Decision Date: November 25, 2016

Court: B.C.S.C., Justice Butler

Citation: 2016 BCSC 2202

Canadian Forest Products Ltd. (“Canfor”) appealed a decision of the Forest Appeals Commission (the “Commission”) to the B.C. Supreme Court. The Commission’s decision concerned nine stumpage rate determinations issued in 2013 and 2014 by the Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”). The stumpage rates applied to timber harvested by Canfor under cutting permits (“CPs”) that authorized Canfor to harvest Crown timber located five to fifteen kilometres from the shore of Williston Lake. Stumpage is a fee paid to the government for harvesting Crown timber. In determining stumpage rates for timber harvested in the Interior Region, the Ministry must apply the policies and procedures set out in the Interior Appraisal Manual (“IAM”).

The appeals raised issues regarding the proper interpretation and application of the IAM regarding log transportation costs when calculating stumpage rates for the CPs. The main issue was whether the stumpage rates should be calculated based on “lake tow” (i.e., log transport on a vessel or by boom and tow), or alternatively truck haul, as the primary log transportation method. In particular, the question was whether the Manson log dump on the shore of Williston Lake was “unsuitable” as a log transportation route involving lake tow, for the purposes of determining stumpage rates for the CPs. Lake tow was a lower cost transportation method than truck haul, and therefore, lake tow produced a higher stumpage rate.

The Manson log dump is within Canfor’s operating area, and was used to access Williston Lake for log transport since the 1970’s. In 2004, Canfor acquired a self-propelled barge (the “Barge”) which can carry timber across Williston Lake year-round. Between 2005 and 2007, Canfor operated the Barge to transport logs from many log dumps around Williston Lake, including the Manson log dump. In late 2007, logging and sawmill operations in the Mackenzie area ceased for economic reasons. Canfor anchored the Barge, but intended to reactivate it in the future. Canfor maintained its licence of occupation over Crown land at the Manson log dump, but performed no maintenance there.

In or about 2009, Canfor resumed harvesting in areas around Mackenzie that were within short truck hauling distance to the sawmill. In 2012, Canfor began to consider harvesting in more distant areas. In 2013, Canfor applied for the CPs. The appraisal data that Canfor submitted to the Ministry with its applications for the CPs indicated truck haul as the log transportation method for the entire distance from the CPs to the sawmill.

In October 2013, Canfor requested that the Ministry’s District Manager deem the Manson log dump to be “unsuitable” as a log transportation route pursuant to section 3.1(3) of the IAM. Section 3.1(1) of the IAM provided that the licensee “must submit an appraisal data submission that is capable of being used by the person who determines the stumpage rate… in a manner that will produce the highest stumpage rate.” However, section 3.1(3) of the IAM provided an exception whereby the District Manager could determine that a transportation route was “unsuitable” based on four criteria. In this case, although lake tow would produce the highest stumpage rate, Canfor submitted that truck haul should be the primary transportation method because the Manson log dump was unsuitable until either the Barge was operational or suitable infrastructure for towing was installed.

In November 2013, the District Manager decided that the Manson log dump was suitable as a log transportation route involving lake tow, for the purposes of determining stumpage rates for the CPs. The Ministry determined the stumpage rates for the CPs based on lake tow as the log transportation method from the log dump across Williston Lake.

In 2014, Canfor appealed the stumpage determinations on the basis that log transport by water via the Manson log dump is “unsuitable” within the meaning of section 3.1(3) of the IAM. Canfor submitted that, in order for the Manson log dump to be suitable, it must actually be ready for use, and it was not ready for use when the stumpage determinations were issued.

Meanwhile, during 2014, Canfor retained an engineer to advise on the work necessary to bring the Manson log dump back into service for use by the Barge. The engineer’s recommendations included re-grading ramps to the foreshore that had eroded, installing rock along the shoreline to prevent erosion, and expanding the site’s log storage area. During 2015, Canfor conducted work at the log dump, with the intention of beginning to use the site in September 2015.

In deciding the appeals, the main issue before the Commission was whether the Manson log dump was unsuitable for water transportation when the stumpage determinations were made. The other issues included whether the District Manager’s decision regarding the suitability of the Manson log dump was inconsistent with the object and purposes of the IAM.

The Commission rejected Canfor’s argument that a log dump must be ready for use in order to be “suitable” for the purposes of determining stumpage rates. The Commission found that a site is suitable if it possesses physical characteristics that make it capable of being put into use without extraordinary effort or expense. Based on the evidence, the Commission found that the Manson log dump possessed physical features that made it suitable as a log transportation route in the past, and the overall physical condition of the site in 2013/2014 was unchanged compared to when it was used in the past. Although there had been erosion since the site was last used, it was no different than the erosion that occurred when the site was in use, even if the cumulative effect was greater due to the deferral of maintenance. Canfor did not need to take extraordinary measures to return the site to operating condition. Most of the work that Canfor’s engineer had recommended was for the purpose of making the site more efficient, and not to make the site safe for use.

The Commission also found that the availability of the Barge was irrelevant to the suitability of the Manson log dump as a log transportation route, because the criteria in section 3.1(3) of the IAM focus on the physical characteristics of the site.

In addition, the Commission held that the District Manager’s decision was consistent with section 3.1 of the IAM, and the market pricing system which underlies the IAM. The parties’ expert witnesses agreed that the purpose of the market pricing system is to resemble, but not mirror, the actual operations of licensees in similar tracts of timber. The Commission held that it would be inconsistent with the market pricing system to determine stumpage rates based on the actual operations that a particular licensee chooses to use at a particular location.

The Commission dismissed the appeals. Canfor appealed the Commission’s decision to the BC Supreme Court, with respect to eight of the nine stumpage determinations. Canfor’s appeal raised two questions: (1) whether the Commission erred in its interpretation of the word “unsuitable” in section 3.1 of the IAM; and (2) whether the Commission misapprehended the evidence with respect to the physical characteristics of the Manson log dump.

First, the Court determined that the Commission’s interpretation of the IAM should be reviewed based on a standard of “reasonableness”, which is concerned both with the existence of justification, transparency and intelligibility in the decision-making process, as well as whether the decision falls within a range of acceptable outcomes which are defensible in respect of the facts and law. The Court held that the Commission is an expert tribunal tasked with adjudicating highly technical matters under provincial forestry legislation. Also, the Court noted that in a previous appeal of a Commission decision involving stumpage rates, the Court had held that the reasonableness standard should be applied.

Next, the Court concluded that the Commission’s decision was reasonable. The Court held that the Commission had considered all of the evidence and arguments presented to it, and its conclusion that the Manson Site was not “unsuitable” was well within the range of reasonable conclusions. The Commission appropriately considered the legislative scheme, and all of the evidence including the historical use of the site and the expert evidence. Further, the Commission did not misapprehend the evidence of Canfor’s expert, let alone do so in a way which could amount to an error of law. Rather, the Commission decided to give that evidence little weight when determining the suitability of the Manson Site. That approach was open to it in light of all the evidence.

Accordingly, the Court dismissed Canfor’s appeal.