Originally published in BC Forest Professional magazine.
In Western Forest Products Ltd. v. Government of British Columbia, Decision Nos. 2013-FA-001(a) and 2013-FA-002(a) (the "Western Decision"), the Forest Appeals Commission has elevated the importance of "accurate information" in the appraisal of stumpage to something more than a legislative or professional obligation. It has, effectively, become a principle of interpretation applicable to BC's stumpage appraisal manuals (the "Manual"). As with most stumpage disputes, the Western Decision concerned a difference of opinion over some obscure provision of the Manual. At issue was the ability of licensees to account for the estimated costs of a road that would service multiple cutting permits in the appraisals of more than one of those cutting permits (rather than only in the appraisal of the first cutting permit serviced by the road).
On account of the minimum stumpage rate applicable in BC, a stumpage rate cannot "go negative" regardless of the magnitude of the estimated costs included in the appraisal of a cutting permit. To avoid any unfairness that could result if a licensee could only use the estimated cost of a road intended to service multiple cutting permits in the appraisal of a single cutting permit, the Manual contemplates that government and a licensee may enter into an "extended road amortization agreement" (or "ERAA"). An ERAA permits a licensee to divide the estimated cost of a road intended to serve multiple cutting permits among the appraisals of those multiple cutting permits. This ensures that all of the estimated costs that a licensee will incur to harvest timber over a particular road are recognized in the stumpage payable for that timber.
In the circumstances of the Western Decision, an ERAA was developed in the appraisal of the first of multiple cutting permits serviced by a particular road, and allocated the estimated appraisal costs of the road between the first two cutting permits. In the appraisal of the second cutting permit an issue arose as to whether the actual dollar amounts that the ERAA attributed to the appraisal of the second cutting permit remained static even though the licensee now had more accurate "as-built" information to estimate the costs subject to the ERAA.
Government took the position that the dollar amounts attributed to each cutting permit in the ERAA remained static regardless of new information. The licensee took the position that section 105.1(3) of the Forest Act required the licensee to submit data that was accurate at the time of the appraisal of the second cutting permit, and that its forest professionals had a professional obligation to do the same. According to the licensee, government was required to proportionately adjust the dollar amounts that the ERAA initially attributed to the appraisal of the second cutting authority to reflect more accurate information that became available.
The Commission found that the Manual, the ERAA, and the past practice among the parties were ambiguous as to whether the dollar amounts specified in an ERAA remained static under the circumstances. To resolve this ambiguity, the Commission turned to the "dominant" factor in interpreting the Manual, and the "paramount" obligation of a licensee and its forest professionals: to ensure that "at the time the [appraisal] information is submitted ... the information is complete and accurate." The Commission held that "the Government's interpretation would mean that less accurate information would be applied to determine the stumpage rate ..." Accordingly, the Commission directed that government proportionately adjust the dollar amounts initially attributed to the second cutting authority in the ERAA to reflect the more accurate information that had subsequently become available.
Unlike some of the Commission's interpretations of the Manual, the paramount importance that the Commission placed upon accuracy of information in stumpage appraisals is not something that government can simply do away with in a subsequent revision of the Manual. This paramountcy is, primarily, a product of the Forest Act and, to a lesser extent, the Foresters Act. While government is free to rewrite the Manual within the scope of the legislative authority given to it under the Forest Act, government cannot rewrite the Forest Act (or the Foresters Act) without the blessing of the Legislature, something that is far more cumbersome.
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