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Vol: III – Issue: I June 2010

[ Previous Forestry Law Reporters ]

Legislative Review, 2010

Generally

Now that we are half way through the year, we can safely say that forestry has not mounted much of a comeback onto the government's legislative agenda. Notwithstanding various initiatives over the past couple years such as 2009's Working Roundtable on Forestry, and 2008's quickly buried Coastal Forest Action Plan, the government seems to have little appetite for significant legislative reform of BC's forest industry.

This is understandable given the government's past enthusiasm for legislative reform in connection with its Forestry Revitalization Plan. To undertake another significant legislative agenda in forestry at this time could give the appearance that the Forestry Revitalization Plan failed to hit the mark. Moreover, American oversight of changes to our forestry legislation in connection with the current Softwood Lumber Agreement probably adds another layer of complexity.

So, the government now appears content to undertake periodic legislative housekeeping of BC's forestry legislation and, perhaps, pursue the odd, discreet, policy initiative. That is indeed what the government has done with its forestry legislative agenda in the first half of 2010.

The Forest and Range Statutes Amendment Act, 2010 ("Bill 7")

The primary feature of 2010 Bill 7, c. 11 [SBC 2010], is the introduction of an allowable annual cut ("AAC") "partition order" into the Forest Act. Currently, section 8(5) of the Forest Act authorizes the Chief Forester to specify portions of an AAC in an AAC determination for a Timber Supply Area ("TSA") or a Tree Farm Licence ("TFL") that are attributable to different types of timber or terrain in different parts of Crown land, or to different areas of Crown land or, in the case of a TFL, to different types of timber and terrain in different parts of private land. When it comes into force, section 3 of Bill 7 will add a new Division 3.01 to the Forest Act that allows the Minister to enforce the specified portions identified in an AAC determination at the tenure level through a "partition order".

Division 3.01 defines a specified portion of an AAC made in an AAC determination under section 8(5) of the Forest Act as an "allowable annual cut partition". A new section 75.02 of the Forest Act under Division 3.01 then authorizes the Minister to issue a partition order to the holder of a TFL or to forest licence holders in a given TSA or TFL area "to ensure the attribution specified in the partition is carried out." A partition order will specify harvesting limits under the tenures subject to the order that relate to types of timber or terrain in parts of Crown land (and private land, in the case of a TFL) within the TSA or TFL, and to different areas of Crown land within the TSA or TFL. An attribution order must specify a term that does not exceed five years, and does not apply to an "exempted licence"—a forest licence with an AAC less than an amount set out in the regulations, or that is a non-replaceable forest licence that satisfies conditions specified in the regulations. Failure on the part of a licensee to conform to a partition order may result in the imposition of a financial penalty, in addition to stumpage, at volumetric rates set out in the regulations.

While Bill 7 clearly indicates that a partition order must apply to all forest licenses in the TSA or TFL area subject to the order, that is not necessarily to say that all forest licenses subject to a given partition order will receive equal treatment. First, there is nothing in Bill 7 to require that harvest limits included in a partition order to apply proportionately among the forest licenses subject to the order. Indeed, section 75.02 allows the Minister to specify limits "for each forest licence". Second, the Minister has the discretion to "waive" a limit imposed under a partition order in the case of any particular tenure, and to grant relief from a penalty imposed on account of a failure to comply with a partition order. In other words, Bill 7 does provide the government with some potential flexibility with respect to the application of a partition order.

The provisions of Bill 7 that relate to partition orders are not yet in force, and will come into force upon order of the Provincial Cabinet.

Bill 7 otherwise contains two other amendments of note:

Waste Assessments under the Forest Act. Bill 7 includes a new section 94.1 with respect to the scaling of special forest products. While the new provision is not particularly remarkable in terms of its substantive subject matter, it does include an interesting definition of "waste assessment" for purposes of "this section": a waste assessment conducted in accordance with the Provincial Logging Residue and Waste Measurement Procedures Manual, as amended from time to time (the "Waste Manual"). "Waste assessments" are referenced throughout the Forest Act: holders of any given forest tenure are required to pay waste assessments on account of timber that is not, at the holder's discretion, cut and removed under a cutting authority. Yet, in these other cases, the term "waste assessment" is not defined with reference to the Waste Manual. So, for purposes of a relatively trivial new provision of the Forest Act, and only for that purpose, the Forest Act has referentially incorporated the Waste Manual; yet for all other purposes the Forest Act has not referentially incorporated the Waste Manual. The problem is that all waste assessments for purposes of the Forest Act are, in fact, undertaken in accordance with the Waste Manual; however, the Forest Act now defines "waste assessment" as an assessment undertaken in accordance with the Waste Manual only for purposes of the new section 94.1. This may lead to unintended interpretational difficulties. This provision of Bill 7 has already come into force.
Retroactivity and Stumpage Determinations. Though the appraisal manuals made under section 105 of the Forest Act have flirted with retroactive determinations or re-determinations of stumpage rates, there was nothing in section 105 of the Forest Act that expressly authorized this retroactivity. Retroactive acts of government are anathema to the law in terms of administrative fairness, statutory interpretation, and Constitutional law. Retroactivity usually requires clear and express legislative authority. Now, under Bill 7, the Legislature has given the government the authority to impose stumpage determinations, re-determinations and variations retroactively—in other words, the appraisal manuals may now provide that a stumpage rate is effective on "any date" whether before or after timber is harvested or scaled, or before or after stumpage is paid on the basis of a previously determined stumpage rate. This provision of Bill 7 came into force retroactive to August 1, 2005.

Forest and Range (First Nations Woodland Licence) Statutes Amendment Act ("Bill 13")

Bill 13, c. 12 [SBC 2010], will make amendments to the Forest Act that will introduce a new form of forest tenure: the "first nations woodlands licence" ("FWL"). However, for the moment at least, this seemingly important measure does not actually appear to change much.

Under a new section 43.54 of the Forest Act, Bill 13 will authorize the government to direct award a FWL, and a FWL is only available to "implement or further an agreement between ... [a] first nation and the government respecting treaty-related measures, interim measures or economic measures". On its face, then, the FWL is apparently the vehicle that the government will use for purposes of its "Forest Tenure Opportunity Agreements" with First Nations (agreements between government and first nations regarding interim accommodation of aboriginal rights and title).

However, virtually everything that the government is able to accomplish through a FWL, the government can already legislatively accomplish with a community forest agreement ("CFA") issued under the Forest Act. The government already has the authority to direct award a CFA (as well as other forms of tenures available under the Forest Act) in furtherance of an agreement between government and a first nation respecting treaty-related measures, interim measures or economic measures". The content of a CFA in section 43.3 of the Forest Act is essentially the same as the content of a FWL under the new section 43.55. Like a FWL, a CFA can even include land in a "reserve" as defined under the Indian Act. The term limits are the same, and the terms of replacement are the same. While the government has the authority to issue a FWL to a "representative" of a first nation, the government can do the same with a CFA (as it also can do with other tenures under the Forest Act). Both a CFA (under section 43.3(g) of the Forest Act) and a FWL (under a new 43.55(h)) also require compliance with any agreement between the parties regarding treaty-related measures, interim measures or economic measures. Bill 13 even amends the Forest and Range Practices Act ("FRPA") so that forest practices undertaken with respect to FWLs are regulated as though an FWL were a CFA. A new section 2.1 of FRPA provides that FRPA applies to a FWL as though it were a CFA if the Crown land subject to the FWL is more than 800 hectares on the coast or 1,200 hectares in the interior (or as though it were a woodlot licence if the amount of Crown land is less than these amounts).

The only apparent substantive legislative difference between a FWL and a CFA is that FWLs are only available to implement or further an agreement between a First Nation and government regarding treaty-related measures, interim measures or economic measures. CFAs, of course, are available in a broader range of circumstances. However, the fact that CFAs are not as specifically targeted as FWLs does not mean government cannot use them for the same purpose as an FWL.

One factor that could further distinguish FWLs from CFAs in the future is the broad discretion vested in the provincial Cabinet to enact regulations with respect to CFAs. Bill 13 has amended the Forest Act to authorize Cabinet to enact regulations that add to the provisions of the Forest Act that relate to FWLs or holders of FWLs, that vary those provisions, and that exempt the application of those provisions. In other words, the entire FWL program is not found in Bill 13—a complete picture will not emerge until the government makes the regulations authorized under Bill 13.

Aside from the foregoing, Bill 13 makes one further amendment of note to FRPA. Currently, a licensee may amend a forest stewardship plan ("FSP") as a minor amendment without ministerial approval under section 20 of FRPA to add another licensee as a party to the FSP. So long as the requirements of section 20 are otherwise satisfied, a licensee without an FSP is able to negotiate an agreement with a licensee that is an approved FSP to have the licensee without an FSP amended into the FSP without the need for ministerial approval. This can eliminate the need for the licensee without an FSP to obtain ministerial approval of an FSP before it commences timber harvesting and road construction. Once in force, however, Bill 13 will amend section 3 of FRPA so that FRPA not only requires ministerial approval of an FSP applicable to proposed timber harvesting and road construction activities, but so that it will also require ministerial approval of any amendment that adds a licensee as a party to an existing, approved, FSP. In other words, licensee-specific approval is now required before a licensee is able to undertake any timber harvesting or road construction activities, even if the minister has already approved those specific activities.

Bill 13 is not yet in force, and will come into force by order of Cabinet.

Forestry Service Providers Protection Act ("Bill 21")

For some time the only legislative security for payment available to anyone working in the forest industry was the antiquated Woodworkers Lien Act. While that legislation suffered from deficiencies too numerous to mention, chief among them was the fact that the legislation only protected the wages of individual forestry workers and, generally, was not available to incorporated contractors. So, while each of a contractor's individual employees would have a lien claim against a licensee that defaulted on its payments to that contractor, the contractor itself had no security other than to sue for breach of contract and to attempt to collect on any judgment.

Bill 21, c. 16 [SBC 2010], represents the government's effort to remedy this deficiency. Under section 2 of this stand-alone legislation, a lien automatically arises in favour of a contractor who provides services to a "forest products owner" against the forest products of the forest products owner. Under section 6, a contractor will also have a charge against all accounts due to a forest products owner to the extent of the amounts owing from the forest products owner to the contractor. Similarly, a subcontractor will also have a charge against all accounts due to a contractor to the extent of any amounts owing from the contractor to the subcontractor (though the subcontractor does not have a claim of lien against the forest products of the forest products owner that employed the contractor).

The legislation also attempts to manage priority issues between lien and charge holders on the one hand, and other third party claimants on the other hand. The legislation also provides a mechanism for the enforcement of liens and charges. Bill 21 provides for separate "lien funds" and "charge funds", and the establishment and distribution of these funds extensively involves the sheriff (whose expenses are paid from these funds). Additionally, the court process also plays a significant role in the enforcement of liens and charges under Bill 21. Court hearings are required to seize forest products, and to distribute proceeds deposited into a lien fund or a charge fund. Moreover, if anyone claims an entitlement to a lien fund or charge fund after a court has already made an order for distribution but before the expiry of the 30 day period the sheriff has to implement the order, the distribution process comes to an end and the parties must go back to court for further directions. A court hearing is also potentially required to discharge an invalid lien or charge. Depending upon the size of the contractor or subcontractor claim, then, the practical utility of lien and charge enforcement is potentially limited after enforcement costs are taken into account, and registration of liens and charges may, on some occasions, have more value as a negotiation mechanism.

Other interesting aspects of Bill 21 include:

Effective Without Registration. Registration of a lien or charge is not necessary to make a lien or charge effective. However, registration is necessary to preserve the priority of a lien or charge (see sections 5, 9, and 14).
Priority. Sections 5, 9 and 14 state that liens and charges under Bill 21 have priority over any other interest in the attached forest products or accounts, respectively, except as provided in Bill 21 and "any other Act". The subjugation of Bill 21 liens and charges to the priority of interests specified in "any other Act" significantly limits the effectiveness of these liens and charges since most legislation that has anything to do with the collection of monies will claim that the interests created under that other legislation takes priority over any other charge. For example, section 130(1)(d)(i) of the Forest Act establishes a lien in favour of the government over the timber and forest products of any person that owes the government money under BC's forestry legislation or under a forest tenure. Section 130(2) of the Forest Act then goes on to provide that a lien under section 130(1)(d)(i) has priority over "all other claims", so this lien would take priority over a Bill 21 lien or charge.
Priority of Third Party Interests after Registration of Lien or Charge. Moreover, if a charge that arises in connection with a third party agreement has priority over a Bill 21 lien or charge, that priority extends to all advances and obligations under that third party agreement, even if those advances and obligations occur after the Bill 21 lien or charge is validly registered.
Amounts Secured. A contractor's lien under section 2(2) of Bill 21 secures the "fair market value" of the services associated with the lien; a charge under sections 6(1) and 11(1) of Bill 21 secures "an amount due".

Finally, Part 2 of Bill 21 provides the legislative authority for government to establish a "Forestry Service Providers Compensation Fund" (the "Fund"). According to section 26 of Bill 21, the idea is to provide a mechanism to compensate forestry service providers from losses suffered on account of insolvent companies and other legal entities. While the "contributors" who will pay into the fund are not explicitly identified in the legislation, section 27 strongly suggests that government intends to impose a levy upon stumpage bearing timber to finance the fund: licensees who manage to remain solvent will have to pay increased stumpage payments to insure forestry service providers against licensees that do not manage to stay solvent. In other words, if government proceeds along this course, the Fund will socialize the risks of licensee insolvency on behalf of forestry service providers through the stumpage system.

Bill 21 is not yet in force, and will come into force by order of Cabinet.

Miscellaneous Regulatory Changes

While a few minor regulatory changes have also come into force so far in 2010, none are of any general consequence.

DISCLAIMER: This report provides general commentary only, and does not constitute legal advice. Persons requiring further information or advice with respect to their specific circumstances should consult with a lawyer. The views expressed herein do not necessarily represent those of Quickscribe Services Ltd., are only intended as general commentary on legislative changes applicable to the BC forest sector, and are not intended to necessarily reflect the official rationale of government or the legislature for any legislative change.

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