(Cite as: 48 FR 24159, *24171)
current exchange rate differential on any prepaid movement from Canada to the United States without regard to the industry
or region involved. When U.S. funds are at a discount in relation to Canadian funds, the shipper who pays in Canadian funds
receives a discount of 60 percent of the exchange rate differential. If, however, charges are paid in the United States, the Canadian
shipper must pay a surcharge of 40 percent of the prevailing exchange rate. Because the sole purpose of the tariff is to adjust for
the differences in the value of the two currencies, it applies only to shipments exported to the United States.
Since 1977, U.S. currency has been at a premium in relation to Canadian currency. Therefore, Canadian shippers have been
paying a surcharge on exports to the United States. Because Canadian shippers have been paying a surcharge, no benefits are
being bestowed through the currency exchange rate tariff on exports of the products under investigation. Based upon our review
of information on the record, the tariff is not intended, nor does it operate, to stimulate exports. Rather, it is a mechanism for
maintaining Canadian rail carrier revenue. Therefore, we determine that the currency exchange rate tariff does not confer a
subsidy within the meaning of the Act.
c. Fuel Tax Refund and Fuel Tax Exemption. The fuel tax refund is a program which applies to the movement of motor carriers
operating in interstate service within the United States, in interprovincial service within Canada, or in
(Cite as: 48 FR 24159, *24171)
international service between Canada and the United States. The purpose of this program is to ensure that all states and
provinces collect taxes equal to the actual fuel consumed within each jurisdiction but which has been purchased outside that
jurisdiction. The tax refund is applied by each jurisdiction uniformly on all truck movements regardless of the type of
merchandise carried, if any.
Each motor carrier must keep a log of travel to ensure proper payment of tax. Each jurisdiction may have different means of
assessing the tax and the amount of fuel tax refund. Assessments are made on the basis of a motor carrier's log.
The fuel tax refund is a mechanism to ensure that each state or province receives proper payment of its share of fuel taxes. It does
not relieve carriers of any tax, nor does it provide any benefits to shipments of the products under investigation.
Within the provinces as well as the states, certain machinery and vehicles are exempt from paying fuel taxes. Exemptions can
include stationary machinery, off-road vehicles, airplanes and public transportation. Off-road vehicles and machinery used in
agricultural, forestry, and mining operations are generally exempt from paying fuel taxes. In addition, machinery and vehicles
used on private roads are exempt because historically, fuel taxes have been used to maintain public roads. Even though some
forestry and mining roads may be
(Cite as: 48 FR 24159, *24171)
designated as public roads, certain machinery and vehicles operating on them may be exempt from paying fuel taxes because the
forestry and mining operators are responsible for road maintenance. Becaujse a wide range of industries are exempted from fuel
tax within each province, we determine that the fuel tax exemption does not provide benefits to a specific industry or group of
industries. Therefore, we determine that the fuel tax refund and the fuel tax exemptions do not confer subsidies on the products
under investigation.
C. Federal/Provincial Programs
1. Forestry Subsidiary Agreements.--a. Funding for Long-Term Forest Management Under the Forestry Subsidiary Agreements.
As described in the "Programs Determined to Confer Subsidies" section of this notice, DREE entered into ten- year GDA's with all
provincial governments except Prince Edward Island. A similar 15-year comprehensive development plan exists for Prince
Edward Island. Forestry subsidiary agreements are available to any province with a GDA and to Prince Edward Island, and have
been negotiated with seven provinces.
Most of the funding under these agreements is for long-range resource management on public lands and public infrastructure
development. Examples of these activities include funding for silviculture camps, tree nurseries and soil and forest inventory
studies. A few other programs are funded under the
(Cite as: 48 FR 24159, *24171)
forestry subsidiary agreements; these are discussed in other sections of this notice, as appropriate.
The long-term forest management activities are conducted by the province on provincial lands, and do not relieve any companies
of obligations incurred in their licensing arrangements. The benefits from these long-term forest management activities will not be
realized until the rotation age (life span from planting to cutting for a tree) is met. This span is at least 40-60 years in eastern
Canada and 60-80 years in the west. Further, activities under the forestry subsidiary agreements are primarily designed to
help achieve the government's goal of renewing a "sustained-yield" forest. For example, ths silvicultural camps facilitate cone
collection for seed supplies of tree nurseries, and soil surveys are for the study of the proper species to plant in certain areas.
These benefits would be attributable to the owner of the resource, the government, not to the short- or medium-term licensee,
which may have its annual allowable yield reduced as a result of these long-term management practices.
Because these benefits will not be bestowed on the products under investigation until well into the future, if at all, and would be
attributable to the government as owner of the resource, we determine that the funding of long-term forest management activities
under the forestry subsidiary agreements does not confer a countervailable benefit on producers of the products under
(Cite as: 48 FR 24159, *24171)
investigation in the period for which we are measuring subsidization.
Under the forestry subsidiary agreements, the federal government makes payments to the provincial governments for the
construction of forest access roads. The companies using these roads for forestry operations are responsible for all maintenance
costs. Although the extraction of wood is one of the primary purposes of building forest roads, access to mineral resources,
recreation, environmental protection, general development and forest management are other purposes. Roads built in each
province under the FSA's are open to the public at all times, with occasional exceptions, such as during the spring when weather
conditions may require closure to prevent damage to the road. Further, the establishment of minimum standards and
specifications for various classes of forest roads, above those standards which would be required by those harvesting stumpage,
ensures that the roads will meet the needs of not only *24172
(Cite as: 48 FR 24159, *24172)
those holding stumpage rights, but also the traveling public and other users. For these reasons, we determine that the
construction of forest access roads does not confer a subsidy within the meaning of the Act.
b. Saskatchewan Forestry Subsidiary Agreement: Opportunity Identification and Technological Advancement. Sector A
(Opportunity Identification and Technological Advancement) of the Saskatchewan Forestry Subsidiary Agreement provides for
provincial funding of research and feasibility studies. These studies are usually conducted by private
(Cite as: 48 FR 24159, *24172)
counsultants hired by the company receiving the funding. The objectives of the studies are to determine industrial opportunities
in forestry, conduct market and feasibility analyses and transfer known technology to an existing or new industrial application.
The results of the studies are held by the government and appear to be publicly available on equal terms. Therefore, we determine
that the studies do not provide contervailable benefits to producers of the products under investigation.
c. Forestry Job Program. The Employment Bridging Assistance Program (EBAP) is a job creation program sponsored by
individual provinces and the Canadian government, pursuant to section 38 of the Federal Unemployment Insurance Act of 1971.
EBAP contracts have been signed with all provinces.
Established organizations, businesses, partnerships, corporations, federal/provincial/territorial/municipal government
departments and agencies are eligible to propose or promote a project. Programs are created according to vocational skills and
the industries involved have included mining, forestry, fishing, tourism and energy. The activities provided by a program must
not replace existing jobs.
The British Columbia/Canada Employment Bridging Assistance Program (Forest) was created to allow forestry-dependent
communities to retain skilled workers during periods of recession.
The federal contribution to project participants consists of unemployment
(Cite as: 48 FR 24159, *24172)
insurance benefits, subject to a maximum of $240 per week per claimant. The maximum allowable amount payable by the
Canada Employment and Immigration Commission (CEIC) for project overhead and administrative costs is $40 per claimant
per week. Any assets purchased with CEIC funds, which have not been physically incorporated into the project, are sold and the
revenue is applied to project costs.
The CEIC contribution is charged to the Special Response Feature Appropriation and is paid to sponsors in three installments. The
cost of premiums for worker's compensation is also paid from this appropriation.
We verified that EBAP assistance is not limited to a specific industry, group of industries, or to companies in specific regions.
Moreover, such programs have been created in many vocational areas. For these reasons, we determine that this program does
not confer a subsidy.
d. Canada/Nova Scotia and Canada/New Brunswick Forestry Subsidiary Agreements--Grants For Private Woodlot
Owners. The Canada/Nova Scotia and Canada/New Brunswick Forestry Subsidiary Agreements provide grants and
technical assistance to private landowners to promote effective management of their forest resources and to support various
silvicultural actitives. Producers of the products under investigation appear to have received grants under both of these
programs.
We determine that these grants do not confer countervailable benefits
(Cite as: 48 FR 24159, *24172)
because they are available to all private landowners and are not limited to a specific enterprise or industry, or group of
enterprises or industries, or to companies in specific regions.
D. Provinicial Programs
1. Alberta--a. Timber Salvage Incentive Program. The Timber Salvage Incentive Program was created because of the need to
harvest large amounts of timber damaged or destroyed by fire or insects. Alberta currently has an extremely high proportion of
damaged timber due to three consecutive years of extensive forest fires. It is in the province's interest to have the timber
harvested. If it is not harvested there is a danger that fire and disease will spread, thus impeding the government of Alberta's
effective management of its forests.
The government instituted the Timber Salvage Incentive Program effective November 1, 1981 through October 31, 1983. The
program provides an incentive of $34 per thousand board feet of timber produced from fire-killed and beetle- killed timber. These
payments are available to all present and future timber harvesters.
Therefore, we determine that the Timber Salvage Incentive Program does not cover countervailable benefits because it is not
limited to a specific enterprise or industry, group of enterprises or industries, or to companies in
(Cite as: 48 FR 24159, *24172)
specific regions.
b. Alberta Opportunity Company. The Alberta Opportunity Company (AOC) is a provincial Crown corporation funded by the
government of Alberta. We reviewed with company officials the annual reports and other records of AOC and found that a variety
of industries in the manufacturing and service sectors received assistance from AOC and that the lumber and wood products
producers received only a small percentage of the total assistance provided by AOC. Therefore, we determine that because AOC
aid is not limited to a specific industry, group of industries, or to companies in specific regions, it is not countervailable.
2. British Columbia--Section 88 Roads. Under section 88 of BC's Forest Act, certain licensee expenditures for constructing
approved roads on Crown lands are credited against total stumpage dues payable to the province. Such costs are beyond those
considered to be normal operating costs of an efficient logger, which are taken into account in BC's stumpage appraisal system
(described in the "British Columbia" section of Appendix B).
The Ministry of Forests grants section 88 road credits because section 88 roads serve to open up areas to recreationalists and
other resource users, and are of higher standards than required by loggers. Licensee expenditures for these main access roads are
not considered in the stumpage appraisal system. The companies who build the roads receive a credit against stumpage payments
for the agreed-upon construction costs. Section 88 roads are under the
(Cite as: 48 FR 24159, *24172)
jurisdiction of the Ministry of Forests, but licensees are responsible for maintaining them.
We determine that section 88 road credits do not confer a subsidy because these roads are build to higher standards than
necessary for normal logging purposes and are open to and used by the general public.
3. Ontario. a. Employment Development Fund. The Employment Development Fund (EDF) was created in the spring of 1979 by an
administrative action of the Cabinet of Ontario. The fund was designed to increase long-term investment and employment in the
province through the provision of grants and loan guarantees to companies making investments that had the potential to create
new jobs. Funding was generally limited to between $2,000 and $3,000 per job created where the new fixed asset investment was
from 10 to 20 times the size of the grant. The EDF was terminated in January 1981, although committed disbursements were made
through August 31, 1982. One grant was provided under this program to *24173
(Cite as: 48 FR 24159, *24173)
producers of the products under investigation in 1979.
EDF funding was provided to a wide range of industries in Ontario and was not limited to a specific industry, group of industries, or
to companies in specific regions. Therefore, we determine that the EDF did not confer a subsidy on the products under
investigation.
b. Non-Forestry Subsidiary Agreement Roads. Under the Ontario Forest
(Cite as: 48 FR 24159, *24173)
Management Agreements (described in detail in the "Ontario" section of Appendix B), the province reimburses companies building
primary and secondary roads on Crown lands. These reimbursement provisions are separate from those included in the Canada
-Ontario Forestry Subsidiary Agreement (FSA). (Federal/provincial FSA's and roads covered by them are discussed above in
this section of the notice.)
These roads are open to the public and must be built to standards set by the province to accommodate other users, such as
recreationalists and the mining industries. Reimbursement is on a per-mile basis, up to a set maximum construction cost
established by the Ministry of Natural Resources. The companies are responsible for all maintenance.
We determine that assistance provided for road construction under Ontario's forest management agreements does not confer a
subsidy because these roads are build to higher standards than necessary for normal logging purposes and are open to and used
by the general public.
4. Quebec.--a. Caisse de Depot et Placement du Quebec. The Caisse de Depot et Placement du Quebec
(CDPQ) was established by an Act of the Assemblee Nationale of Quebec in 1965. Under the trusteeship of the provincial
Ministere des Finances and the Regie des Rentes of Quebec, CDPQ manages several pension funds and insurance
programs, namely:
The universal auto insurance program against physical injury to persons;
(Cite as: 48 FR 24159, *24173)
A specific insurance program for farmers;
The universal pension plan for all citizens of Quebec; and
Specific pension plans for all Quebec civil servants and construction workers.
CDPQ is prevented by law from acquiring more than 30 percent of any company's common stock, and from making funds available
to companies on other than commercial terms. Indeed, CDPQ is compelled by law, as a fiduciary institution, to invest pension and
insurance funds in order to achieve the best possible return on investment for the benefit of its annuitants.
We verified that CDPQ funds are invested over a broad spectrum of industries not only throughout Quebec and Canada,
but also on the international financial markets. Accordingly, we determine that none of the producers of the products under
investigation received any countervailable benefits from CDPQ.
b. FRI Industrial Incentives Fund for Small and Medium-Sized Businesses.This program, which falls under the aegis of FRI (see the
"Programs Determined to Confer Subsidies" section of this notice), was established to allow small and medium-sized firms to
deposit one half of their income tax payable to the province into an escrow fund, from which they could withdraw funds
equivalent to 25 percent of the cost of approved development projects (up to the amount of their deposit only). The program was
discontinued in June, 1981.
(Cite as: 48 FR 24159, *24173)
We verified that producers in a wide range of industries in all regions of Quebec participated in this program. Because the FRI
Industrial Incentives Fund was not limited to a specific industry, group of industries, or to companies in specific regions, we
determine that it did not confer subsidies on the products under investigation.
c. Programme Experimental de Creation d'Emplois Communautaires. The Programme Experimental de Creation
d'Emplois Communautaries (PECEC), administered by the Office de Planification et de Developpement du Que>= 1bec (OPDQ),
makes cash payments to entrepreneurs to assist them in maintaining and creating jobs for the chronically unemployed. A few
producers of the products under investigation received grants under this program, as did producers in many other industries. We
verified that the program was not limited to a specific industry, group of industries, or to companies in specific regions.
Accordingly, we determine that this program does not confer subsidies on the products under investigation.
d. PME-Innovation. The PME-Innovation (PME-I) program, which was discontinued late in 1981, was administered by the
Ministere de l'Industrie, du Commerce et du Tourisme of Quebec. Its purpose was to assist small and medium-sized
businesses ("petites et moyennes entreprises") in obtaining capital for investment in a production or marketing project. Under this
program, one loan was made to a softwood lumber consortium. We verified that PME-I assistance
(Cite as: 48 FR 24159, *24173)
was not limited to a specific enterprise or industry, group of enterprises or industries, or to companies in specific regions of the
province of Quebec. Therefore, we determine that the program does not confer a subsidy on the products under investigation.
e. SDI Programs. The Export Expansion Program administered by SDI is discussed in the "Programs Determined to Confer
Subsidies" section of this notice. In addition, SDI manages a number of domestic programs of which producers of the products
under investigation availed themselves. These programs fall under two headings: development grant programs and a loan and
loan guarantee program, entitled "Financial Assistance to Manufacturing Firms."
(1) Development Grant Programs. Grants for SDI domestic development programs are in the form of cash reimbursements for
interest costs accrued on a company's investment.
(a) Financial Assistance for High-Growth Firms. To be eligible for this program, a firm must be located and have its headquarters
in Quebec, and its growth and profitablity rates must equal or exceed the provincial average.
(b) Financial Assistance Program for Mergers and Acquisitions. Under this program, which was discontinued in the summer of
1982, SDI paid a percentage of the investment costs involving stocks or assets in an approved merger. Benefits paid under this
program were sometimes combined with reductions in interest rates on loans bestowed under the program described in (2)
below.
(Cite as: 48 FR 24159, *24173)
Under each of these programs, the overall maximum grant amount is a certain percentage of the investment cost. Grants are
generally disbursed for five years in equal annual installments. Regardless of the authorized maximum, the annual disbursement
can never exceed actual interest paid by the company in a given year.
We note that in our final affirmative countervailing duty determination on "Railcars from Canada" (48 F.R. 6569,
February 14, 1983), we erroneously determined SDI's domestic programs to be countervailable on the basis that their availability
only in Quebec made them region-specific within the broader context of Canada. In fact, since it is a program of the GOQ
and is generally available throughout Quebec, it is not region-specific.
Further, we erroneously calculated the benefit by considering funds authorized instead of funds actually disbursed. The petition
was withdrawn and the case terminated before we discovered these two errors. We have now calculated *24174
(Cite as: 48 FR 24159, *24174)
that the correct subsidy in that case, after deduction of the improperly applied SDI "benefit" of the U.S. $173 per railcar, was
actually U.S. $110,392 per railcar, instead of the U.S. $110,565 as set forth in the final determination (a reduction of 0.16
percent).
(2) Financial Assistance to Manufacturing Firms. Under this program, SDI makes loans and loan guarantees to profitable firms that
prove they cannot obtain financing through normal channels. Since 1981, SDI has used a monthly
(Cite as: 48 FR 24159, *24174)
composite of long-term commercial interest rates of the ten major lenders in Canada. We verified that SDI loans are made on
terms not inconsistent with commercial considerations. Moreover, their availability is not limited to a specific industry, group of
industries or to companies in specific regions.
Therefore, we conclude that the above SDI grant and loan programs do not confer subsidies within the meaning of the Act.
III. Programs Determined Not To Be Used
We determine that the following programs which were listed in the notice of "Initiation of Countervailing Duty
Investigations" are not used by the manufacturers, producers, or exporters of the products subject to these investigations.
A. Federal Programs.
Enterprise Development Program--Loans. The Enterprise Development Program includes a component that provides loans to
companies, as described in the "Programs Determined Not To Confer Subsidies" section of this notice. We found that no loans
under the EDP were issued to producers of the products under investigation. We determine that this part of the EDP program was
not used by
(Cite as: 48 FR 24159, *24174)
producers of the products under investigation during the period for which we are measuring subsidization.
B. Federal/Provincial Programs
Canada/Nova Scotia Forestry Subsidiary Agreement--Grants. Subsidiary agreements for forest management could be
negotiated under the GDA's. Forestry subsidiary agreements have been reached with seven provinces.
Under the Nova Scotia forestry subsidiary agreement, grants were provided to producers of the products under investigation
under two components, the sawmill improvement component and the forest management component. The forest management
component grants are discussed in the "Programs Determined Not to Confer Subsidies" section of this notice. The forestry
subsidiary agreements with other provinces are discussed in other sections of this notice, as appropriate.
The sawmill improvement component of the Canada-Nova Scotia Forestry Subsidiary Agreement provided grants of up to
$50,000 per mill to encourage the adoption of improved sawmilling technology, better safety and improved conditions. We
found that the grants under this component were designed and used to offset the short-term operating expenses and the lower
productivity associated with the installation of improved sawmilling technology and better
(Cite as: 48 FR 24159, *24174)
safety and working conditions in the recipient mill.
Producers of the products under investigation received improvement grants between 1978-1981, but not in 1982. Because the
grants were used to offset short-term operating expenses, we would allocate them to the year received. Because no grants were
provided to producers of the products under investigation in 1982, we determine that this program was not used during the
period for which we are measuring subsidization.
C. Provincial Programs
1. Alberta--Inventory Financing. The Alberta Inventory Financing program was administered by the Alberta Opportunity
Company. Although the program was approved, there were no disbursements made under it, and the program is now longer in
effect. Producers of the products under investigation did not use the program during the period for which we are measuring
subsidization.
2. British Columbia.-Market Development Assistance (MDA). The MDA program is designed to benefit manufacturers of new,
innovative products who are attempting to develop new export markets. Only two or three producers/exporters of the products
under investigation have received support under this program, and all were assessing markets other than the United States.
Therefore, we determine that this program was not used by
(Cite as: 48 FR 24159, *24174)
producers/exporters for exports to the United States of the products under investigation during the period for which we are
measuring subsidization.
3. Quebec--SDI--Financial Assistance Program to Advanced Techology Firms. Financial Assistance to Advanced Technology
Firms is one of the three domestic development grant programs administered by SDI (see the "Programs Determined Not To
Confer Subsidies" section of this notice). To be eligible for assistance under this program, a firm must demonstrate
higher-than-average productivity, and the individual investment for which the grant is awarded must be at least $50,000. Since
the program's inception in 1974-75, producers of the producers of the products under investigation have not met these basic
eligibility requirements, and we verified that none of these producers received funds under the program. We determine that this
program was not used by any of the producers of the products under investigation during this period for which we are measuring
subsidization.
Comments. The issues raised by the parties during of these investigations are discussed in detail in Appendix C to this notice.
Verification. In accordance with section 776(a) of the Act, we verified the data used in making our final determinations. During
this verification, we followed normal procedures, including inspection of documents, discussions with government officials at the
federal and provincial levels and on-site inspection of manufacturers' operations and records.
(Cite as: 48 FR 24159, *24174)
Administrative Procedures. The Department has afforded interested parties an opportunity to present oral views in accordance
with its regulations (19 CFR 355.35). The only request for a public hearing was withdrawn. In accordance with the Department's
regulations (19 CFR 355.34(a)), timely written views have been received and considered.
This notice is published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d)).
Lawrence J. Brady,
Assistant Secretary for Trade Administration.
Appendix A--Description of Products
The products covered by these investigations are described below:
The term "softwood lumber" covers those products included in the Tariff Schedules of the United States (1982) (TSUS) in items
202.03-202.30 (rough, dressed, or worked softwood lumber). Specifically excluded are drilled and treated lumber, wood siding,
and edge-glued or end-glued wood not over 6 feet in length or over 15 inches in width. "Rough lumber" is lumber just as it comes
from the saw, whether in its original sawed size or edged, resawn, crosscut, or
(Cite as: 48 FR 24159, *24174)
trimmed to smaller sizes. "Dressed lumber" is lumber which has been dressed or surfaced by planing on at least one edge or face.
"Worked lumber" is lumber which has been matched (tongue-and-grooved), shiplapped (rabbeted or lapped joint), or patterned on
a matching machine, sticker, or molder.
2. The term "softwood shakes and shingles" refers to wood products most frequently made from red cedar, that are used for
roofing or siding. "Softwood shakes" are *24175
(Cite as: 48 FR 24159, *24175)
approved durable wood of random widths ranging from 4 inches to 14 inches which come in four types: hand-split and resawn,
taper- split, straight-split and taper-sawn. "Softwood shingles" are tapered pieces of approved durable wood, sawed both sides, of
random widths ranging from 3 inches to 14 inches and in lengths of 16 inches, 18 inches or 24 inches. For purposes of this
investigation, the term "softwood shakes and shingles" refers only to those products designated in TSUS as item 200.85.
3. The term "softwood fence" refers to three types of fences: picket, stockade, and rail. Picket fences are made of wood pickets
nailed to horizontal back rails which are fastened to the supporting posts. The pickets vary in length and thickness, lengths range
from 24'' to 92'', and thickness varies from 1/2 '' to 3''. The species of wood used in picket fences is usually cedar for the posts and
conifers or softwoods for the backrails and pickets. Rail fences consist of line posts and horizontal rails. Cedar is generally used for
the line posts and cedar or conifers or northern softwood
(Cite as: 48 FR 24159, *24175)
are used for the rails. Stockade fences vary in height from 3 feet to 10 feet. Widths are usually 7 feet or 8 feet. Line posts are
generally cedar, and stockade sections are made from northern softwoods. This investigation covers softwood fences both
assembled and unassembled, which fall under TSUS item 200.75.
Appendix B--Provincial stumpage
Provincial Crown lands account for 81 percent of the productive forest lands in Canada. Under the terms of the Canadian
Constitution, provincial crown lands fall under the jurisdiction of the provincial governments which are exclusively responsible
for the management and administration of the forests on these lands.
Alberta
Background
Approximately two thirds of Alberta is covered by forests, almost all of which are owned by the provincial government. Most of
the forested area is inaccessible, and logging can only be carried out during winter when the ground
(Cite as: 48 FR 24159, *24175)
is frozen. According to the provincial government, cold-weather logging increases timber harvesting costs. Managed by the
Alberta Forest Service under a long-term sustained yield policy, the forests are divided into forest management units which are
allocated under the stumpage allocation arrangements described below. Only 60 percent of the annual allowable cut (AAC) has
been allotted under the stumpage allocation arrangements, because supply exceeds demand. Any company, including foreign
companies, registered in Alberta or Canada can be awarded stumpage rights under the various allocation arrangements.
Softwood lumber is the only product under investigation manufactured in Alberta. Lumber accounted for 61.7 percent by volume
of the coniferous round timber harvested in 1981. Plywood accounted for 8.9 percent pulpwood 25.9 percent.
Stumpage Allocation Arrangements
There are five stumpage allocation arrangements in Alberta:
Forest Management Agreement (FMA);
Timber or Coniferous Quota Certificate (Quota);
Commercial Timber Permit (CTP);
Local Timber Permits; and
(Cite as: 48 FR 24159, *24175)
Forest Products Tags.
FMA's and Quotas are 20-year allocations, while the CTP's can range from one to five years, and Local Timber Permits and Forest
Products Tags are limited to terms of one year or less. The rights to cut standing timber under any of these allocation
arrangements do not vary by the type of product that will be manufactured from the stumpage, but they do vary by type of
allocation arrangement.
These arrangements can cover both coniferous and deciduous timber; however different requirements and dues rates are
specified for each type of timber. Under all the allocation arrangements, the Forest Service retains primary responsibility for fire
prevention and suppression, as well as for insect and disease control.
Forest Management Agreement
Currently, there are six Forest Management Agreements (FMA's) outstanding which account for 35.8 percent of the total net
coniferous AAC. The term of each FMA is 20 years with renewal rights for an additional 20 years. The procedure for acquiring
stumpage rights through an FMA is as follows.
The Forest Service advertises a development area and invites proposals for one year. The proposals are analyzed by the Forest
Service and public hearings are
(Cite as: 48 FR 24159, *24175)
held, after which the successful proponent is selected by the government. After selection, the actual agreement is negotiated and
approved by the Cabinet through an Order-in-Council.
The government's intent in allocating timber under an FMA is good use and development of the resource under a long-term
sustained yield policy. In order to achieve this, the company holding an FMA is required to develop a management plan to ensure
sustained yield, and to develop inventory studies, conduct reforestation and regeneration, conduct ongoing silviculture, build
roads, and make a performance guarantee ranging from $25,000 to $2,000,000 in the development area.
In addition to undertaking these responsibilities, the company must pay stumpage dues on the sawlogs harvested. All FMA
holders except one pay the regulation rate of dues set forth in the Timber Management Regulations of the Forest Act of 1971 (one
company negotiated a lower rate of dues in view of the inferior quality of the timber and the need for special equipment). The
Regulatons state that the General Rate of Crown Dues on green coniferous timber suitable for lumber manufacture is $0.70 per
cubic meter. Holders must also pay annual holding and protection charges which cover ground rent and protection costs.
Under the FMA's the provincial government must approve the management plan and the ACC in accordance with Timber
Management Regulations.
(Cite as: 48 FR 24159, *24175)
Timber Quota Certificates
The quota certificate (Quota) is a long-term right to harvest a share of the AAC of a forest management unit. Implemented in 1966,
the Quota system replaced the short-term competitive bid system. Currently, the Quota system accounts for 19.9 percent of the
total net coniferous AAC. The purpose of the Quota system was threefold:
1. to eliminate abuses inherent in the bid system, such as speculation resulting in timber being held and not cut;
2. to ensure that a fair price would be paid and that timber would be cut; and
3. to provide timber operators with a long-term secure stumpage supply in order to encourage industry to make capital
investments in the area.
In 1966, quotas were granted to all established timber operators for up to 20 years based on each operator's average production
from 1960 through 1964. Most quotas issued since 1966 have been sold competitively.
The 20-year term of the Quota is divided into five-year periods. At the end of every five-year period, a Quota holder is subject to
penalties, including revocation of the Quota, if the amount of timber harvested is not within ten percent of the total of the AAC's
for the five-year period.
(Cite as: 48 FR 24159, *24175)
In order to cut the timber authorized in the Quota, a holder must obtain a Timber License and submit, for Forest Service approval,
an annual operating plan for the Timber License. The Quota holder is also responsible for regeneration and reforestation, as well
as for road construction and silviculture.
Stumpage dues paid by the Quota holder are determined through an appraisal formula which modifies the regulation rate of dues
according to logging conditions. The appraisal factor is based on four elements and is fixed for five years:
1. Average haul distance to nearest usable trackage point;
2. Average gross volume per harvestable acre;
3. Average gross volume per tree; and
4. Average cull as a percentage of gross volume.
Timber Management Regulations provide that the minimum rate of dues under the Quota system, after taking into account the
appraisal factor, cannot be less than 25 percent of the regulation rate. The appraisal system takes into account the quality and
accessibility of timber. Quota holders must also pay annual holding and protection charges.
Under the Quota system, the Forest Service is responsible for the sustained yield management plan. The Forest Service lays out
the cutting sequence and selects the areas to be logged.
(Cite as: 48 FR 24159, *24175)
Commercial Timber Permit
The Commercial Timber Permits (CTP's) are short-term (one to five years with an average of two to three years) arrangements
which are sold at public auction to the highest bidder except when issued to Quota holders for the salvage of dead or damaged
timber. Only 2.4 percent of the total net coniferous AAC is allotted under CTP's. Generally, to obtain a CTP the permittee must own
or operate a mill within the area *24176
(Cite as: 48 FR 24159, *24176)
and must not hold any other active stumpage arrangement.
The bidding process for a CTP determines the actual amount of dues to be paid. The minimum starting bid equals the regulation
rate of dues plus the appraisal factor which can be a positive or negative number. This starting bid becomes the upset price which
is added to the highest bid rate in order to establish the rate of dues to be paid. In addition to dues, the CTP holder must deposit a
performance guarantee, pay a reforestation levy, and pay holding and protection charges.
As with the Quota system, CTP holders must submit an annual operating plan for Forest Service approval. Under a CTP, the Forest
Service is responsible for selection of the stands to be cut, silviculture and reforestation (the company pays a reforestation levy).
(Cite as: 48 FR 24159, *24176)
The CTP differs from a Quota in that the CTP represents the right to cut standing timber, while the Quota grants the right to a
certain share of the AAC. As such, while the "value" of the stumpage forms the basis of the bid price for a CTP, the Quota cannot be
based on the "value" of the stumpage, since the share of AAC provided under the Quota varies in accordance with the changes in
the AAC.
Local Timber Permit (LTP)
Issued for a term of one year or less, the LTP authorizes logging for the permittee's own use or to supplement his income by selling
logs to local mills. LTP's account for 1.5 percent of the total net coniferous AAC. LTP's are issued on a first-come, first-served basis
unless demand is high, in which case they are issued by draw.
The dues charged are the regulation rate in effect at the time the LTP is issued. Permittees are exempt from cruising, holding and
protection charges, and only pay a reforestation levy if the volume harvested is over 130 cubic meters.
Forest Products Tag (Tree Tag)
(Cite as: 48 FR 24159, *24176)
Tree Tags are 30-day authorizations to cut timber for personal use or for small volumes of Christmas trees, firewood and
fenceposts. Tree tags are non- renewable and non-refundable. The holder pays the regulation rate of dues, but no other charges.
The percentage of AAC allocated under Tree Tags is negligible.
British Columbia
Background
The Forest Act lists seven different forest tenure arrangements available in British Columbia: Tree Farm Licenses, Forest Licenses,
Timber Sale Licenses (Major), Timber Sale Licenses (Minor), Timber Sales, Pulpwood Agreements and Woodlot Licenses. Annual
rents represent a charge for reserving the use of the resources under license.
On request or independently, the Minister of Forests may advertise and invite applications for licenses. A license may not be
entered into unless there has been an advertisement and a public hearing has been held on all applications.
In addition, the province must evaluate the proposal in terms of its objectives, including revenues, management and use,
environmental issues, and social benefits such as increased employment. Stumpage rights can be awarded