Decision Date: August 14, 2008

Panel: David Ormerod

Keywords:  Forest Act – s. 105(1); Interior Appraisal Manual – ss. 4.3.1.1.4; stumpage rate; road construction; estimated development cost; agreement to apportion development cost estimates

Tahtsa Timber Ltd. (the “Appellant”) appealed two stumpage determinations issued by the Timber Pricing Officer, Northern Interior Forest Region, Ministry of Forests and Range (the “Ministry”).  The determinations applied to timber harvested under cutting permits 104 and 108 issued under a non-replaceable forest licence (“NRFL”) held by the Appellant.  The Appellant asked the Commission to direct the Timber Pricing Officer to include an additional $126,000 in estimated road development costs in determining the stumpage rates for cutting permits 104 and 108.

In 2003, the Ministry had asked the Appellant to construct a forest service road.  In exchange, the Ministry offered to allow the Appellant to allocate the total estimated development cost of the road among several of the Appellant’s cutting permits under the NRFL that were, or would in the future be, tributary to the road.  The parties signed an apportionment agreement which identified the estimated total cost of the road and outlined how those estimated costs would be apportioned to existing and future cutting permits.  Six of those cutting permits were never harvested and no stumpage was billed to them.  Under the apportionment agreement, $126,000 in estimated development costs had been attributed to them.

The Appellant submitted that the cutting permits which were not harvested were “surrendered” to the Crown with no outstanding “take or pay” obligations, and therefore, those cutting permits effectively did not exist.  The Appellant argued that the $126,000 in estimated development costs that could have been applied to the stumpage appraisals for those cutting permits should be applied to cutting permits 104 and 108.

The Government submitted that the total estimated road development costs covered by the apportionment agreement had already been amortized against cutting permits that were issued under the Appellant’s NRFL.

The Commission reviewed the language in section 4.3.1.14 of the Interior Appraisal Manual (“IAM”) and the apportionment agreement.  Based on the language in the IAM and the agreement, the Commission found that the estimated development costs could not be reallocated from the unharvested cutting permits that had been surrendered to other cutting permits.  The Commission also found that the agreement apportioned the estimated development costs for stumpage appraisal purposes only.  The agreement expressly stated that it did not constitute an obligation to ensure that estimated costs would equal actual construction costs or that estimated costs would be “written off” in stumpage appraisals.

Accordingly, the Commission confirmed the stumpage determinations under appeal.

The appeals were dismissed.