Assistant Director, Renewable Resources and Planning
Bureau of Land Management
Senate Energy & Natural Resources Committee
H.R. 3759, BLM Contract Extension Act
March 10, 2010
Thank you for inviting the Department of the Interior to testify on S. 2791, the Forest Harvest Opportunities Act, and H.R. 3759, the BLM Contract Extension Act.The Administration supports the goal of the bills to allow timber sale contract extensions for market-related reasons.This approach would assist timber sale purchasers whose industry is facing serious economic challenges. We appreciate Senator Merkley's efforts to address this very time-sensitive issue, and we would like to work with the Subcommittee on technical changes that give the Secretary the discretion to grant the extensions.
The Bureau of Land Management (BLM) manages approximately 253 million acres of surface lands, of which more than 60 million acres are forests and woodlands.Approximately 11 million acres are commercial forestland within the 11 western States and
Each year, the BLM offers approximately 270 million board feet of timber through sales contracts.Both large and small businesses purchase BLM timber sales.Timber sale contracts are sold primarily through competitive bidding and are awarded for a contract period of three years.
The forest products industry is facing an unprecedented struggle due to the downturn in the national economy and the housing market.According to the Western Wood Products Association, western lumber production in 2009 decreased by approximately 21 percent to 10.2 billion board feet, the lowest since the 1930s, about half the volume Western mills produced in 2005.The value of lumber has declined even more steeply. The estimated wholesale value of western lumber was $3.66 billion in 2008, a decrease of 40 percent from its 2007 value of $6.1 billion according to the Western Wood Products Association.
Many timber purchasers bought BLM contracts in good faith at prices that, under current market conditions, render the completion of their contract obligations no longer economically viable.BLM timber sale purchasers have been faced with difficult decisions of whether to default on their contracts or harvest the wood at a great economic loss, both of which could result in severe consequences to their companies and to the local communities that support them.Under current regulations, the BLM may grant a one-year contract extension, but that extension may not be granted on the basis of market fluctuations.However, the BLM and timber contract purchasers may mutually agree to cancel a contract.Mutual cancellation would relieve existing purchasers' duty to perform their contract obligations and allow the BLM to reoffer the sales at prices reflecting current market conditions.
On October 14, 2009, the BLM provided direction to its State Offices to offer timber contract purchasers the option to request a one-time mutual cancellation of contracts.On November 14, 2009, all eligible timber sale contractors received a letter from the BLM with information regarding the opportunity to make such a request within 60 days.The BLM received 46 requests for mutual cancellation of timber sales from purchasers in
The House passed H.R. 3759, as amended, on January 19, 2010.The Administration supports H.R. 3759, as amended, which authorizes, but does not require the Secretary to grant three-year market-related contract extensions to qualified contracts upon a written request made by a purchaser within 90 days of enactment.Qualified contracts must meet certain criteria: 1) the contract has not been terminated; 2) the contract was awarded during the period beginning on January 1, 2005, and ending December 31, 2008; 3) there is unharvested volume remaining on the contract; 4) the contract is not a salvage sale; and 5) there is no urgent need to complete harvest under the contract due to deteriorating timber conditions.The House bill also requires the BLM to promulgate new regulations authorizing the BLM to extend timber contracts due to changes in market conditions and to negotiate new contract terms.
S. 2791 requires the Secretary of the Interior to grant three-year economy-related timber contract extensions within 30 days of a request from the timber purchaser.The bill would apply to contracts executed on or before December 31, 2008, for which there is unharvested timber volume remaining and the contract is still in effect.The purchaser would be required to make a written request for an economy-related extension within 90 days of enactment of the Act. The BLM is concerned about mandatory timber contract modifications, and would like to work with the subcommittee to make the extensions within the Secretary's discretion (as provided for in the House-passed H.R. 3759).
Thank you for the opportunity to testify on S. 2791 and H.R. 3759.The BLM is currently involved in negotiations with timber sale purchasers to authorize mutual cancellation of timber sales.Most of these same purchasers would also qualify for timber sale contract extensions under either bill.In order for the purchasers to have either the option to request a three-year contract extension or to complete mutual cancellation negotiations, enactment of legislation is necessary.Many purchasers have expressed a preference to extend their contracts rather than to proceed with mutual cancellation.Having the option to extend these contracts would also be administratively beneficial to the BLM.We look forward to working with the Committee on this important legislation.