Decision Date: December 15, 2021

Panel: Michael Tourigny, Cynthia Lu, Ian Miller

Keywords: Forest and Range Practices Act – ss. 71(5), 72; Forest Act – ss. 105(5.1), 105(5.2); Interior Appraisal Manual; stumpage redetermination; road development costs; changed circumstance; reappraisal data; contravention; administrative penalty; officially induced error; due diligence

Interfor Corporation (“Interfor”) filed two appeals related to the stumpage it had to pay on Crown timber harvested under a cutting permit (“CP192”).

One appeal was against a determination of contravention and the associated penalty under the Forest and Range Practices Act, issued by the District Manager (the “Manager”) of the Thompson Rivers Forest District, in the Ministry of Forests, Lands, Natural Resource Operations and Rural Development (the “Ministry”). The Manager found that Interfor had contravened section 105(5.2) of the Forest Act by failing to submit information necessary to redetermine the stumpage rate applicable to timber harvested under CP192. The Manager found that a ‘changed circumstance’ under the Interior Appraisal Manual (“IAM”) had occurred when Interfor decided not to harvest a cut block and not build associated roads that were planned for CP192, resulting in 57% lower estimated road development costs. The Manager held that because there was a difference of more than 15% in estimated road development costs, Interfor was required to notify the Ministry of a changed circumstance that triggered a stumpage reappraisal. Interfor’s failure to notify the Ministry and provide the reappraisal data contravened section 105(5.2) of the Forest Act, and the Manager levied a penalty of $17,549 for the contravention.

The second appeal was against a stumpage redetermination issued to Interfor after the Manager concluded that a stumpage reappraisal was required. The Ministry redetermined the stumpage rate applicable to timber harvested under CP192, resulting in an increase from $0.25 to $2.20 per cubic meter of timber.

On appeal, Interfor requested that the Commission rescind the determination of contravention, the penalty, and the stumpage redetermination, and restore the original stumpage rate. Interfor submitted that it did not contravene section 105(5.2) of the Forest Act, because the criteria in the IAM for a ‘changed circumstance’ reappraisal had not been met. In addition, Interfor submitted that even if there was a changed circumstance according to the IAM, Interfor was not liable for the contravention based on the defences of officially induced error and due diligence.

The Commission considered the language in the relevant sections of the IAM, and the undisputed fact that the 15% threshold was exceeded. The Commission found that a changed circumstance under the IAM had occurred in relation to the estimated road development costs for CP192, and the stumpage rate for CP192 had to be redetermined based on revised estimated road development costs. Accordingly, the Commission confirmed the stumpage redetermination.

In addition, the Commission found that Interfor did contravene section 105(5.2) of the Forest Act by failing to submit reappraisal data for CP192 to the Ministry, and the defences of officially induced error and due diligence did not apply in the circumstances.

Specifically, Interfor failed to establish that its erroneous interpretation of the IAM, which led to its contravention, was the result of an officially induced error. There was insufficient evidence to support Interfor’s contention that the Ministry’s policies or procedures supported Interfor’s belief that there was not a changed circumstance, or that the Ministry treated unharvested timber as having been harvested for the purposes of post-harvest waste assessments.

Regarding due diligence, the Commission held that Interfor had a reasonable system to identify changed circumstances when it conducted its post-harvest analysis for CP192. However, Interfor did not take reasonable steps to ensure effective operation of, and compliance with, that system. Therefore, Interfor failed to exercise due diligence.

Finally, the Commission found that a penalty of $12,011 would address the need for deterrence and the factors in section 71(5) of the Forest and Range Practices Act including the economic benefit derived from the contravention. The Commission agreed with the Manager that a deterrent penalty of $10,000 was warranted, because this was Interfor’s second contravention of section 105(5.2) of the Forest Act in 5 years. To address Interfor’s economic benefit from the contravention, the Commission added an additional $2,011, rather than $7,549 as was added by the Manager.

In conclusion, the Commission confirmed the determination of contravention and the stumpage redetermination, but varied the penalty by reducing it from $17,549 to $12,011. The appeal was allowed, in part.