2301006 Informal Interpretation

Sheinberg, Samuel I.
From: 	HSRHelp
Sent: 	Friday, January 20, 2023 4:42 PM
To: 	Walsh, Kathryn E.; Berg, Karen E.; Musick, Vesselina; Shaffer, Kristin; Sheinberg, Samuel I.; Six, Anne;
Fetterman, Michelle
Subject: 	FW: Rule 802.2 Question
To:
Cc: HSRHelp <HSRHelp@ftc.gov>
From: Whitehead, Nora <nwhitehead@ftc.gov>
Sent: Friday, January 20, 2023 4:41:31 PM (UTC-05:00) Eastern Time (US & Canada)
Subject: RE: Rule 802.2 Question
The pipeline payment counts toward the $5MM figure, but the insurance payment does not.
From: HSRHelp <HSRHelp@ftc.gov>
Sent: Friday, January 20, 2023 3:01 PM
To: Walsh, Kathryn E. <kwalsh@ftc.gov>; Berg, Karen E. <KBERG@ftc.gov>; Musick, Vesselina <vmusick@ftc.gov>;
Shaffer, Kristin <kshaffer@ftc.gov>; Sheinberg, Samuel I. <SSHEINBERG@ftc.gov>; Six, Anne <asix@ftc.gov>; Whitehead,
Nora <nwhitehead@ftc.gov>; Fetterman, Michelle <mfetterman@ftc.gov>
Subject: FW: Rule 802.2 Question
From:
Sent: Friday, January 20, 2023 3:00:24 PM (UTC-05:00) Eastern Time (US & Canada)
To: HSRHelp <HSRHelp@ftc.gov>
Subject: Rule 802.2 Question
I would like to confirm the application of the unproductive real property exemption in 16 CFR 802.2(c) to a transaction
our client is considering. Our client owns real estate that is timberland, separated into a number of parcels. We have
determined which parcels potentially fall within the unproductive real property exemption, taking into account the
PNO’s guidance on physical separation of real property parcels as required by Rule 802.2(c)(iii). Our question concerns
the $5 million in total revenues provision in Rule 802.2(c)(1).
The revenues from ordinary business operations (revenues from sales of timber and carbon offsets) for one physically
separate parcel of timberland unproductive real property did not exceed $5 million during the 36 months preceding the
acquisition the parties are considering. However, two extraordinary events within the 36 month period resulted in two
additional payments being made to the owner with respect to the parcel.
1. Within the last 36 months, the owner received a payment of insurance proceeds from its insurer that reflected
payment for hurricane damage to timber on the parcel.
2. Within the last 36 months, the owner received a payment from a third party for placement of a perpetual pipeline on
the parcel. The owner remains title owner of the parcel, but it has perpetually relinquished operational control over the
area of land on which the pipeline will run.
If neither the insurance proceeds payment or the payment for the placement of the pipeline are considered revenues
generated by the real property parcel, then the revenues generated by that parcel do not exceed $5 million in the prior
36 months.
We understand that for purposes of 802.2(c), “total revenues” are net sales/net revenues (Informal Interpretation
1509005, September 30, 2015). The insurance payment did not result from the sale of any timber, but was a payment
for damages to the value of the timber. Likewise, the payment for the perpetual pipeline did not result from the sale of
timber, but from the granting of the perpetual easement that allows construction of the pipeline.
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Wou ld eithe r of those payments count as "revenue" that wou ld count toward the $5 million figure for purposes of Rule
802.2(c)?
Thank you for your ass istance.
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