Decision Date: October 29, 2010

Panel: Margaret Eriksson

Keywords:  Forest and Range Practices Act – s. 71(2); Forest Act – s. 105.1; Interior Appraisal Manual –  ss. 2.2, 4.3.3, 4.3.3.1; appraisal data submission; accurate; road development; engineered cost estimate; contravention; stumpage rate

Ainsworth Lumber Co. Ltd. (“Ainsworth”) appealed a determination and notice of penalty issued in July 2008 by the District Manager (the “Manager”), Cascade Forest District, Ministry of Forests and Range (the “Ministry”).  In the determination, the Manager found that Ainsworth had contravened section 105.1 of the Forest Act by failing to submit accurate information in the appraisal data submissions it provided to the Ministry for use in determining the stumpage rate applicable to timber harvested under a cutting permit.  The Manager levied a penalty of $1,500 for the contravention.  Specifically, the Manager found that Ainsworth did not provide accurate information in the second set of detailed engineering cost estimates (“ECEs”) it had submitted regarding the constructing one road and reconstruction of portions of another road and associated spurs.  The Manager held that although Ainsworth ultimately submitted a third and “final” ECE that was accurate, Ainsworth knew at the time of the second “inaccurate” ECE that it would not be carrying out all of the work proposed in the ECE.  The Manager found that Ainsworth had knowingly filed the inaccurate ECE, which was unchanged from Ainsworth’s initial ECE, despite the Ministry questioning the accuracy of Ainsworth’s first ECE.  The first and second ECEs totalled $811,015 and were filed before the work had been completed, whereas the final ECE totalled $613,480 and was based on the actual work completed.

Ainsworth appealed to the Commission on the basis that the second ECE was “accurate” within the meaning of section 105.1 of the Forest Act, because the ECE reflected the costs that Ainsworth expected to incur, at the time when the roads were still under construction and the actual costs had not yet been determined.  Alternatively, Ainsworth submitted that even if the ECE was inaccurate and there was a contravention of section 105.1, no penalty should have been levied.

The Commission considered the meaning of the word “accurate” in section 105.1 of the Forest Act, in the context of the legislative scheme including section 105(1) of the Forest Act and the relevant sections of the Interior Appraisal Manual (“IAM”).  The Commission found that the IAM requires licensees to provide ECEs in their appraisal data submissions as a forward-looking exercise, and these estimates reflect those of a notional average operator.  In this context, “accurate” means “conforming… with a given standard”, as defined in the Canadian Oxford Dictionary.  The Commission noted that section 2.2 of the IAM establishes a process whereby the licensee will be notified if a district manager is of the view that there is an omission or error in the licensee’s appraisal data submissions, and the licensee may then revise its submissions.  Turning to the facts in this case, the Commission found that, when the Ministry expressed concerns about Ainsworth’s initial ECE, the Ministry did not specifically ask Ainsworth to submit its actual costs to date, nor did the Ministry refer to any section of the IAM that requires a licensee to update its ECEs based on actual costs incurred at the date of the information request.  In the absence of a specific reference to which part of the formulae in the IAM Ainsworth had failed to meet, or a specific request from the Ministry for actual detailed engineering costs to date, the Commission was unable to conclude that the information submitted in Ainsworth’s second ECE was inaccurate.  The Commission held that the second ECE reflected Ainsworth’s estimates of the engineering costs that a notional average operator would incur at the site.  Only after the construction was complete and site conditions were known were the actual costs known and Ainsworth was able to submit its final ECE, which reflected its actual costs.  The Commission concluded that the estimates in the second ECE were accurate at the time they were submitted, and therefore, Ainsworth did not contravene section 105.1 of the Forest Act.

Accordingly, the determination and penalty were rescinded, and the appeal was allowed.