Forest Appeals Commission

Appeals from the Forest Act - 2011

2011-FA-001(a) Lowell A. Johnson Consultants Ltd. v. Government of British Columbia

Decision Date: November 15, 2011

Panel: James Hackett

Keywords: Forest Act - s. 105(1); Interior Appraisal Manual – ss. 2.2.1(1)(b), 4.3.2.2(2); stumpage rate; changed circumstance reappraisal; temporary road; development cost estimate; additional stabilizing material 

Lowell A. Johnson Consultants Ltd. (the “Appellant”) appealed a stumpage rate determination issued in December 2010 by the Timber Pricing Officer, Nadina Forest District, Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”).  The determination resulted from a reappraisal of a previous determination issued in November 2009, for a cutting permit issued under a forest licence.  

During an inspection of the cutting permit area, the Ministry discovered that additional stabilizing material had not been placed on all of the temporary roads claimed in the licensee’s original appraisal data submissions.  The Ministry considered this to be a “changed circumstance” within the meaning of section 2.2.1(1)(b) of the Interior Appraisal Manual (“IAM”), requiring a reappraisal.  In the reappraisal, the Ministry deleted the cost estimate for additional stabilizing material for all of the temporary roads in the cutting permit area.  This resulted in a reduction of more than 15 percent in the total estimated development costs, and an increase in the stumpage rate from $7.54 per cubic metre to $9.42 per cubic metre on sawlogs scaled between September 5 and September 30, 2009.

The Appellant appealed the reappraised stumpage rate on three grounds: (1) there had been no “changed circumstance” as defined in the IAM, because although additional stabilizing material was not actually added to the roads, contrary to the original appraisal data submissions, there had been no change in the licensee’s plans in that regard between the effective date of the original determination (September 4, 2009) and the effective date of the reappraisal (September 5, 2009); (2) the cost estimate for additional stabilizing material was improperly removed for all of the roads; and (3) the roads should have been designated as “short term” instead of “temporary,” as defined in section 4.3.2.2(2) of the IAM.  The Appellant also requested an order of costs against the Government. 

The Government submitted that the reappraised stumpage rate should be confirmed, because a changed circumstance had occurred and the roads were properly classified as “temporary”.  The Government argued that the appeal should be dismissed, and the application for costs should be denied.

The Commission found that the language in section 2.2.1(1)(b) of the IAM indicates that a changed circumstance occurs when there is a difference of 15 percent or more between the total development cost estimate in the appraisal data submission for the most recent appraisal or reappraisal, and the total development cost estimate that corresponds to the actual activities undertaken in the cutting permit area.  The Commission noted that the per kilometre allowances for road costs, set out in tables in the IAM, are average costs derived from data for roads in the Forest District, and Ministry staff multiply those costs to the applicable road lengths to estimate the road cost for appraisal purposes.  In this case, the difference was greater than 15 percent, and therefore, a changed circumstance reappraisal was required.  The Commission also distinguished this appeal from a previous appeal (International Forest Products Limited v. Government of British Columbia, Decision No. 2009-FA-007, June 16, 2011), on the basis that the two appeals involved differently worded sections of different Appraisal Manuals.  For those reasons, the Commission rejected the Appellant’s first and second grounds for appeal.

On the third ground for appeal, the Commission considered the definitions of “temporary road” and “short term road” found in section 4.3.2.2(2) of the IAM.  That section defines “temporary road” as “a road that is planned to be used for harvesting and/or hauling for less than one year.”  The Commission noted that the cutting permit in this case was valid for less than one year, and the forest licence expired at the same time.  Consequently, no further cutting permits would be issued under the forest licence.  Moreover, the Appellant provided no evidence demonstrating that biomass fibre from the cutting permit area was harvested and removed from the area before the cutting permit expired.  For those reasons, the Commission concluded that the roads in were properly classified as “temporary”, and the reappraised stumpage rate was confirmed.

Finally, the Commission found that there were no special circumstances that warranted an order for costs.

Accordingly, the appeal was dismissed, and the Appellant’s application for costs was denied.

2009-FA-007 International Forest Products Limited v. Government of British Columbia

Decision Date: June 16, 2011

Panel: Gabriella Lang, Bruce Devitt, O'Brian Blackall

Keywords: Forest Act - ss. 105(1), 148.6; Coast Appraisal Manual – ss. 3.2, 3.3, 3.3.1, 3.3.1.1, 3.3.1.2, 4.1; changed circumstance; reappraisal; cable yarding

International Forest Products Ltd. (“Interfor”) appealed a stumpage rate determination issued by the Regional Business Analyst for the Coast Forest Region, Ministry of Forests and Range (the “Ministry”).  The appeal concerned whether a stumpage rate reappraisal had been triggered by a “changed circumstance” with respect to Interfor’s harvesting methods in the area of cutting permit (“CP”) 136, forest licence A19232, on northern Vancouver Island. 

The process for determining stumpage rates begins with the licensee preparing an appraisal data submission and sending it to the Ministry.  In April 2007, Interfor sent its appraisal data submission for CP 136 to the Ministry.  The appraisal data submission estimated that 34 percent of the timber volume would be harvested by cable yarding, and the remainder would be harvested by ground-based methods.  Cable yarding is generally more expensive than ground-based harvesting methods, and it generally causes less disturbance of moist soils.  The Ministry accepted the appraisal data submission and used it to determine a stumpage rate for CP 136.

In May 2007, the Ministry notified Interfor that a stumpage rate of $17.59 per cubic metre applied to sawlogs harvested under CP 136, effective on April 30, 2007.

In June and July 2007, Ministry staff inspected the CP 136 area, and observed that there had been less harvesting by cable yarding than indicated in the original appraisal data submission.  The Ministry determined that there had been a changed circumstance within the meaning of section 3.3.1(1)(a) of the Coast Appraisal Manual (“CAM”), which requires a reappraisal where:
 

The Ministry requested that Interfor provide a reappraisal data submission reflecting the change in the volume harvested by cable yarding.  However, Interfor disputed that a “changed circumstance” had occurred.  For the reappraisal, Interfor re-sent its original appraisal data submission to the Ministry. 

In May 2009, the Ministry issued the reappraisal with a stumpage rate of $19.96 per cubic metre for sawlogs harvested under CP 136, effective May 1, 2007.  The Ministry based the reappraisal on its estimate of that four percent of the volume had been harvested by cable yarding. 

Interfor appealed the reappraisal to the Commission.  It requested that the original stumpage rate be restored on the basis that: (1) there had been no “changed circumstance” within the meaning of section 3.3.1(1)(a); and (2) even if there was a changed circumstance, section 3.3.1.2 of the CAM specified that the effective date of the reappraisal was May 1, 2007, and the original appraisal data submission should be used in a reappraisal because there was no change in the site conditions of CP 136 between April 30, 2007 (the effective date of the original stumpage determination) and May 1, 2007 (the effective date of the reappraisal).

The Government submitted that a changed circumstance had occurred because Interfor harvested at least 15 percent more volume by ground-based methods than was indicated in the original appraisal data submission.  The Government argued that the change in the actual volume harvested by cable yarding, compared to the volume indicated in the original appraisal data submission, was evidence of a changed circumstance.

The Commission considered the words in section 3.3.1(1)(a) of the CAM, based on their ordinary meaning in the context of the CAM.  The Commission found that the words “plans” and “is planned” indicate an intention to do something, and are prospective or forward looking.  The Commission then considered whether there was evidence of Interfor’s original plan or intentions for harvesting the CP 136 area, and whether there was evidence that Interfor’s plan or intentions with respect to harvesting methods changed after it submitted the original data appraisal submission.  The Commission held that Interfor’s original appraisal data submission showed the original plan or intentions for harvesting CP 136.  Interfor’s staff who prepared the original data submission used professional judgement to estimate the percentage of harvesting by cable yarding, based on their knowledge of the site and the typical weather conditions during the time of year when harvesting would occur.  However, the Commission found that there was no evidence that, sometime after submitting the original data submission, Interfor planned or intended to use a method to harvest at least fifteen percent of the volume that was different from the method that Interfor planned to use when the original data submission was prepared.  Although there was a change in the actual percentages harvested by the two methods, there was no evidence that Interfor or its contractor had planned that change.  The site conditions when the CP 136 area was harvested were unusually dry for that time of year, so the contractor was able to do more ground-based harvesting than originally planned.  The Commission held that, if the Minister had intended for evidence of the actual volumes harvested by different methods to trigger a changed circumstance reappraisal, the Minister should have clearly said so in the CAM.

In addition, the Commission found that there would have been no changes in the conditions of the CP 136 area between April 30 and May 1, 2007, and therefore, the original appraisal data submission should be used if a reappraisal was required.

Accordingly, the appeal was allowed.

2005-FA-002(a), 003(a), 009(a), 010(a), 048(a), 078(a), 131(a); 2006-FA-020(a) and 031(a) Western Forest Products Inc. v. Government of British Columbia

Decision Date: May 19, 2011

Panel: Alan Andison

Keywords:  Forest Act - ss. 105(1), 105(2), 148.6; Ministry of Forests and Range Act – s. 4(e); stumpage rate; appraisal log dump; truck haul distance; discretion; admissibility of evidence

Western Forest Products Ltd. (“Western”) appealed nine separate stumpage rate determinations issued between September 2004 and May 2006 by the Regional Appraisal Coordinator (the “Coordinator”), Coast Forest Region, Ministry of Forests (the “Ministry”).  The determinations applied to sawlogs harvested under nine cutting permits (“CPs”) located within Western’s tree farm licence (“TFL”) 25, near Port Renfrew on the west coast of Vancouver Island.  The appeals concerned the selection of the appraisal log dump in calculating the stumpage rates for the CPs. 

The Coast Appraisal Manual (“CAM”) sets out the policies and procedures that apply to stumpage appraisals in the Coast Region.  The stumpage determinations were issued under the 2004 version of the CAM that, for the first time, incorporated the market pricing system (“MPS”) into all stumpage appraisals on the Coast.  The MPS is an equation-based model that uses data from past winning bids for Crown timber that was sold through a competitive bidding process.  Data from competitive timber sales are applied in calculating stumpage rates from timber held under long-term tenures, such as TFL 25, which are not sold through a competitive bidding process.  The truck haul distance is a variable in the MPS equation in the CAM for calculating stumpage rates.  The truck haul distance is the volume weighted average one-way haul distance from the geographic centre of each part of the CP area to the appraisal log dump.  Thus, calculating the truck haul distance requires the selection of an appraisal log dump.  The farther the appraisal log dump is by road from the CP area, the longer the truck haul distance.  Truck haul distance is a negative factor in the equation used to determine stumpage rates, and therefore, a longer truck haul distance will produce a lower stumpage rate, assuming the other variables remain constant.  The phrase “appraisal log dump” is defined in the CAM, but the parties disputed how that definition should be interpreted and applied.

Western appealed on the grounds that the Coordinator erred by using the Jordan River log dump rather than the Shoal Island log dump, located near Chemainus, as the appraisal log dump for the purpose of determining the stumpage rates for the nine CPs.  The Jordan River log dump is located near Port Renfrew, is owned by Western, and was used almost exclusively by Western during the relevant time period.  There was no dispute that the Jordan River log dump is closer by road to the nine CPs than the Shoal Island log dump, and that most of the timber harvested from the nine CPs was hauled to the Jordan River log dump.  However, Western submitted that the Jordan River log dump was not a reasonable choice of appraisal log dump for the CPs because it was not available to any operator other than Western.  Western argued that in choosing an “appraisal log dump”, as defined in the CAM, the MPS principles that inform the CAM require selection of the closest log dump by road to the centre of the CP area that is operational and generally available to all licensees, which in this case is the Shoal Island log dump.

The Government submitted that the definition of “appraisal log dump” in the CAM is clear, and it provides the Coordinator with no discretion when selecting an appraisal log dump.  The Coordinator must simply pick the closest log dump by road to the centre of the CP area, which in this case is the Jordan River log dump.

The Commission considered two issues: (1) whether the Coordinator exercises discretion when selecting the appraisal log dump; and if so, (2) whether the Coordinator exercised his discretion in an unreasonable manner when he selected Jordan River as the appraisal log dump for the nine CPs. 

During the hearing of the appeals, the Commission also made a number of oral rulings on the admissibility of certain evidence, and those rulings were discussed in the written decision.

The Commission found that the courts have held that the CAM is akin to subordinate legislation, and therefore, the CAM must be interpreted in accordance with the principles of statutory interpretation.  The Government’s witness, a Ministry forester who is responsible for drafting the CAM, provided testimony about his intention in drafting the definition of “appraisal log dump”.  Western objected to that evidence.  The Commission held that his evidence was admissible under section 148.6 of the Forest Act, but it gave no weight to the evidence of his intended meaning of “appraisal log dump”, because the CAM is approved by the Minister, and the Minister’s intention must be determined from the words in the CAM, read in their ordinary sense harmoniously with the scheme and objects of the CAM and its parent legislation.  Applying the principles of statutory interpretation to the definition of “appraisal log dump” in the context of the CAM, the Commission held that the Coordinator exercises discretion when he or she selects the appraisal log dump for a CP.  The Commission found that there is no list of appraisal log dumps in the applicable versions of the CAM, and the definition of “appraisal log dump” does not dictate which sites may be considered as options for appraisal log dumps.  The Coordinator considers information that is not provided in the CAM regarding potential log dump sites, and the Coordinator selects from potential log dump sites based on his or her professional knowledge about timber harvesting and transport processes.

Regarding the second issue, the Commission held that certain evidence Western sought to admit, which was challenged by the Government, regarding the MPS and the CAM, was admissible under section 148.6 of the Forest Act, but it gave little weight to most of that evidence because it was of limited relevance.  The Commission gave more weight to Western’s evidence that provided an overview of the MPS and how it was developed.  However, none of the evidence specifically addressed the selection of the appraisal log dump for the purpose of calculating the truck haul distance under the relevant version of the CAM.  The Commission gave little weight to the witnesses’ opinion evidence about how the CAM should be interpreted, because it is the Commission’s role, and not the role of witnesses, to interpret the CAM. 

The Commission then considered the language in the relevant provisions of the CAM, as well as the applicable case law and legislation.  The Commission found that section 4(e) of the Ministry of Forests and Range Act requires the Government to assert its financial interests in its forest resources in an equitable manner, and to apply the policies and procedures in the CAM in the same way to all licensees.  However, the equitable application of the CAM may result in different stumpage rates for licensees harvesting different stands of timber from the same general area.  In addition, the Commission found that the CAM contains two primary constraints on the selection of an appraisal log dump: (1) the definition of “appraisal log dump”, which indicates that the appraisal site must be a “log dump” and must be the closest one to the CP area; and (2) section 4.1(1) of the CAM, which indicates that stumpage rates must be determined in a manner that produces the highest stumpage rate for the CP area. 

In the context of the CAM which is based on the MPS, the Commission interpreted the definition of “appraisal log dump” to mean the closest site to the CP area that was a functional log dump at the time of appraisal, and was available for use by both a hypothetical market bidder and the affected licence holder.  The evidence established that the Jordan River log dump was functional at the time of appraisal, and that the actual winning bids for timber near Port Renfrew which were used to develop the MPS equation in the CAM, were appraised to the Jordan River log dump, despite that fact that those bidders did not actually use that log dump or haul their logs to it.  Regarding Western’s nine CPs, the evidence indicated that the Jordan River log dump was functioning and available to Western and its affiliated companies at the time of appraisal.  The Commission held that, if the timber in TFL 25 was, hypothetically, sold through a competitive bidding process, at least one hypothetical winning bidder would have been in Western’s position in terms of having access to the Jordan River log dump.  There was no reason why a hypothetical bidder, participating in a hypothetical timber auction, could not have made a winning bid that took into account the truck haul distance to the Jordan River log dump. 

Section 4.1(1) of the CAM requires, in the context of the MPS and when dealing with timber held under a long-term tenure, that the Coordinator select the appraisal log dump that will result in the highest market stumpage rate that a hypothetical winning bidder would pay, if the timber was sold through a competitive auction.  In this case, the Jordan River log dump was the appropriate choice because it was the closest log dump to the nine CPs that was functional and available to a hypothetical winning bidder at the time of appraisal, and it results in a higher stumpage rate than if Shoal Island was selected as the appraisal log dump.  Consequently, the Commission concluded that the Coordinator exercised his discretion in a reasonable manner when he selected Jordan River as the appraisal log dump for the nine CPs.

Accordingly, the appeals were dismissed.

2007-FA-035(a), 044(a), 051(a); 2008-FA-009(a), 011(a) Canadian Forest Products Ltd. v. Government of British Columbia

Decision Date: May 10, 2011

Panel: Alan Andison

Keywords: Forest Act - ss. 105(1); Interior Appraisal Manual; Canadian Forest Products Ltd. v. British Columbia (2009 BCSC 1040); stumpage rate; changed circumstance reappraisal; consent order

Canadian Forest Products Ltd. (“Canfor”) appealed five separate stumpage rate determinations issued between April 2007 and February 2008 by the Timber Pricing Coordinator (the “Coordinator”), Ministry of Forests and Range (the “Ministry”). The appealed determinations were reappraisals of previous stumpage rate determinations that were issued between July 2002 and March 2005. The reappraisals were issued on the basis that a “changed circumstance” had occurred, within the meaning of the Interior Appraisal Manual (“IAM”) in effect at the time. Canfor objected to the reappraisals on the basis that the timber affected by the reappraisals had been harvested and scaled before the reappraisals took effect, and that the changed circumstance reappraisal provisions of the IAM cannot apply retroactively to timber that has already been scaled.

When Canfor filed the appeals, it requested that they be held in abeyance pending the Commission’s final decision on another appeal (2007-FA-023) that dealt with the same issue regarding the IAM’s changed circumstance provisions.

On November 13, 2007, the Commission issued its final decision on appeal 2007-FA-023. Canfor appealed that decision to the BC Supreme Court. The Court issued its decision on July 30, 2009: Canadian Forest Products Ltd. v. British Columbia (2009 BCSC 1040). A further appeal to the BC Court of Appeal was resolved before it was heard.

Meanwhile, the outstanding appeals continued to be held in abeyance while the court proceedings were in progress. Once those proceedings were completed, the parties negotiated an agreement to settle the outstanding appeals based on the BC Supreme Court’s decision.

Accordingly, by consent of the parties, the Commission ordered that the reappraisal determinations were set aside, and the original stumpage rate determinations were restored.
 
The appeals were allowed, by consent.

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