oversight

Natural Resources: Status of Merchantable Material Contracting Pilot Program Authorized by the Secure Rural Schools and Community Self-Determination Act of 2000

Published by the Government Accountability Office on 2003-05-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting Office
Washington, DC 20548




                                   May 9, 2003

                                   Congressional Committees

                                   Subject: Natural Resources: Status of Merchantable Material Contracting
                                   Pilot Program Authorized by the Secure Rural Schools and Community
                                   Self-Determination Act of 2000

                                   The Secure Rural Schools and Community Self-Determination Act of 2000,
                                   enacted October 30, 2000,1 mandated that we assess a merchantable
                                   material contracting pilot program authorized by the act and report on our
                                   assessment by September 30, 2003. The pilot program encompasses
                                   certain forest-related projects undertaken as a result of the act and
                                   mandates the use of separate contracts for the harvesting or collection of
                                   merchantable material, such as timber, and the sale of that material rather
                                   than a single contract for both activities.

                                   In summary, based on our preliminary work, of the approximately
                                   1,300 forest-related projects approved at the time of our review, only 13
                                   are expected to generate merchantable material and, thus, be eligible for
                                   the pilot program. Only 6 of these 13 are expected to be conducted within
                                   the pilot program—and none of the 6 has yet been implemented. Given the
                                   preliminary nature of the pilot program and the small number of projects,
                                   a full-scale assessment by September 30, 2003, would provide very limited
                                   information. We briefed your offices on these findings and reached
                                   agreement that no further assessment of the pilot program will be
                                   conducted at this time. Also as agreed, we are providing this letter
                                   summarizing program activity to date.


                                   Since the early 20th century, counties containing federal lands have been
Background                         compensated for the tax-exempt status of federal lands within their
                                   boundaries. This compensation generally represents a percentage of the
                                   receipts generated on federal lands through the sale or use of natural
                                   resources—such as timber, minerals, recreation, or grazing permits.
                                   Localities generally are required to use these funds for roads, schools, or
                                   other services and facilities. However, the steep decline in federal timber


                                   1
                                    Pub. L. No. 106-393, 114 Stat. 1607 (2000).



                                   Page 1                      GAO-03-596R Merchantable Material Contracting Pilot Program
sales during the 1990s resulted in a significant decrease in federal
payments to counties that historically depended on timber receipts.

The Secure Rural Schools and Community Self-Determination Act of 2000
was enacted, in part, to address the decline in federal payments by
stabilizing payments to counties that depended on revenues from timber
sales on Forest Service and certain Bureau of Land Management (BLM)
lands.2 Under the act, each county may continue to receive a portion of the
revenues generated from these lands or can choose instead to receive
annual payments equal to the average of the three highest annual revenue
payments to the county from fiscal year 1986 through fiscal year 1999.

Counties electing the second option generally must use 80 to 85 percent of
the payments on certain county services such as maintaining roads and
schools.3 The remainder can be (1) reserved by the county for special
projects that benefit federal lands, known as Title II projects; (2) reserved
by the county for county projects related to federal lands (such as
search-and-rescue work on federal lands), known as Title III projects; or
(3) returned to the Treasury. The merchantable material contracting pilot
program applies only to Title II projects.

Title II projects are to be proposed by local resource advisory committees
and must be approved by Forest Service or BLM; these agencies then carry
out approved projects using the reserved Title II funds. Projects are to
improve maintenance of existing infrastructure, enhance forest
ecosystems, and restore and improve land health and water quality. The
act requires that a certain percentage of Title II projects nationwide that
are expected to generate merchantable material must be implemented
under the pilot program, using separate contracts for harvesting or
collecting the material and selling it.4 The authority to initiate Title II
projects under the act expires September 30, 2006.




2
The act covers all National Forest System lands as well as certain BLM lands in Oregon.
3
 Counties receiving less than $100,000 annually from National Forest System lands may
spend up to 100 percent of the payment on these county services.
4
 In fiscal year 2001, 15 percent of Title II projects generating merchantable material were to
be conducted under the pilot program; in fiscal years 2002 and 2003, 25 percent of projects;
and in fiscal years 2004-2006, 50 percent.




Page 2                      GAO-03-596R Merchantable Material Contracting Pilot Program
                                           According to our analysis, as of February and March 2003, the Forest
Few Pilot Projects                         Service or BLM had approved 1,268 Title II projects. Of these, 13 projects
Have Been Approved,                        are expected to generate merchantable material: 1 began in fiscal year
                                           2002 and is ongoing, 9 are expected to begin in fiscal year 2003, and the
and None Have Yet                          remainder to begin in fiscal year 2004 or later.5 Of the 10 projects
Been Implemented                           underway or expected to begin in fiscal year 2003, 6 are expected to be
                                           included in the pilot program using separate contracts for harvesting and
                                           selling merchantable material. All six pilot program projects are in Oregon,
                                           and all involve removing small-diameter trees. As of March 2003, no
                                           harvesting or collection of merchantable material had begun on any of
                                           the six projects. Table 1 shows the projects’ locations and anticipated
                                           start dates.

Table 1: Title II Projects to Be Conducted Under the Merchantable Material Contracting Pilot Program

                                         Project location            Title II funds        Estimated start
 Project name                            (county and state)              reserved                     date      Managing agency
 Boaz Forest Health and                  Jackson (OR)                    $108,362              Spring 2003      BLM
 Small Diameter Utilization
 Density Reduction–Chetco                Curry (OR)                         75,000            Spring 2003       Forest Service
 Small Tree Treatment Project–Illinois   Josephine (OR)                     67,500           Summer 2003        Forest Service
 Valley
 Waters Creek Fuel Reduction             Josephine (OR)                   146,250             Spring 2003       Forest Service
 Westside Small Tree–Chetco              Curry (OR)                        75,000            Summer 2003        Forest Service
 Westside Small Tree–Gold Beach          Curry (OR)                        68,550            Summer 2003        Forest Service
Source: Forest Service and BLM.




                                           Because of the small number of approved projects expected to be
                                           conducted within the merchantable material contracting pilot program,
                                           further assessment of the program by September 30, 2003, would provide
                                           limited useful information. As agreed with your offices, we are providing
                                           this letter summarizing program activity to date and plan no further
                                           assessment of the pilot program at this time.




                                           5
                                            No Title II projects involving merchantable material were approved or undertaken in
                                           fiscal year 2001.




                                           Page 3                    GAO-03-596R Merchantable Material Contracting Pilot Program
                  To determine the number of Title II projects, including the number of
Scope and         projects expected to generate merchantable material and the number to be
Methodology       conducted in the pilot program, we reviewed Forest Service and BLM
                  documents including lists and descriptions of projects; interviewed
                  officials in all nine Forest Service regions and BLM’s Oregon State Office;
                  and interviewed cognizant headquarters officials in Forest Service and
                  BLM. We conducted our work from January through March 2003 in
                  accordance with generally accepted government auditing standards.


                  We requested comments on a draft of this letter from the Secretaries of
Agency Comments   Agriculture and of the Interior. In response, we received oral comments
                  from the Forest Service’s Director of Policy Analysis and BLM’s Acting
                  Group Manager for the Forest and Woodland Management Group, who
                  generally concurred with the information presented in our letter. The BLM
                  official also provided some technical corrections, which we incorporated
                  as appropriate.


                  We are sending copies of this letter to the Secretary of Agriculture and the
                  Secretary of the Interior. The letter also is available on GAO’s home page
                  at http://www.gao.gov/.

                  If you have questions about this letter or need further information, please
                  contact me at (202) 512-3841, or David P. Bixler, Assistant Director, at
                  (202) 512-7201. You may also reach us by email at hillbt@gao.gov or
                  bixlerd@gao.gov. Other key contributors to this assignment were James
                  Espinoza, Steve Gaty, and Diane Lund.




                  Barry T. Hill
                  Director, Natural Resources
                   and Environment




                  Page 4                GAO-03-596R Merchantable Material Contracting Pilot Program
           List of Congressional Committees

           The Honorable Thad Cochran
           Chairman
           The Honorable Tom Harkin
           Ranking Minority Member
           Committee on Agriculture, Nutrition, and Forestry
           United States Senate

           The Honorable Pete V. Domenici
           Chairman
           The Honorable Jeff Bingaman
           Ranking Minority Member
           Committee on Energy and Natural Resources
           United States Senate

           The Honorable Bob Goodlatte
           Chairman
           The Honorable Charles W. Stenholm
           Ranking Minority Member
           Committee on Agriculture
           House of Representatives

           The Honorable Richard W. Pombo
           Chairman
           The Honorable Nick J. Rahall, II
           Ranking Minority Member
           Committee on Resources
           House of Representative




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           Page 5               GAO-03-596R Merchantable Material Contracting Pilot Program
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