Decision Date: September 11, 2018

Panel: Daphne Stancil, Les Gyug, Norman E. Yates

Keywords: Forest Act – s. 105.1(3); Forest and Range Practices Act – s. 72; contravention; timber cruise; accurate data; stumpage appraisal; due diligence; administrative penalty

Apollo Forest Products Ltd. (“Apollo”) appealed a determination issued by the District Manager (the “Manager”), Stewart Nechako Natural Resource District, Ministry of Forests, Lands, Natural Resource Operations, and Rural Development (the “Ministry”). The Manager determined that Apollo had contravened section 105.1(3) of the Forest Act by submitting inaccurate data with its application for a cutting permit. The Manager levied an administrative penalty of $10,000 under the Forest and Range Practices Act (“FRPA”).

Apollo holds a forest licence which grants it the right to harvest Crown timber within the licence area. Before harvesting timber in the licence area, Apollo must apply for a cutting permit. When applying for the cutting permit in this case, the Interior Appraisal Manual (“IAM”) required Apollo to provide the Ministry with a stumpage appraisal data submission which included timber cruise data from the area to be harvested. Section 105.1(3) of the Forest Act states that the holder of an agreement, such as a forest licence, who is required to submit information to the government for use in determining a stumpage rate “must ensure that, at the time the information is submitted, the information is complete and accurate.”

Stumpage is the price paid to the government for harvesting Crown timber. The IAM sets out mandatory policies and procedures for determining stumpage rates in the Interior region of BC. The stumpage payable under cruise-based cutting permits is determined from a pre-harvest estimate of the timber in the area to be harvested. A timber cruise is a process for estimating the volume of timber in an area. Sample plots are selected in the cruise area, and information about each tree in the sample plots is recorded, including tree species and diameter. The IAM requires that timber cruise data be gathered in accordance with the Ministry’s Cruising Manual, which sets out procedures and standards for timber cruising.

Before applying for the cutting permit, Apollo’s contractor conducted a timber cruise of the cutting permit area based on 190 sample plots, and estimated the net merchantable timber volume for the cutting permit area. Apollo provided the cruise data to the Ministry.

Ministry staff conducted field checks to determine the accuracy of Apollo’s cruise data. The Ministry found statistically significant differences which resulted in the original timber cruise underestimating the merchantable timber volume in the cutting permit area. Among other things, the Ministry checked the locations of 15 of the original cruise plot centres, and found that 12 of the plot centre locations failed to meet the standards of tolerance specified in the Cruising Manual (i.e., plus or minus 2 percent for horizontal distance, and plus or minus 2 degrees for the compass bearing).

The Ministry notified Apollo that the original timber cruise did not meet the requirements of the Cruising Manual (i.e., the plots were outside of the allowable standards of tolerance), and therefore, the timber cruise data was not accurate. The inaccuracy in the location of plot centres resulted in a lower estimate of timber available for harvest. If the Ministry had used the lower estimate, it would have resulted in a lower stumpage rate for timber harvested under the cutting permit.

In response, Apollo had its contractor re-cruise the cutting permit area, and Apollo submitted the re-cruise data to the Ministry. Ministry staff performed a field check of the re-cruise data, reviewing 19 plots, and rejected the re-cruise data.

Apollo then hired a different contractor to conduct another re-cruise of the area. Ministry staff conducted a field check of the new re-cruise data, and found the results to be acceptable. Apollo re-submitted its application for the cutting permit using the new contractor’s data, and the Ministry issued the cutting permit.

Subsequently, the Ministry investigated the matter, and the Manager found that Apollo had contravened section 105.1(3) of the Forest Act in respect of the original timber cruise data. The Manager also concluded that Apollo had not established the defences of due diligence or officially induced error under section 72 of the FRPA, and levied a penalty of $10,000.

Apollo appealed to the Commission. Apollo argued that it had not contravened section 105.1(3) of the Forest Act, because it had submitted accurate timber cruise data. Alternatively, Apollo submitted that it had exercised due diligence to prevent the contravention.

The Commission first considered whether Apollo had submitted “accurate” timber cruise data as required by section 105.1(3) of the Forest Act. The Commission found that, in this context, “accurate” means “conforming with a given standard”, and the required standards were set out in the Cruising Manual, which applied pursuant to the IAM. Thus, in order for the timber cruise data to be “accurate”, the data had to be obtained using practices that complied with the standards in the Cruising Manual, and had to result in a reliable and unbiased estimate which was within the specified confidence interval or sampling intensity. The Cruising Manual’s standards require every plot centre to be established where it falls according to the cruise plan. Although the Cruising Manual specifies allowable tolerances, accounting for human (and instrument) error, any plots falling outside those tolerances are unacceptable.

Based on the evidence, the Commission concluded that the only plausible explanation for discrepancies of the magnitude detected in the original cruise data was that the plot centres were not placed according to the cruise plan. The initial cruise data was flawed due to the placement of plot centres, and the data collection procedures did not meet the Cruising Manual’s standards. Accordingly, he original cruise data was not “accurate” at the time that it was submitted, contrary to section 105.1(3) of the Forest Act.

Next, the Commission considered whether Apollo had established the defence of due diligence by taking all reasonable steps to prevent the contravention. The Commission found that Apollo did not do what is reasonably expected of a licensee to prevent the submission of inaccurate cruise data with its application for a cutting permit. Apollo did not have a system in place for supervising its timber cruising contractor, and reviewing the contractor’s performance. Hiring a contractor who is a registered professional – even one with cruising experience – does not obviate the need for supervision. In addition, it was not reasonable for Apollo to rely on Ministry cruise checks, and Apollo’s internal “office checks”, for quality assurance. An office check is a procedure for ensuring that all of the required information is included in a cutting permit application, but does not provide assurance that a contractor’s field work is accurate. The Commission concluded that Apollo did not meet the test for due diligence.

Given that Apollo did not appeal the $10,000 penalty, the Commission made no findings with respect to the appropriateness of the penalty amount.

Accordingly, the appeal was dismissed.