[atlas:bill]

AN ACT Relating to timber substitution; adding a new chapter to Title 79 RCW; creating a new section; prescribing penalties; and providing a contingent effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that the rules adopted in 1990 in response to the passage of the federal forest resources and conservation and shortage relief act did not provide any mechanism to allow for any changes to these rules to reflect changes in federal law. The legislature also finds that no state statutory authority exists for these rules, and that the rules lack the authority to impose civil penalties.

The legislature finds that the state of Washington and its political subdivisions sell large amounts of timber from their public lands. Revenues from those timber sales are used to support school construction, benefit of the state's higher education institutions, and provide assistance to other trust beneficiaries. The legislature is concerned with the declining revenues that are being generated for these trusts, and at the amount of timber that is being harvested from public lands in Washington but being processed outside of the state.

It is the legislature's intent to provide more flexibility in the operation of the timber substitution rules in order to increase the potential amount of money that can benefit the trusts, provide mills within Washington state with a more certain wood supply, give necessary rule-making authority to a state agency to adopt necessary changes to the timber substitution rules, and to statutorily authorize the timber substitution rules.

NEW SECTION. Sec. 2. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Agency" means any state or unit of local government that owns or manages land from which timber is harvested in the state of Washington.

(2) "Department" means the department of revenue.

(3) "Export" means either to load on a conveyance or vessel or put in a log raft with the intent to ship to a foreign destination, or to place at a facility such as a port, yard, pond, or dock with the intent to load on a conveyance or vessel or put in a log raft for shipment to a foreign destination.

(4) "Export restricted timber" means unprocessed timber originating from a sale of timber from public lands that has been designated as export restricted under section 3 of this act, and includes both logs and stumpage originating from such a sale.

(5) "Federal forest resources conservation and shortage relief act" means the federal forest resources conservation and shortage relief act of 1990 (16 U.S.C. Sec. 1620 et seq.) as now or hereafter amended.

(6) "Person" means any individual, partnership, corporation, association, or other legal entity and includes any subsidiary, subcontractor, parent company, and business affiliates where one affiliate controls or has the power to control the other or when both are controlled directly or indirectly by a third person.

(7) "Processing facility" means a facility for converting unprocessed timber into any of the items of processed timber as defined by the department by rule. Chip plants, pulp mills, and facilities that process only western red cedar products are not considered processing facilities.

(8) "Public lands" means lands in the state of Washington that are held or owned by the state of Washington or unit of local government within the state.

(9) "Purchaser" means a person who has been awarded a timber sale contract to harvest or acquire export restricted timber from public lands in the state of Washington.

(10) "Substitution" means the purchase of export restricted timber or possession of an active sale contract for export restricted timber: (a) By a person who owns and operates a processing facility; (b) where the person owning the processing facility also exports or sells for export from the United States unprocessed timber originating from private lands in Washington, Oregon, or Idaho; and (c) where the lands are owned by the person, or the person has exclusive rights to harvest timber from the lands, where the rights may be exercised at any time during a period of more than seven years.

(11) "Unit of local government" means any county, city, town, special district, municipal corporation, or quasi-municipal corporation in the state of Washington.

(12) "Unprocessed timber" means trees or portions of trees or other roundwood not processed to standards and specifications suitable for end product use.

NEW SECTION. Sec. 3. (1) Each agency managing public lands subject to this chapter must designate timber sales to be sold as export restricted and as exportable. An order issued by the secretary of commerce of the United States remains in effect until revised by order of the secretary. Sales designated as export restricted must be distributed proportionately throughout the geographical area of land owned or managed by the agency. Timber originating from sales designated as export restricted must be representative of the species and grade distribution of the agency's sale program.

(2) Designation of timber sales as export restricted and as exportable must be on a sale-by-sale basis and apply to the entire sale being considered. However, a sale must be subdivided into portions that are export restricted and exportable if there are insufficient sales in the annual sales program to ensure that designation on a sale‑by‑sale basis meets the applicable requirements of the federal forest resources conservation and shortage relief act.

NEW SECTION. Sec. 4. (1) No person may export from the United States export restricted timber. No person may sell, trade, exchange, or otherwise convey export restricted timber to any other person for the purpose of export from the United States.

(2) Except as specifically provided under this chapter:

(a) No person may purchase or possess an active contract for export restricted timber from an agency if the person owns and operates a processing facility and the processing of export restricted timber at the facility by such a person would constitute substitution;

(b) No person may purchase from another person export restricted timber if the person is prohibited under (a) of this subsection from purchasing the timber directly from the agency managing the public lands from which the timber originated.

NEW SECTION. Sec. 5. The prohibition against substitution in section 4 of this act does not apply to:

(1) The use of timber originating from public lands that is either hardwood timber or western red cedar;

(2) The sale of up to fifty percent of the volume in any sale purchased in calendar year 2002 or thereafter to a person or persons who are otherwise ineligible under section 4 of this act to purchase export restricted timber, but only if the timber is processed at a domestic facility. Hardwoods and western red cedar are not considered as part of the volume within a sale under this exemption. The transferor must notify the department in writing of such a transaction prior to physically transferring the timber to the transferee. Rights to purchase export restricted timber under this subsection may be used on a sale-by-sale basis and may not be accumulated or transferred to other sales. The advertised volume or volume specified in the sale agreement must serve as the basis for determining the sale volume to which the percentage applies;

(3) The purchase by any person of export restricted timber originating from public lands east of the crest of the Cascade mountain range if such a person does not export or sell for export timber from private lands in that geographic area. However, a person located east of the crest of the Cascade mountain range who was ineligible to purchase export restricted timber east of the Columbia river under the regulations in effect upon January 1, 2002, may not bid on export restricted timber sales of timber located in the Loomis forest until July 1, 2004;

(4) A log, regardless of gross scale, sold to a domestic processing facility for the purpose of conversion into chips, pulp, or pulp products;

(5) The sale of timber that has suffered damage from fire, insects, or disease;

(6) The sale of timber in which at least ninety percent of the volume of the sale is not of export grade. This exemption includes thinnings and small patch clear-cuts offered for sale; or

(7) Situations that the department has determined constitute exceptional circumstances so that the seven-year restriction contained in section 2(10)(c) of this act, relating to a person's rights to exclusively harvest timber from privately owned lands at any time during a period of more than seven years, does not apply. The department must make such determinations on a case-by-case basis.

NEW SECTION. Sec. 6. (1) An agency must accept bids from persons not otherwise eligible to bid on sales of export restricted timber for the purpose of opening these bids on a contingent basis. Bids received from otherwise ineligible persons may be opened only if the agency receives less than three bids on the proposed timber sale from eligible bidders. Once opened, contingent bids are treated in the same manner as if the bid had been received from a person who is eligible to bid on export restricted timber. If the agency does receive bids from at least three persons who are eligible to bid on export restricted timber sales, all contingent bids received by the agency must be destroyed without those bids being opened.

(2) Each agency must collect information on an annual basis regarding the number of export restricted timber sales in which contingent bids are received, the number of contingent bids received, the number of times contingent bids are opened on an export restricted timber sale, the number of export restricted timber sales in which a contingent bidder was awarded the sale, and the successful bid amount for all export restricted timber sales awarded to contingent bidders. Information collected regarding contingent bids must be forwarded to the department of natural resources. The department must maintain the information regarding contingent bids and provide a summary of this activity to the appropriate legislative committees on a biennial basis.

NEW SECTION. Sec. 7. (1) The department must develop and issue uniform forms to be used as purchaser certifications and transferee certifications for purposes of submission under section 8 of this act. Each form must include a notification, conspicuously placed, that the making of a false statement on the certification is punishable as a gross misdemeanor under RCW 9A.72.040. The forms shall include all necessary provisions to account for exemptions allowed under section 5 of this act.

(2) Copies of all certifications received by the department must be available for public inspection at reasonable hours and locations.

(3) The department may audit certifications submitted by any person in order to ensure that the person is able to account for the disposition of all export restricted timber that the person has purchased from a public agency or received by means of transfer from another person.

(4) The department must develop and implement a program to audit certifications submitted in order to ensure that persons who acquire export restricted timber are able to account for the disposition of all export restricted timber that they have purchased from a public agency or received by means of transfer from another person.

NEW SECTION. Sec. 8. (1) Prior to issuing a contract for the sale of export restricted timber, an agency that has offered the timber for sale must require that the purchaser submit two signed copies of a purchaser certification form developed by the department, which affirms, under penalty of law, the truth of each of the following:

(a) That the timber, while still in unprocessed form, will not be:

(i) Exported by the purchaser or used in substitution by the purchaser; or

(ii) Transferred to any other person for the purpose either of export or to be used in substitution;

(b) That hammer brands and red paint applied to the timber as required by this chapter remain on the timber until it is domestically processed;

(c) That prior to selling, trading, exchanging, or otherwise conveying any timber that is export restricted timber to any other person, the purchaser (transferor) must require the transferee to provide to the purchaser two signed copies of a completed transferee certification developed by the department; and that the purchaser must provide the department with one copy not later than five days after receipt from the transferee;

(d) That the purchaser must not sell, trade, exchange, or otherwise convey export restricted timber in violation of this chapter to any person identified on the list of ineligible purchasers published by the department under this chapter.

(2) An agency must submit a copy of the purchaser certification to the department no later than five days after the receipt of a purchaser certification furnished to the agency under this section. The agency must make copies of the reports available to the public at reasonable times and locations.

(3) A person possessing export restricted timber must, prior to selling, trading, exchanging, or otherwise conveying the timber to another person, require the transferee to provide to the transferor two signed copies of a completed transferee certification developed by the department. The transferee certification must include an affirmation, under penalty of law, as to the truth of each of the items required to be affirmed in a purchaser certification, as well as the quantity of export restricted timber that is being transferred. The transferor must provide to the department one signed copy of the transferee certification not later than five days after the receipt from the transferee.

NEW SECTION. Sec. 9. (1) The department must establish and maintain a list of persons who, due to violations of this chapter, are ineligible to purchase export restricted timber. The department must add a person's name to the list if it finds, or has been notified by an agency, that the person has violated the provisions relating to the prohibition against exports, the prohibition against substitution, or the limitation on indirect transactions. A person must be removed from the list after the period of time has elapsed as is required under the debarment order issued under section 12 of this act. A person whose name is placed on the list for a second debarment may not have their name removed from the list.

(2) The department must provide a copy of the list of ineligible purchasers to each agency that sells export restricted timber, and each person who requests to receive copies of the list. The department must provide revised copies of the list to all of these agencies and persons whenever a person is added to or removed from the list.

NEW SECTION. Sec. 10. (1) Agencies contracting for the sale of export restricted timber from public lands must include in the contracts clauses incorporating the applicable requirements relating to the prohibitions on export and substitution, reporting, and enforcement. In addition, the contracts must include clauses that provide that a violation by the purchaser of the prohibitions relating to the prohibitions on export and substitution are sufficient cause for the agency to cancel the contract.

(2) Agencies contracting for the sale of export restricted timber from public lands must attach to the contracts a copy of the most recent list of ineligible purchasers published by the department pursuant to section 9 of this act.

(3) By March 31st of each year, each agency selling timber from public lands must report to the department on the results of its sales program for the preceding calendar year. The report must include information on the volume, species, grade, and geographical distribution of sales sold as export restricted and not export restricted.

NEW SECTION. Sec. 11. (1) All log ends ten inches or greater in diameter from sales of unprocessed timber by a public agency covered by this chapter must, prior to removal from the sale area, be hammer branded with a brand registered under chapter 76.36 RCW.

(2) In addition to all applicable branding requirements, both ends of all logs from those sales designated as export restricted by an agency must, prior to removal from the sale area, be painted with durable red paint.

(3) If timber that has been properly marked and branded is subdivided into smaller pieces for any purpose other than immediate processing, each piece must be marked in the same manner as the original timber.

NEW SECTION. Sec. 12. (1) If the department finds that a person has violated any provisions of this chapter, or any rule implementing this chapter, the department must provide written notice of the violation to the person and provide the person an opportunity to be heard concerning the department's findings. The person must have an opportunity to contest the department's findings or explain any mitigating circumstances. If a person fails to respond to the notice, or the department determines after the hearing that a provision of this chapter or a rule implementing this chapter was violated, the department may impose the following civil penalties:

(a) A fine not to exceed fifty thousand dollars for each violation that the person should have known constituted a violation;

(b) A fine not to exceed five hundred thousand dollars for each violation the person committed willfully.

(2) The department must adopt by rule standards for determining the civil penalties to be imposed. These standards may be based upon the value of the timber involved, the duration of the violation, the frequency of the violations, any previous violations, and other facts and circumstances the department determines are relevant to set the civil penalties under this section.

(3) A person who knowingly violates any of the prohibitions contained in section 4 of this act pertaining to export, substitution, or indirect transactions must be debarred, by an order issued by the department, from bidding on or purchasing export restricted timber originating from any public lands covered by this chapter for a period of two years.

(4) A second debarment of any person under this section, which is for a violation by the same person committed after the first debarment of the person under this section, will result in a permanent debarment of the person from bidding on or purchasing export restricted timber.

(5) The Washington administrative procedure act, chapter 34.05 RCW, applies to the issuance of any order by the department, or any determination by a state agency that a violation of any of the prohibitions contained in section 4 of this act pertaining to export, substitution, or indirect transactions has occurred. Agencies other than state agencies must follow appropriate procedures in issuing an order for a violation of the prohibitions contained in section 4 of this act pertaining to export, substitution, or indirect transactions.

(6) For the purposes of this section, the term "person" includes any previously formed but no longer existing entity that would be included in section 2(6) of this act if the entity were in existence.

NEW SECTION. Sec. 13. (1) The department is responsible for the proper administration of this chapter. The department has the authority to adopt, in accordance with chapter 34.05 RCW, all rules to implement this chapter. The department also has the authority to administer and otherwise modify chapter 240-15 WAC, as recodified pursuant to section 14(2) of this act, to ensure that it is consistent with the provisions of this chapter. The department may undertake studies, analysis, or research necessary to carry out the provisions of this chapter. The department may delegate powers, duties, and functions of the department to its employees as it deems necessary. The department may also enter into all necessary contracts and accept any gifts, grants, or funds for the purposes of this chapter.

(2) Whenever the department becomes aware of a violation, or possible violation, of the prohibitions relating to export, substitution, or certain indirect transactions, it must notify the managing agency so that the agency may promptly take appropriate action, as provided in this chapter.

(3) The department must develop and implement a program for the monitoring of export restricted timber in transit and at ports and other facilities for the purpose of ensuring that export restricted timber is not exported from the United States or used in substitution. The department may enter into contracts or agreements with other appropriate state or federal authorities for the purpose of meeting the monitoring requirements of this section.

NEW SECTION. Sec. 14. (1) The legislature finds that the rules pertaining to timber substitution have been established within the Washington Administrative Code since 1990. The legislature also finds that these rules were adopted without the benefit of state statutes providing direction for these rules. The legislature is concerned that there will be considerable disruption to the timber substitution program if the department is required to adopt rules to administer a program it is already administering. The legislature further recognizes that all details contained in agency rules are not appropriate for codification into statute because efficiencies in administration may allow for such improvements as simpler reporting requirements. Future efficiencies could reduce the burden for the department, the government agencies calling for bids and issuing timber contracts, and the timber community. Therefore, this section gives effect to the rules adopted by the governor in chapter 240-15 WAC without requiring the readoption of these rules or the preparation of small business economic impact statements by the department. The absence of language contained within that chapter of regulations concerning this chapter may not be construed as an intent by the legislature to change or repeal the requirements of chapter 240-15 WAC as it existed on January 1, 2002. Only those provisions of chapter 240-15 WAC that are clearly inconsistent with the provisions and purposes of this chapter may be considered no longer in effect. The legislature intends by the adoption of this chapter to expand the current exemptions from the substitution rules, to give the department the necessary rule-making authority to administer this chapter, to create a pilot program, and to place the current system into statute.

(2) The code reviser's office must recodify the rules contained in chapter 240-15 WAC as a separate chapter under the responsibility of the department. The department must issue an interpretive statement that discusses any changes in the current administration of the timber substitution rules program. The interpretive statement must also describe which, if any, of these changes will be subject to a rule-making proceeding under chapter 34.05 RCW. The code reviser's office must publish this interpretive statement in the Washington State Register.

NEW SECTION. Sec. 15. (1) The legislature finds that there is some disagreement regarding the impacts likely to result from relaxation of the timber substitution rules. The legislature therefore finds it is in the public interest and for the benefit of the general welfare of the citizens of this state to establish a temporary pilot program within strict parameters to examine how a border county with an exceptionally high unemployment rate is impacted by a temporary relaxation of the substitution rules. The legislature recognizes that Klickitat county has been one of the counties with the highest levels of unemployment since the mid-1980's. Klickitat county currently has an unemployment rate of over ten percent and has only one timber mill remaining open. The legislature finds that because this mill exports less than ten percent of its privately owned timber, and that this timber is only exported because it is too large for processing in its own manufacturing facilities, that a relaxation of the timber substitution rules in Klickitat county is likely to result in an expanded job base and more revenue for the county.

(2) A temporary pilot program is authorized for Klickitat county for a three-year period beginning on July 1, 2002, and expiring on June 30, 2005, that allows the existing timber mill in Klickitat county to bid on export restricted timber sales subject to the limitations of this section. Bids submitted by the existing timber mill under this section must be treated as a bid from an eligible bidder and not as a contingent bid under section 6 of this act. The purpose of this pilot program is to examine: (a) How often the existing timber mill is successfully awarded export restricted timber sales through the bidding process; (b) the number of bids received by public agencies on export restricted timber sales in which the existing timber mill submitted a bid under this section, and whether it appears that more revenue is being produced for the trusts on those sales where the existing timber mill submits a bid; (c) the creation of any jobs at the existing timber mill related to relaxation of the timber substitution rules, as well as the wage levels of those jobs created; (d) any increased revenue to Klickitat county as a result of export restricted timber sales being awarded to the existing timber mill; and (e) other positive or negative economic impacts that the county can identify as a result of a relaxation of the timber substitution rules in Klickitat county. The existing timber mill must agree: That during its participation in the pilot program it will export no more than ten percent of its privately owned timber, and that any timber it exports cannot be suitable for processing at its own mill. A joint agreement must be signed by the department of revenue, Klickitat county, and the existing timber mill that outlines the monitoring and reporting responsibilities of each party. The department of revenue must issue a report on its findings regarding the pilot program by January 1, 2006.

NEW SECTION. Sec. 16. This chapter does not apply to the extent that an order issued by the secretary of commerce of the United States under the federal forest resources conservation and shortage relief act is suspended, removed, or modified by the president of the United States. Timber that has been determined to be surplus to the needs of timber manufacturing facilities in the United States by the secretary of agriculture or the secretary of the interior of the United States is not subject to regulation under this chapter.

NEW SECTION. Sec. 17. The governor shall submit this chapter and any implementing rules adopted by the department to the secretary of commerce for approval under 16 U.S.C. Sec. 620c(d)(2). The governor must also provide any information reasonably requested by the secretary of commerce to determine whether the state's program complies with all requirements of federal law. If the secretary of commerce disapproves the state's program as submitted, the department may adopt rules consistent with the intent of this chapter in order to correct those deficiencies in the program identified by the secretary of commerce.

NEW SECTION. Sec. 18. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 19. This act takes effect upon the approval of this act and related regulations by the secretary of commerce under 16 U.S.C. Sec. 620c(d)(2).

NEW SECTION. Sec. 20. Sections 1 through 14 and 16 through 19 of this act constitute a new chapter in Title 79 RCW.