Sections 77.06 (2), 77.82 (3) (c), 77.91 (1), Wis. Stats., and 227.11 (2) (a), Wis. Stats.

Sections 77.06 (2) and 77.91 (1), Wis. Stats. directs the department to establish stumpage rates on an annual basis for use in determining the severance and yield taxes assessed when timber is harvested from lands designated as forest crop land and managed forest land. New rates shall take effect on November 1 each year. Section 77.82 gives implicit authority to the department to create rules for processing petitions.

The proposed rule:

For purposes of the Forest Crop Law (FCL) and the Managed Forest Law (MFL), this rule repeals NR 46.30(2)(a) to (g) and recreates NR 46.30(2)(a) to (h) to revise annual stumpage values used to calculate severance and yield taxes due on timber cut during the period from November 1, 2010 through October 31, 2011. One new stumpage table is created to represent stumpage values used to calculate severance and yield taxes on timber if the timber sold by weight (tons) includes both pulpwood and fine woody material. Thirteen separate zones reflect varying stumpage values for different species and products across the state.

Timber prices have steadily fallen throughout the past year, although overall prices did not fall as significantly as what was observed one year earlier. The average statewide prices for sawlogs decreased 3%, with a range of a 13% increase to a 34% decrease. The average statewide prices for pulpwood decreased 4%, with a range of a 16% increase to a 20% decrease. Prices for mixed products (mixture of sawlogs and pulpwood for red pine, white pine and spruce) have dropped 3%, with a range of a 32% increase and a 21% decrease. Piece products (posts, poles and Christmas trees) had a 1% increase in prices, with some market zones having an increase in prices of 4% to a 1% decrease.

While the statewide stumpage rates largely decreased, there are fluctuations between market zones and individual prices. Of all total 630 prices calculated, 149 (24%) increased, 198 (31%) decreased and 283 (45%) stayed the same.

The severance and yield tax collected in CY 2009 was $1,284,934. This value is 26% lower than it was in CY 2008. Timber harvest volumes are down since CY 2008 by the following amounts:

Timber Product	% Change
Cordwood	Down 17%
Fuelwood	Up 97%
Sawlogs	Down 20%
Mixed Product	Up 106%
Piece Products	Down 2%

If the same amount of timber is harvested in 2011 as was harvested in 2009, local municipalities will receive a decrease in the yield and severance tax payments by an estimated $1,500. Estimates are based on the average change in rates for private land timber sales across species and zone for each product type (cordwood, sawtimber and mixed), the volumes reported and paid for in CY 2009, and the assumption that the volume and the ratio of the cordwood and sawtimber will remain the same. Actual impact for a county and municipality will vary by the number of harvests completed and the actual species and products cut.

Stocking requirements are established to determine when lands are adequately stocked and capable of fully utilizing the site to grow forest products in a reasonable time frame. Fully stocked stands can be thinned or harvested at regular intervals, providing Wisconsin's forest products industry with valuable raw material and local municipalities with a periodic income through payment of severance and yield taxes.

The minimum medium density for plantations has been established at 600 trees per acre. Current research has shown that plantations have the ability to fully utilize the size at lower densities than was previously determined, as long as the trees are evenly distributed throughout an area. NR 46.02(24m) and NR 46.18(2) will be amended to establish the minimum medium density for a plantation at 400 trees per acre to reflect this new information.

Landowners who purchase expiring forest crop law lands within 18 months prior to the expiration of forest crop law contract may be interested in enrolling in the managed forest law program. New landowners, depending upon the date of purchase, may find it difficult to meet the petition deadlines established by statute and administrative code. Forest crop law lands that are not immediately enrolled in the managed forest law are placed on the regular property tax rolls and landowners are assessed a termination tax.

NR 46.16 (1) (cm) is created to allow landowners who purchase expiring forest crop law lands within 18 months prior to the end of the forest crop law expiration the opportunity to apply for the July 1 petition deadline or later for good cause to be considered for designation effective the following January 1.

Management plans would need to be developed by certified plan writers; however management plans would not need to have been previously reviewed by the department by the deadline date of March 1. Department review of the managed forest law petition will be done according to the provisions of NR 46.18 (5).

Recent changes to NR 46.16(5) required that landowners enroll lands by municipality except when lands on either side of the municipal line do not meet eligibility requirements. Changes to NR 46.16(7) will require that the same eligibility requirements apply to additions as well as new enrollments so that additions across municipal lines are done only in situations where lands cannot qualify for a new entry under NR 46.17 and s. 77.82 (1) (a), Stats.

The method in which certified plan writers submit their plan preparation costs for work done in the previous 12 months is being amended to make it easier for certified plan writers to submit the data.

Currently, NR 46.165 (4) (f) requires that certified plan writers submit their plan preparation cost by base rate per plan plus the cost per acre. Many certified plan writers charge clients an hourly rate or a per acre rate. These certified plan writers are not able to easily determine their base rate and cost per acre.

The change to administrative code will eliminate the requirement to submit a base rate per plan.

The department collects this information in order to determine the average cost of plan writing services statewide. This average value is used to charge landowners for plan writing services on plans that the department writes.

Management plans that are submitted for the July 1 petition deadline without a management plan or indicating a certified plan writer are placed on a management plan referral list. Certified plan writers are given the opportunity to offer plan writing services to landowners.

NR 46.18 (7) (c) provided that certified plan writers must submit their offers in writing and include the cost for the management plan preparation service and guarantee that an approvable plan will be completed by the following July 1. The department does not require that it receive a copy of the offer, only that a certified plan writer report that an offer has been made within 5 days of the offer under NR 46.18(7)(d).

The managed forest law statutes and administrative codes establish the eligibility and management provisions of the program, but do not establish the business practices of certified plan writers in working with private landowners. Additionally, the cooperating forester agreement (note: certified plan writers must also be a cooperating forester) states that cooperating foresters have sole control over the methods, hours worked, and time and manner of any performance under the agreement other than as expressly required by the Cooperative Agreement.

Because the department has no mechanism to insure that written offers are provided to landowners, and because the department does not direct the business practices of certified plan writers, NR 46.18(7)(c) this provision will be removed from administrative code.

The department must charge landowners a plan preparation fee that includes a base rate and a rate per acre. Changes to NR 46.165 (4) (f) to eliminate the requirement to submit a base rate per plan will require the department's billing procedure to also change. Changes to NR 46.18 (8) (b) will eliminate the base rate per plan.

There are no known federal rules which apply to stumpage rates or Managed Forest Law petitions.

Checks with the surrounding states of Minnesota, Michigan, Iowa and Illinois indicate that while they offer some type of incentive program to forest landowners, none of the states have similar forestry practice requirements nor do they calculate annual stumpage rates for severance and yield taxes in conjunction with their programs.

For owners of land designated as managed forest law or forest crop law, there is an anticipated decrease in cost associated with the decrease in yield tax on managed forest law lands and severance tax on forest crop law lands based on the average decrease in stumpage rates proposed for both pulpwood (4% decrease) and sawlogs (3% decrease). Actual cost could be an increase or decrease depending on the specific species, product and zone.

For owners who qualify for the exemption of payment of the forest crop law termination tax, an estimated $3,000 will be saved by the owner. The estimated savings of $3,000 is based upon an average termination tax paid by owners in FY 2009. There will likely be one landowner per year who will qualify for this exemption.

Changes associated with submitting and approving management plans prepared by certified plan writers and DNR foresters will have no fiscal effect and allow additional time for plans to be written and approved.

Stumpage rate data is collected from Department Foresters and Cooperating Foresters annually. This data is used to calculate a three year weighted average for each species and product by zone. Only data obtained from private timber sales was used in the stumpage rate calculation.

wtd avg current year minus 3 stumpage value	wtd avg current year minus 2 stumpage value	wtd avg current year minus 1 stumpage value	wtd avg current year minus 1 stumpage value
_________________________________________________________________________________ # of years wtd avg stumpage values
____________________________________________________________________ = Stumpage Rate 2
(if there is a wtd avg current year minus 1 stumpage value, otherwise it's 1)

The current rates in NR 46.30 were compared to the proposed rates to determine the average change in rates by product.

A review of the law shows the impact on small business. The actual impact is dependant on the amount of timber (if any) is scheduled to be harvested on their specific land during this stumpage rate year and on the expected number of additions.

This rule will impact small businesses (i.e., farmers, landowners) that have land designated as managed forest land or forest crop land. Those involved in this voluntary program pay a reduced tax in place of the regular property tax in exchange for sound forest management on the land. When timber is harvested they pay a 5% yield tax or 10% severance tax, which is calculated using the stumpage rates established in NR 46.30. At the time of entry into these programs the owner pays for the preparation of a management plan, which includes sound forest management practices that must be completed during the order period to ensure and maintain a healthy stand of timber.

Pursuant to s. 227.114, Stats., the proposed rule may have an impact on small businesses. The initial regulatory flexibility analysis is as follows:

Any business with land enrolled in either the Managed Forest Law or the Forest Crop Law or wishing to enroll land under the Managed Forest Law.

No procedures not already required.

No new skills are required.

The Department's Small Business Regulatory Coordinator for this rule may be contacted at quinn.williams@ wisconsin.gov or by calling (608) 266-1318.

The Department has made a preliminary determination that this action does not involve significant adverse environmental effects and does not need an environmental analysis under ch. NR 150, Wis. Adm. Code. However, based on the comments received, the Department may prepare an environmental analysis before proceeding with the proposal. This environmental review document would summarize the Department's consideration of the impacts of the proposal and reasonable alternatives.

This proposed rule change addresses the annual stumpage rate changes used in the calculation of severance and yield tax collections under Forest Cop Law (FCL) and Managed Forest Law (MFL) when timber is harvested from the private lands enrolled in the programs.

Revenues to local municipalities will decrease due to a decrease in the average stumpage value for sawlogs, pulpwood, mixed products and piece products. Timber prices have steadily fallen throughout the past year, although overall prices did not fall as significantly as what was observed a year earlier. The average statewide prices for sawlogs have decreased 3%, with a range of a 13% increase to a 34% decrease. The average statewide prices for pulpwood have decreased 4%, with a range of a 16% increase to a 20% decrease. The average statewide prices for mixed products (mixture of sawlogs and pulpwood for red pine, white pine and spruce) have decreased 3%, with a range of a 32% increase to a 21% decrease. Lastly, the average statewide prices for piece products (posts, poles, and Christmas trees) have increased 1%, with a range of a 4% increase to a 1% decrease.

While the statewide stumpage rates decreased slightly, there are fluctuations between market zones and individual prices. Of the total 630 prices calculated, 149 (24%) increased, 198 (31%) decreased, and 283 (45%) stayed the same.

The severance and yield taxes collected in CY 2009 were $1,284,934. This is 26% less than the severance and yield taxes collected in CY 2008. Timber harvest volumes have also changed since CY 2008 in the following manner: pulpwood volumes decreased 17%, fuelwood volumes increased 97%, sawlog volumes decreased 20%, mixed products volumes increased 106%, and piece products volumes decreased 2%.

To estimate the fiscal impact of stumpage rate changes, the Department assumes that overall timber harvest volumes remain the same in CY 2011 as they were in CY 2009. Because of offsetting increases and decreases in timber sale revenues based on differences in market zone, wood classification, harvest volume and timber prices, the Department estimates that a net total of $1,500 less in yield and severance taxes will be collected as a result of the rate changes, which equates to a net decrease of less than 1% of revenues for local municipalities.

Amendments to the minimum medium density of plantations will have no state or local fiscal effect. The change will relieve some landowners of replanting plantations if the survival rate is 400 well-spaced tree seedlings per acre.

Procedure and process clarifications for additions of land to existing managed forest law, the provisions for certified plan writers to submit management plan preparation fee data, the removal the conditions of a written offer, and the Department's billing process will have no state or local fiscal impact.

Decrease existing revenues.

Mandatory decrease in revenues.

Towns, Villages, Cities, Counties.

SEG.

NOTICE IS HEREBY GIVEN THAT pursuant to ss. 227.11 (2) (a), 281.15, 283.001 (2), 283.13 (5), 283.15, 283.31, 283.35 and 283.37, Stats., the Department of Natural Resources will hold public hearings on proposed revisions to Chapters NR 102 and 217, Wis. Adm. Code, relating to phosphorus water quality standards criteria and limitations and effluent standards.