Forestry companies may have cheated the province out of $138 million in stumpage fees from the first quarter in 1998 to the second quarter of 2000, according to an investigative report initiated by Forests Minister Gordon Wilson.
Wilson started the investigation in response to rumours that forestry companies were paying junk wood rates for prime timber, and discovered that the five major companies in the province Interfor, Weyerhauser, TimberWest, Western Forest Products and West Fraser Timber have knowingly engaged in a practice known as "grade setting".
The practice involves logging companies going into a cutblock and cutting only the low grade timber. A Ministry of Forests worker then looks at the low-grade cut wood and assigns a stumpage value to the entire block that is well-below market value and doesnt accurately reflect the true timber value of an area.
On one Interfor cutting permit alone, grade setting techniques resulted in the initially appraised stumpage rate falling from $41 per cubic metre to just $2.19, saving the company $5 million. In the fourth quarter of 1999, more than half the wood logged by Interfor on the coast was assessed at 25 cents per cubic metre.
In response to the findings, Wilson has called for a stumpage management meeting with the coastal forest industry to address concerns.
"The ministrys preliminary information suggests that while most licencees are operating within the policy and legislation, others continue to manipulate the system," says Wilson. Staff have introduced new scaling practices this month to improve the accuracy of price scaling, and have started a series of field audits to ensure that companies are scaling or measuring and reporting the volume and grade of cut timber soon after it is cut.
"These measures to curtail stumpage management are in place, but other action may also be needed," said Wilson. "I am prepared to allow industry input into further changes to halt these practices while avoiding unnecessary financial burdens for those companies who are playing by the rules."
About 86 per cent of all stumpage payments for the coast were determined by the old system, which was more open to abuses.
The Sierra Legal Defence Fund, which has been conducting an investigation of its own based on Wilsons findings, say $138 million is just the tip of the iceberg.
In a recent report titled "Stumpage Sellout" Sierra Legal says that as much as $6 billion in stumpage fees would have been collected by the government if major forest companies paid market rates for logs between 1993 and 1998.