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-051(a) In the matter of an appeal under section 146 of the Forest Act, R.S.B.C. 1996, c BETWEEN: Greg DuBois (Summit Valley Contracting Ltd.) APPELLANT AND: Government of British Columbia RESPONDENT BEFORE: DATE: APPEARING: A Panel of the Forest Appeals Commission David Ormerod, Panel Chair Conducted by way of written submissions concluding on December 13, 2006 For the Appellant: Greg DuBois, RPF For the Respondent: Gareth Morley, Counsel APPEAL This appeal is brought by Greg DuBois of Summit Valley Contracting Ltd. against the August 10, 2006, Stumpage Advisory Notice (the SAN ) issued for Blanket Salvage Cutting Permit 1 ( CP 1 ) of Salvage Non Replaceable Forest Licence A75431 (the Licence ). The Licence is located within the Rocky Mountain Forest District ( RMFD ), Southern Interior Forest Region ( SIFR ), of the Ministry of Forests and Range (the Ministry ). The SAN for CP 1 set the stumpage rate for all coniferous sawlogs at $13.89/m 3, for the period August 1, 2006 to July 31, 2007, by applying the district average sawlog stumpage rate, excluding rates from blanket salvage permits. This procedure was used in accordance with section 6.3.1(1)(b) of the Interior Appraisal Manual (the IAM ). 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.

2 DECISION NO FA-051(a) Page 2 The Appellant asks the Commission to apply Invoice X in setting the stumpage rates for CP 1 of the Licence, for the period August 1, 2006 to July 31, The volume of timber shown in this invoice (64 m 3 ) was not used to determine the stumpage rate in the SAN based on the SIFR s interpretation of billing record in section of the IAM. The Government asks the Commission to dismiss the appeal. BACKGROUND Harvesting of Crown timber in British Columbia is authorized by a cutting permit appurtenant to one of several forms of tenure. The Licence is a non-replaceable forest licence to salvage timber, and is held by Summit Valley Contracting Ltd., of Invermere. The appeal is filed by Greg DuBois on behalf of the Appellant, Summit Valley Contracting Ltd. As the Appellant knew that stumpage rates for CP 1 were to be set on August 1, 2006 for the following year, he made enquiries of the SIFR and RMFD between November 2005 and March 2006 to determine how these rates would be set. On November 15, 2005 following the bid opening for the Licence, Mr. DuBois met with Brian Russell, SIFR Timber Pricing Co-ordinator, in Kamloops. correspondences took place between Mr. DuBois and staff in the SIFR and RMFD offices in February and March, According to section 105 of the Forest Act, stumpage rates must be calculated in accordance with the policies and procedures approved for the forest region by the Minister. In this case, the policies for determining the stumpage rate for a blanket salvage cutting permit are found in section of the IAM, Amendment Number 13. Amendment No. 13 was published on June 1, 2006 and came into effect on that same day. Thus, the amendment came into effect after the Appellant s discussions with the SIFR. Section provides as follows: 1. The stumpage rate for a blanket salvage cutting permit shall be the weighted average sawlog stumpage rate 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 licence, 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

3 DECISION NO FA-051(a) Page 3 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 m 3 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 m 3 in the same forest district as the area to which the blanket salvage cutting permit applies. 2. In each of [sic] paragraph (a) of subsection (1) of this section, 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 determined as follows: $/m 3 = (sum of Grade 3 value billed x 0.95)* + (sum of Grade Blank value billed)* (sum of Grade 3 volume billed x 0.95)* + (sum of Grade Blank volume billed)* * From the billing records of Revenue Branch for coniferous sawlogs during the 12-month billing period ending March 31 in the first year where the volume of these coniferous sawlogs is greater than 500 cubic metres. 3. In paragraphs (b) and (c) of subsection (1) of this section, 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 determined as follows: $/m 3 = (sum of Grade 3 value billed x 0.95)* + (sum of Grade Blank value billed)* (sum of Grade 3 volume billed x 0.95)* + (sum of Grade Blank volume billed)* * From the billing records of Revenue Branch for coniferous sawlogs during the 12-month billing period ending March 31 in the first year. 4. Except as provided in Appendix VI, 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. Section 6.3.1(1)(a) applies in the determination of the stumpage rates for CP 1 if cutting authorities issued for the Licence, other than blanket salvage cutting permits, had more than 500 m 3 of harvest volume stumpage billed in the year ending March 31, The minimum 500 m 3 requirement is made is section 6.3.1(2). If there was no such history, and because the Licence is reported to have an annual allowable cut in excess of 3,000 m 3, then section 6.3.1(1)(b) applies, and that year s stumpage billing history for all cutting authorities, from all licences, other than blanket salvage cutting permits, would be used to determine the stumpage rate for CP 1. As noted above, Amendment No. 13 was issued on June 1, Prior to this amendment, section 6.3.1(2) used the wording sum of the stumpage billed according to stumpage billing records for sawlogs divided by the sum of the

4 DECISION NO FA-051(a) Page 4 volume of those sawlogs, without further qualification. Therefore, when Mr. DuBois had his discussions with Mr. Russell and other SIFR staff, there was no minimum 500 m 3 requirement for section 6.3.1(1)(a) to apply. On March 16, 2006, Cutting Permit 2 ( CP 2 ) for the Licence was approved, and timbermark BM5002 was issued. CP 2 is apparently not a blanket salvage permit, and therefore timber harvests billed before March 31, 2006, would constitute billing records to be considered for application of section 6.3.1(1)(a) in respect of setting the rates for CP 1. Two truckloads under timbermark BM5002 were scaled at the end of March, totaling 64 m 3, and billed to the Appellant as Invoice X194236, dated April 11, Apparently this is the only volume scaled in the year ending March 31, 2006, from all cutting authorities of the Licence that are not blanket salvage cutting permits. In setting the stumpage rates for CP 1 in the SAN issued August 10, 2006, the SIFR did not apply section 6.3.1(1)(a), but instead applied section 6.3.1(1)(b). The Appellant had been informed by SIFR on April 11th that the billing dates, rather than the scaling dates, would determine what subsection of section 6.3.1(1) would apply in setting the rates for CP 1. On April 12, 2006, based on this information, Mr. DuBois wrote to Jim Shafthuizen, RPF, Revenue Manager for the SIFR, outlining his concerns regarding how the volume scaled under timbermark BM5002 was going to be treated. In this letter, Mr. DuBois states: The IAM (section ) describes how to calculate the stumpage rate for blanket salvage. It does not make reference to Billing Date it refers simply to determining a stumpage rate based on stumpage billed according to stumpage billing records for the period ending on March 31. I have received the first stumpage bill (Invoice X194236) for the wood delivered on T/M [timbermark] BM5002. The bill is for the [scaling] period from March 15 31, 2006; it reflects timber sold by the government during that period. I would presume that on an accrual accounting basis that all timber sold is accrued to the month in which the stumpage is earned. The scale date sets the date of sale for the timber and determines the period for which the timber is recognized. In this case, all scaling in the month of March will be included as stumpage revenue for the period ending March 31, It is this concept that influences my interpretation of the IAM which suggests that invoice X details stumpage billed and forms part of the stumpage billing records of the revenue branch for the twelve month period ending March 31 (2006). I am further discouraged that I openly conversed with several staff members of the MOF of my intention to get approval on BM5002 so that some wood could be scaled by March 31, 2006 to ensure it s [sic]

5 DECISION NO FA-051(a) Page 5 inclusion in the calculation of the blanket salvage rate. No one indicated that the Scale Date is irrelevant, and the Billing Date is used. The letter was written before Amendment No. 13 was issued. If the Appellant is right that the 64 m 3 billed in Invoice X should count as billing history for the year ending March 31, 2006, it would be subject to the requirement that at least 500 m 3 of harvest volume has to be billed from all applicable cutting authorities for section 6.3.1(1)(a) to apply. There is no dispute that such volume was less than 500 m 3. On receipt of the SAN, the Appellant filed its appeal. The appeal was conducted by way of written submissions. In his written submissions, the Appellant states: If the IAM used the words billing date in section it would be clear to the process used. The Revenue Branch uses scale date in the process of setting stumpage rate periods and also collecting payment on harvested timber; for the Revenue Branch to use billing date in determination of the stumpage rate for blanket salvage is very misleading and inconsistent. The Appellant then discusses its correspondence with various Ministry staff in regard to the March 31, 2006 deadline. The Appellant s point is that, although the Ministry staff had various opportunities, they never advised him that the scale date is not relevant to the stumpage determination that it is billing date that is used. The Appellant notes that there was a November 15, 2005, meeting between Brian Russell, Timber Pricing Coordinator, and Greg DuBois to discuss the procedure for blanket salvage rates. He states that at that meeting Brian Russell implies that scale date is important. The Appellant also refers to a number of s between Greg DuBois and various Ministry staff. The Appellant states: These communications did not result in any clarification from MOF that scale date is not important in the determination of a blanket salvage cutting permit. The lack of understanding by MOF staff on the procedure of using billing date for blanket salvage stumpage rates further illustrates that the IAM is not clear on this matter. Regarding Amendment No. 13, the Appellant notes that the amendment was made after the March 31 st period, yet before the August 1, 2006 date when the stumpage rate for blanket salvage is set. The Appellant made all arrangements based on the IAM in effect prior to March 31, Further, the bid paid to the MOF for SNRFL A75431 was also based on that interpretation of the IAM. The licensee planned on constructing a blanket

6 DECISION NO FA-051(a) Page 6 salvage permit which would have a stumpage rate on August 1, 2006 which reflected other cutting permits of SNRFL A75431, not a district average. The Appellant submits that it is unfair for the Ministry to change the rules after the licensee has conducted business and scaled less than 500 cubic meters for a March 31, 2006 deadline. It submits: Since amendment #13 has changed the validity of whether a license average or a district average is used in determining blanket salvage rates, it should not apply to volume scaled within the period ending March 31, The greater than 500 cubic meter requirement should apply for volume scaled within the period ending March 31, 2007 which is after the amendment took effect on June 1, The Appellant concludes by stating, Had either MOF individuals or the IAM clearly stated the importance of billing date, the licensee would have conducted business differently. The Government responds that Invoice X194236, being dated after the end of March 2006, is not a billing record that can be used to set the rates for CP 1 for the period August 1, 2006 to July 31, 2007, that the application of Amendment No. 13 is retrospective rather than retroactive, and the appeal must be dismissed. ISSUES The primary issue to be decided in this appeal is whether the SIFR erred in setting the stumpage rates for CP 1, as stated in the SAN of August 10, A secondary issue raised by the Appellant is whether the IAM Amendment No. 13 which made changes to section is retroactive and is, therefore, fundamentally unjust. Consideration of these issues will be dealt with under the following headings: 1. Whether any errors were made in the SAN issued for CP Whether the SIFR acted properly in applying Amendment No. 13. RELEVANT LEGISLATION Forest Act 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

7 DECISION NO FA-051(a) Page 7 (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 a determination, order or decision of (c) a determination of an employee of the ministry, under section 105(1), and 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. DISCUSSION AND ANALYSIS 1. Whether any errors were made in the SAN issued for CP 1. The Appellant submits that the SIFR incorrectly interpreted the IAM in issuing the SAN for CP 1. His principal argument is that principles of accrual accounting would dictate that the term stumpage billed refers to the transaction date which is actually the scale date. The Commission disagrees. The Ministry of Forests and Range generates stumpage invoices for volumes scaled over a period of time, with each scale billed at the rates of stumpage that are in effect for the date of scale, and these invoices are not back-dated to any one of the scale dates that they may span. The stumpage accounts receivable by the Government date from the dates of invoicing. The stumpage billing records are simply the records of invoices, and reflect different dates than the scale dates.

8 DECISION NO FA-051(a) Page 8 The Commission notes that, under Part 7 of the Forest Act, the rate of stumpage applied is that which is in effect on the date of scaling, and finds that the wording stumpage billing records of the revenue branch for the twelve-month period ending on March 31, as used prior to Amendment No. 13, and the wording From the billing records of the Revenue Branch for coniferous sawlogs during the 12- month billing period ending March 31 is clear. Records have to be created by the billing processes. If the stumpage for a particular scale has not been billed, there is no billing record that includes it. The scale record, or return as it is often known, is not a billing record; therefore, its date has nothing to do with the billing records. The intent of section 6.3.1(2) to use billing records, as opposed to scaling records, has been in place since at least Amendment No. 5 of the IAM, which was effective August 1, This information was available to the Appellant when it bid for the Licence, and when conducting operations under all the cutting authorities that had been issued for the Licence. Consequently, the Commission finds that Invoice X cannot be used as part of the billing record for the year ending March 31, 2006, and the appeal fails on this ground. Further, it is common ground that there are no other billing records to be used in the application of section 6.3.1(1)(a) for the purposes of determining stumpage rates for CP 1 for the period August 1, 2006 to July 31, Accordingly, either section 6.3.1(1)(b) or section 6.3.1(1)(c) is to be used. As there is apparently no issue between the parties that the allowable annual cut of the Licence is in excess of 3,000 m 3, the Commission finds that section 6.3.1(1)(b) applies, and that the SIFR correctly applied this section. No error was made in this regard. 2. Whether the SIFR acted properly in applying Amendment No. 13. The Appellant asserts the application of Amendment No. 13 is effectively retroactive, and is unfair and inequitable in that it changes the business rules upon which prior actions were based. In the Appellant s case, he proceeded to log a small volume under CP 2 in March on the understanding that any timber harvest attributable to cutting authorities for the Licence, other than blanket salvage permits, had the potential to set the stumpage rates for CP 1 in the future. That possibility was removed with Amendment No. 13, as he had not planned to produce a minimum 500 m 3 from that source at that time. The Government submits that the amendment was restrospective rather than retroactive and cites E. A. Driedger 1, A retrospective statute operates forward, but it looks backward in that it attached new consequences for the future to an event that took place before the statute was enacted. 1 E. A. Driedger, Statutes: Retroactive Restrospective Reflections, 56 Can. Bar Rev. 264 cited by Newbury J.A. in British Columbia Hydro and Power Authority v. North Fraser Harbour Commission, 2003 BCCA 436, rev d on other grounds British Columbia Hydro and Power Authority v. British Columbia (Environmental Appeal Board), 2005 SCC 1.

9 DECISION NO FA-051(a) Page 9 In the present appeal, Mr. DuBois did not receive stumpage billing in the year April 1, 2005 to March 31, 2006 for any volume of timber that was harvested under authorities other than blanket salvage cutting permits. Consequently, Amendment No. 13 has had no impact on the setting of stumpage rates for CP 1 for the year August 1, 2006 to July 31, 2007, and this ground of appeal fails. Although the retroactive/retrospective argument did not require analysis by the Commission, in reviewing the materials, the Commission is sympathetic to the Appellant s concerns about the implementation date of the amendment. The Commission is of the view that Amendment No. 13 should not have taken effect until April 1, That way, all licensees would have been given the time to make adjustments to their operations to avoid any negative outcome from the amendment. 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 here. For the reasons provided above, the Commission confirms the stumpage rates determined for CP 1 are those stated in the SAN of August 10, The appeal is dismissed. David Ormerod David Ormerod, Panel Chair Forest Appeals Commission January 30, 2007