Forest Appeals Commission

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1 Forest Appeals Commission Fourth Floor 747 Fort Street Victoria British Columbia Telephone: (250) Facsimile: (250) Mailing Address: PO Box 9425 Stn Prov Govt Victoria BC V8W 9V1 DECISION NO FA-108(a) In the matter of an appeal under section 146 of the Forest Act, R.S.B.C. 1996, c BETWEEN: Jocko Creek Land and Timber Ltd. APPELLANT AND: Government of British Columbia RESPONDENT BEFORE: DATE: A Panel of the Forest Appeals Commission Alan Andison, Panel Chair Conducted by way of written submissions concluding on April 3, 2006 APPEARING: For the Appellants: Brian Bondar For the Respondent: Gareth Morley, Counsel APPEAL Jocko Creek Land and Timber Ltd. appeals a September 19, 2005, Stumpage Advisory Notice (the SAN ) issued for Cutting Permit W ( CP W ) of Woodlot Licence W0382 ( WL 382 ). WL 382 is a licence held by the Appellant, and is located within the Kamloops Forest District, Southern Interior Forest Region ( SIFR ), of the Ministry of Forests and Range. Tracy Hendry, RPF, the SIFR Timber Pricing Co-ordinator, issued the SAN which set the stumpage rate at $25.44/m 3, for the period August 1, 2005 to July 31, The Timber Pricing Co-ordinator determined that the applicable stumpage rate for CP W was the overall district average for cutting authorities, other than blanket salvage cutting permits. This appeal is heard pursuant to Part 12, Division 2 of the Forest Act. The powers of the Commission on an appeal are set out in section 149(2) of the Forest Act: 149 (2) On an appeal, the commission may (a) confirm, vary or rescind the determination, order or decision, or (b) refer the matter back to the person who made the initial determination, order or decision, with or without directions. The Appellant asks the Commission to reduce the stumpage rate. This appeal was conducted by way of written submissions.

2 DECISION NO FA-108(a) Page 2 BACKGROUND In British Columbia, the harvesting of Crown timber is authorized by a cutting permit appurtenant to one of several forms of tenure. The cutting permit at issue in this appeal, CP W, is a blanket salvage cutting permit. It has an allowable annual cut of more than 3000 m 3. A stumpage rate is the amount of money that a person must pay to the Government for harvesting Crown timber. The applicable rates of payment are determined by the policies and procedures approved by the Minister of Forests, pursuant to section 105 of the Forest Act. The Ministry of Forests determines the rate that a licensee must pay, and advises the licensee of the rate in a stumpage advisory notice or a stumpage adjustment notice. The policies and procedures for determining the stumpage rate for this blanket salvage cutting permit are found in section 6.3.1, Amendment Number 4, of the Interior Appraisal Manual (the IAM ), which took effect on August 1, The relevant section is as follows: 1. The stumpage rate for a blanket salvage cutting permit shall be the weighted average sawlog stumpage rate that is in effect when the stumpage rate is determined for: a. All the cutting authorities other than blanket salvage cutting permits, that are located in the same forest district as is the land to which the blanket salvage cutting permit applies, and that have been issued under the same licensee, or, b. if there are no records from which the weighted average sawlog stumpage rate may be determined under paragraph (a) and the licence under which the blanket salvage cutting permit has been issued has an allowable annual cut of m 3 or more then: all the cutting authorities, other than blanket salvage cutting permits for areas of land located in the same forest district that the area to which the blanket salvage cutting permit applies, or c. if there are no records from which the weighted average sawlog stumpage rate may be determined under paragraph (a) and the licence under which the blanket salvage cutting permit is issued has an allowable annual cut of less than m3 per year, then all the cutting authorities, other than blanket salvage cutting permits, which have been issued under licences that have allowable annual cuts less than m3 in the same forest district as the area to which the blanket salvage cutting permit applies. 2. The weighted average sawlog stumpage rate that is in effect for the period between August 1 of one year (the first year) and July 31 of the following year, is the sum of the stumpage billed according to stumpage billing records of the revenue branch for the twelve-month period ending on March 31 in the

3 DECISION NO FA-108(a) Page 3 first year for sawlogs of grade code () blank during that period divided by the sum of the volume of those sawlogs The stumpage rate for a blanket salvage cutting permit shall be redetermined on August 1 each year in accordance with the procedure in this section. According to this section, if a blanket salvage cutting permit is issued pursuant to a licence that has billing records for other non-blanket salvage cutting authorities in the previous year (as set out in section 6.3.1(2)), then the stumpage rate for the blanket salvage cutting permit is the licence average. If the only cutting authorities for the licence from which volume has been taken in the previous year are blanket salvage, then a district average is used. If the annual allowable cut for the licence is over 3,000 m 3, the overall district average is used; if less, then a district average of low volume cutting authorities is used. The Government notes that this section of the IAM sets out a new way of appraising stumpage for blanket salvage cutting permits. On September 19, 2005, the Timber Pricing Co-ordinator issued the SAN under appeal. She set the rate at $25.44/m 3, which was the overall district average stumpage rate for the Kamloops Forest District. The Timber Pricing Co-ordinator applied the district average pursuant to subsection 6.3.1(1)(b) of the IAM, after determining that the other subsections did not apply. Specifically, she concluded that subsection 6.3.1(1)(a) did not apply as the Appellant did not have any nonblanket salvage permits with a stumpage billing in the previous year ending March 31, 2005 a weighted average sawlog stumpage rate as defined in subsection 6.3.1(2). On October 5, 2005, the Appellant appealed the SAN. It raised various concerns about the fairness and the impact of the Minister s policies on woodlot licensees. The Government responded by arguing that the Timber Pricing Co-ordinator applied the appropriate section of the IAM, applied the section correctly, and that the SAN should be upheld. It submits that the Notice of Appeal contains no arguable case and should be dismissed on jurisdictional grounds alone. After the parties submissions on the appeal had been made, a decision in an unrelated matter was released by the Commission: Sivert Smith Andersen and Shawn Andersen v. Government of British Columbia, (Decision No FA-109(a), March 6, 2006) (hereinafter Andersen). That decision also related to the application of section of the IAM. Given its potential relevance to the subject matter of the present appeal, the Commission provided the parties with an opportunity to comment on the application of Andersen and its impact on the SAN at issue in the present appeal. 1 The Government states that the reference to grade code () blank in section 6.3.1(2) refers to sawlogs as defined in section 2 of the Schedule of Interior Timber Grades, forming part of the Scaling Regulation, B.C. Reg. 446/94. It states that unlike other grades in that regulation, there is no grade code ascribed to sawlogs, hence the reference to () blank.

4 DECISION NO FA-108(a) Page 4 Both parties provided brief submissions in response. ISSUE Whether section of the IAM was properly applied in this case. RELEVANT LEGISLATION Stumpage rates are determined under authority of section 105 of the Forest Act, R.S.B.C. 1996, c Stumpage rate determined 105 (1) Subject to the regulations made under subsections (6) and (7), if stumpage is payable to the government under an agreement entered into under this Act or under section 103 (3), the rates of stumpage must be determined, redetermined and varied (a) by an employee of the ministry, identified in the policies and procedures referred to in paragraph (c), (b) at the times specified by the minister, and (c) in accordance with the policies and procedures approved for the forest region by the minister. The powers and procedures for administrative reviews and appeals are found in sections 143 to 149(2) of the Forest Act. The following sections are relevant to this appeal: Determinations that may be appealed 146 (2) An appeal may be made to the Forest Appeals Commission from... (b) a determination of an employee of the ministry under section 105 (1). Powers of commission 149 (2) On an appeal, the commission may (a) confirm, vary or rescind the determination, order or decision, or (b) refer the matter back to the person who made the initial determination, order or decision with or without directions. (3) If the commission decides an appeal of a determination made under section 105, the commission must, in deciding the appeal, apply the policies and procedures approved by the minister under section 105 that were in effect at the time of the initial determination.

5 DECISION NO FA-108(a) Page 5 DISCUSSION AND ANALYSIS 1. Whether section of the IAM was properly applied in this case. The SAN issued by the Timber Pricing Co-ordinator for CP W set the stumpage rate at the district average of $25.44/m 3, for the period August 1, 2005 to July 31, In setting this rate, the Timber Pricing Co-ordinator concluded that subsection 6.3.1(1)(a) did not apply because the Appellant did not have any nonblanket salvage cutting permits with billings in the previous year as specified by the IAM. The Government submits that the Timber Pricing Co-ordinator determined that the annual allowable cut for WL 382 was over 3,000 m 3 at the effective date of the appraisal. At that time, Ministry records indicated that the district average stumpage rate for the Kamloops Forest District was $25.44/m 3. As support for the Government s contention that the annual allowable cut for WL 382 was over 3,000 m 3 at the effective date of the appraisal, the Government tendered a document with the heading Kamloops Blanket Salvage August The Appellant s licence is shown on this document, along with the species, volume billed, value billed and average stumpage rate per cubic metre for timbermark W0382C. All of this information is crossed out with the following handwritten explanation: All adjustments CP C had no rates as of December 31, 2003 Cutting permit C ( CP C ) is a non-blanket salvage cutting permit issued under WL 382, and is within the same forest district as CP W. From this document it appeared that the Timber Pricing Co-ordinator concluded that subsection 6.3.1(1)(a) of the IAM did not apply because there were no actual stumpage billings in the relevant time period for CP C, only adjustments. In Andersen, the Commission found that adjustments can be applied by the Revenue Branch when determining the stumpage rate for blanket salvage cutting permits pursuant to section of the IAM. Since the handwritten note appeared to indicate that there had been adjustments to CP C which may be relevant to the stumpage determination for CP W, the Commission offered the parties an opportunity to make submissions on the applicability of the Andersen case to the present appeal. In relation to the Andersen case, the Government advises that CP C for WL 382 did, in fact, have adjustments during the twelve-month period. Taking into consideration those adjustments, it states that the weighted average is $5.07/m 3. The Government goes on to state that if the determination of the Appellant s stumpage rate were to be done today, based on the law as clarified by the Commission s decision in Andersen, the Appellant would have a licence average, and it would be $5.07/m 3. However, it also submits that the principle in Andersen was not the subject of this appeal and the Appellant must request an amendment of its grounds for appeal.

6 DECISION NO FA-108(a) Page 6 In a letter dated March 24, 2006, the Appellant requested an amendment to its Notice of Appeal. It asks that the Commission consider the Andersen decision and find that that the stumpage rate for CP W should be $5.07/m 3, which is the weighed average stumpage rate in effect for CP C. The Government does not take a position on whether the amendment should be allowed. The Panel s findings As a preliminary matter, the Panel allows the amendment to the Appellant s Notice of Appeal. This amendment resulted from a new interpretation of section of the IAM, an interpretation which only came to light when the decision in Andersen was released. Further, as both parties commented on the impact of that decision to the present appeal, no prejudice flows from the amendment. In Andersen, the Commission found at pages 9-10: the Commission finds that these adjustment records are actually part of the sum of stumpage billed according to stumpage billing records for the twelve-month period. Without them, the billing does not fully reflect the final scale amounts. In the Commission s view, the fact that the adjustment records can be orphaned by the delays in stumpage bill finalization is irrelevant to the requirement of section 6.3.1(2) that stumpage billed records, that exist for the year ending March 31, be summed. These adjustment records are for adjusted stumpage invoices, and they are properly part of the billing record for the billing year ending March 31. The Commission notes that section 6.3(3), with respect to determining stumpage rates for road permits, contains the same wording as section 6.3.1(2). The Commission notes that adjustments to the stumpage bills can be both negative and positive, depending on the value of the final ratios relative to the interim ratios. While the Government s arguments suggest that the Appellants want to use negative values to assess a stumpage rate, some of the Final Bill line records show positive values. The Commission finds that whether or not the adjustments are negative or positive is irrelevant for the purposes of determining if adjustments form part of the sum of the stumpage billed in section 6.3.1(2) of the IAM. The Commission finds that any stumpage bill that includes volume and stumpage rates becomes part of the billing history, as the invoices generated from the adjustments will be either for positive (stumpage owing) or negative (stumpage credited) amounts. The question for the Commission is whether or not the Minister intended this for section

7 DECISION NO FA-108(a) Page 7 The Commission then answered this last question in the affirmative. This Panel of the Commission has considered the Andersen decision and agrees with, and adopts the reasoning and conclusions on the interpretation of section of the IAM. Consequently, the adjustments to CP C, which were billed in the year ending March 31, 2005, constitute a weighted average sawlog stumpage rate and section 6.3.1(1)(a) of the IAM applies to the rate determination in this case. According to the Government, the relevant weighted average rate applicable to CP C is $5.07/m 3. Therefore, pursuant to section 6.3.1(1)(a) of the IAM, the stumpage rate for CP W is also $5.07/m 3. As a result of these findings, the submissions by the Government regarding jurisdiction need not be addressed. DECISION In making this decision, this panel of the Commission has considered all of the evidence and arguments provided, whether or not they have been specifically reiterated in this decision. For the reasons provided above, the Commission refers this matter back to the SIFR Timber Pricing Co-ordinator to redetermine the SAN for CP W of WL 382, by taking into account the above-reference adjustments for CP C. Based upon the adjustments, the stumpage rate for the period August 1, 2005 to July 31, 2006 $5.07/m 3. The appeal is allowed. Alan Andison Alan Andison, Panel Chair Forest Appeals Commission April 12, 2006