are based upon the rate at which the successful purchaser intends to remove the timber. The other agencies used fixed minimum payments. The advance payment schedule of the Bureau of Indian Affairs for allotted timber sales is so onerous that it sharply restricts bidding.

The joint committee concludes that competition will be fostered and small business will be given an equitable opportunity to bid on timber only if deposits with bid and installment payments are kept at the minimum needed to protect the interests of the Government. Responsible Government officials indicated a commendable awareness of the need for smaller short-term sales with reasonable financial requirements so as to provide increased opportunities for competition. Marketing restrictions

The Federal agencies can allocate timber to particular areas, communities, or companies under permissive legislation authorized by the Congress.

The Department of the Interior's community timber allocation device is termed a "marketing area"; the Department of Agriculture designates its device as a "Federal unit." Both Departments use the term "cooperative agreement" to define a unit under which public and private timber is pooled, and the owner of the private timber receives public timber noncompetitively at the appraised value. The Department of the Interior has created 12 marketing areas in the State of Oregon. The Forest Service has created 5 Federal units in the West, and 1 cooperative agreement in the State of Washington. It is significant that there is basic disagreement among the agencies on the desirability and effectiveness of the marketing area device in western Oregon, where the heaviest concentration of Federal timber exists. There the Bureau of Land Management uses the marketingarea device as a means of restricting bidding on Federal timber to those within a certain defined area, while the Forest Service has not applied similar restrictions.

The joint committee finds that the question of whether or not Federal units or marketing areas serve the public interest is also the subject of sharp and well-defined disagreement within the industry. The testimony of industry witnesses naturally tended to reflect their particular positions and their ideas of the effect of marketing restrictions upon their operation.

Testimony of agency officials experienced in dealing with the problem over the years was so vague and ambiguous that the hearing record is devoid of informed official opinion on this subject.

The joint committee concludes that this inadequacy of the agencies' evidence on this subject resulted either from a deplorable lack of knowledge or from an unwillingness on the part of policymaking officials to take a position which might be controversial.

The lack of informed official testimony makes it difficult for the committee to formulate a sound policy on the complex problem of marketing-area restrictions. The problem must be solved. To do so requires that the Congress be given sound, factual data and analyses by the executive agencies without further delay.

From such testimony as was forthcoming, together with other facts of record, we find that the device of the cooperative agreement, intended by Congress to promote sustained-yield practices on private forest lands, has not received public acceptance, due to its monopo

listic and noncompetitive features. Only one cooperative agreement has been consummated in the 12 years since the Sustained Yield Act of 1944 was passed. The joint committee has noted with concern current attempts to set up a cooperative agreement under the act in the Cedar River watershed on the Snoqualmie National Forest in the State of Washington as a means of eliminating competitive sales and to promote a potentially monopolistic situation under the guise of watershed protection.

The joint committee commends those land and timber-owning companies which have adopted sustained-yield cutting and reforestation practices dedicated to the treatment of timber as a perpetual crop. The significant progress made in sustained-yield management by those companies, which are the few that could qualify for a cooperative agreement, makes it doubtful whether there is any further need for this device, or whether new agreements would serve any useful purpose.

RECOMMENDATIONS

Size, length, timing, and financial terms

G-1. The annual sales programs of the timber-managing agencies should be coordinated in a manner which will assure maximum competition and maximum opportunities to bid for all potential purchasers in any given area. Wide publicity and an opportunity for interested persons to suggest sales and to comment on proposed sales should be provided for in these annual programs. This objective is equally desirable in giving notice of long-range timber-development programs.

G-2. A major portion of the timber should be sold in medium and small sales of not more than 3 years' duration.

G-3. Sales should be timed and located so as to assure maximum competition and participation in the bidding.

G-4. Advance and installment payments should be kept at a level which encourages maximum bidder participation. Bidders and purchasers should be permitted to submit adequate bonds in lieu of substantial cash downpayments to protect the Government's interest. Marketing restrictions

In

G-5. The agencies should make a complete review of marketing areas and Federal units as a type of restriction on who may be eligible to purchase Federal timber. This review should answer the basic questions of (1) what in the experience of the agencies has been their actual effects, if any, in practice; and (2) whether these restrictions serve any useful purpose at this time, and, if so, in what way. particular the Forest Service and the Bureau of Land Management should cooperate in a special study in western Oregon to analyze the effect of the presence of the O. and C. marketing-area restrictions and of the absence of similar restrictions on national-forest timber on price, competition, and the economic development of the region.

G-6. The criteria for the creation of cooperative agreements should be completely reevaluated by the Federal agencies. The agencies should consider whether the law is really workable, or whether it is inconsistent with the basic relationship that should exist between the Government as a manager of public timber for the use and enjoyment of all, and the private forest industry as only one of the users of public timber.

In these studies particular attention should be directed to ascertaining whether the cooperative agreement provides or prevents suitable opportunities for small business to compete on equal terms with concerns with greater working capital and large land and timber holdings. G-7. A report should be made to the Congress by March 31, 1957, setting forth the results of the review and the recommendations of the agencies.

G-8. The price at which Federal timber is offered for sale under any cooperative agreement or authorized timber allocation should be the current fair market value, as indicated by bids in competitive areas.

RESPONSE BY THE DEPARTMENT OF AGRICULTURE

Recommendation G-1

For the last several years the Department of Agriculture has been publicizing its annual sales program in all areas where there was sufficient interest in such timber sales to justify the work involved in holding annual meetings and making statements on the matter. Contacts and discussions are maintained with other Federal agencies in areas where there is a significant interrelationship of sales programs. One objective of all national-forest timber sale programs is to provide maximum competitive opportunities for national-forest timber in areas not subject to special considerations under the act of March 29, 1944.

The Department is in agreement that widespread publicity and opportunities to submit proposals should be available in connection with long-range timber development programs in undeveloped areas. This policy has been pursued over the years in the development of pulp sales in Alaska. Numerous pamphlets, magazine articles, and news releases were prepared. For many years before the first plant was established, direct discussions were had with virtually all major companies who might have a possible interest in establishing pulp mills in Alaska. Other comparable examples are a bulletin outlining the possibilities of making pulp in eastern Montana, widespread publicity in an effort to obtain establishment of a pulp mill to use the dead spruce timber of Colorado, a mimeographed release setting forth the opportunities for establishing a pulp and paper enterprise in the Southwest, and a prospectus outlining the possibilities for a major sale of hardwood pulp in the Allegheny National Forest in Pennsylvania. After such advance publicity has been made, it often becomes necessary, once a specific interest is developed, to move rapidly while markets and the interest in capital financing are favorable and make a rather prompt advertisement. Recommendation G-2

The Forest Service makes about 30,000 sales of forest products per year. In fiscal year 1957 there were 31,426 sale transactions. Of this number 9,739 sales were for forest products which could not be measured or converted into boardfoot measurement. Practically all of such nonconvertible product sales are in small amounts. Out of the 21,687 sales of forest products which were either measurable in or convertible to board-feet, 19,738 or about 91 percent were less than $2,000 in amount. This 91 percent of the number of sales provided a cut of only about 10 percent of the volume. There were 1,949 sales of over $2,000 in amount. These provided 90 percent of the total cut of 6,974 million boardfeet. The Forest Service therefore engages in extensive very-small-sale activity. Approximately 30 percent of the national-forest cut comes from sales from $2,000 in value to 5 million board-feet in volume (small size class). Twenty-five percent of the cut comes from sales between 5 and 15 million board-feet (medium size class). Thirteen percent of the cut comes from sales between 15 and 25 million board-feet (large size class). Twenty-two percent of the cut comes from sales of over 25 million board-feet (very large size class). Thus a total of 65 percent of the national-forest cut comes from small and medium-sized sales (15 million board-feet or less), and a total of 78 percent of the cut comes from sales which do not exceed 25 million board-feet.

The present distribution of cut among sale size-classes represents substantial progress toward smaller size sales and of duration of 3 years or less. Prior to World War II the bulk of the volume cut from the western national forests came from large sales of long duration. This was necessary because originally largescale cutting on the national forests in the West could only be conducted through railroad operations which required large sales. When trucking became feasible,

it continued to be necessary to make large sales for amortization of timber access roads constructed by timber purchasers. Expansion of the number of smaller size sales in the western areas became possible when funds for construction of public financed access roads became available through the Defense Highway Act during World War II. The timber access road construction program now underway has made it possible to make 65 percent of the cut from sales of less than 15 million board-feet.

Some sales in the large-size class are still needed for the following reasons or circumstances:

(a) Salvage of dead or deteriorating timber before it becomes unmerchantable. (b) Removal of timber from a dam site or from within the flowage boundaries or from other type of clearing required for an authorized land use within the time limits of the construction schedule for the project.

(c) Amortization, at rates generally used by the forest-products industry of the region and acceptable to the Government, of access roads which the purchaser must build.

(d) Amortization, at rates generally used by the forest-products industry of the region and acceptable to the Government, of manufacturing or processing facilities needed for efficient processing and utilization of the national-forest timber in the working circle.

Recommendation G-3

Except for areas established under the act of March 29, 1944, where competition may have been placed as a subsidiary objective or eliminated, one of the objectives of the Forest Service sales program is to provide maximum competitive opportunities for bidding. This is one of the main objectives of the Forest Service right-of-way policy. However, sound property management and silvicultural objectives should not be subordinated to get maximum competition. Recommendation G-4

The Forest Service requires a deposit with bid in all sales above $2,000 in amount. The size of the deposit with bid is approximately the value of a 1-month cut, with a maximum of $100,000. The value of the 1-month cut is determined by multiplying the weighted average value of the stumpage plus required deposits at the advertised rate by the lowest rate of monthly production which would complete the sale within the period of the contract, with full consideration of the normal number of operating months during that period. The Forest Service considers this requirement a reasonable one and essential to insure good faith on the part of all bidders participating. Any relaxation in this requirement would open up possibilities for bidding by parties who might not prove responsible. The deposit is frequently much less than the initial downpayment in comparable private transactions. Since at least 10 months are usually allowed for an operating period even in smaller advertised sales, this means that the initial deposit with bid seldom is as much as 10 percent of the appraised value of the total sale.

The minimum advance payment in Forest Service contracts is the value of the cut for a month of operation, based on the bid prices and operating plans of the purchaser. Advance payments of less than 1 month are scarcely workable under timber-sale conditions where the rate of felling, which governs the rate at which advance payments must be called for, can vary considerably in different periods. On August 10, 1956, the Department authorized use of surety bonds or negotiable Government securities in lieu of advance stumpage payments. This permits purchasers to submit special bonds guaranteeing payment for all timber cut and the Forest Service to bill the purchaser after the logs are scaled at the end of each month. Because some operators have had difficulty in obtaining such bonds, further adjustments were made in bond and payment requirements in May 1957 to permit acceptance of payment bonds in smaller amounts and to permit felling but not removal, under specified circumstances, of timber in advance of payment. Recommendations G-5, G–6, and G-7

The Department of Agriculture has responded to the requests expressed in these three recommendations in its letter of May 29, 1957, to Senator Murray and Congressman Dawson.

Recommendation G-8

Sales of timber at appraised price without opportunity for competitive bidding are made by the Forest Service in one cooperative unit and in two Federal units. The appraised price in these units is geared to the current fair market value. In recommendation K-3 the committee proposes that appraised prices be con

sistent with the fair market value of timber as established by competitive bids for comparable timber. As indicated in the discussion of that recommendation, the Department agrees with the basic principle involved. The difficulties of applying this principle are discussed under that recommendation.

RESPONSE BY THE DEPARTMENT OF THE_INTERIOR

Recommendation G-1

The Department is in general agreement with this recommendation to the extent that a flexible program is developed. Since 1949 the Bureau of Land Management has prepared and widely publicized an annual calendar-year timbersale plan for the O. and C. lands. The plan shows the location, estimated volume, and probable date of offering of individual sales by districts. The plan is made up of suggestions submitted by prospective bidders and pursuant to management plans developed by the Bureau foresters. The proposed plan is reviewed by local advisory boards (composed of a broadly representative group of private citizens within each forest district and representing forest industry, agriculture, mining. etc.), the Bureau's State supervisor and his staff, and is publicized just prior to the end of the preceding calendar year. During the past year it has been the practice to hold a series of forum type public meetings in the districts to explain the plan for the forthcoming year.

The actions of the Bureau of Indian Affairs with respect to this recommendation can probably be strengthened. There has been an informal type of coordination, locally, in the sale of timber by the three Federal agencies. Indian agency personnel are generally in touch with personnel of adjoining National Forest and Bureau of Land Management offices, which leads to mutual understanding of sales programs, at least in general terms. The Bureau will take steps to determine in what areas it is desirable to develop coordinated sales programs with other Federal agencies. Where the need is indicated, such coordination can probably be accomplished through periodic meetings and scheduling of sales.

With development of new management plans for Indian timberlands, a tentative cutting schedule will be included within the management plan and be reasonably publicized. This flexible schedule will be reviewed and revised as necessary.

Recommendation G-2

During the past 15 years it has been the Bureau of Land Management's policy and practice to make timber sales of no more than 3 years' duration. As indicated in the committee's staff report (p. 76): "Since 1940 73 percent of the O. and C. sales by volume and 88 percent by number have been in quantities of less than 5 million board-feet, while only 12 percent of the volume and 2 percent of the number of sales have been in those larger than 10 million board-feet."

With respect to Indian lands, this recommendation has been covered in considerable detail under recommendation No. 2 of section F of this report. Briefly, the Department does agree in general with the recommendation.

Recommendation G-3

The Department agrees in general with this recommendation, but some caution is necessary since blind adherence to the recommendation might not be desirable. Timber sales on public forest land administered by the Bureau of Land Management are coordinated locally with national forest sales so as to avoid simultaneous sales which would result in lessening competition and participation.

While it is desirable to encourage healthy competition with respect to Indian lands, the Bureau questions seriously whether it is in the public interest or in the interest of the Indians to encourage competition of the type that would result in a cut-out and get-out economy. The Bureau's objective is to offer timber for sale in such a manner as to maintain operations on each reservation at essentially the full sustained-yield capacity of the forest, consistent with sound property management and silvicultural objectives.

In times of very active demand it would be possible to make offerings in excess of both sustained-yield capacity and installed plant capacity. Such action would invite outside interests to buy the timber and install additional plant capacity. Thereafter, the Bureau would be faced with insistent demands to keep the increased mill capacity supplied with logs. Pressures would be developed to break down the approved management practices and harvesting schedules that are best suited to the forest, and to continue harvesting timber at a rate in excess of sustained-yield capacity.