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 NOS FA-002(a); 2007-FA-003(a); 2007-FA-004(a) In the matter of an appeal under section 146 of the Forest Act, R.S.B.C. 1996, c BETWEEN: Jannette and Dean Daly Silverking Woodlands Inc. Allan Bahen and Anne Lockington APPELLANTS AND: Government of British Columbia RESPONDENT BEFORE: DATE: A Panel of the Forest Appeals Commission David Ormerod, Panel Chair Conducted by way of written submissions concluding on May 11, 2007 APPEARING: For the Appellants: Dean Daly, RPF For the Respondent: A. K. Fraser, Counsel APPEALS These appeals are brought by Jannette and Dean Daly, Silverking Woodlands Inc., and Allan Bahen and Anne Lockington against January 12, 2007, Stumpage Advisory Notices ( SANs ) issued for Cutting Permit Y ( CP Y ) of Woodlot Licences ( WL ) 1481, 1714, and 106, respectively. These WLs are located within the Skeena Stikine Forest District, Northern Interior Forest Region ( NIFR ), of the Ministry of Forests and Range. Brian Oke, RPF, the NIFR Timber Pricing Officer, issued the SANs which set the stumpage rates for the period January 12, 2007 to April 15, The rates set in the SANs under appeal replaced rates set in previous SANs that were issued in July 2006, for periods that had not yet expired. The three appeals were heard together as they are made on identical grounds and on common evidence. The appeals were conducted by way of written submissions. These appeals are 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

2 DECISION NOS FA-002(a)/003(a)/004(a) Page 2 (b) refer the matter back to the person who made the initial determination, order or decision with or without directions. The Appellants ask the Commission to re-instate the rates previously set and the periods they had been set for. The Government asks that the new rates and periods of applicability be confirmed. BACKGROUND Harvesting of Crown timber in British Columbia is authorized by a cutting permit appurtenant to one of several forms of tenure. WLs 1481, 1714 and 106 have had blanket salvage cutting permits issued, and designated as Y. In July, 2006, these blanket salvage cutting permits were issued SANs that set stumpage rates and periods of application as follows: Appeal WL CP Mark SANdate Begin End BA LO SP 2007FA Y W1481Y 27Jul06 01Aug06 31Mar FA Y W1714Y 26Jul06 01Aug06 31Jul FA Y W0106Y 27Jul06 01Aug06 31Mar On January 12, 2007, the Minister approved Amendment No. 18 of the Interior Appraisal Manual ( IAM ), which brought into immediate effect an amendment to section On this date, the Minister also issued a memorandum directing all Interior Regional Managers to reappraise all woodlot blanket salvage cutting permits, effective immediately, and to further reappraise all such permits on or after April 16, According to the Appellants, this directive was made without the prior knowledge or consultation of the woodlot licensees, who may have entered into business agreements in accordance with stumpage rates that had been set for periods not yet expired. The Timber Pricing Officer acted upon the Minister s direction to reappraise all woodlot blanket salvage permits and to make the reappraisals effective January 12, Consequently, SANs were issued for the subject CPs in January, 2007, as follows: Appeal WL CP Mark SANdate Begin End BA CE FI HE LA LO SP 2007FA Y W1481Y 18Jan07 12Jan07 15April FA Y W1714Y 18Jan07 12Jan07 15April FA Y W0106Y 18Jan07 12Jan07 15April The appeals are made on the following grounds:

3 DECISION NOS FA-002(a)/003(a)/004(a) Page 3 1. The Government has a legal obligation to honour the stumpage rates and the periods of applicability as set out in the SANs issued in July, The Appellants have made business arrangements, including log purchase agreements, and logging contracts, based on the July, 2006 stumpage rates. 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 of Forests and Range. The policies for determining the stumpage rate for these blanket salvage cutting permits are found in section of the IAM. When the July, 2006 SANs were issued, section of the IAM provided as follows: Blanket Salvage Cutting Permits 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 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)*

4 DECISION NOS FA-002(a)/003(a)/004(a) Page 4 * 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. The SANs issued on January 18, 2007, to be effective from January 12 to April 15, 2007, were based on Amendment No. 18. This amendment changed section by prefacing subsection 1 with the words Except as provided in subsection 4 of this section, renumbering subsection 4 to 5, and inserting a new subsection 4: 4. The sawlog stumpage rate for each species of timber harvested under a woodlot blanket salvage permit will be 35% of the sawlog stumpage rate in Table 6-1 for that species. The stumpage rate must not be lower than the prescribed minimum stumpage rate. This subsection will expire on April 15, The Appellants submit that the application of Amendment No. 18 created a breach of contract as it unilaterally replaced the stumpage rates that had not yet expired with untenably higher rates, and they ask that the SANs issued in July, 2006 be reinstated. In response, the Government says that the Minister has the legal authority under section 105(1) of the Forest Act to amend stumpage policy and procedures at any time, that SANs are not a contract, and that the Timber Pricing Officer complied with the amended IAM when he issued the SANs under appeal. The Government also submits that the appeals amount to an attempt to judicially review Amendment No. 18 itself, which the Commission does not have the power to do. The Government asks the Commission to dismiss the appeals. ISSUE The issue in these appeals relates to the authority of the Timber Pricing Officer to redetermine stumpage rates when the rates had previously been set in SANs that are not yet expired. The Commission will consider the following question:

5 DECISION NOS FA-002(a)/003(a)/004(a) Page 5 Did the Timber Pricing Officer have the authority to issue the SANs effective January 12, 2007, for the woodlot blanket salvage cutting permits? 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.

6 DECISION NOS FA-002(a)/003(a)/004(a) Page 6 DISCUSSION AND ANALYSIS Did the Timber Pricing Officer have the authority to issue the SANs effective January 12, 2007, for the woodlot blanket salvage cutting permits? These appeals are similar to two that the Commission has heard previously. In Jack Alexander Bellamy v. Government of British Columbia (Appeal 2004-FA- 075(a), April 22, 2005) (unreported) (hereinafter Bellamy), the appeal was from a SAN issued as a result of an amendment to the IAM, which replaced previously established rates for a woodlot s blanket salvage cutting permit, that had been set for a period not yet expired. In Bellamy, the issues included whether Amendment No. 8 of the IAM, which required annual reappraisal of all blanket salvage cutting permits on their anniversary, applied to a cutting permit when the licensee had previously elected, pursuant to section 2.5(2) of the IAM, to fix the stumpage rates for the term of the cutting permit. The Commission found that while the stumpage rates were properly re-determined as a result of Amendment No. 8 of the IAM, the quarterly adjustments had been set aside by the licensee s election to fix the rates. The other case is James Brown-John et al. v. Government of British Columbia (Appeal 2004-FA-084(a), June 17, 2005) (unreported) (hereinafter Brown-John). That appeal arose on similar circumstances, in that the Appellants held a blanket salvage cutting permit, and they had elected to fix the stumpage rate at the rate set out in two previous SANs. In Brown-John, the main ground for appeal was that Amendment No. 8 could not retroactively or retrospectively interfere with the vested rights to the stumpage rates set out in the previous SANs issued under section 2.5(2), as the Amendment was not worded in a manner that expressed a clear intention to operate this way. In its decision, the Commission considered the nature and structure of stumpage law as discussed in Re MacMillan Bloedel and Appeal Board under Forest Act (1984), 8 D.L.R. (4 th ) 33 (B.C.C.A.) and British Columbia (Ministry of Forests) v. Canadian Forest Products Ltd., [2000] B.C.J (B.C.C.A.), and concluded as follows (at pages 10 and 11): the Minister has unfettered discretion to prescribe policies and procedures by which stumpage is to be determined in order to assert the financial interests of the Crown; this interest is to be asserted in a systematic and equitable manner; stumpage rates calculated in accordance with the IAM may change over the term of a cutting permit; and the Minister s power to establish policies and procedures is a form of statutory power, closer to a legislative than an administrative power. In deciding Brown-John, the Commission found that the Minister, in approving Amendment No. 8, intended to interfere with the stumpage rates in previous SANs issued for blanket salvage cutting permits on woodlots, so that the permits did not remain locked-in to multi-year low rates, when conditions warranted that they be

7 DECISION NOS FA-002(a)/003(a)/004(a) Page 7 changed. The Commission found that, regardless of the merits of a particular policy that had been approved by the Minister pursuant to section 105 of the Forest Act, it did not have the jurisdiction to interfere with such a policy. In the present appeals, the Commission is not dealing with stumpage rates that the licensee had elected to fix, as in Bellamy and Brown-John, but with SANs issued in conformance with section 6.3.1, and the Minister s separate directive that Amendment No. 18 be immediately applied to all woodlot blanket salvage cutting permits. Although the source of the requirement to apply the amendment immediately is a directive from the Minister, the Commission finds that it does not have the jurisdiction to interfere with either the Minister s discretion to approve stumpage determination policies and procedures, or his discretion to specify when stumpage rates must be determined, redetermined and varied pursuant to section 105(1) of the Forest Act. In reaching that conclusion, the Commission has considered the language in sections 105(1) and 149(3) of the Forest Act, which are discussed below. Specifically, in examining section 105(1), the Commission notes that subsection (b) operates independently of subsection (c). While the IAM makes up the policies and procedures approved for the forest region by the minister, as referenced in subsection (c), the timing of the application of these policies and procedures can be independently set by the Minister under subsection (b). The Commission finds that the Minister s directive to reappraise all woodlot blanket salvage permits effective January 12, 2007 was issued under subsection (b), which specifies that stumpage rates must be determined, redetermined and varied at the times specified by the Minister. Moreover, section 149(3) of that Act requires the Commission to apply the policies and procedures approved by the Minister under section 105 that were in effect at the time of the initial determination when deciding appeals of stumpage determinations. That section requires that, in this case, the Commission must apply the IAM, as amended on January 12, There is no evidence before the Commission that the Timber Pricing Officer improperly applied the IAM as amended on January 12, 2007, or failed to do so at the times specified by the minister in the January 12, 2007 directive. Accordingly, the Commission finds that the Timber Pricing Officer did not err in issuing the SANs that are under appeal, despite the fact that the terms of the previous SANs had not yet expired. Although the Commission cannot re-instate the previous SANs for the reasons discussed above, the Commission is sympathetic to the licensees who have faced unexpected cost increases as a result of Amendment No. 18, and the Minister s directive that it be immediately applied to all woodlot blanket salvage cutting permits. The Appellants have stated that this directive is inequitable, because Community Forest Licence holders, with salvage stumpage rates due to expire December 31, 2007, had their existing rates confirmed to the end of the winter. However, no documentary evidence of this was placed before the Commission, and the Government has not responded to that argument.

8 DECISION NOS FA-002(a)/003(a)/004(a) Page 8 Under section 12 of the Forest Act, there may be Community Forest Agreements and Community Salvage Licences, but not Community Forest Licences. The Commission understands that the Appellants are probably referring to Community Salvage Licences, and notes only that such a licence is a different form of cutting authority than a blanket salvage cutting permit for a woodlot, and therefore may be subject to different stumpage rate determination policies and procedures. 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 finds that the Timber Pricing Officer did not err in determining the stumpage rates set out in the SANs, or in making those rates effective on January 12, The Commission confirms the stumpage determinations set out in those SANs. The appeals are dismissed. David Ormerod David Ormerod, Panel Chair Forest Appeals Commission June 21, 2007