downpayment when
a purchaser's scheduled operations are delayed, interrupted, or
extended for 30 or more consecutive days for any of the following
reasons:
(1) Forest Service requests or orders purchaser to delay or
interrupt operations for reasons other than breach;
(2) A contract term addition pursuant to purchaser shifting
operations to a sale designated by the Forest Service as in urgent need
of harvesting; or
(3) An extension of the contract term authorized upon a
determination of substantial overriding public interest, including a
market-related contract term addition, or an urgent removal contract
term extension under 36 CFR 223.53.
(l) When purchaser is not cutting or removing timber under contract
during a qualifying period of delay, interruption, or extension listed
in paragraph (k) of this section, the downpayment may be reduced to
$1000 or 2 percent of the downpayment amount stated in the contract,
whichever is greater. The purchaser must restore the downpayment to the
full amount stated in the contract within 15 days from receipt of the
bill for collection and written notice from the contracting officer
that the basis for temporarily reducing the downpayment no longer
exists. Purchaser shall not cut or remove timber on a contract where
the downpayment has been temporarily reduced until the downpayment
amount stated in the contract is fully restored.
0
3. Amend Sec. 223.50 by revising paragraphs (b) introductory text and
(f) and adding paragraph (b)(3) to read as follows:
Sec. 223.50 Periodic payments.
* * * * *
(b) Except for lump sum sales, each timber sale contract of more
than one full normal operating season shall provide for periodic
payments. The number of periodic payments required will be dependent
upon the number of normal operating seasons within the contract, but
shall not exceed two such payments during the course of the contract.
Periodic payments must be made by the periodic payment determination
date, except that the amount of the periodic payment shall be reduced
to the extent that timber has been removed and paid for by the periodic
payment determination date. Should the payment fall due on a date other
than normal billing dates, the contract shall provide that the payment
date will be extended to coincide with the next timber sale statement
of account billing date.
* * * * *
(3) Notwithstanding this paragraph (b), periodic payments are not
required for stewardship contracts unless the contracting officer
determines that periodic payments are needed to ensure the Government's
financial security.
* * * * *
(f) The amount of any periodic payment(s) not yet reached shall be
revised when rates are redetermined under the contract. The revised
periodic payment amounts shall be based on a recalculated total
contract value using the same procedures described in (c) and (d) of
this section. The recalculated total contract value is the current
contract value following the rate redetermination plus:
(1) The total value of timber scaled prior to establishing
redetermined rates in a scaled sale; or
(2) The total value of timber shown on the timber sale statement of
account as having been cut, removed and paid for.
Dated: August 7, 2009.
Ann Bartuska,
Acting Deputy Undersecretary, NRE.
[FR Doc. E9-19372 Filed 8-12-09; 8:45 am]
BILLING CODE 3410-11-P