Sometimes, after a BC Timber Sale is entered into, the unexpected occurs. A bridge might wash out. A wildfire might burn up the standing timber. A nearby mill might shut down. There might be a worldwide economic meltdown that causes a drying up of lumber markets.

Ordinarily, if a BCTS holder does not harvest his sale by the time the licence expires, there will be financial consequences. Government does allow, in appropriate circumstances, relief from those consequences.

The starting point for discussion is whether the first tree has been felled on the sale. If not, the sale holder has the opportunity to surrender the sale back to government. At worst, the holder forfeits his deposit.

But, under the legislation, the holder may apply for deposit forfeiture relief. Relief may be granted if the reasons for the surrender are “circumstances beyond the holder’s control, and unrelated to the holder’s financial situation.” A washed out bridge provides a clear example where such an application is likely to succeed. On the other hand, the closing of a nearby mill, with the result that the timber must be trucked farther and at greater expense, is a case where such an application is likely to fail.

Once that first tree has been felled, the implications of non-completion are much more severe. Mostly that comes from the government’s take-or-pay waste assessment program. Simply put, if a holder does not harvest all of the standing timber, he will be treated as if he had. He will pay stumpage on the standing timber left behind after the licence expires.

A holder faced with an uncompleted sale that is soon to expire will almost certainly apply to extend that sale. The fee for a year’s extension depends upon the amount of timber still to be harvested. At most, the fee is 5% of the total stumpage to be paid on the total volume advertised. Note that a timber sale cannot exceed four years in length. A two year term might be extended by a year, and on a later application by another year. But, it cannot be extended beyond that.

After an extension fee is paid, the holder may apply for a refund. The same question arises: was the need for the extension circumstances beyond the control of the holder, and unrelated to the holder’s financial situation? If so, that extension fee may be refunded.

Sometimes, the four years elapses. No more extensions are available. A take-or-pay waste invoice is rendered, which the holder is expected to pay. Even in this case the opportunity exists for the holder to request relief from the payment of this waste assessment. This type of relief is found in the waste assessment manual. Even so, the same two criteria apply: was the failure to fully harvest due to circumstances beyond the holder’s control, and unrelated to the holder’s financial situation?

Consider the case where a holder has only have harvested 50% of the total sale. The take-or-pay assessment will be huge. The deposit will be fully forfeited, and credited against the stumpage bill. The holder is expected to pay the balance owing.

Separate from take-or-pay is the prospect that the licence has lapsed and there is other non-compliance. Maybe the block wasn’t cleaned up. A road wasn’t decommissioned. This will result in the forfeiture of some amount of the deposit. And, again, there is an ability to apply for relief from that. The same criteria apply.

Be aware of the time limits for these applications. For deposit forfeiture relief, the application must be made within 30 days after licence surrender. For extension fee relief, it must be made within 30 days after the date of the extension application. For waste assessment relief, it must be made before the waste invoice is issued, which can happen just days after the sale expires.

The British Columbia Timber Sales Advisory Council webpage contains lists of applications that have been made for relief.

A review of those suggests that there was a time when government would recognize “extraordinary economic events” as the basis for relief. That is to be distinguished from ordinary economic events, such as the rise or fall of log prices, for which there is no relief. The tremendous economic meltdown in or about 2008 is now behind us, and it now appears that a claim of “extraordinary economic events” can no longer be made. That being the case, a review of the recent applications would suggest that they are more likely to fail than succeed (there was a 54% failure rate is 2010, and a 73% failure rate is 2011). It also appears that extension fee waivers are the most common type of application.

There is obviously some tension between those BCTS holders that harvest as expected, even in the face of adversity, and those who do not harvest and instead seek relief. Government needs to walk a careful path, bearing in mind its own interests, and the interests of the industry participants.

John Drayton is a lawyer with Gibraltar Law Group who practices in the areas of forestry and motor transport law.