B-175840, JUN 16, 1972, 51 COMP GEN 826

B-175840: Jun 16, 1972

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TIMBER SALES - ACCESS ROADS - AMORTIZATION - "EARNED PURCHASE CREDIT" TRANSFERS THE PROPOSAL TO CHANGE THE ROAD AMORTIZATION PROVISIONS IN STANDARD FOREST SERVICE TIMBER SALE CONTRACTS SO AS TO PERMIT TRANSFER OF "EARNED PURCHASER CREDIT" BETWEEN CONTRACTS - CREDITS EARNED WHEN THE RATE OF TIMBER REMOVAL IS INSUFFICIENT TO AMORTIZE THE COST OF CONSTRUCTING ACCESS ROADS BUILT TO THE AREA FROM WHICH THE TIMBER IS TO BE REMOVED - MAY NOT BE APPROVED IN THE ABSENCE OF STATUTORY AUTHORITY. 1972: REFERENCE IS MADE TO A LETTER DATED APRIL 28. IT IS REPORTED THAT "EARNED PURCHASER CREDIT" IS PART OF A SYSTEM EMPLOYED TO AMORTIZE ROAD CONSTRUCTION COSTS INCURRED IN CONSTRUCTING SPECIFIED ROADS TO REMOVE TIMBER FROM A PARTICULAR SALE AREA.

B-175840, JUN 16, 1972, 51 COMP GEN 826

TIMBER SALES - ACCESS ROADS - AMORTIZATION - "EARNED PURCHASE CREDIT" TRANSFERS THE PROPOSAL TO CHANGE THE ROAD AMORTIZATION PROVISIONS IN STANDARD FOREST SERVICE TIMBER SALE CONTRACTS SO AS TO PERMIT TRANSFER OF "EARNED PURCHASER CREDIT" BETWEEN CONTRACTS - CREDITS EARNED WHEN THE RATE OF TIMBER REMOVAL IS INSUFFICIENT TO AMORTIZE THE COST OF CONSTRUCTING ACCESS ROADS BUILT TO THE AREA FROM WHICH THE TIMBER IS TO BE REMOVED - MAY NOT BE APPROVED IN THE ABSENCE OF STATUTORY AUTHORITY. TO APPLY PURCHASER CREDITS TO OTHER THAN THE CONTRACT OF TIMBER UNDER WHICH EARNED WOULD EXCHANGE TIMBER FOR ROAD CONSTRUCTION AND 16 U.S.C. 476, AUTHORIZING THE SALE OF TIMBER IN NATIONAL FORESTS, PROVIDES THAT THE SECRETARY OF AGRICULTURE MAY SELL THE TIMBER FOR NOT LESS THAN THE APPRAISED VALUE.

TO THE SECRETARY OF AGRICULTURE, JUNE 16, 1972:

REFERENCE IS MADE TO A LETTER DATED APRIL 28, 1972, FROM THE ASSISTANT SECRETARY REQUESTING OUR DECISION ON A PROPOSAL BY INDUSTRY TO CHANGE THE ROAD AMORTIZATION PROVISIONS IN STANDARD FOREST SERVICE TIMBER SALE CONTRACTS SO AS TO PERMIT TRANSFER OF EARNED PURCHASER CREDIT BETWEEN CONTRACTS.

IT IS REPORTED THAT "EARNED PURCHASER CREDIT" IS PART OF A SYSTEM EMPLOYED TO AMORTIZE ROAD CONSTRUCTION COSTS INCURRED IN CONSTRUCTING SPECIFIED ROADS TO REMOVE TIMBER FROM A PARTICULAR SALE AREA. UNDER THE SYSTEM, TIMBER IS APPRAISED AND OFFERED FOR SALE AS IF THE NECESSARY ROADS HAD ALREADY BEEN CONSTRUCTED. AS ROAD CONSTRUCTION PROCEEDS, THE TIMBER PURCHASER IS CREDITED FOR THE ESTIMATED COST OF SUCH WORK UP TO THE MAXIMUM AMOUNT STATED IN THE CONTRACT AND THE EARNED CREDITS APPLIED AGAINST THE CHARGES, IN EXCESS OF BASE RATES, FOR THE TIMBER. SINCE ROAD CONSTRUCTION MUST PRECEDE TIMBER REMOVAL, AND THE RATE OF REMOVAL MAY NOT BE SUFFICIENT TO AMORTIZE THE COSTS, THERE MAY BE A BALANCE OF EARNED BUT UNUSED PURCHASER CREDIT EQUIVALENT TO ABOUT ONE YEAR'S ROAD CONSTRUCTION COST AT ANY GIVEN TIME. INDUSTRY PROPOSES THAT IT BE ALLOWED TO APPLY THIS BALANCE TOWARD STUMPAGE CHARGES ON OTHER SALES AND THEREBY REDUCE CASH OUTLAYS. IT IS ARGUED THAT THIS WOULD BE IN THE PUBLIC INTEREST AS IT WOULD RESULT IN A MORE EFFECTIVE USE OF CAPITAL AND BETTER AND MORE ORDERLY ROAD CONSTRUCTION AND TIMBER HARVESTING ON NATIONAL FOREST LANDS.

IT IS THE DEPARTMENT'S POSITION THAT ANY SUCH BENEFITS AS MAY ACCRUE WOULD NOT BE SUFFICIENT TO OFFSET THE DISADVANTAGES, WHICH INCLUDE A TEMPORARY REDUCTION IN STUMPAGE RECEIPTS. IT IS POINTED OUT THAT WHILE IT MIGHT BE ARGUED THAT ANY REDUCTION IN CASH PAYMENTS ON ONE SALE WOULD BE OFFSET BY HIGHER PAYMENTS ON OTHER SALES, THERE ARE SITUATIONS WHERE THIS WOULD NOT BE TRUE. SO-CALLED DEFICIT SALES ARE CITED IN ILLUSTRATION. THESE ARE SALES IN WHICH THE DIFFERENCE BETWEEN VALUE AT BASE RATES, WHICH MUST BE PAID IN CASH, AND BID RATES IS LESS THAN THE ESTIMATED ROAD COST. TRANSFER OF EARNED PURCHASER CREDIT FROM SUCH SALES WOULD RESULT IN REDUCED TOTAL STUMPAGE CHARGES. ANOTHER EXAMPLE CITED INVOLVES SALES FROM WHICH THE TIMBER IS NOT REMOVED AS A RESULT OF DAMAGE AFTER CONSTRUCTION OF THE ROAD.

FURTHERMORE, IT IS THE DEPARTMENT'S VIEW THAT INDUSTRY'S PROPOSAL WOULD BE CONTRARY TO THE LONG-ESTABLISHED PRINCIPLE THAT A TRACT OF TIMBER MAY NOT BE CHARGED WITH COSTS FOR WORK WHICH IS NOT NECESSARY TO THE HARVESTING OF THAT TIMBER. CITED IN THIS CONNECTION ARE TWO DECISIONS OF OUR OFFICE, B-65972, MAY 19, 1947, AND B-130831, FEBRUARY 7, 1958. ALSO CITED AS AN EXAMPLE OF THIS PRINCIPLE IS THE FOLLOWING QUOTATION FROM A PORTION OF THE LEGISLATIVE HISTORY OF THE EASEMENT ACT, PUBLIC LAW 88-657, 16 U.S.C. 532:

THE AMENDMENT TO SECTION 4 ADOPTED BY THE SENATE AND INCLUDED IN THE REPORTED BILL MAKES IT CLEAR THAT PURCHASERS OF NATIONAL FOREST TIMBER AND OTHER FOREST PRODUCTS WILL NOT BE REQUIRED TO PAY OUT OF THEIR OWN FUNDS MORE THAN THE COST OF THE STANDARD OF ROAD NEEDED IN THE HARVESTING AND REMOVAL OF THE TIMBER AND OTHER PRODUCTS COVERED BY THE PARTICULAR SALE.

THE QUESTION INVOLVED IN THE CITED CASES WAS WHETHER YOUR DEPARTMENT HAD AUTHORITY TO PROVIDE FOR THE CONSTRUCTION OF PERMANENT TYPE ROADS BEYOND THOSE REASONABLY REQUIRED BY TIMBER PURCHASERS TO REMOVE TIMBER THROUGH A REDUCTION IN THE APPRAISED VALUE OF THE GIVEN TRACT OF TIMBER. WE POINTED OUT THAT THE ONLY STATUTORY AUTHORITY, 16 U.S.C. 476, TO SELL NATIONAL FOREST TIMBER PROVIDES THAT THE SECRETARY OF AGRICULTURE " *** MAY SELL THE SAME FOR NOT LESS THAN THE APPRAISED VALUE *** ." IN CONSTRUING THE PROVISIONS OF THIS STATUTE WE CONCLUDED THAT WHILE THERE WAS NOTHING CONTAINED THEREIN WHICH EXPRESSLY PERMITS THE USE OF PROCEEDS FROM SUCH SALES FOR ROAD CONSTRUCTION, THE SECRETARY PROPERLY RECOGNIZED THAT TIMBER PURCHASERS MUST HAVE ACCESS ROADS AND MAY PROPERLY ALLOW THE COST OF CONSTRUCTING ROADS AGAINST THE APPRAISED VALUE OF THE TIMBER PURCHASED. HOWEVER, WE CONCLUDED THAT TO PROVIDE FOR CONSTRUCTION OF ROADS OF A HIGHER STANDARD THAN NECESSARY FOR TIMBER REMOVAL THROUGH A REDUCTION OF THE APPRAISED VALUE WOULD REDUCE THE PRICE OF THE TIMBER SOLD ACCORDINGLY AND WOULD RESULT IN THE EXCHANGE OF TIMBER FOR ROAD CONSTRUCTION WITHOUT STATUTORY AUTHORITY THEREFOR. IT IS OUR VIEW THAT APPLICATION OF PURCHASER CREDIT TO OTHER THAN THE TRACT OF TIMBER UNDER WHICH IT WAS EARNED WOULD LIKEWISE BE THE EXCHANGE OF TIMBER FOR ROAD CONSTRUCTION AND WITHOUT STATUTORY AUTHORITY.

ACCORDINGLY, WE ARE CONSTRAINED TO OBJECT TO THE TRANSFER OF EARNED PURCHASER CREDIT BETWEEN CONTRACTS.