Further consideration of the size and timing of sales, and its effect upon competitive interest, will be found under the discussion on recommendation No. 2, section F, of this report.

Recommendation G-4

The Department agrees that it is advisable to maintain advance and installment payments at such levels as to encourage maximum bidder participation but it is not convinced that there is any real need for the use of payment bonds in lieu of advance cash payments.

Advance payment and installment payment.-The levels of advance payments and installment payments which have been in effect regarding timber sales from the public domain administered by the Bureau of Land Management have, the Bureau is convinced, encouraged maximum bidder participation.

The question of advance payments in the sale of Indian trust allotted timber is covered under recommendation No. 3, section F, of this report.

Under the Bureau of Indian Affairs present procedure, advance deposits must be made by the purchaser before timber may be cut. When timber is cut and scaled, the value of the scaled timber is credited against the advance deposit. Before the advance deposit is exhausted the purchaser is called upon to make another deposit or installment in a stated amount, and this procedure is continued to insure that the purchaser always has an advance deposit balance against which to credit the value of the timber being cut. The size of the deposit is stipulated in each contract, and varies between contracts according to the contemplated rate of cutting.

By the foregoing procedure the amount payable to an allottee or to the tribe can be transferred to the appropriate individual or tribal account as promptly after the timber is scaled as available personnel can process the transaction.

Deposits with bid and payment bonds.-The present method and level of deposits with bid now in force on Bureau of Land Management timber sales is satisfactory in the opinion of the Bureau.

The practicality of using payment bonds in lieu of advance cash payments has been reviewed thoroughly with representatives of the timber industry, bonding companies and banks in western Oregon regarding Bureau of Land Management timberlands. They are practically unanimous in opposing such bonds as being impractical for small operators.

The Bureau of Indian Affairs has been subjected to justifiable criticism because it has held all deposits with bids for timber pending determination of the high bidder and acceptance of his bid. There have been delays of several months, in some instances, in making this determination. The unsuccessful bidders have properly objected to the retention of their rather substantial deposits with bid for such extended periods.

The proposed revision of regulations, now under review for approval, provides that promptly upon opening of bids and determination of high bidder the deposits of all other bidders will be returned. If individuals submitting lower bids request further consideration, their deposits will also be held. The revised regulations will also authorize the deposits of checks, cash, or money orders in contrast to the present regulations which require the deposit of a certified check.

With these changes in the regulations, the Bureau of Indian Affairs is not in favor of authorizing the use of a bid bond. When the contract is executed and approved the purchaser's deposit with bid becomes available immediately to apply against the timber he will cut. The bid bond, therefore, would be of no particular advantage to bidders, and it would increase the paperwork incident to beginning operations under an approved contract.

The Bureau of Indian Affairs is opposed to the use of a payment bond to cover timber being cut under an approved contract. It would not be in the best interest of the Indians, and would not provide the purchaser, particularly the smaller purchaser, with a significant advantage over the paying procedure that is now in effect.

To the best of the Bureau's knowledge, no purchaser has approached the Indian Bureau with the suggestion that he be permitted to furnish a payment bond, nor has there been any expression of dissatisfaction by such purchasers with the present advance payment procedures of the Bureau's contracts.

If the payment bond procedure were adopted, there would be additional delays in placing funds in the appropriate accounts. A billing to the purchaser would be prepared after completion of the scale report. The purchaser would have perhaps 15 days in which to make payment. His payment would first be taken up in a special deposit and then distributed to the appropriate individual or tribal

account. In all, if the payment bond procedure were adopted, there would easily be 3 weeks' to 2 months' additional delay in placing funds in the appropriate accounts. This would be an undesirable delay from the standpoint of the allottees, who are anxious to receive payment as soon as possible. To the tribe, it could mean a month's additional delay in deposit of funds to the tribe's interestbearing account in the Treasury.

The Bureau of Indian Affairs questions whether the suggested procedure would be a significant advantage to the purchaser, particularly to the smaller operator. A brief analysis has been made of payments by means of advance deposits during the past several years under a half-dozen contracts. It indicates that actual rates of cutting have required one or more advance deposits each month during the active logging season, and that the working balance (the difference between actual billings for timber scaled and the deposit then in hand) has not been so large or for such a protracted period that it would be onerous to a reasonably well financed operator. The maintenance of this working balance would not ordinarily be so burdensome as to induce the purchaser to adopt the alternative of providing a bond on which he would have to pay premiums.

There is reason to believe that the smaller or poorly financed operator would experience difficulty in posting an acceptable bond in the required amount. Although changing conditions may at some time indicate the value of a payment bond, the Bureau is not disposed to provide for its use at this time. Recommendation G-5

The Bureau of Land Management held public hearings on proposals to amend its O. and C. marketing area system. During 1956 the Bureau retained a forestmanagement expert to make a fact-finding survey regarding the effectiveness of the marketing-area system. The Forest Service cooperated in that survey by making its timber sale records available for analysis and comparison with similar data relating to Bureau timber sales.

The results of the fact-finding survey, together with results of the hearings which preceded it, indicated the existence of a strong feeling in the communities, for whose benefit the marketing areas were established, that marketing areas may have outlived their usefulness and were no longer needed. In view of this situation, the Bureau of Land Management held a public hearing on March 1, 1957, in Portland, Oreg., for the purpose of giving all interested companies and communities full opportunity to express their views on the question of whether the marketing-area system should be continued or abolished.

The testimony submitted at the hearing and during the ensuing 15 days was overwhelmingly in favor of abolishing the marketing areas. Accordingly, the marketing areas were abolished March 31, 1957.

With respect to the Bureau of Indian Affairs, marketing areas have never been established. This recommendation is not directed to this Bureau.

Recommendation G-6

In consequence of a public hearing in 1948 to consider establishing a proposed cooperative sustained-yield forest-management agreement for certain O. and C. lands and the intermingled private lands, the Bureau of Land Management concluded that such agreements would probably not be warranted during the foreseeable future. Thus far none has been made, and none are contemplated.

The Bureau of Indian Affairs has not established sustained-yield units, either on Indian lands alone or in cooperation with Federal or private agencies under authority of the act of March 29, 1944 (16 U. S. C. 583). This recommendation, therefore, is not directed to this Bureau.

Recommendation G-7

The Department submitted the requested report on marketing conditions to Senator James E. Murray on April 9, 1957.

Recommendation G-8

Neither the Bureau of Land Management nor the Bureau of Indian Affairs has entered into cooperative sustained-yield agreements, and does not contemplate entering into cooperative agreements. Hence, this recommendation does not apply to this Department.

H. LAND AND TIMBER EXCHANGE AND DEVELOPMENT OF NEW AREAS

FINDINGS AND CONCLUSIONS

1. Land and timber exchange

Exchanges permit the Government to enter into agreements with private lumbermen whereby both land and timber are exchanged to provide better Federal forest management.

In the 34 years since enactment of the exchange legislation (42 Stat. 465; 43 Stat. 1215), the Forest Service has obtained 6,631,444 acres through exchange and 18,366,282 acres through acquisition by purchase under the Weeks law (36 Stat. 962).

In recent years the forest-products industry has taken a firm stand against adding to the Forest Service domain additional acreage either through purchase or exchange. One type of exchange which has been subjected to widespread criticism, although it involves only some 2 percent of national-forest holdings, is that under which Federal timber is exchanged for cutover land. We find that this practice is undesirable, because it results in a loss to the Government through disposal of Federal timber without competitive bidding; it encourages overcutting on private land, because the private-land owner realizes that he can trade his cutover land for valuable Government timber; it imposes an expensive burden on the Federal Government, because it must rehabilitate and reforest the land it acquires in the exchange; in large exchanges it tends to create monopoly by entrenching one operator in a position of dominant control to the exclusion and eventual elimination of others.

On the other hand, we find that land-for-land exchanges which eliminate land not needed for Federal purposes or result in the consolidation of Federal holdings so as to facilitate management, can be beneficial.

2. Development of new areas and utilization of unused species

The joint committee finds that the opening of new areas to timber utilization and development offers a sound method of helping reduce some of the local pressures in areas where cut exceeds growth. For example, there are vast stands of subalpine species that can and should be utilized. The development of these areas and the use of these species will promote a broad timber economy and help relieve the economic effects of lower production in areas now being overcut. Such new uses can help to take up the slack in employment in timber areas, as the volume of sawtimber declines. In addition, higher utilization of the so-called minor species in areas with fully developed plant facilities will also help to maintain employment and prevent the wastage of timber.

When there is genuine competitive interest in timber sales of this type the agencies should not unreasonably delay offering timber for sale.

Land and timber exchange

RECOMMENDATIONS

H-1. Exchanges generally should be limited to elimination from the Federal domain of lands no longer needed for public purposes or to consolidate Federal landholdings.

H-2. Existing exchange statutes should be amended to require congressional approval of any further stumps-for-stumpage exchanges involving offered lands in excess of 1 section, or 640 acres.

H-3. The advertisement of exchanges should include full information on the volume and value of the Federal timber involved, and the kinds of Federal and private lands proposed to be exchanged. Development of new areas and utilization of unused species

H-1. The agencies should promote the development of those areas containing potentially valuable stands of commercial timber now considered of marginal utility. Sales of this type should be planned for competitive bidding and the maximum opportunity for small-business participation.

H-2. The agencies should also encourage the utilization of minor species in fully developed areas by research and marketing studies designed to increase buyer acceptance of the products from these species, in order that a ready market and profitable manufacture will develop for them.

RESPONSE BY THE DEPARTMENT OF AGRICULTURE

Recommendation H-1 (land and timber exchange)

About 90 percent of current national forest land exchange cases are to consolidate Federal landholdings or to eliminate lands no longer needed for public purposes. Some land exchanges, however, will not classify under the two above categories and yet may yield special public values and benefits. For example, a few exchanges are made each year which provide: (a) Road or trail rights-of-way, (b) research or administrative value, (c) scenic lookout points for public use, or (d) the preservation of special scenic values. Land exchanges for these purposes might be highly desirable from a public standpoint regardless of whether national forest land was also thereby consolidated or whether national forest land no longer needed for public purposes was also eliminated. In each case the tract or site might otherwise be unavailable, and its prompt acquisition by exchange may result in vital public benefits.

Recommendation H-2 (land and timber exchange)

During recent years the authorization for national forest stumpage-for-land exchanges has been practically unused. Such minor use as has been made of this authorization permits the prompt handling of special cases, such as when the use of this exchange procedure is the only practicable method by which a tract needed for public use may be acquired.

Recommendation H-3 (land and timber exchange)

At present, the public advertisement of national forest exchanges includes a legal description of both the private and Federal tracts involved. Usually the kind of Federal and private land involved in the proposed exchange can be determined by interested parties by locating the lands from the legal descriptions, but there would be no objection-other than the added expense of including such information in the advertisement.

While an exchange is still pending, the Government should have the same rights as do private individuals to hold in confidence the information prepared at Government expense, which is basic to sound negotiation. To do otherwise would be contrary to Government practices in many other fields. Similarly, we believe that landowners offering an exchange are entitled to have the financial aspects of their offers held in confidence until the transaction is assured, as would be the case between private parties. The National Forest Reservation Commission, which has reviewed and approved or disapproved thousands of land acquisition cases for national-forest purposes-both purchase and exchange-has studied this problem, and as a result it has adopted a policy that detailed information relative to the value of the lands or timber should not be made public while land or timber exchanges or purchase cases are still pending. After consummation, the entire record is available for the review of any interested person or group. It is felt this policy is sound and essential to protect the interest of the Government,

and that it provides the seller with at least the same protection as in the case of similar negotiations with other private owners.

Recommendation H-1 (development of new areas and utilization of unused species) The agencies should promote the development of those areas containing potentially valuable stands of commercial timber now considered of marginal utility. Sales of this type should be planned for competitive bidding and the maximum opportunity for small-business participation.

The Department of Agriculture is in general agreement with this recommendation. It should be pointed out, however, that sales of timber with present marginal utility are seldom suitable for bidding by the smaller business enterprises. Generally, the initial operation of timber, which at the time is of marginal utility, must be undertaken by a larger concern with sufficient capital to do the pioneering and the risk taking. Production of multiple products also is ofetn necessary to assure complete utilization of the timber and profitable operation of the processing plants.

The Forest Service has initiated several specific studies of national-forest timber resources in marginal areas in the Rocky Mountain regions to appraise market development opportunities and to guide industrial development.

Recommendation H-2 (development of new areas and utilization of unused species) The Forest Service is currently conducting some research to find new uses and improved techniques for using minor species, low-grade timber and species for which markets are limited, and wood residues now wasted on logging operations and in processing plants. New techniques have been developed, for example, for pulping minor species such as western red alder. Other studies are underway to develop new processes and new pulping procedures that will permit economic use of various low-grade hardwoods for pulp and paper products. The new "cold soda" process of pulping hardwoods, developed by the Forest Products Laboratory is now in use in three commercial plants in the country. In the field of wood chemistry, research is developing new or improved processes for producing a wide range of industrial chemicals such as furfural, levulinic acid, and various other products. New methods for seasoning western oak and other little-used hardwood species are being investigated to find ways of utilizing such species for lumber, veneer, or other wood products. Research in product improvement by such methods as paper overlays on low-grade lumber is also pointing the way to better uses of wood.

In the field of marketing research studies are underway in several localities to appraise opportunities for expanding markets for little-used species, thinnings, and wood residues. The economic possibilities of utilizing sawmill waste for pulp chips, for example, are being investigated in a number of areas. Other studies are determining the economic advantages of integrated utilization of timber for a variety of products.

Expansion of such utilization and marketing research is needed to determine more adequately the possibilities for developing new products and new uses for wood, improved methods for processing and using wood products, and methods for increasing the efficiency of marketing various timber products.

RESPONSE BY THE DEPARTMENT OF THE INTERIOR

Recommendation H-1 (land and timber exchange)

"Exchanges generally should be limited to elimination from the Federal domain of lands no longer needed for public purposes or to consolidate Federal land holdings" (p. 30).

The Department is in general agreement with this recommendation. Landpattern adjustments to consolidate public domain land, forest lands, and O. and C. lands into more efficient management units are carried out by the Bureau of Land Management.

The principal authority for Bureau of Land Management exchanges of public domain is section 8 of the Taylor Grazing Act (48 Stat. 1269). This section provides for the exchange of land for land. With respect to land exchanges with private owners, section 8 requires that the public interest must be benefited thereby. With respect to land exchanges with States, section 8 makes it mandatory to consummate any proposed exchange unless the exchange would adversely affect the management of grazing districts.

Most exchanges consummated under the Taylor Grazing Act are proposed by private individuals or by the States. With minor exceptions, as indicated below, they result in the consolidation of Federal management units, such as Bureau