Decision Date: October 21, 2019

Panel: Robert Wickett, Q.C.

Keywords: Forest Act – s. 105; stumpage rate determination; road development costs

Interfor Corporation (“Interfor”) appealed a stumpage rate determination issued by a Timber Pricing Coordinator in the Ministry of Forests, Lands, Natural Resource Operations and Rural Development (the “Ministry”). Stumpage is a fee paid to the government for harvesting Crown timber. The stumpage rate applied to timber harvested by Interfor under a cutting permit (“CP 332”) issued under a tree farm licence (“TFL 23”). 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”).

In calculating the stumpage rate in this case, the Timber Pricing Coordinator excluded certain road development costs (the “Disputed Road Costs”) that Interfor claimed when it applied for CP 332. The Disputed Road Costs were incurred by the former holder of TFL 23, Pope & Talbot Ltd. (“Pope & Talbot”), which built a road with the intention of harvesting timber under cutting permit 344 (“CP 344”), but Pope & Talbot surrendered CP 344 before harvesting the timber. The Timber Pricing Coordinator excluded those costs based on section 4.3.1.3(1)(a) of the IAM, which lists “Constructed roads that have been previously considered in appraisals of Crown timber within another cutting authority” as a cost that is ineligible for inclusion when calculating the stumpage rate for a cutting permit.

Interfor appealed the determination on the grounds that the Timber Pricing Coordinator should have included the Disputed Road Costs when determining the stumpage rate for CP 332, based on a proper interpretation of section 4.3.1.3(1)(a) of the IAM. Interfor asked the Commission to rescind the determination and refer the matter back to the Timber Pricing Coordinator with directions to include the Disputed Road Costs. If the appeal was successful, Interfor would have saved approximately half a million dollars in stumpage on the timber to be harvested under CP 332.

First, the Commission confirmed that the appeal proceeded as a new hearing, and the Commission owed no deference to the Timber Pricing Coordinator’s determination.

Next, the Commission considered the proper interpretation of section 4.3.1.3(1)(a) in the context of the IAM and the Forest Act. The Commission held that Interfor’s interpretation would only be available if the words in that section are ambiguous, and they are not. The Commission also found that the object and scheme of the IAM did not support Interfor’s interpretation. The IAM generally uses estimated or predicted development costs, and not the licensee’s actual costs, when calculating stumpage rates. If a licensee’s actual costs are higher than the predicted costs, or if no revenue is actually generated by the licensee such that stumpage would be paid (and development costs could be taken into account, as in the case of Pope & Talbot’s CP 344), then that is to the detriment of the licensee. In any event, there was no evidence that the Disputed Road Costs were actually passed on by Pope & Talbot to Interfor when it purchased TFL 23.

For all of those reasons, the Commission dismissed the appeal.