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 APPEAL NO FA-075(a) In the matter of an appeal under section 146 of the Forest Act, R.S.B.C. 1996, c BETWEEN: Jack Alexander Bellamy (Horning Forest Products and Services Ltd.) APPELLANT AND: Government of British Columbia RESPONDENT BEFORE: DATE: A Panel of the Forest Appeals Commission James S. Hackett, Panel Chair Conducted by way of written submissions concluding on March 11, 2005 APPEARING: For the Appellant: Perry Horning, RPF For the Respondent: Gareth Morley, Counsel APPEAL This is an appeal brought by Jack Alexander Bellamy against stumpage rate determinations found in a Stumpage Advisory Notice and six Stumpage Adjustment Notices (collectively, the stumpage notices ) for blanket salvage cutting permit WO442, CP Z ( CP Z ). These stumpage notices were issued by Brian Russell, Timber Pricing Coordinator, Southern Interior Forest Region, Ministry of Forests. The stumpage notices that are most contentious are those setting stumpage rates of $3.54/m 3 and $8.21/m 3 for sawlogs scaled between July 1, 2004 and September 30, 2004 and October 1, 2004 and April 30, 2005, respectively. The Appellant appeals these determinations on the grounds that the stumpage rate should have been fixed at a rate of $0.25/m 3. This appeal was heard by written submissions pursuant to Part 12, Division 2 of the Forest Act. The powers of the Forest Appeals Commission on an appeal are set out in section 149(2) of that Act as follows: 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. The Appellant asks that the stumpage rate for CP Z be fixed at $0.25/m 3, the rate that was previously given for the duration of the cutting permit.

2 APPEAL NO FA-075(a) Page 2 BACKGROUND Jack Alexander Bellamy is the registered owner of Woodlot Licence No. W0442. This woodlot is situated in the Rocky Mountain Forest District, near Invermere, BC. The woodlot licence area is currently experiencing a bark beetle outbreak. On July 30, 2003, the Appellant obtained a stumpage advisory notice setting the stumpage rate for CP Z at $0.25/m 3 from November 1, 2002 to October 31, He also received a stumpage adjustment notice, also dated July 30, 2003, advising that the total stumpage rate for sawlogs cut and scaled between November 1, 2002 and July 1, 2006, inclusive, would be $0.25/m 3. At the time these notices were issued, reappraisal of blanket salvage cutting permits was not required. On November 1, 2003, the Minister of Forests approved Amendment No. 8 to the Interior Appraisal Manual (the IAM ). This amendment required reappraisals of all blanket salvage cutting permits at the anniversary date of the cutting authority. The anniversary date for CP Z is November 1st. According to the Government, this amendment applies to CP Z and, consequently, CP Z should have been reappraised on November 1, 2003, coincident with Amendment No. 8. It was not reappraised and neither the Appellant nor the Region became aware of this issue until September On September 15, 2004, Perry Horning, a registered professional forester acting for the Appellant, ed Kelly Love, Tenures Forester with the Ministry of Forests. Mr. Horning states that he had not received any other stumpage adjustment or notice for CP Z since the July 30, 2003 stumpage adjustment notice. He notes that the July 2003 notice states that the rate remains effective for wood scaled from November 1, 2002 to July 1, Mr. Horning asked whether the July 1, 2006 date coincides with the current term of the cutting permit, as he did not have a copy of the permit. The question posed in this was brought to the attention of Brian Russell, Timber Pricing Forester for the Southern Interior Forest Region. In a September 30, , Mr. Russell advised that the appraisal expiry date for CP Z was actually July 1, 2005 (not 2006), and advised that a reappraisal is required for CP Z as of November 1, 2003 in accordance with the IAM amendment. On October 21, 2004, the Appellant provided the Region with a reappraisal form, which included a request that the stumpage rate be extended to April 30, On November 17, 2004, Brian Russell, Timber Pricing Coordinator, issued the stumpage notices at issue in this appeal. The contents of the stumpage notices are summarized as follows: Scaling Dates Stumpage Rate ($/m 3 ) Nov. 1, 2002-Oct. 31, Nov. 1, 2003-Dec Jan. 1, 2004-Mar. 31,

3 APPEAL NO FA-075(a) Page 3 Apr. 1, 2004-June 30, July 1, 2004-Sept. 30, Oct. 1, 2004-Apr. 30, Also enclosed with the stumpage notices was an undated letter from Jim Schafthuizen, Revenue Manager - Timber Pricing, Southern Interior Forest Region, to woodlot licensees which states: I am writing to clarify the reason for the new stumpage advisory notice attached to this letter. On November 1, 2003 an amendment to the Interior Appraisal Manual (IAM) resulted in a change in procedures for appraising blanket salvage cutting permits. As identified in section 2.3.2(2) of the Interior Appraisal Manual, blanket salvage cutting permits must be reappraised at the anniversary date of the cutting authority. Prior to this amendment the Southern Interior Forest Regional office issued stumpage rates for the term of the blanket salvage licence. The attached stumpage advisory notice will cancel and replace the previous notice that you have received. From November 1, 2002 to June 30, 2004, the rates contained in the notices remained at the statutory minimum of $0.25/m 3. On July 1 and October 1, the rates increased to $3.54/m 3 and $8.21/m 3, respectively, as a consequence of the procedures for calculating stumpage rates under the Comparative Value Pricing system. It should be noted that the Ministry adjusted the stumpage rates for CP Z on a quarterly basis. It submits that, upon the November 1, 2003 reappraisal date, CP Z s rates were no longer fixed; rather, according to the IAM they had to be adjusted quarterly until such time as the Appellant requested they be fixed again. The Appellant appeals these stumpage notices on the grounds that the stumpage rate should have been fixed at a rate of $0.25/m 3 because that was the rate fixed in July of 2003 for the duration of CP Z. If the Ministry does not honor that fixed rate, the Appellant submits that his operation is uneconomical and harvesting in the woodlot is not viable. The Government argues that the stumpage notices under appeal were made in accordance with the mandatory provisions of the IAM. It argues that the Appellant s financial situation resulting from changes in the stumpage rate is not a proper ground for appeal. Moreover, the Appellant s request to continue the rate of $0.25/m 3, initially set in a notice of July 30, 2003, for the term November 1, 2002 to July 1, 2006, is inconsistent with Amendment No. 8 of the IAM. It maintains that, effective November 1, 2003, this amendment requires annual reappraisals of blanket salvage cutting permits. As a result, new stumpage rates had to be assessed for those cutting authorities. After submissions were initially closed, the Commission wrote to both parties asking whether the Appellant had provided written notice, prior to the effective date of Amendment No. 8, that it wanted fixed rather than quarterly adjusting stumpage rates. Both parties responded to this question.

4 APPEAL NO FA-075(a) Page 4 ISSUES The issues in this appeal are as follows: 1. Whether the financial viability of an operation is a factor that can be taken into consideration when deciding the appropriateness of a stumpage rate. 2. Whether sections 2.5(2)(d) and of Amendment No. 8 to the IAM apply such that CP Z is subject to a mandatory annual reappraisal commencing on November 1, If CP Z should have been reappraised on November 1, 2003, should the stumpage rate have been adjusted quarterly between November 1, 2003 and November 17, 2004? RELEVANT LEGISLATION A licensee harvesting Crown timber in British Columbia must pay a fee to the Crown known as stumpage. Section 105 of the Forest Act addresses the determination of stumpage rates. Section 105(1), as amended effective November 4, 2003, states as follows: 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 policies and procedures approved by the minister for the Interior region are found in the IAM. Relevant portions of Amendment No. 8 to the IAM are as follows: 2.5 Fixed Stumpage Rate and Extension of Term Woodlots 2. a. An appraised or reappraised stumpage rate for a cutting authority, other than a road permit, issued under a woodlot licence shall be adjusted quarterly unless a woodlot licensee chooses in accordance with this section, to have, or the woodlot licence has under section 2.5,(2)(c) a fixed stumpage rate for the term of the cutting authority and all extensions. b. A licensee may choose to change the adjusting stumpage rate to a fixed stumpage rate at any time upon giving three (3) weeks prior written notice of that choice to the regional appraisal coordinator. Once the choice has

5 APPEAL NO FA-075(a) Page 5 been made by the licensee, it is irrevocable and is not retroactive. Where the proper notice above, is given, the stumpage rate will be fixed. c. Where a woodlot licence cutting authority has a stumpage rate that is not adjusted quarterly as of April 1, 2003, that stumpage rate shall remain fixed for the term of the cutting authority and all extensions. d. Where a woodlot licence cutting authority has a stumpage rate that is fixed by section 2.5,(2)(b) or 2.5,(2)(c) that cutting authority shall only be reappraised under section 2.3.1,(1),(d) [changed circumstance], section [annual reappraisal for road permits and blanket salvage cutting permits], or section [Minister s Direction] Annual Reappraisal for Road Permits and Blanket Salvage Cutting Permits 2. A blanket salvage permit must be reappraised at the anniversary date of the cutting authority using the procedures provided by the director of Revenue Branch. The powers and procedures for appealing a decision to the Commission are found in sections 146 to 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), Powers of commission 149 (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 the financial viability of an operation is a factor that can be taken into consideration when deciding the appropriateness of a stumpage rate. A stumpage appraisal is the process by which Ministry of Forests employees determine the stumpage rates that a licensee must pay to the Government for harvesting Crown timber. The Ministry first reviews and checks the data obtained from the licensee on the control sheet. It then confirms or varies the licensee s estimates of road construction, harvesting and transportation costs required to harvest timber under its cutting permit, and then takes those costs (the cost estimates) into account when setting the stumpage rate for the cutting permit. The stumpage rate calculated for the cutting permit is then sent to the licensee in a stumpage advisory notice. Subsequent stumpage rate information is sent in a

6 APPEAL NO FA-075(a) Page 6 stumpage adjustment notice. Woodlot licensees have the option under the IAM to elect fixed or quarterly adjusted stumpage rates for the term of their cutting permits. In his submissions on this appeal, the Appellant explained the basic logging economics of his woodlot operation. He explained that his total development costs were $52.95/m 3, excluding any consideration for reforestation, post harvest obligations, snow plowing and stumpage. He also explained that local markets for Douglas-fir and lodgepole pine timber were Golden and Radium, BC, respectively. His pro-rated selling price for this timber was $57.40/m 3, leaving an operating margin of $4.45/m 3. He claimed that these were very accurate estimates, based on 18 years of experience dealing with tree to truck logging operations. He states that even at $0.25/m 3, it may be difficult for him to break even, presumably after all obligations are accounted for. He states that, The viability of the woodlot is at stake and the spread of the beetle to the surrounding crown and private lands is inevitable if the harvesting is not completed immediately. I anticipate that it will take a couple of years of follow up baiting and harvesting to successfully control the current beetle outbreak. The Ministry of Forests willingness to honor the July 30, 2003 stumpage notice is the only chance that I will have at meeting my forest health objectives and adequately managing and conserving the forest resources entrusted to me. Finally, the Appellant acknowledges that a licensee cannot appeal to the Commission simply on grounds that salvage harvesting operations will be uneconomical. However, he argues that there is a flaw in an appraisal system that results in operations becoming uneconomical. Appraisal selling prices are based on end product rather than log prices. He states that it is impossible for him to sell his logs at the appraised price. Moreover, the least cost rule bears little, if any, relation to the realities of the local market. The Appellant concludes that these rules have a very significant impact on his ability to receive a fair and economically viable stumpage rate. The Government submits that the IAM has the force of law. They quote from a previous Commission decision in Esker Lake Forest Management Ltd. v. Government of British Columbia (Appeal No FA-059(a), December 22, 2004) (unreported) (hereinafter Esker Lake), where a panel of the Commission states at page 8: The Commission recognizes that the increase in stumpage rate from $0.78 per m 3 to $26.68 per m 3 imposes a very large cost increase, which could cause the Appellant to stop salvaging beetle-damaged timber. However, the Appellant has not shown that the [Northern Interior Forest Region] applied the IAM to different cutting permit reappraisals in different or arbitrary ways. To the contrary, the evidence before the Commission is that the NIFR has applied the IAM systematically and equitably. While the result in the Appellant s case may compromise the ability of the Appellant to harvest beetle-damaged timber, the Commission finds that the IAM was applied as it should have been. The Government notes that in Esker Lake, the Commission found that the IAM was applied systematically and equitably, even if that meant a particular cutting permit

7 APPEAL NO FA-075(a) Page 7 was rendered uneconomical. In this case, the Appellant s increased stumpage costs are mainly due to an increase in the base rate, which would have been applied systematically and equitably to all appraisals within the Comparative Value Pricing system. Therefore, this is not an appropriate ground of appeal or an appropriate factor to consider in this case. The Commission s Findings The Commission agrees with the Government on this issue. A substantial volume of timber is sold by the Crown every year that may well be uneconomical, at least from an appraisal standpoint. This means that the stumpage value calculated through a standard appraisal is a negative value. The logical implication of this is that the Crown should actually pay a licensee for the right to harvest timber. Since such reasoning leads to a perverse outcome from a public policy perspective, the Crown invokes a statutory minimum stumpage rate of $0.25/m 3 for timber that has an imputed negative value. Actual logging costs and prices incurred by a licensee may vary from values established in an appraisal. Since the stumpage rate for CP Z went from the statutory minimum of $0.25/m 3 in the second quarter of 2004 (April-June) to $3.54/m 3 in the third quarter of 2004 (July to September), while presumably, actual costs and prices remained the same, this tract of timber became more and more uneconomical to harvest. This finding is consistent with the Appellant s submission. Nevertheless, this is an event that happens regularly within the stumpage system. Individual licensees must manage their stumpage program by the best means possible. This includes forecasting rates quarter by quarter, and adjusting logging plans wherever possible, which the Commission acknowledges can be difficult for a woodlot licensee to do. The Comparative Value Pricing system tracks market conditions after the fact. Market prices for dimension lumber increased during the second and third quarter of 2004, which translated into an increase in the base rate from $18.15/m 3 in the second quarter to $25.45/m 3 in the third quarter, and $30.19/m 3 in the fourth quarter. As the Government states in its submissions, the base rate increase was the main reason for the increase in the stumpage rate for CP Z. Other licensees were treated the same way because the base rate applied to their appraisals as well. The Commission therefore finds that the financial viability of an operation is not a relevant factor to be taken into consideration by the Commission when considering the appropriateness of a stumpage rate. 2. Whether sections 2.5(2)(d) and of Amendment No. 8 to the IAM apply such that CP Z is subject to a mandatory annual reappraisal commencing on November 1, The Government cites Amendment No. 8 to the IAM as authority for the reappraisal and the issuance of new rates. In particular, the Government relies upon section 2.5(2)(c) and (d) of Amendment No. 8 which relates specifically to woodlots. That amendment came into effect on November 1, 2003, and is reproduced as follows: 2.5 Fixed Stumpage Rate and Extension of Term Woodlots

8 APPEAL NO FA-075(a) Page 8 c. Where a woodlot licence cutting authority has a stumpage rate that is not adjusted quarterly as of April 1, 2003, that stumpage rate shall remain fixed for the term of the cutting authority and all extensions. d. Where a woodlot licence cutting authority has a stumpage rate that is fixed by section 2.5,(2)(b) or 2.5,(2)(c) that cutting authority shall only be reappraised under section 2.3.1,(1),(d) [changed circumstance], section [annual reappraisal for road permits and blanket salvage cutting permits], or section [Minister s Direction]. [emphasis aded] The Government states that prior to Amendment No. 8, the licensee could fix its stumpage rate and that rate remained in effect for the term of the cutting authority. It notes that the Region fixed the rate for CP Z to the end of the term of the cutting authority in the July 30, 2003 stumpage adjustment notice, thus, CP Z fit within section 2.5(2)(c). However, when Amendment No. 8 took effect on November 1, 2003, it changed the situation for blanket salvage cutting permits. Specifically, subsection (d) was added which makes an exception to the fixed rates referenced in subsection (c). The Government submits that the new subsection requires blanket salvage cutting permits to be reappraised annually under section 2.3.2, which also took effect on November 1, Section states as follows: Annual Reappraisal for Road Permits and Blanket Salvage Cutting Permits 2. A blanket salvage permit must be reappraised at the anniversary date of the cutting authority using the procedures provided by the director of Revenue Branch. [emphasis added] The Government argues that it is clear that the effect of Amendment No. 8, when read in its entirety, was to deprive these particular licensees of the ability to fix their rates past the anniversary date of their appraisal. Therefore, with regard to CP Z, the stumpage rate determined under the original notice would have to be reappraised, and a new rate issued. In summary, the Government submits that, as of July 30, 2003, the stumpage rate for CP Z was fixed at $0.25/m 3 and could only be changed when the CP expired - there was no reappraisal of those cutting authorities. However, when Amendment No. 8 came into effect, the rate could change by way of a reappraisal if one of the sections referred to in section 2.5(2)(d) of the IAM applied. If any of the sections in 2.5(2)(d) applied, the stumpage rate had to be reappraised. That is what happened in relation to CP Z. The Government states that Amendment No. 8, introduced effective November 1, 2003, was interpreted by the Ministry to mean that CP Z now had to be reappraised annually, starting on November 1, The Appellant s main ground for appeal is that the November 17, 2004 notices should be rescinded because the Ministry already fixed the stumpage rate at $0.25/m 3 for the duration of CP Z in its July 30, 2003 stumpage adjustment notice. The Appellant points out that the July 30, 2003 notice stated that the stumpage rate for CP Z was fixed at $0.25/m 3 until July 1, It appears that he is arguing that if something is fixed for its duration, it cannot be changed mid stream. Therefore the amendment requiring reappraisal should not apply to CP Z.

9 APPEAL NO FA-075(a) Page 9 The Appellant also argues that a reappraisal is not required because Amendment No. 8 came into effect on November 1, 2003, the anniversary date of CP Z. Since Amendment No. 8 was unknown at that time, the existing appraisal that was fixed and effective must remain for the term of the cutting permit. He argues that this course of action was consistent with the IAM at the time of the reappraisal. In addition, the Appellant argues that it was not possible for him to know the timing of this amendment. He wasn t notified of the change until he received the letter in November of 2004, more than one year following the IAM amendment, when the stumpage notices were delivered to his office. The Appellant also states that a common forest district operating procedure is to submit reappraisal information three months prior to the reappraisal date, specifying changes to appraisal information, and so on. The Commission understands the Appellant to be saying that on or around August 1, 2003 is the time that new information would be submitted, but there was none, therefore, there was no way for him to know about the change. The Appellant also points out that, after the July 30, 2003 notice, he did not receive any stumpage notices until November 17, He submits that prior to November 1, 2003, he could not, and did not know that the Ministry was intending to amend the IAM as it did by Amendment No. 8. The Ministry did not advise the Appellant of this amendment. The Commission s Findings Section 105 of the Forest Act states in part that...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. [emphasis added] Furthermore, according to section 149(3) of the Forest Act, 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. Thus, regardless of how unfair the Commission believes the policies of the Minister may be, or the impact they may have on a particular licensee, the Commission is bound by those policies. In this case, it is clear that the intent of Amendment No. 8 is to capture stumpage value for the Crown by forcing reappraisals of blanket salvage cutting permits on their anniversary dates. This is the time for a stumpage determination (reappraisal) specified by the Minister in section 105(3)(b) of the Forest Act. Pursuant to Amendment No. 8, the Commission finds that a reappraisal was required because CP Z was caught by one of the sections mentioned in section 2.5(2)(d); namely, it was caught by section of the IAM which requires annual reappraisals for blanket salvage cutting permits. The Commission disagrees with the Appellant that the Government must be held to the rate set out in the July 30, 2003 stumpage adjustment notice for the duration of the cutting authority. The stumpage adjustment notice is a document issued by

10 APPEAL NO FA-075(a) Page 10 authorized employees within the Ministry of Forests, and must be issued in accordance with the policies and procedures of the IAM. There is nothing in woodlot licences, the legislation or the IAM that indicates the rate in a stumpage notice is unalterable and not subject to change. To the contrary, the stumpage scheme is such that the stumpage rates may change if the IAM is amended. The Appellant submits that he had no knowledge of the November 1, 2003 amendment. To accept this argument as a reason not to apply Amendment No. 8 would, in effect, place the entire responsibility for tracking and communicating the development of Ministry of Forests revenue policy, and the IAM, on the Ministry. While the Ministry must make these policies known and should assist licensees, responsibility to ascertain and understand the legislation and the changes to the manuals that will affect or impact the cutting authority, also lies with each licensee. This is particularly so in relation to stumpage rates since the stumpage to be paid is one of the key components to the success or failure of a logging operation. Furthermore, each licensee has the means available to stay current with IAM developments. Woodlots are represented on the Interior Appraisal Advisory Committee, where changes are discussed and debated before being incorporated into the IAM. The IAM is also available, along with all amendments, on the Ministry of Forests website. Clearly, the Appellant had ample time to check the website on or in the months following November 1, There is no evidence to indicate that this was done, and the Commission is of the view that, had the Appellant done so, this situation may have been avoided, at least in part. Accordingly, the Commission finds that sections 2.5(2)(d) and section of Amendment No. 8 to the IAM apply to the facts of this case and CP Z is subject to a mandatory annual reappraisal commencing on November 1, If CP Z should have been reappraised on November 1, 2003, should the stumpage rate have been adjusted quarterly between November 1, 2003 and November 17, The Government argues that the plain meaning of section 2.5(2)(a) of the IAM is that stumpage rates are adjustable unless fixed. Since the Appellant did not fix the stumpage rate once Amendment No. 8 came into effect, the rate was properly adjustable. While the Appellant may not have been aware that a reappraisal for CP Z was required and, therefore, did not start the reappraisal process until September 2004, the Government submits that this should have no impact on the propriety of the rates appraised. Moreover, licensees have a responsibility to stay current with developments and amendments to the IAM. The Ministry of Forests, therefore, reappraised CP Z as of November 1, 2003, and adjusted the rates quarterly from that point forward until the Appellant provided a new election of a fixed rate, which did not occur until November of At that time, the stumpage rate was $8.21/m 3, which was the only rate to be fixed. The Appellant submits that on November 1, 2003, the Ministry made the assumption that stumpage rates would start adjusting again, and not remain fixed, as the Appellant had requested earlier. This is evident from the Government s submission that stumpage rates were determined on the assumption that, upon reappraisal on November 1, 2003, CP Z s stumpage rates started as adjusting rates again, until they were fixed as a result of the November 17, 2004 request. He submits that this assumption is incorrect and the result was completely unfair.

11 APPEAL NO FA-075(a) Page 11 Furthermore, the Appellant argues that the Ministry was negligent in not sending stumpage notices in a timely manner that would have allowed him the opportunity to respond to the changes. The Commission s Findings Although the IAM does not expressly say so, the impact of subsection 2.5(2)(d) and section (requiring anniversary date reappraisals for blanket salvage cutting permits) is that all previous stumpage advisory or adjustment notices issued to licensees that conflict with the new reappraisal requirement, are no longer valid to the extent that they conflict. This is the only plausible interpretation of the new sections since, as noted by the Government, subsection 2.5(2)(d) specifically refers to subsection (c) dealing with woodlot licences that have had rates fixed for the term of the cutting authority and all extensions. In referring to this section, and then requiring a reappraisal in section (d), the implication is that those fixed terms referred to in subsection (c), no longer exist - a new set of rules apply. Consequently, the July 30, 2003 stumpage adjustment notice setting the rate of $0.25 for the term of the cutting authority was, effectively, cancelled as of the anniversary date of the cutting authority - i.e., November 1, The question then is, whether the rates for CP Z, issued after the reappraisal, should have been adjusted quarterly, as was done in this case, or should remain fixed, as had been the case prior to the reappraisal. Section 2.5(2)(a) of the IAM states that an appraisal or reappraisal of a stumpage rate for a cutting authority issued under a woodlot licence shall be adjusted quarterly unless the licensee chooses to have the rate fixed. According to the Government s argument, this fixed rate only lasts until the cutting authority is reappraised. At that time, the cycle begins again and the licensee must go through the election process as set out in sections 2.5(2)(a) and (b). The Commission finds that this interpretation is not supported by the language contained in 2.5(2)(a) which states An appraised or reappraised stumpage rate for a cutting authority,, issued under a woodlot licence shall be adjusted quarterly unless a woodlot licensee chooses in accordance with this section, to have, or the woodlot licence has under section 2.5,(2)(c) a fixed stumpage rate for the term of the cutting authority and all extensions. [Emphasis added] This section contemplates a reappraisal of a stumpage rate for a woodlot licence and specifically states that it will be adjusted quarterly unless the rate has already been fixed under section 2.5(2)(c), which was the case for CP Z. The Commission finds that, in accordance with the IAM, the rate for CP Z, upon reappraisal, should have been fixed as had previously been the case under section 2.5(2)(c). The Commission notes that the rate issued after the reappraisal was $0.25/m 3. Accordingly, the rate for CP Z should be fixed at $0.25/m 3 until the Appellant s next anniversary date reappraisal, which is November 1, DECISION The Commission has carefully considered all the evidence before it, whether or not specifically reiterated here. The Commission rescinds the stumpage notices that do not reflect the stumpage rate initially assessed as a result of the November 1, 2003 reappraisal (i.e.,

12 APPEAL NO FA-075(a) Page 12 $0.25/m 3 ) and refers the determinations back to the Timber Pricing Coordinator to be reassessed to reflect the Appellant s previous choice of a fixed rate. Accordingly, the appeal is allowed in part. James S. Hackett James S. Hackett, Panel Chair Forest Appeals Commission April 22, 2005