Decision Date: September 21, 2005

Panel: Margaret Eriksson, R.A. Gorley, Robert Wickett

Keywords: Forest Act – ss. 105(1)(a)-(c), Coast Appraisal Manual – ss. 2.2.9.a and b., 4.1.6-9, 4.5.2.3; point of origin; appraisal log dumps; licensee neutrality; average efficient operator, comparative-value pricing model.

Western Forest Products Limited (“Western”) appealed 15 Stumpage Advisory Notices (“SANs”) issued by a Regional Appraisal Coordinator with the Ministry of Forests (the “Ministry”) for various cutting permits (the “CPs”) issued for Western’s Tree Farm Licence 25 (“TFL 25”).  The Regional Appraisal Coordinator calculated Western’s truck haul and towing or barging allowance on the basis of Jordan River as the appraisal log dump.

Western sought an order rescinding the SANs and directing the Regional Appraisal Coordinator to reappraise the stumpage rates for the CPs using the same appraisal log dump that had been used in the appraisal of TimberWest Forest Products Limited’s (“TimberWest’s”) cutting permits in the same area; namely, the Sooke Basin log dump.

Western submitted that all licensees should be treated equally when determining stumpage rates in the same harvesting area, and that the concepts of licensee neutrality and the notional efficient operator should be applied even if not expressly stated in the CAM.

The crux of the appeal dealt with whether the Jordan River site is an unsuitable appraisal log dump for Western with regard to the CPs.

The Commission cited the Forest Appeal Board’s (the “Board”) 1998 decision in TimberWest Forest Limited v. Province of British Columbia (Ministry of Forests) (Appeal No. 1997-FAB-07, March 4, 1998) (unreported), where it was found that a point of origin must have a functioning, accessible facility to transfer logs from trucks to booms and it must yield the least total cost.  Since only Western had access to the site the Board concluded that Jordan River could not be used as a point of origin because “it would capture one licensee’s unique efficiencies” contrary to the Ministry’s stumpage pricing principles.

The Commission also found that this situation is distinguishable from Teal Jones Forest Ltd. v. Government of British Columbia (Appeal Nos. 2004-FA-072(a) to 074 (a), 080(a) to 083 (a), 089(a), 2005-FA-031(a) and 046(a), May 20, 2005) (unreported).  Although the facts were similar, the SANs in that situation were issued under the newer market pricing system (“MPS”).  The SANs in the situation at hand were issued under the comparative-value pricing model (“CPV”).  Under the CVP, the Ministry must choose the method of transportation based on a notional “average efficient operator,” whereas under MPS, the consideration is based on what an “average notional bidder” would reasonably do and offer to pay, having considered all of the circumstances.

The Commission found that in order to exercise discretion in a reasonable manner, the appraiser always needs to give reasonable consideration to actual circumstances when estimating appraisal costs.

The Commission concluded that the Jordan River site is not suitable for use by a notional average operator because it has several physical and environmental constraints that prevent a notional average operator from having access to it.  Since an appraisal is based on estimated costs of a notional average operator, if Jordan River is unsuitable as an appraisal log dump for the notional average licensee, it must be unsuitable for all.

Accordingly, the Panel rescinded the SANs under appeal and directed the Regional Appraisal Coordinator to reappraise the stumpage rates for the CPs using the same appraisal log dump utilized by TimberWest for its cutting permits in the same area.