Decision Date: December 2, 2013

Panel: James Hackett

Keywords: Forest Act – ss. 105(1),105.1, 105.2(1), 105.2(2), 105.2(3), 149(3) ; Coast Appraisal Manual – s. 5.3.2.1; stumpage rate; estimated road development cost; extended road amortization agreement; agreement to apportion new development cost estimate; most accurate information

Western Forest Products Ltd. (“Western”) appealed two separate stumpage determinations issued on May 31, 2013 by the Timber Pricing Coordinator (the “Coordinator”), Coast Forest Region, Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”). The appeals were heard together.

The stumpage determinations pertain to cutting permit 300 (“CP 300”) which covers an area within tree farm licence 19 held by Western and located in the Campbell River Forest District on Vancouver Island. At issue was whether the Coordinator erred in determining the stumpage rates by using an incorrect amount for road development costs associated with a September 28, 2011 extended road amortization agreement (the “Agreement”) rather than the revised cost estimate provided in Western’s appraisal data submission for CP 300. Western provided the Coordinator with updated road development cost estimates based on “as-built” conditions”, and requested that the Ministry amend the Agreement to reflect the updated cost estimates. The Ministry refused to amend the Agreement and calculated the stumpage rates using the original cost estimates set out in the Agreement.

Western appealed the stumpage determinations on the ground that the Coordinator erred in using the original cost estimates rather than the updated “as-built” estimate in determining the stumpage rates. Western’s main arguments on appeal were: (1) the Coordinator determined the stumpage rates based on information that was no longer accurate, which is contrary to the requirements, objectives and intent of the Forest Act (the “Act”) and the Coast Appraisal Manual (the “CAM”) and contrary to requirements in the Foresters Act and past Ministry interpretations of the CAM; (2) the Ministry exercised its discretion under the CAM unreasonably when it declined to amend the Agreement to account for the updated and more accurate information that was available when Western submitted its appraisal data for CP 300; and alternatively, (3) the Agreement required the Ministry to determine the extended road amortization cost allowances applicable to the stumpage rates for CP 300 based on the information available when Western submitted its appraisal data for CP 300.

The Government submitted that the statutory and professional obligations to submit accurate and complete information for stumpage appraisal purposes are not relevant because the CAM and the Agreement define the originally apportioned balance of the estimated road development cost as complete and accurate for the purposes of appraising the tributary cutting authority area (i.e. CP 300) and as such there is no need to update costs with more accurate data. The Government further submitted that (1) the Commission had no jurisdiction to review the refusal to amend the Agreement because the Agreement is a contract, and the authority to make and amend such agreements was outside of the stumpage appraisal process; alternatively, (2) if the Commission did have jurisdiction to review the refusal to amend the Agreement, the refusal was a reasonable decision in the circumstances; and (3) the Commission should give some degree of deference to the Coordinator’s decision.

As a specialized tribunal with expertise in deciding appeals under forestry legislation and de novo powers in hearing those appeals, the Commission found that it is not obligated to give any deference when reviewing the Coordinator’s stumpage rate determination or the decision refusing to amend the Agreement.

The Commission found that section 105.1 of the Act, read together with the Foresters Act and its related bylaws, requires licensees and their forest professionals to submit accurate data to the Ministry for stumpage appraisal purposes and that section 3.2 of the CAM, which authorizes the Ministry to review appraisal data for errors or emissions, is consistent with those accuracy requirements. Accordingly, the Commission found that the accuracy of the licensee’s data will always be a relevant consideration in a stumpage appraisal, which then leads to the question of the nature of the Commission’s jurisdiction in relation to an extended road amortization agreement (“ERAA”). In this regard the Commission found that an ERAA operates as an integral part of the stumpage appraisal process. The Ministry’s exercise of discretion in making or amending an ERAA is an “intermediate component” of that process. Therefore, the Commission’s jurisdiction in deciding stumpage appeals must necessarily include interpretation and consideration of the terms of the Agreement itself and the jurisdiction to consider whether the Ministry exercised its discretion reasonably in denying the request for an ERAA amendment.

Further, the Commission found that the Coordinator should have applied the original apportioned percentages in the Agreement to the updated dollar values that Western submitted with the entire appraisal data for CP 300. There was no clear and obvious direction given to the use of percentage apportionments or static dollar amounts to tributary appraisals in the Agreement. Given the lack of clarity, the Commission found that the Agreement must be read in the context of the CAM which implies that the monetary values within the Agreement should be updated when the tributary cutting authority is appraised, to be current with the cost base of the CAM in effect at that time.

In allowing the appeals the Commission found that the Coordinator’s exercise of discretion in refusing to apply the “as-built” cost estimates, which was the most accurate information available at the time when the data was submitted for the purpose of determining the stumpage rates for CP 300, and in refusing to amend the Agreement, was unreasonable because it was inconsistent with section 105.1 of the Act, the overall scheme of the CAM and the objectives and intent of the governing legislation. The Coordinator’s determinations were reversed, and the matter was remitted back to the Coordinator with directions that the stumpage rates for CP 300 be determined using the appraisal data that Western submitted for CP 300, and to amend the monetary value assigned in the Agreement accordingly.