Decision Date: June 5, 2008

Panel: David Ormerod

Keywords:  Forest Act – s. 105(1); Interior Appraisal Manual – s. 6.3.1; stumpage rate; blanket salvage woodlot licence; log grade

Iron Mountain Ranch Ltd. (the “Appellant”) appealed a stumpage determination set out in a stumpage advisory notice issued by the Appraisal Administrator, Central Cascades Forest District, Southern Interior Forest Region.  The determination pertained to timber harvested under cutting permit W (“CP W”) of a blanket salvage woodlot licence held by the Appellant.

In determining the stumpage rate for CP W, the Appraisal Administrator applied section 6.3.1(2)(b) of the of the Interior Appraisal Manual (the “IAM”), rather than section 6.3.1(2)(a), resulting in a higher stumpage rate for CP W.  In doing so, the Appraisal Administrator relied on the language in a formula in section 6.3.1(4)(a) of the IAM, which only refers to “grade 1” and “grade 2” sawlog volumes and values billed.  Based on those words, the Appraisal Administrator only counted logs that had been recorded as grades 1 and 2 in the billing records for the licence during the relevant time period.  She did not include logs that had been recorded as “ungraded” in the billing records for the licence during that time period.  The total volume of grades 1 and 2 sawlogs that were billed to the licence during that time period was less than the 500 m³ minimum required for section 6.3.1(2)(a) to apply in determining the stumpage rate.  Therefore, the stumpage rate was determined based on data from other licences, and not the weighted average sawlog stumpage rate for the licence.

The Appellant argued that the Appraisal Administrator erred in not counting the “ungraded” logs towards the 500 m³ minimum required for section 6.3.1(2)(a) to apply.  It argued that, although the those logs were not recorded as grades 1 and 2, the logs were, in fact, sawlogs that had been billed to the licence during the relevant time period, but they were called “ungraded” instead of grades 1 or 2 because those logs were scaled before the Scaling Regulation was amended by repealing the former grades that were designated for sawlogs (i.e., grade “blank” and grade 3), and replacing them with grades 1 and 2 for sawlogs.  Essentially, the Appellant argued that the intention of section 6.3.1(4) of the IAM was to use sawlog data pertaining to the licence to determine the weighted average sawlog stumpage rate for the licence, and that a change in the grades used for scaling sawlogs should not result in sawlogs that had been graded under the former scheme from being excluded when calculating the stumpage rate for CP W.

Based on the evidence, the Commission found that the reference in the billing records to “ungraded” logs was a reference to grade “blank” sawlogs under the former provisions of the Scaling Regulation.  The Commission further found that, if the ungraded sawlogs had been counted in the formula in section 6.3.1(4)(a), which had previously included grade blank sawlogs but was amended to include only grades 1 and 2 sawlogs, then the volume billed to the licence during the relevant time period would have exceeded the 500 m³ threshold, and the stumpage rate would have been determined at the lower rate.  The Commission held that, if the reference to grades 1 and 2 in section 6.3.1(4)(a) of the IAM was interpreted based on its plain and ordinary meaning, it conflicts with sections 6.3.1(2) and 6.3.1(4)(b) of the IAM, which indicate an intention to count “sawlogs”.  Further, the Commission found that applying the formula in section 6.3.1(4)(a) based on its plain and ordinary meaning, which is what the Appraisal Administrator did, led to an absurd result, because some sawlogs that had been billed to the licence during the relevant time period were counted (i.e., grades 1 and 2), and others were not (i.e., ungraded or grade blank).  The Commission found that the principles of statutory interpretation require that words must be interpreted in their entire context, and interpretations that lead to internal conflicts and absurd results are to be avoided if possible.  Accordingly, the Commission found that the intent of section 6.3.1(4)(a) of the IAM, when considered in the context of the language in other parts of section 6.3.1, was to count all sawlogs billed to the licence during the relevant time period, and therefore, the Appraisal Administrator should have counted the ungraded sawlogs in determining the stumpage rate for the licence.

The Commission referred the matter back to the Appraisal Administrator with directions to re-determine the stumpage appraisal for CP W by including the ungraded sawlog volumes that were billed to the licence during the relevant time period.

Accordingly, the appeal was allowed.