Forestry Giant Not Owed Compensation, BC Supreme Court Rules

A decision by the Supreme Court of British Columbia to reject a $75-million compensation claim made by a logging company that once operated on Haida Gwaii could have reverberations across the province as the government continues its reconciliation efforts with First Nations.

First Nations territories cover every corner of British Columbia. Similarly, B.C.’s forests are overlain by hundreds of renewable, long-term forest licences and tree farm licences that one provincial government after another granted to logging companies over the decades.

Over the years, as tensions have mounted in the face of protests to protect remnant old-growth forests, the conferring of those logging licences has sometimes resulted in big payouts to companies when the province designated new parks in areas previously earmarked for logging.

A prime example is the $84 million in compensation that the B.C. government agreed to pay MacMillan Bloedel in 1999 after the government created a number of new parks on Vancouver Island, including parts of Clayoquot Sound, which had been the site of the then-most sustained act of civil disobedience in Canadian history as hundreds of protesters were arrested for defying a court injunction and blockading logging roads leading into the sound’s ancient forests.

Blockades set the stage for new rules

In seeking $75 million in compensation for alleged losses of portions of its logging tenures on Haida Gwaii, however, Teal Cedar Products Ltd., a subsidiary of the Teal-Jones Group, tried to argue something entirely different: that changes to where it could log, how it could log and when it could log amounted to a form of expropriation for which the company should be compensated millions in taxpayer dollars.

Earlier this month, Teal lost its bid for compensation when B.C. Supreme Court Justice Brenda Brown released her decision.

Teal’s lawyers had argued unsuccessfully that the actions of a special management body unique to Haida Gwaii and known as the Haida Gwaii Management Council, or HGMC, had effectively taken away portions of Teal’s logging tenures and that the company was now owed tens of millions of taxpayer dollars.

From the outset, HGMC members were guided by a new set of guidelines grounded in an “ecosystem-based management” approach to the islands’ forests as opposed to the largely timber-only management regime that had prevailed for generations before.

The previous regime had galvanized members of the Haida Nation to launch logging blockades in 1985 that garnered headlines around the world and ultimately stopped old-growth logging on most of the islands comprising Gwaii Haanas, the southern portion of the Haida Gwaii archipelago.

Much of what followed in the ensuing decades, including the creation of the HGMC, flowed from those historic blockades and a number of court actions to follow.

“We have devised a practical way to work together in providing for the well-being of the lands,” then-Haida Nation president Guujaaw said of the HGMC when it was unveiled on April 13, 2011. “Having resolved many of the immediate conflicts, co-operation in planning and management will set the condition for a more orderly future.”

A year after the council was unveiled it delivered a momentous decision, when the approved aggregate logging level on Haida Gwaii was reduced by nearly half from 1.8 million cubic metres per year to 929,000 cubic metres per year.

“New or changed constraints on the land base,” as Justice Brown wrote in her decision, included “new reserves” where no logging would be permitted and also increased regulatory requirements.

“The effect of these changes was to reduce the available land base that licensees were able to access for harvesting,” Brown wrote, adding that this also came at the expense of additional planning and development costs for all logging companies operating on the archipelago, including the Haida Nation’s own logging company, Taan Forest.

Teal was among the companies that had to adjust to the new realities arrived at jointly by the provincial government and Haida Nation. The forests it had once assumed it would log after purchasing licences previously held by TimberWest Forest Corp. in 1997 were no longer available.

Teal reaches a ‘pinch point’

By 2014, a consultant hired by the company told Teal that it was rapidly reaching a “pinch point” where its projected supplies of timber from Haida Gwaii would fall, resulting in declining numbers of logs for its mills in the Lower Mainland. In just a couple of years, the consultant said, Teal would be able to log only about 30,000 cubic metres of timber from the islands per year.

Two years after receiving that report, Teal sold its licences on Haida Gwaii for $5.4 million to A&A Trading, a company active in the log exporting business. And then it launched its compensation claim, naming the province and Haida Gwaii Management Council as defendants.

In her decision, Justice Brown noted that Teal’s position was that the HGMC’s actions amounted to a “constructive taking.” While not a formal expropriation, Teal said the council’s actions amounted to a de facto partial taking of property, for which the company should be compensated.

“However,” Justice Brown noted, “Teal’s position depends on whether you look at the restricted areas alone or at the tenures as a whole, because Teal did not lose the ability to harvest in non-restricted areas.”

In other words, while the HGMC had placed restrictions on where logging could occur, Teal was still free to apply to build roads into and log certain forests where restrictions were not in place.

Justice Brown ultimately ruled in favour of arguments advanced by Chris Tollefson, who was senior counsel for the HGMC.

In final arguments before the court, Tollefson noted that Teal at no time “possess[ed] property rights to the standing timber under its tenures.”

Licences offer an ‘opportunity to be in the ball game’

“At best,” Tollefson’s submission stated, “the Tenures offered an opportunity to harvest subject to securing applicable cutting and road permits.”

Tollefson would go on to argue that Teal’s tree farm licence and forest licence — just like any other tree farm licence or forest licence bestowed to any other forest company — did not give it the right to log trees wherever and whenever it chose within its licensed areas.

“No harvest at all can occur absent a cutting permit, and the Plaintiff has no right to harvest at any particular location of its choosing within the licence area,” Tollefson argued.

“Rather, both forms of tenure are governed by a regulatory regime that imposes a range of site-specific limitations on where harvesting may occur. Under this regime, a licensee is not entitled to harvest timber in a way inconsistent with valid objectives. In short, the Plaintiff has no legally cognizable, vested property right in the Tenures in toto or in any portion thereof.”

That argument held sway with Justice Brown.

“I am not persuaded that the tenures conferred a property interest or right on Teal,” she wrote in her judgment. “In this case, the tenures were not a vested right. Rather, their use was contingent on the licensee obtaining various permits or authorizations, like a road or cutting permit.”

In a subsequent interview with The Tyee, Tollefson said that “a park analogy is not apt to what happened here.” Teal and other companies holding forest licences and tree farm licences are given an “opportunity to be in the ball game.” But the rules governing that game can and do change. And companies know that or should know that when they choose to apply for such licences.

Allan McDonell, a retired lawyer who was appointed a Queen’s counsel in 1998, told The Tyee that the language in forest licence and tree farm licence documents is similar across the board, and that there was nothing special about Teal’s circumstances.

Tenure holders are not protected “from the consequences of a reduction” in permissible logging “where the province acts in good faith to accommodate Aboriginal interests and advance reconciliation,” McDonell told The Tyee. “Such actions are mandated by the province’s constitutional responsibilities, and they take precedence.”

Justice Brown’s decision, McDonell said, rejected Teal’s arguments that it was entitled to compensation. Any other logging company would find itself in a similar boat if the province, acting alone or in conjunction with another First Nation as it did with the Haida, were to make similar regulatory changes in good faith.

“We welcome this judgment that strongly affirms the HGMC has the mandate and the authority to make decisions that best maintain the cultural and environmental integrity of Haida Gwaii,” Allan Davidson (Chief Skil Hiilans), the current chair and founding member of the HGMC, said following the decision.

The Tyee submitted questions to Teal-Jones, which filed for creditor protection last year, but did not receive a reply before publication.