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Forest Appeals Commission

 

Appeals from the Forest Act - 2008


2005-FA-113(b), 2005-FA-128(a) & 2005-FA-129(a) Weyerhauser Company Limited v. Government of British Columbia

Decision Date: November 28, 2008

Panel: Alan Andison

Keywords:  consent order; stumpage rate; appraisal log dump

Weyerhaeuser Company Limited (“Weyerhaeuser”) appealed three stumpage determinations issued by the Timber Pricing Coordinator, Southern Interior Forest Region, Ministry of Forests and Range, for three cutting permits in the Kamloops Forest District. The appeals concerned the cost allowances for various roads that Weyerhaeuser planned to build in order to harvest the cutting permit areas.  Weyerhaeuser had submitted data to the Ministry indicating the lengths of the new roads that Weyerhaeuser estimated needed to be built. The Timber Pricing Coordinator had not accepted all of those road lengths, and had substituted other lengths for the purposes of determining the stumpage rates applicable to timber harvested under the cutting permits.

On April 11, 2006, the Commission issued a preliminary decision on one of the appeals. The Commission found that the Timber Pricing Co-ordinator had the discretion to reject the road lengths submitted by Weyerhaeuser, and to substitute road lengths that were reasonable, if, based on the relevant information available to her, the length of road proposed by Weyerhaeuser was unnecessary, taking into account regulatory requirements and the least cost principle (Appeal No. 2005-FA-113(a)). However, that decision was not conclusive of the appeals, because the factual merits of the stumpage determinations had not been addressed.

Before the Commission held a hearing on the factual merits of the appeals, the parties negotiated a settlement. By consent of the parties, the Commission ordered that the stumpage determinations be varied by applying road length data that was agreed upon by the parties. 

Accordingly, the appeals were allowed.

2008-FA-007(a) & 2008-FA-010(a) Tahtsa Timber Ltd. v. Government of British Columbia

Decision Date: August 14, 2008

Panel: David Ormerod

Keywords:  Forest Act - s. 105(1); Interior Appraisal Manual – ss. 4.3.1.1.4; stumpage rate; road construction; estimated development cost; agreement to apportion development cost estimates

Tahtsa Timber Ltd. (the “Appellant”) appealed two stumpage determinations issued by the Timber Pricing Officer, Northern Interior Forest Region, Ministry of Forests and Range (the “Ministry”).  The determinations applied to timber harvested under cutting permits 104 and 108 issued under a non-replaceable forest licence (“NRFL”) held by the Appellant.  The Appellant asked the Commission to direct the Timber Pricing Officer to include an additional $126,000 in estimated road development costs in determining the stumpage rates for cutting permits 104 and 108.

In 2003, the Ministry had asked the Appellant to construct a forest service road.  In exchange, the Ministry offered to allow the Appellant to allocate the total estimated development cost of the road among several of the Appellant’s cutting permits under the NRFL that were, or would in the future be, tributary to the road.  The parties signed an apportionment agreement which identified the estimated total cost of the road and outlined how those estimated costs would be apportioned to existing and future cutting permits.  Six of those cutting permits were never harvested and no stumpage was billed to them.  Under the apportionment agreement, $126,000 in estimated development costs had been attributed to them. 

The Appellant submitted that the cutting permits which were not harvested were “surrendered” to the Crown with no outstanding “take or pay” obligations, and therefore, those cutting permits effectively did not exist.  The Appellant argued that the $126,000 in estimated development costs that could have been applied to the stumpage appraisals for those cutting permits should be applied to cutting permits 104 and 108.

The Government submitted that the total estimated road development costs covered by the apportionment agreement had already been amortized against cutting permits that were issued under the Appellant’s NRFL. 

The Commission reviewed the language in section 4.3.1.14 of the Interior Appraisal Manual (“IAM”) and the apportionment agreement.  Based on the language in the IAM and the agreement, the Commission found that the estimated development costs could not be reallocated from the unharvested cutting permits that had been surrendered to other cutting permits.  The Commission also found that the agreement apportioned the estimated development costs for stumpage appraisal purposes only.  The agreement expressly stated that it did not constitute an obligation to ensure that estimated costs would equal actual construction costs or that estimated costs would be “written off” in stumpage appraisals.

Accordingly, the Commission confirmed the stumpage determinations under appeal.

The appeals were dismissed.

2008-FA-001(a), 002(a), 003(a), 004(a), 005(a) Pristine Log and Timber Ltd. v. Government of British Columbia

Decision Date: July 14, 2008

Panel: Alan Andison

Keywords:  Forest Act - ss. 103(1), 105(1); Interior Appraisal Manual – ss. 2.4, 5.6.6; stumpage rate; bonus bid; void decision; conflict between subordinate legislation and Act

Pristine Log and Timber Ltd. (the “Appellant”) appealed the total stumpage rate set out in five notices issued by the Timber Pricing Coordinator, Southern Interior Forest Region, Ministry of Forests and Range (the “Ministry”).  The stumpage rate pertained to timber harvested under a non-replaceable forest licence held by the Appellant.  The notices under appeal were issued after the Ministry discovered an omission in previously issued notices.  The original notices had set the total stumpage rate for sawlogs harvested under the licence at $0.25 per m3.  That total stumpage rate omitted the bonus bid of $5.43 per m3, which the Appellant had submitted in its application and tender for the licence, and which was a term of the licence agreement.  In September 2007, the Timber Pricing Coordinator issued the new notices which set the total stumpage rate at $5.68 per m3, retroactive to the periods covered by the original notices.

The Appellant argued that the revised total stumpage rate should apply as of September 1, 2007, rather than retroactively to the periods covered by the original notices.  The Appellant submitted that omitting the bonus bid was “an error… in performing the calculations specified in the manual” under section 2.4(1)(c) of the Interior Appraisal Manual (the “IAM”), and therefore, it was a correctable error.  Under section 2.4(5) of the IAM, if a correctable error is made, then the effective date of the reappraisal is the first day of the month following the date on which notice of the error is received by the regional manager, which would be September 1, 2007, in this case.

The Government submitted that the omission was not “an error… in performing the calculations specified in the manual” under section 2.4(1)(c) of the IAM.  The Government argued that section 5.6.6 of the IAM sets out, as a matter of law, the “total stumpage rate” under the IAM.  Section 5.6.6 states that “The total stumpage rate is the upset stumpage rate plus any bonus bid.”  The Government submitted that the Appellant had harvested and scaled all of the timber under the licence before September 1, 2007, and therefore, applying section 2.4 of the IAM would result in the Appellant paying no bonus bid at all.  The Government argued that failing to pay the bonus bid would conflict with the Appellant’s legal obligation under the licence agreement and section 103(1) of the Forest Act to pay the bonus bid.  The Government submitted that interpretations of the IAM that do not conflict with the Forest Act are preferred under the rules of statutory interpretation.

The Commission considered the meaning of sections 2.4 and 5.6.6 of the IAM, as well as the language in sections 103(1) and 105(1) of the Forest Act.  The Commission found that, although section 103(1) uses the word “stumpage” broadly, subsections (c) and (d) distinguish between the bonus bid and “the rate of stumpage applicable to the timber under section 105” as separate components of the amount payable under section 103.  This provides that the bonus bid is distinct from “the rate of stumpage applicable to the timber under section 105.”  The Commission held that this indicates that the addition of the bonus bid to the upset stumpage rate under section 5.6.6 of the IAM is not a calculation that is “specified in the manual”.  The Commission also found that section 5.6.6 reflects the provisions in section 103(1) of the Forest Act; namely, that the total amount payable to the government on a per cubic metre basis, otherwise known as the total stumpage rate, is the sum of the bonus bid and the rate of stumpage applicable to the timber under section 105, otherwise known as the upset stumpage rate.  Also, section 105(1)(c) of the Forest Act directs that the policies and procedures in the IAM are to be used for the determination of stumpage rates.  The Commission found that the bonus bid is not a stumpage rate; rather, it is a distinct financial obligation under the Forest Act that is added to the stumpage rate to create the “total stumpage rate”.  Therefore, the addition of the bonus bid to the previously calculated stumpage rate is not a calculation specified in the manual, and consequently, it is not a correctable error under section 2.4(1)(c) of the IAM.

Additionally, the Commission held that section 2.4 of the IAM does not contemplate correcting the omission that occurred in this case.  Here, the Timber Pricing Coordinator completely omitted the bonus bid from the total stumpage rate.  If section 2.4 applied, the Appellant would pay no bonus bid on any of the timber harvested.  This omission, and the result that would occur if section 2.4 applied, is contrary to the Appellant’s mandatory legal obligation to pay the bonus bid, as set out in section 103(1) of the Forest Act as well as the licence agreement.  Applying a procedure in the IAM, a form of legislation subordinate to the Forest Act that produces a result which goes against the clear and express language of the Forest Act cannot be what the Minister intended.  The rules of statutory interpretation require that, if there is a plausible interpretation of section 2.4 that avoids conflict with the Forest Act, that interpretation is to be preferred.  Consequently, the Commission found that the types of “errors” contemplated in section 2.4(1) of the IAM do not include a complete failure to include the bonus bid in the total stumpage rate such that the licensee avoids paying any bonus bid whatsoever. 

The Commission concluded that the total stumpage rate set out in the original notices was void and the total stumpage rate had to be calculated anew, which is what the Timber Pricing Coordinator did.  The Timber Pricing Coordinator properly included the bonus bid in the new total stumpage rate, and properly set the effective dates of the new notices to be the same as the original notices.

Accordingly, the Commission confirmed the stumpage determinations under appeal.

The appeals were dismissed.

2005-FA-123(a) Teal Cedar Products Ltd. v. Government of British Columbia

Decision Date: July 2, 2008

Panel: Alan Andison

Keywords:  consent order; stumpage rate; appraisal log dump

Teal Cedar Products Ltd. (“Teal”) appealed a stumpage determination issued by the Regional Appraisal Coordinator, Coast Forest Region, Ministry of Forests, for a cutting permit held by Teal. 

By consent of the parties, the Commission ordered that the stumpage determination be rescinded and remitted back to the Regional Appraisal Coordinator for re-determination, using Shoal Island as the appraisal log dump for the purposes of calculating the estimated wining bid and the tenure obligation adjustment under the Coast Appraisal Manual.

Accordingly, the appeal was allowed.

2007-FA-056(a), 2007-FA-057(a) Western Forest Products Inc. v. Government of British Columbia

Decision Date: June 17, 2008

Panel: Alan Andison

Keywords:  Forest Act - s. 105(1); Coast Appraisal Manual; stumpage rate; tenure obligation adjustment; consent order

Western Forest Products Inc. (the “Appellant”) appealed two separate stumpage determinations set out in stumpage advisory notices issued by the Regional Appraisal Coordinator, Coast Forest Region, Ministry of Forests and Range.  The determinations applied to timber harvested under two cutting permits held by the Appellant under tree farm licence 39. 

By consent of the parties, the Commission referred the matter back to the Regional Appraisal Coordinator with directions to re-determine the stumpage rates for the cutting permits, utilizing a specified methodology for calculating the tenure obligation adjustment under chapter 5 of the Coast Appraisal Manual. 

Accordingly, the appeal was allowed.

2007-FA-053(a) Iron Mountain Ranch Ltd. v. Government of British Columbia

Decision Date: June 5, 2008

Panel: David Ormerod

Keywords:  Forest Act - s. 105(1); Interior Appraisal Manual – s. 6.3.1; stumpage rate; blanket salvage woodlot licence; log grade

Iron Mountain Ranch Ltd. (the “Appellant”) appealed a stumpage determination set out in a stumpage advisory notice issued by the Appraisal Administrator, Central Cascades Forest District, Southern Interior Forest Region.  The determination pertained to timber harvested under cutting permit W (“CP W”) of a blanket salvage woodlot licence held by the Appellant. 

In determining the stumpage rate for CP W, the Appraisal Administrator applied section 6.3.1(2)(b) of the of the Interior Appraisal Manual (the “IAM”), rather than section 6.3.1(2)(a), resulting in a higher stumpage rate for CP W.  In doing so, the Appraisal Administrator relied on the language in a formula in section 6.3.1(4)(a) of the IAM, which only refers to “grade 1” and “grade 2” sawlog volumes and values billed.  Based on those words, the Appraisal Administrator only counted logs that had been recorded as grades 1 and 2 in the billing records for the licence during the relevant time period.  She did not include logs that had been recorded as “ungraded” in the billing records for the licence during that time period.  The total volume of grades 1 and 2 sawlogs that were billed to the licence during that time period was less than the 500 m3 minimum required for section 6.3.1(2)(a) to apply in determining the stumpage rate.  Therefore, the stumpage rate was determined based on data from other licences, and not the weighted average sawlog stumpage rate for the licence. 

The Appellant argued that the Appraisal Administrator erred in not counting the “ungraded” logs towards the 500 m3 minimum required for section 6.3.1(2)(a) to apply.  It argued that, although the those logs were not recorded as grades 1 and 2, the logs were, in fact, sawlogs that had been billed to the licence during the relevant time period, but they were called “ungraded” instead of grades 1 or 2 because those logs were scaled before the Scaling Regulation was amended by repealing the former grades that were designated for sawlogs (i.e., grade “blank” and grade 3), and replacing them with grades 1 and 2 for sawlogs.  Essentially, the Appellant argued that the intention of section 6.3.1(4) of the IAM was to use sawlog data pertaining to the licence to determine the weighted average sawlog stumpage rate for the licence, and that a change in the grades used for scaling sawlogs should not result in sawlogs that had been graded under the former scheme from being excluded when calculating the stumpage rate for CP W.

Based on the evidence, the Commission found that the reference in the billing records to “ungraded” logs was a reference to grade “blank” sawlogs under the former provisions of the Scaling Regulation.  The Commission further found that, if the ungraded sawlogs had been counted in the formula in section 6.3.1(4)(a), which had previously included grade blank sawlogs but was amended to include only grades 1 and 2 sawlogs, then the volume billed to the licence during the relevant time period would have exceeded the 500m3 threshold, and the stumpage rate would have been determined at the lower rate.  The Commission held that, if the reference to grades 1 and 2 in section 6.3.1(4)(a) of the IAM was interpreted based on its plain and ordinary meaning, it conflicts with sections 6.3.1(2) and 6.3.1(4)(b) of the IAM, which indicate an intention to count “sawlogs”.  Further, the Commission found that applying the formula in section 6.3.1(4)(a) based on its plain and ordinary meaning, which is what the Appraisal Administrator did, led to an absurd result, because some sawlogs that had been billed to the licence during the relevant time period were counted (i.e., grades 1 and 2), and others were not (i.e., ungraded or grade blank).  The Commission found that the principles of statutory interpretation require that words must be interpreted in their entire context, and interpretations that lead to internal conflicts and absurd results are to be avoided if possible.  Accordingly, the Commission found that the intent of section 6.3.1(4)(a) of the IAM, when considered in the context of the language in other parts of section 6.3.1, was to count all sawlogs billed to the licence during the relevant time period, and therefore, the Appraisal Administrator should have counted the ungraded sawlogs in determining the stumpage rate for the licence.

The Commission referred the matter back to the Appraisal Administrator with directions to re-determine the stumpage appraisal for CP W by including the ungraded sawlog volumes that were billed to the licence during the relevant time period.

Accordingly, the appeal was allowed.

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