DAR File No. 27178

School and Institutional Trust Lands, Administration

R850-70

Sales of Forest Products from Trust Lands Administration Lands

NOTICE OF PROPOSED RULE

DAR File No.: 27178
Filed: 05/14/2004, 05:23
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is being amended to improve the rule structure, provide greater protection of the resource, and to bring the rules into alignment with current practices.

Summary of the rule or change:

Changes to the structure of the rule have been made throughout in order to better clarify the process. The exclusion of sawlogs from the small forest product permit program, limits on the value of forest products sold to a person each year, and the removal of the maximum value for non-competitive forest product sales are being implemented in order to better protect the resource. Changes being made to align the rule with current practices include requiring the advertisement of timber sales to include bidder qualifications, requiring the submission of an application fee, requiring the submission of a timber harvest plan prior to the commencement of harvesting operations, defining the types and forms of bonds submitted for timber sales, authorization of timber contract extensions under certain conditions, and the clarification of long-term agreements (LTA).

State statutory or constitutional authorization for this rule:

Subsections 53C-1-302(1) and 53C-2-201(1)(a)

Anticipated cost or savings to:

the state budget:

New forms will be printed for small forest products. However, the existing supply was low so the new costs will be minimal. Having the ability to sell forest products non-competitively, regardless of value, will reduce agency cost in some timber sales by reducing processing steps. No new manpower will be needed.

local governments:

This rule does not affect local government. Therefore, there is no anticipated cost or savings to local governments.

other persons:

The Division of Forestry, Fire and State Lands may incur some additional costs in processing the registrations of timber sale applicants. These costs are as yet undetermined.

Compliance costs for affected persons:

There may be some minimal costs in time and effort incurred in getting registered with the Division of Forestry, Fire and State Lands. There may also be costs associated with getting an "Extension of Time" for a timber sale contract. These costs are currently not quantifiable.

Comments by the department head on the fiscal impact the rule may have on businesses:

It is our anticipation that this rule will have little fiscal impact on business. Essentially, we are cleaning up ambiguities in the existing rule which should make the forest product sales and permitting process more smooth-flowing and predictable.

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Kim S. Christy at the above address, by phone at 801-538-5183, by FAX at 801-355-0922, or by Internet E-mail at kimchristy@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/01/2004

This rule may become effective on:

07/02/2004

Authorized by:

Kevin S. Carter, Director

RULE TEXT

R850. School and Institutional Trust Lands, Administration.

R850-70. Sales of Forest Products From Trust Lands Administration Lands.

R850-70-100. Authorities.

This rule implements Sections 6, 8, 10, and 12 of the Utah Enabling Act, Articles X, XVIII, and XX of the Utah Constitution, and Section 53C-1-302(1)(a)(ii) which authorize the [Director]director of the School and Institutional Trust Lands Administration to provide for the sale of forest products, desert products, and other vegetative material from Trust Lands Administration lands.

R850-70-150. Planning.

1. Pursuant to Section 53C-2-201(1)(a), the Trust Lands Administration shall [also undertake to ]complete the following planning obligations[,] for all competitive and non-competitive forest product sales, in addition to the rule-based analysis and approval processes [that are prescribed]required by this rule:

(a) To the extent required by the Memorandum of Understanding between the State Planning Coordinator and the School and Institutional Trust Lands Administration, submit the proposal for review by the Resource Development Coordinating Committee (RDCC);

(b) Evaluation of and response to comments received through the RDCC process; and

(c) [Evaluation of]Evaluate and [response]respond to any comments received through the [solicitation process]advertising and notice processes described in [R850-70-800(1)(b)]R850-70-600(1).

2. All other forest product sales within this category of activity carry no planning obligations by the agency beyond existing rule-based analysis and approval processes.

R850-70-200. [Forest Products Defined]Definitions.

1. Sawlogs: portions of a tree stem that exceed seven feet in length and are at least six inches in diameter inside bark at the small end.

2. Poles: portions of a tree stem that are at least ten feet in length and do not exceed six inches in diameter at four and one-half feet above the ground.

3. Mine Props: portions of a tree stem that are between seven and ten feet in length, and six to nine inches diameter inside bark at the small end.

4. Posts: portions of a tree or tree stem, generally Utah juniper, which are no more than ten feet in length and are less than six inches in diameter at the top (small end).[ diameter.]

5. Fuelwood: any portion of a tree, including those portions defined as sawlogs[;], poles[;], mine props[;], or posts[;] that is harvested for use as fuel.[ Normally including deadwood sales.]

6. Christmas Tree: any coniferous tree, or part thereof, cut and removed from the place where grown without the foliage being removed.

7. Ornamental: any coniferous or deciduous tree, shrub, or bush less than 20' in height and no more than six inches diameter at four and one-half feet above the ground, which is removed from a natural setting, generally with roots attached, for transplant elsewhere.

8. Desert Plants: include any member of the Cactaceae Family or the Agavaceae Family.

9. Other Products: include boughs, branches, pinyon nuts, cones, Juniper berries, and native seed.

R850-70-300. Proof-of-Ownership.

Proof-of-ownership shall be issued with each sale of forest products in compliance with Section 78-38-4.5.

R850-70-400. Permit Sales.

The agency may make sales of forest products, with the exception of sawlogs, with a Small Forest Products Permit when the total sale value does not exceed [$300]$500.00. The permit shall be on a form prescribed by the agency. Persons purchasing Small Forest Product Permits shall be restricted to a total value of $500.00 per commodity per calendar year. A Small Forest Product Permit does not grant exclusive use of the permitted lands or the resources contained thereon.

R850-70-500. Noncompetitive Sales.

[At the discretion of]If the director [or designated representative(s),]finds it to be in the best interests of the trust, the agency may [make]sell forest [product]products [sales, not to exceed a value of $2,000,] at not less than an agency-established minimum value [the established base rate] without soliciting competitive bids.

R850-70-600. Competitive Sales.

[The agency must make sales of forest products through competitive bidding procedures when the total sale value exceeds $2,000.

R850-70-700. Advertising Forest Product Sales.

Reasonable notice must be given to potential purchasers and other interested parties prior to completion of any sale with a potential total value exceeding $2,000. The cost of the notice will be borne by the successful applicant.

R850-70-800. Competitive Bidding Procedure.

1. Sales of timber and large forest products resources shall be initiated by the agency and shall follow the procedures below:

(a) Initial bidding shall be conducted through sealed bids which must contain 10% of the bid amount. Those submitting the three highest sealed bids shall be allowed to enter into oral auction.

(b) All sales shall be advertised through publication at least once a week for at least two weeks in one or more newspapers of general circulation in the county in which the sale is located. This notice shall contain, but is not limited to:]1. Sales of forest products shall be initiated by the agency and shall follow the procedures below:

(a) All competitive sales shall be advertised through publication at least once a week for at least two weeks in one or more newspapers of general circulation in the county in which the sale is located. The cost of the notice will be borne by the successful applicant. This notice shall contain, but is not limited to:

i) the legal description of the affected lands;

ii) the species and estimated quantity of forest products;

iii) minimum sale price;

iv) bond amounts;

[iv)]v) advertising and processing costs, as far as is known;

[v)]vi) dates of bidding period;[ and]

[vi)]vii) date, time, and location of oral auction[.]; and

viii) bidder qualifications.

(b) Notice shall also be given to potential purchasers and other interested parties, whose names are on an agency maintained mailing list prior to any competitive sale.

(c) Initial bidding shall be conducted through sealed bids. Each sealed bid must contain 10% of the bid amount and the application fee. The bidders submitting the three highest sealed bids shall be allowed to enter into an oral auction.

(d) Sales shall be awarded to the highest qualified bidder unless a bidder has been previously disqualified, or is notified by the agency in writing within ten business days of the auction that the bid will be disqualified, on the grounds of previous poor performance or other good cause shown. The agency shall declare the successful bidder within ten business days of the bid opening. Failure of the successful bidder to execute a contract within 30 days of receipt may result in cancellation of the sale and forfeiture of all monies submitted.

2. The agency may [cancel]withdraw, at its sole discretion any [timber or large forest products sale prior to sale closing]forest products sale prior to contract execution. All fees associated with a withdrawn sale shall be returned to the purchaser.

[R850-70-900. Awarding Forest Product Sales.

Sales shall be awarded to the highest qualified bidder unless a bidder is disqualified, in writing, by the agency on the grounds of previous poor contract performance or other good cause shown. The agency shall award sales within ten business days of the bid opening.]

R850-70-700. Timber Sale Contracts.

1. Timber Sale Contracts must be used for all sales of sawlogs and any other forest product where the value exceeds $500.00.

2. Each Timber Sale Contract shall contain the provisions necessary to ensure the responsible harvest of forest products, including the applicable provisions of 53C-4-202.

[R850-70-1000. Bonding Requirements.]R850-70-800. Timber Harvesting.

1. Prior to commencement of harvest operations, the purchaser shall submit a timber harvest plan for agency review. Harvesting operations shall not commence until the purchaser is notified, in writing, that the timber harvest plan has been approved by the agency.

[1.]2. Prior to commencement of harvest operations, the purchaser shall post with the agency [a bond]bonds in the form and [amount]amounts as may be determined by the agency to assure compliance with all terms and conditions of the sale contract. Such bonds shall include the following:

[2.](a) A performance bond [will]shall be [posted for]submitted in an amount at least twice the estimated cost of rehabilitation.[ Unless the sale was paid for in advance, the bond will also include the full purchase price of the sale.]

(b) A payment bond shall be submitted in an amount equal to the full purchase price of the sale unless the sale has been paid for in advance, or, at the discretion of the agency, the full price of the largest cutting unit of the sale.

3. All bonds posted may be used for payment of all monies due to the Trust Lands Administration on the total purchase price, and also for the costs of compliance with all other performance terms and conditions of the sale as specified in the contract.

4. [Bonds]The purchaser's bonds shall be maintained in effect even if the purchaser conveys all or part of the sale interest to an assignee[,] or subsequent purchaser until such time as the purchaser fully satisfies sale contract obligations, or until such time as the bond is replaced with a new bond posted by the assignee.

5. Bonds may be increased in reasonable amounts, at any time as the agency may order, provided the agency first gives the purchaser 30 days written notice stating the increase and the reason(s) for the increase.

6. Bonds may be accepted in any of the following forms at the discretion of the agency:

(a) Surety bond with an approved corporate surety registered in Utah.

(b) Cash deposit. The Trust Lands Administration will not be responsible for any investment returns on cash deposits.

[(c) Certificate of deposit in the name of the "School and Institutional Trust Lands Administration" and purchaser with an approved state or federally insured banking institution registered in Utah. All certificates of deposit must be endorsed by the purchaser prior to acceptance by the agency.

Certificate of deposit must:

i) have a maturity date no greater than 12 months,

ii) be automatically renewable; and

iii) be deposited with the agency, the purchaser will be entitled to and receive the interest payments.

(d)](c) an irrevocable letter of credit for a period longer than the term of the sale.

7. Bonds shall remain in force until such time as all contract payments and performance provisions have been satisfied by the purchaser and so documented by the agency in writing.

[R850-70-1100. Assignments.]R850-70-900. Assignments.

1. Competitively let sales may be assigned, in accordance with procedures established by the agency, to any person, firm, association, or corporation qualified to execute the terms and conditions of the sale contract, with prior written approval from the agency, provided that the assignee agrees to be bound by the terms and conditions of the sale and to accept the obligations of the assignor.

2. Permits and non-competitive sales may not be assigned.

R850-70-1000. Extensions of Time.

Extensions of time to complete the harvesting operations authorized by a timber contract may be granted if the director finds it to be in the best interests of the trust. Prior to the approval of a request for an extension of time, the agency may require amendments to the contract, including, but not limited to:

(a) Increasing the amounts and extending the effective dates of bonds; and,

(b) Increasing the price of the forest products authorized by the contract.

[R850-70-1200. Forest Product Valuation.]R850-70-1100. Forest Product Valuation.

Forest products shall be offered for sale based on a methodology or price schedule to be determined by the agency pursuant to board policy.

[R850-70-1300. Long-Term Agreements.]R850-70-1200. Long-Term Agreements.

1. Long-term agreements (LTA) are those sales where the harvest of specified forest products will take place over a period of time exceeding two years. Upon approval of the director, the agency may enter into an LTA with a purchaser for a period not to exceed ten years provided that:

(a) Resource or other benefits can be demonstrated by the LTA.

(b) The LTA is advertised and competitively bid.

(c) The area included in the LTA is defined by legal or other tangible description.

(d) The LTA includes provisions for periodic reappraisal and adjustment of prices.

(e) The LTA may not preclude or prohibit forest product sales to other purchasers on trust lands adjacent to or within the area designated by the LTA.

(f) The LTA provides for amendment and cancellation during the term of the LTA.

(g) The LTA does not preclude or prohibit other concurrent resource management activities and uses adjacent to or within the area designated by the LTA.

(h) Each LTA states that access granted by the LTA is not exclusive.

(i) A due-diligence provision is included in each LTA.

[R850-70-1400. Fees and Procedures.]R850-70-1300. Fees and Procedures.

The agency may establish fees and develop [such ]procedures [as may be ]necessary to provide for the administration and sale of forest products pursuant to Section 53C-1-302(1)(b)[(iii)].

KEY: forest products, administrative procedures, timber

[November 1, 2002]July 2, 2004

Notice of Continuation December 4, 2002

53C-1-302(1)[(a)(ii)]

53C-2-201(1)(a)

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Kim S. Christy at the above address, by phone at 801-538-5183, by FAX at 801-355-0922, or by Internet E-mail at kimchristy@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.