Decision Date: June 27, 2011

Panel: Alan Andison, Les Gyug, James Hackett

Keywords:  Wildfire Act – ss. 3(1), 27; Wildfire Regulation – s. 9; Forest Act – ss. 103(1), 103(3), 105(1); forest fire; penalty; damaged or destroyed timber; stumpage

Canadian National Railway (“CNR”) appealed two determinations issued by the Fire Centre Manager (the “Manager”), Kamloops Fire Centre, Ministry of Forests and Range.  In the first determination, the Manager found that CNR had contravened section 3(1) of the Wildfire Act and sections 9(a), (b) and (c) of the Wildfire Regulation in relation to railway operations that caused a wildfire (“Fire 135”).  The Manager levied penalties of $1,000 for the contravention of the Wildfire Act, and $10,000 for the contraventions of the Wildfire Regulation.  The Manager also ordered CNR to pay $254,680.38 in damages for Crown timber that was burned in Fire 135, which was 75 percent of the total stumpage value of the timber, as calculated by the Manager.  In the second determination, the Manager found that CNR had contravened section 9(a) of the Wildfire Regulation in relation to railway operations that caused another wildfire (“Fire 136”).

Fire 135 occurred near Ashcroft, BC, and was reported on the evening of July 29, 2005.  The fire was caused by hot metal fragments falling from the dragging brake of a CNR railway car.  The hot fragments ignited vegetation on the railway right-of-way.  Shortly after the fire was reported, the Ministry dispatched initial attack crews and aircraft to extinguish the fire.  The following day, the fire escaped from the right-of-way and expanded to cover an area of approximately 40 square kilometres.  The fire damaged or destroyed 25,010.8 cubic metres of mature Crown timber.  Approximately one year after the fire, a licensee harvested the area and paid $4,874.80 in stumpage for harvesting 19,809.79 cubic metres of salvaged timber.

Before the appeals were heard, the parties settled several matters.  The parties agreed that Fires 135 and 136 were caused by a single act and that there were no contraventions in relation to Fire 136, and therefore, the appeal of the second determination should be allowed.  In relation to Fire 135, the parties agreed that CNR had only contravened section 9(a) of the Wildfire Regulation, and CNR agreed to pay the $10,000 penalty.

The remaining issue to be decided by the Commission was the value of the Crown timber that was burned in Fire 135.  The parties agreed on the volume of timber that had been damaged or destroyed by Fire 135, but they disagreed on the applicable valuation date for calculating the value of the timber.  CNR argued that the timber value should be calculated based on the stumpage rate that applied on the date that the salvaged timber was scaled, and that the Manager had jurisdiction to reduce the amount to 75 percent of the timber value.  In addition, CNR submitted that it should not have to pay any amount for the timber, because stumpage was paid when the timber was salvaged.  The Government argued that the timber value should be calculated based on the stumpage rate that would have applied on the date that the fire ignited, that the Manager had no jurisdiction to reduce the amount to 75 percent of the timber value, and that the claim against CNR for timber value under the Wildfire Act is unrelated to the stumpage revenue that was collected when the timber was salvaged.

The Commission found that section 27(1)(c) of the Wildfire Act together with section 30(a) of the Wildfire Regulation require that, when a cost recovery order is made, the value of the Crown timber damaged or destroyed as a result of the contravention must be calculated by ascertaining the amount of stumpage applicable to that timber under the Forest Act.  The Commission found that section 103(3) of the Forest Act should be applied, because it describes the procedure for calculating the amount of stumpage owing when a person “cuts, damages, destroys or removes Crown timber without authorization”.  The Commission also found that section 103(3) contemplates using the stumpage rate that “would likely have applied to the timber” under section 105(1) of the Forest Act “if rights to the timber had been granted under an agreement entered into under” the Forest Act.  The Commission interpreted this to mean that the applicable stumpage rate is the one that would have applied when the timber might have been harvested.  Given that no cutting permit was in place when the fire occurred, the Commission concluded that the appropriate stumpage rate for valuing the timber in this case is not the one that would have applied when the fire occurred; rather, it is the stumpage rate that would likely have applied in the future.  Based on the parties’ submissions, the most likely possible future rate is the one that applied when the timber was cruised or scaled; namely, $0.25 per cubic metre.

In addition, the Commission found that the Manager had no statutory authority to reduce the value of the damaged or destroyed timber to 75 percent of its stumpage value.  Section 27(1)(c) of the Wildfire Act requires the timber value to be calculated in the “prescribed” manner.  The prescribed manner is set out in section 30 of the Wildfire Regulation, and it refers to the Forest Act.  None of the legislation authorizes the Manager to reduce the value of the damaged or destroyed timber for the reasons given by the Manager.

Finally, the Commission found that nothing in the relevant legislation indicated that the stumpage revenue paid when the licensee salvaged the damaged timber should be applied as a “credit” when assessing damages against CNR for causing the fire that damaged the timber.

In summary, by consent of the parties, the Commission rescinded: the determination regarded Fire 136; the finding that CNR contravened section 3(1) of the Wildfire Act; the associated $1,000 penalty; and, the finding that CNR contravened section 9(b) and (c) of the Wildfire Regulation.  Also by consent of the parties, the Commission confirmed the finding that CNR contravened section 9(a) of the Wildfire Regulation, and it confirmed the associated $10,000 penalty.  The Commission varied the amount that CNR was required to pay under section 27(1)(c) of the Wildfire Act for the damaged and destroyed timber, and directed the Manager to re-assess those damages to 100 percent of the timber value based on the stumpage rate that applied on the date the timber was scaled.

Accordingly, the appeal in relation to Fire 136 was allowed, by consent (Appeal No. 2008-WFA-002).  The appeal in relation to Fire 135 (Appeal No. 2008-WFA-001) was allowed, in part.