[Federal Register Volume 73, Number 171 (Wednesday, September 3, 2008)]
[Proposed Rules]
[Pages 51388-51393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-20301]


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DEPARTMENT OF AGRICULTURE

Forest Service

36 CFR Part 223

RIN 0596-AC79


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

AGENCY: Forest Service, USDA.

ACTION: Proposed rule; request for public comment.

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SUMMARY: The Forest Service proposes amending its regulations to expand 
the maximum amount of additional time certain contracts may receive 
when there is a continuous and prolonged drastic reduction in wood 
product prices for 2\1/2\ years or longer. Additionally, the proposed 
rule modifies the procedure for selecting the producer price index to 
be used in establishing market-related contract term additions and 
emergency rate redeterminations. Finally, this proposed rule makes a 
change to the amount of additional market-related contract term 
addition time that may be added to timber sale contracts when the 
normal operating season specified in a contract is less than three 
months.

DATES: Comments must be received in writing on or before October 3, 
2008.

ADDRESSES: Written comments concerning this notice should be addressed 
to USDA Forest Service, Director of Forest Management, 1400 
Independence Avenue, SW., Mail Stop 1103, Washington, DC 20250-1103. 
Comments may also be sent via e-mail to <a href="/cdn-cgi/l/email-protection#036e716077624365702d6566672d7670"><span class="__cf_email__" data-cfemail="48253a2b3c29082e3b662e2d2c663d3b">[email protected]</span></a>, or via 
facsimile to Lathrop Smith at (202) 205-1045.
    All comments, including names and addresses when provided, are 
placed in the record and are available for public inspection and 
copying. The public may inspect comments received at the office of the 
Director of Forest Management, Third Floor, Southwest Wing, Yates 
Building, 201 14th Street, SW., Washington, DC. Visitors are encouraged 
to call ahead to (202) 205-1496 to facilitate entry to the building.

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

    Prior to 1980, purchasers of National Forest timber defaulted very 
few timber sale contracts. Cyclic fluctuations in forest products 
markets occurred but were of comparatively short duration and limited 
impact. Forest Service timber sale contract terms were often as long as 
the cycles making it possible to overlap the market price cycles. Prior 
to 1980, it also was believed that the long-term projection for forest 
products prices indicated a continuing trend of price increases. Under 
those circumstances a purchaser could usually schedule a sale's harvest 
for a time when the markets were good or were at least good enough that 
the purchaser would not lose more money operating a sale than would be 
lost in a default.
    Beginning in 1980, the forest products market began a serious and 
dramatic decline, leaving a large number of purchasers with timber 
sales bid at prices far higher than the market was bringing. Faced with 
the likelihood of massive defaults and attendant adverse economic 
impacts on industry and dependent communities, the government began 
taking steps to respond to the adverse economic impacts. In 1980, 1981, 
and 1982, the Chief of the Forest Service granted timber sale contract 
term extensions based on findings of substantial overriding public 
interest (48 FR 38862). The intent of these extensions was to provide 
purchasers additional contract

[[Page 51389]]

time until the markets improved. Unfortunately, the adverse market 
conditions continued.
    On October 16, 1984, the President signed into law the Federal 
Timber Contract Payment Modification Act (16 U.S.C. 618) (Buy-Out Act). 
The Buy-Out Act allowed purchasers of Federal timber to return certain 
sales to the government upon payment of a ``buy-out charge'' and, thus, 
avoid default. Both the Congress and the Administration viewed this 
legislation as an extraordinary measure to respond to a one-time crisis 
and recognized the need to develop mechanisms to avoid such a crisis in 
the future.
    On November 6, 1987, the Forest Service published a proposed rule 
(52 FR 43020) to establish procedures for extending contract 
termination dates in response to adverse conditions in the timber 
market. This proposed Market-Related Contract Term Addition rule was 
published as part of a larger proposal that included rules for 
implementing downpayment and periodic payment procedures as required by 
the Federal Timber Contract Modification Act. The intent of these rules 
was to encourage orderly harvest of national forest timber sales, 
ensure the government's financial security, and avoid the need for 
future buyouts in periods of severe market decline.
    Market declines sufficient to trigger a market-related contract 
term addition generally coincide with downturns in housing starts in 
conjunction with national economic slowdowns. In the early 1980s, such 
economic distress broadly affected community stability and the ability 
of industry to supply construction lumber and other products for public 
use and threatened the maintenance of plant capacity necessary to meet 
the Nation's needs for wood products from domestic sources.\1\ 
Accordingly, in order to ensure the retention of a viable established 
industry capable of supplying the wood fiber needs of the public for 
housing and other products, the Chief of the Forest Service issued a 
final rule on December 7, 1990, finding that the substantial overriding 
public interest justifies market-related contract term additions 
whenever there is a drastic reduction in wood product prices (55 FR 
50643).
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    \1\ Forest Service paper Policy Alternatives for Market-Related 
Contract Term Additions, June 27, 1996.
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    The Chief's finding was based on the fact that market-related 
contract term additions: (1) Help purchasers avoid severe financial 
hardship; (2) ensure that the Federal government receives payments due 
from purchasers by reducing the likelihood of default; and (3) help 
ensure that receipts to States and counties from timber sales are not 
adversely affected by contract defaults. Additionally, market-related 
contract term additions help promote stability in the wood products 
industry. This in turn helps ensure community stability, competition, 
employment, investment, productivity, innovation and the industry 
infrastructure needed by the Forest Service to accomplish land 
management objectives most economically done with timber sales.
    In accordance with the December 7, 1990, final rule, the Forest 
Service monitors and uses producer price indices for wood products as 
prepared by the Bureau of Labor Statistics to determine when a drastic 
reduction in wood product prices has occurred. The Forest Service 
currently uses the Softwood Lumber Index (WPU0811), the Hardwood Lumber 
index (WPU0812) and the Wood Chips index (PCU3211133211135). Each index 
monitors different segments of the wood products industry. Each 
contract over one year in length is assigned the index that represents 
more than one-half of the advertised volume. When a drastic reduction 
in the assigned index has occurred for two consecutive quarters during 
the contract period, the Forest Service notifies purchasers and, upon a 
purchaser's written request, adds one year to the contract term. For 
each additional consecutive quarter a drastic reduction occurs, the 
Forest Service, upon a purchaser's written request, adds an additional 
3 month period to the normal operating season of the contract.
    Under the current rule, no more than twice the original contract 
length or 3 years, whichever is less, may be added to a contract's term 
by market-related contract term addition. Pursuant to the National 
Forest Management Act of 1976 (16 U.S.C. 472a(c)), total contract 
length cannot exceed 10 years as the result of market-related contract 
term addition. Further, market-related contract time may not be granted 
for those portions of the contract that (1) have a required completion 
date, (2) the Forest Service determines that the timber is in need of 
urgent removal, or (3) timber deterioration or resource damage will 
result from delay.
    Since the market-related contract term addition rule was adopted, a 
drastic reduction in softwood lumber prices occurred for five quarters 
in 1994-1995, three quarters in 1998, six quarters in 2000-2001, and 
for 11 quarters beginning in September 2005, through March 2008. The 
hardwood index has also shown a drastic reduction in the first two 
quarters of 2008. As a result, many purchasers requested and received 
additional contract time for qualifying timber sales.
    The drastic decline in softwood lumber prices in the early 1980s 
began following a peak in the softwood lumber index in the third 
quarter of 1978 and bottomed out four years later in the third quarter 
of 1982. During that decline the index, adjusted to a constant dollar 
basis, lost 56 points or 36 percent of its value. By comparison, the 
current decline of the softwood lumber index is already greater in 
magnitude. The current decline began following a peak in August 2004, 
and by March 2008, the index, adjusted to a constant dollar basis, had 
lost 76 points or 48.5 percent of its value. It is unknown when the 
current decline will end.
    The intent of the market-related contract term addition regulations 
are to avert massive defaults and attendant adverse economic impacts on 
industry and dependent communities by providing purchasers additional 
contract time until markets improve. Since adoption of the regulations 
in 1990, the three-year limit on market-related contract term additions 
has met that objective in the three previous periods when a drastic 
reduction in wood prices occurred. But, when a drastic decline in wood 
prices continues for over three years as it currently has and the 
market-related contract term additions run out before markets improve, 
purchasers holding high priced sales bid when the markets were stronger 
are likely to face severe economic hardship without some form of 
relief.
    As of May 1, 2008, there were 1,030 non-salvage sales awarded prior 
to April 1, 2007, that were over one year in original contract length 
and with volume remaining to remove. Approximately twenty-three 
percent, or 239 of those sales, have received additional contract time 
totaling three years or more, and over half of those sales were awarded 
prior to the softwood index peaking in August 2004. The additional time 
granted in excess of the maximum market-related contract term addition 
time was for reasons unrelated to market conditions such as adverse 
weather conditions that prevented operations.
    To respond to the poor market conditions and associated adverse 
economic impacts on industry and dependent communities, Section 8401 of 
the Food, Conservation, and Energy Act of 2008, Public Law 110-246, 122 
Stat. 1651 (June 18, 2008), authorized the Forest Service to add up to 
four years of market-related contract term addition to contracts 
awarded prior to

[[Page 51390]]

January 1, 2007. While section 8401 provides immediate relief to 
contracts that had or were about to reach the three-year limit, the 
committee notes for section 8401 state ``the Managers encourage the 
Forest Service to revise the existing regulations within 90 days of 
enactment of this Act to reflect provisions of this section for future 
market problems.''
    In light of the managers' statement, and to address prolonged 
adverse market conditions in the future, the Forest Service proposes 
amending the market-related contract term addition regulations at 36 
CFR 223.52 to allow certain contracts to receive more than three years 
of additional time when there is a prolonged drastic reduction in wood 
product prices. To be eligible for market-related contract term 
addition time in excess of three years, contracts must meet the 
conditions for market-related contract term addition in Sec.  223.52, 
and the index specified in the contract must trigger for eleven 
consecutive quarters following the award date in the contract. The 
criteria of eleven consecutive quarters was selected because under the 
formula for granting market-related contract term additions, all sales 
will have reached the three year limit, prior to, but no later than, 
the tenth consecutive quarter (Sec.  223.52(c)(3)). Beginning with the 
eleventh consecutive qualifying quarter, and for each subsequent 
consecutive qualifying quarter, the contract may receive an additional 
three months of normal operating season time. Contracts where all 
biddable species were at base rates during any quarter between the 
original contract termination date and any adjusted termination date 
will not be eligible for more than three years of market-related 
contract term addition. The rationale for this criterion is that sales 
at base rates have stumpage prices as low as permitted, so additional 
time for market conditions to improve is not needed.
    Under this proposed rule, the maximum amount of market-related 
contract term addition time a contract awarded after December 31, 2006, 
may receive will be controlled by the 10-year limit on total contract 
length established under the National Forest Management Act of 1976 (16 
U.S.C. 472a(c)). But, pursuant to the 2008 Farm Bill, sales awarded 
prior to January 1, 2007, may only have the termination date adjusted 
by up to four calendar years as the result of market-related contract 
term addition.
    An additional proposed amendment to the market-related contract 
term addition regulations at 36 CFR 223.52 will authorize contracting 
officers to select an index at the time certain contracts are awarded 
that is different from the one identified in the sample contract. Each 
timber sale contract over one year in length includes one of three 
producer price indices (softwood lumber, hardwood lumber or wood chips) 
updated monthly by the Bureau of Labor Statistics. The index selected 
for each sale is based on the species and product characteristics that 
represent more than one-half of the advertised volume. The index is 
used to determine when the contract is eligible for a market-related 
contract term addition and/or an emergency rate redetermination. This 
proposed rule change would authorize contracting officers to select an 
alternative producer price index at the time a contract is awarded when 
the appropriate Forest Supervisor has determined, prior to advertising 
the contract, that the species and potential product characteristics 
are such that more than one index could represent more than one-half of 
the advertised volume. Upon a purchaser's written request, the 
contracting officer could select an alternative index to the one 
identified in the sample contract if the contracting officer determines 
that the alternative index better represents the highest percentage of 
the products the successful bidder intends to produce or have produced 
from the sale.
    On sales providing this alternative index option, all bidders will 
have an equal opportunity to substitute a more representative index, 
which should reduce the risk of potential bid protests over this 
change. Providing bidders with a process for changing the index on 
sales where more than one index may be applicable may also result in 
higher bids. For these sales, the prospectus will state that the 
contracting officer may, upon the purchaser's written request, select 
an alternative index from paragraph (b), and may modify the contract by 
mutual agreement, at time of contract award, to include an alternative 
index that the contracting officer has determined represents the 
highest percentage of products the purchaser intends to produce or have 
produced from the sale. The purchaser will be required to make a 
written request for an index change that includes documentation showing 
how the purchaser anticipates the timber will be processed. If the 
purchaser is a non-manufacturer, the written request should show the 
percentage of sale volume the purchaser intends to deliver to different 
manufactures, such as 75 percent to an oriented strand board processor 
(OSB) and 25 percent to a pulp mill.
    This change to the regulation is needed because different uses of 
technology for processing forest products continue to evolve. Thus 
selecting the appropriate index prior to knowing who the purchaser will 
be and what products will be produced may not be possible when a sale 
is offered. For example, a sale that is predominantly aspen may be sold 
in a market area that has a pulp mill, an OSB mill, and a sawmill 
capable of processing aspen lumber. Since the pulp mill is the closest 
mill to the sale, it is used as the appraisal under the current 
regulation. Consequently, the Forest Service assigns the wood chips 
index to the sale when it is advertised. If the pulp mill owner buys 
the sale, the wood chips index is the correct index for the product 
that will be produced and a change of index would not be appropriate. 
However, if the OSB mill owner buys the sale, the softwood lumber index 
would be more appropriate since OSB is a building material that tends 
to follow softwood lumber prices. Further, if the sawmill owner buys 
the sale, the hardwood lumber index may be most appropriate, unless the 
principal aspen product is pannelling, in which case the softwood 
lumber index may be most appropriate. In addition, if a non-
manufacturer buys the sale with the intention of merchandizing the wood 
to all three mills, the most appropriate index would be based on which 
mill is expected to process the highest percentage of the sale volume. 
In this example, if the purchaser intended to sell 40 percent of the 
sale volume to the OSB mill, 30 percent to the pulp mill and 30 percent 
to the hardwood lumber mill, the appropriate index would be softwood 
lumber as it is the index representing the single greatest percentage 
of volume. While this estimate is based on market conditions at the 
time the contract is awarded, the purchaser can change the mix of 
products produced during the life of the sale. However, the purchaser 
will not be permitted to change the index after award unless that index 
is discontinued and/or the Forest Service adopts and offers replacement 
indices.
    Another example occurred in 2006 and 2007 on certain sales using 
the wood chips index. In November 2006 (71 FR 66160) and again in 
November 2007 (72 FR 64991), specified timber sales were granted one 
year extensions based on a determination of substantial overriding 
public interest. Excluded from these extensions were sales on the 
softwood lumber index because those sales were already receiving 
market-related contract term additions. Most of the substantial 
overriding public interest extensions granted went to sales

[[Page 51391]]

in the lake states region (predominately Minnesota) that were on the 
wood chips index despite the fact that most of the wood was actually 
being manufactured into oriented strand board. Although oriented strand 
board prices were plummeting along with softwood lumber prices, these 
sales were not eligible for market-related contract term additions 
because the wood chips index remained high. If the index on those sales 
had been changed from wood chips to softwood lumber when those 
contracts were awarded, the substantial overriding public interest 
extensions would not have been needed. To avert that situation in the 
future, and to implement the Managers' direction for the 2008 Farm 
Bill, a process for changing the index at the time of award when more 
than one index may be appropriate is needed.
    Expanding existing rights to market-related contract term addition 
to include a procedure for changing the index at the time of contract 
award is in the public interest. In most market areas, the species 
product combinations are easy to identify prior to offering a sale, and 
there will be little need or justification to change the index at the 
time of contract award. However, in situations such as the examples 
described above where more than one index may apply, a procedure for 
changing the index when the contract is awarded to reflect the 
principal product the purchaser intends to produce is needed. The 
objective is to allow the parties to enter into contracts under terms 
that reflect market conditions at the time of award; it is not to 
guarantee profitable market conditions or a certain level of profit 
throughout the life of the contract. The intended effect is to avert 
the need for substantial overriding public interest extensions, 
determinations, as well as legislation like the 2008 Farm Bill, which 
provides relief to contracts with indices that became mismatched with, 
or did not reflect, the products the purchaser produced.
    Currently, 36 CFR 223.52(a)(2) provides that the Forest Supervisor 
shall select from the available indices in Sec.  223.52(b) the index to 
be used in each contract based on the species and product 
characteristics, by volume, included in a contract. The existing rule 
also provides that the index selected shall represent more than one-
half of the advertised volume. The existing rule is silent as to when 
Forest Supervisors must choose an appropriate index but the practice 
has been to identify the index when a contract is advertised.
    Buying a sale that uses an index that does not represent the 
principal product a purchaser intends to produce increases the 
purchaser's risk that a drastic reduction in the prices of the wood 
products it is producing will not result in a market-related contract 
term addition. Providing a procedure to change the index once the 
purchaser and the principal product it intends to produce are 
identified will have the effect of reducing the purchaser's risk, which 
may also increase bids.
    Finally, under the current regulation, a contract may receive a one 
year market-related contract term addition when there are two 
consecutive qualifying quarters and may receive three months of 
additional time within the contract's normal operating season for each 
subsequent consecutive qualifying quarter subject to the limits on 
total additional contract time. Some sales have a normal operating 
season that is less than three months resulting in a situation where 
the contract could be extended for more than one year if three months 
of normal operating season is added to the contract term. This proposed 
change will limit the amount of additional time to no more than one-
calendar year when the normal operating season is less than three 
months.

Regulatory Certifications

Regulatory Impact

    This proposed rule has been reviewed under USDA procedures and 
Executive Order 12866 on Regulatory Planning and Review. It has been 
determined that this proposed rule is not a significant regulatory 
action and is not subject to Office of Management and Budget (OMB) 
review. This proposed rule will not have an annual effect of $100 
million or more on the economy and will not adversely affect the 
economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local or tribal 
governments or communities. This proposed rule will not interfere with 
an action taken or planned by another agency nor raise new legal or 
policy issues. Little or no effect on the national economy will result 
from this regulatory action, which consists of necessary, technical 
changes to the regulation governing market-related contract term 
additions. Using the replacement indices and the modified formula 
contained in this proposed rule, the Forest Service will be able to 
determine whether a drastic decline in wood products prices has 
occurred. Finally, this action will not alter the budgetary impact of 
entitlements, grants, user fees, or loan programs or the rights and 
obligations of recipients of such programs. Accordingly, this proposed 
rule is not subject to OMB review under Executive Order 12866.
    Moreover, this proposed rule has been considered in light of the 
Regulatory Flexibility Act (5 U.S.C. 610 et seq. ), and it is hereby 
certified that this action will not have a significant economic impact 
on a substantial number of small entities as defined by that act. As 
revised in this proposed rule, the Forest Service will be able to grant 
additional market-related contract term additions to small and large 
purchasers when there is a prolonged drastic reduction in wood product 
prices. This will have the intended effect of averting massive defaults 
and attendant adverse economic impacts on industry and dependent 
communities by providing purchasers additional contract time until 
markets improve.

Proper Consideration of Small Entities

    This proposed rule has been considered in light of Executive Order 
13272 regarding proper consideration of small entities and the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), which 
amended the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The 
Forest Service has determined that this action will not have a 
significant economic impact on a substantial number of small entities 
as defined by SBREFA.
    To the extent that the proposed rule imposes additional 
requirements on small entities, these requirements are the minimum 
necessary to protect the public interest, are not administratively 
burdensome or costly to meet, and are well within the capability of 
small entities to perform.

Unfunded Mandates Reform

    Pursuant to Title II of the Unfunded Mandates Reform Act of 1995 (2 
U.S.C. 1531-1538), which the President signed into law on March 22, 
1995, the Forest Service has assessed the effects of this proposed rule 
on State, local, and tribal governments and the private sector. This 
proposed rule does not compel the expenditure of $100 million or more 
by any State, local, or tribal government or anyone in the private 
sector. Therefore, a statement under section 202 of the act is not 
required.

Environmental Impact

    This proposed rule concerns the extension of timber sale contracts 
when warranted by a drastic reduction in wood product prices, and, as 
such, has no direct effect upon the amount, location, or manner of 
timber offered for purchase. Section 31.1b of Forest Service Handbook 
1909.15 (57 FR

[[Page 51392]]

43180; September 18, 1992) excludes from documentation in an 
environmental assessment or impact statement ``rules, regulations, or 
policies to establish Service-wide administrative procedures, program 
processes, or instructions.'' The agency's assessment is that this rule 
falls within this category of actions and that no extraordinary 
circumstances exist which would require preparation of an environmental 
assessment or environmental impact statement.

Controlling Paperwork Burdens on the Public

    This proposed rule includes information collection requirements as 
defined in 5 CFR part 1320. Accordingly, the review provisions of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq. ) and 
implementing regulations at 5 CFR part 1320 apply. This collection of 
information was submitted to the Office of Management and Budget (OMB) 
and received emergency approval under OMB No. 0596-0212. Notice of this 
information collection and request for comment was published in the 
Federal Register on July 22, 2008 (73 FR 42542). This rule contains no 
additional information collection under the Paperwork Reduction Act.

Energy Effects

    This proposed rule has been reviewed under Executive Order 13211, 
Actions Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. It has been determined that this proposed rule 
does not constitute a significant energy action as defined in the 
Executive order.

Federalism

    The agency has considered this proposed rule under the requirements 
of Executive Order 13132, Federalism. The agency has made an assessment 
that the proposed rule conforms with the federalism principles set out 
in this Executive Order; would not impose any compliance costs on the 
States; and would not have substantial direct effects on the States, on 
the relationship between the national government and the States, or on 
the distribution of power and responsibilities among the various levels 
of government.

Consultation and Coordination With Indian Tribal Governments

    This proposed rule does not have tribal implications as defined in 
Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments, and, therefore, advance consultation with tribes is not 
required.

No Takings Implications

    This proposed rule has been analyzed in accordance with the 
principles and criteria contained in Executive Order 12630, and it has 
been determined that the rule does not pose the risk of a taking of 
Constitutionally-protected private property.

Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The agency has not identified any State or local 
laws or regulations that are in conflict with this regulation or that 
would impede full implementation of this rule. In any event, after 
adoption of this proposed rule: (1) All State and local laws or 
regulations that conflict with this rule or that would impede full 
implementation would be preempted; (2) no retroactive effect would be 
given to this final rule, except as described herein; and (3) the 
proposed rule would not require the use of administrative proceedings 
before parties could file suit in court challenging its provisions.

List of Subjects in 36 CFR Part 223

    Administrative practice and procedure, Exports, Forests and forest 
products, Government contracts, National forests, Reporting and 
recordkeeping requirements.
    Therefore, for the reasons set forth in the preamble, part 223 of 
Title 36 of the Code of Federal Regulations is amended as follows:

PART 223--SALE AND DISPOSAL OF NATIONAL FOREST SYSTEM TIMBER

    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.

    2. Amend Sec.  223.52 by revising paragraphs (a)(2) and (c)(2) 
through (4) to read as follows:


Sec.  223.52  Market-related contract term additions.

    (a) * * *
    (2) The contract term addition provision of the contract must 
specify the index to be applied to each sale. The Forest Supervisor 
shall determine, and select from paragraph (b) of this section, the 
index to be used for each sale based on the species and product 
characteristics, by volume, being harvested on the sale. The index 
specified shall represent more than one-half of the advertised volume. 
If none of the indices in paragraph (b) represent more than one half of 
the advertised volume, the index specified shall represent the species 
product combination representing the highest percentage of volume for 
which there is an index. When the Forest Supervisor determines that the 
species and potential product characteristics are such that more than 
one index could be used, the prospectus will state that the Contracting 
Officer may, upon the purchaser's written request, select an 
alternative index from paragraph (b), and may modify the contract by 
mutual agreement, at time of contract award, to include an alternative 
index that the Contracting Officer has determined represents the 
highest percentage of products the purchaser intends to produce or have 
produced from the sale. Purchasers seeking a change of index at time of 
award must substantiate the need for an alternative index by providing 
the Contracting Officer with a written request including a list of 
products by volume it intends to produce or expects will be produced 
from the timber on that sale. In the event a mutual agreement to modify 
a contract to include an alternative index is not reached at time of 
award, the index specified in the sample contract shall apply.
* * * * *
    (c) * * *
    (2) For each additional consecutive quarter in which a contract 
qualifies for a market-related contract term addition, the Forest 
Service will, upon the purchaser's written request, add an additional 3 
months during the normal operating season to the contract, except that 
sales with a normal operating season of less than 3 months may only 
receive additional time equal to their normal operating season.
    (3) No more than 3 years of MRCTA time shall be added to a 
contract's term by market-related contract term addition unless the 
following conditions are met:
    (i) The sale was awarded after December 31, 2006;
    (ii) During each quarter between the original contract termination 
date and the current termination date, contract rates for one or more 
of the biddable species exceeded base rates; and
    (iii) A drastic reduction in wood product prices occurred for 
eleven consecutive qualifying quarters.
    (4) For contracts eligible for more than 3 calendar years of 
market-related contract term addition under Sec.  223.52(c)(3), 
beginning with the eleventh consecutive qualifying quarter, and for 
each subsequent consecutive qualifying quarter, the Forest Service 
will, upon the purchaser's written request, add an additional 3 months 
during the normal operating season to

[[Page 51393]]

the contract, except that sales with a normal operating season of less 
than 3 months may only receive additional time equal to their normal 
operating season.
* * * * *

    Dated: August 26, 2008.
Sally Collins,
Associate Chief, Forest Service.
[FR Doc. E8-20301 Filed 9-2-08; 8:45 am]
BILLING CODE 3410-11-P


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