Decision Date: November 13, 2007

Panel: Alan Andison

Keywords: stumpage rate; Forest Act – s. 105; Interior Appraisal Manual; development costs; detailed engineering cost estimate; least cost determination; road reconstruction and replacement; road management

West Fraser Mills Ltd. and Houston Forest Products Company (collectively referred to as “West Fraser”) appealed a stumpage rate determination set out in a Stumpage Advisory Notice (“SAN”. The SAN applied to a cutting permit issued under a forest licence located in the Nadine Forest District, Northern Interior Forest Region. The determination was based in part on a detailed engineering cost estimate for the structural repair and gravel resurfacing of 160 metres of the Morice River Forest Service Road.

West Fraser appealed on the basis that the detailed engineering cost estimate should include the cost of paving the road surface rather than resurfacing the road with gravel. West Fraser asked the Commission to rescind the SAN and refer the matter back to the Timber Pricing Officer, with a direction to re-calculate the stumpage rate to include an allowance for the cost of paving the road section.

The Commission first considered the application of the “least cost” principle, which requires that development, harvesting and transportation costs be assessed so as to produce the least total cost estimate.  The Commission found that, while the Interior Appraisal Manual (the “IAM”) and the Regional Manager’s Procedures required West Fraser to rebuild and restore the road bed to its original condition or carrying capacity, they did not specifically require the reapplication of the same surface material. As gravel is a structurally sufficient surface material on a Forest Service Road, there was no need to surface the road section with asphalt. The Commission determined that the cost of the surface material was an appropriate factor to consider and that the Timber Pricing Officer had properly applied the least cost principle by including the cost of using of gravel instead of asphalt.

The Commission also determined that section 4.3.1(2) of the IAM does not mention or require life cycle estimates or maintenance costs for road reconstruction and replacement, and, therefore, future maintenance costs are not to be included in the detailed engineering cost estimate for road development.

Finally, the Commission found that any potential increased road maintenance and management costs that could have resulted in the future from gravel surfacing of the road section should not be taken into consideration in the detailed engineering cost estimate. Rather, routine maintenance costs are accounted for in the transportation costs estimate. Further, the maintenance costs associated with a gravel surfacing had not yet been incurred. The SAN should not reflect future savings that cannot be accurately accounted for, because it was unknown how long West Fraser would be using that portion of the road for harvesting purposes.

Accordingly, the Commission confirmed the stumpage rate set out in the SAN and dismissed the appeal.