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Coastal BC stumpage : an in-depth explanation of the BC coastal stumpage determination process Yano, Jordan Apr 8, 2015

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    Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process  Final Submission – April 8th, 2015 For FRST 497 Graduating Requirement For Review by: Professor Dennis Bendickson and Dr. George Hoberg    By: Jordan  Yano Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  i | P a g e   Abstract The stumpage system in British Columbia is broken into two different appraisal systems, one for the coast region and one for the interior. The current coastal appraisal system causes confusion within the industry and usually results in the need for an expert to handle all of the stumpage compilation needs for a company, and another person to calculate a rate on behalf of the Provincial Government. This discussion paper looks at the coastal appraisal system for areas held by licensees and by the BC Timber Sales system, and how the system calculates a final stumpage rate for both. By rearranging the equations used by the appraisal process, it has been determined that the final rate is highly variable depending on microsite conditions, and therefore the system should be critically examined and refined by the governing body. Two such modifications are briefly examined; one using a straight taxation system and the other examines the use of an escrow account, which licensees can withdraw from for required silviculture treatments.  Acknowledgements The author would like to extend a sincere thank you to his primary advisor for this graduating essay, Professor Dennis Bendickson for his continual help with the topic. He would also like to thank Larry Henkelman at Western Forest Products in Gold River for his generous help throughout the writing process and guiding the initial research efforts. Finally, the author would like to thank the management team at Alternative Forest Operations, Sig Kemmler, Jason Kemmler, Bridger Schmidt and Jeremy Elliott, for giving guidance on choosing an interesting and valuable topic for research. Without the help of these individuals and the authors’ colleagues, this graduating essay would not have been possible. Keywords Stumpage, British Columbia, Forestry, Coast, Appraisal, Market Pricing System, BCTS    Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  ii | P a g e   Glossary of Terms All of the terms described below are important to understand when determining a stumpage price. The abbreviated variable is listed first, followed by an explanation and then the associated units in square brackets, if applicable. They are listed in alphabetical order, grouped by equation that the respective variables belong to.  Estimated Winning Bid (EWB) Equation  ALP: Average conifer log selling price [m3] CEDARCYPRESS: Fraction of conifer cruise volume that is cedar and cypress, decimal rounded to 2 places      [unitless] CPIF:  BC Consumer price index measured against 2002 and reported monthly, multiplied by a calculated constant of 0.01078 [unitless] CRUISE: If cruise is used to grade logs for appraisal for more than 50% of the total net cruise, then this equals 1, if not then it is 0 [unitless] DFIR2: If selling price zone is 52 then this equals the fraction of douglas-fir in the stand, otherwise it is 0 [unitless]  DISTAVGBID: Average number of bidders for the forest district, table of values found in Appendix 3 [unitless] GAMBDIST400: Average straight line distance, weighted by net cruise volume, to Gambier Island, if it is greater or equal to 400 km then this equals 1, if not than it is 0 [unitless] HELI: Fraction of volume that is harvested by helicopter, skyline or any system that suspends logs for more than 600 m straight line to closest landing [unitless]  ISOLATED: Value of 1 given if all parts of the cutting authority or heli-service landings are not connected by a road suitable for motor vehicles to the center of the nearest community, if not then it is 0 [unitless] Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  iii | P a g e   LOCATION: Average straight line distance, weighted by net cruise volume, to nearest listed major city center, based on BC Albers [km] LUMPSUM: If cutting authority is a cruise-based competitive timber sale without a need to change the stumpage rate over the landscape then this is 1, if not then it is 0 [unitless] PIECESIZE: Cruise data for coniferous net volume per 10 m log, rounded to 2 decimals [m3] SLOPE: Average percent slope in non-helicopter harvested areas [%] Selling Price Zone 52: Describes when the pricing system is used for second growth timber, therefore, old growth is excluded from this selling price zone [unitless] VOL: If the annual allowable cut of a timber license is greater than 10,000 m3 then this value is 28,882, if it is not than this equals the total net cruise volume that is coniferous [m3] VPH: Volume per hectare rounded to 2 decimals. See Appendix 1 for a description of the actual equation [m3/ha] Tenure Obligation Adjustments (TOA) Equation  BS: The cost a licensee incurs from implementing various silviculture prescriptions. Adjustments vary by forest district and vary from $2.89/m3 to $8.97/m3. See Appendix 2 for a complete table of costs by silviculture prescription.  FPA: The cost incurred for forest planning and administration activities. These include the costs incurred for long term management on public land, incurred by the licensee, not the market logger. Total adjustment is $12.39/m3. LG: This is an allowance for low grade fraction by timber species on the land base. It is determined by calculating the sum of the volume of each timber species and multiplying that by its associated low grade fraction coefficient. The sum of all adjusted species is then divided by the total net cruise volume to get a value for low grade fraction. The list of low grade fraction coefficients can be found in Appendix 6.  Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  iv | P a g e   LVC: An adjustment made for a low volume permit. If the cutting authority provides an annual allowable cut less than 10,000m3 and has a total net cruise volume less than 10,000m3, then the adjustment can be made. Total adjustment for low volume is $7.51/m3. MLC: This is the market logger cost; it tries to simulate the actual cost incurred for road and tree crown modification, of the logger who is responsible for harvest of the timber in the timber sale area. Formulas for determination by old growth and second growth can be found in Appendix 1.  RD: An allowance for road development into a cutting permit. It includes cost of road and bridge construction and deconstruction, culvert installation and extending existing roads. The total adjustment is calculated as an algorithm based on project costs and total net cruise volume. See Appendix 5 for a description of how this is calculated. RFM: This is a factor that aids in the return on capital employed for forest management. RFM applies to the tenure obligation adjustment equation, and the value is currently 1.069. RM: The cost of maintaining roads where logs will be transported over road by truck. Includes, but isn’t limited to, activities from grading and repairs to deconstruction. The final adjustment is $1.45/m3. RU: Charges that may be incurred as a result of paying to use roads not owned by the crown to haul logs. Must be approved by the regional manager and typically does not include charges for road use on an Indian Reserve or private lands. The total adjustment is calculated as a cubic meter rate of total cost of using the road. Volume Per Hectare (VPH) Equation  HS: The volume harvested by helicopter, not including single stem selection systems. HSSSS: The volume harvested by helicopter single stem selection systems. NHSVPH: The volume per hectare not selected by any helicopter harvesting method.   Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  v | P a g e   Market Logger Cost (MLC) Equation  HW: The fraction of the harvestable timber that is harvested by helicopter and water dropped,  BCTS: The cost of the infrastructure that BC timber sales constructs, and is currently set at $0.35/m3,  LG: Low grade fraction determined in the tenure obligation adjustment equation, and CTSSO: A cost for competition built into the market pricing system model, called the competitive timber sales specified operation cost, and is currently set at $0.26/m3.  Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  vi | P a g e   Table of Contents ABSTRACT ............................................................................................................................................................... I ACKNOWLEDGEMENTS ........................................................................................................................................... I KEYWORDS ............................................................................................................................................................. I GLOSSARY OF TERMS ............................................................................................................................................. II ESTIMATED WINNING BID (EWB) EQUATION ............................................................................................................... II TENURE OBLIGATION ADJUSTMENTS (TOA) EQUATION .................................................................................................. III VOLUME PER HECTARE (VPH) EQUATION .................................................................................................................. IV MARKET LOGGER COST (MLC) EQUATION ................................................................................................................... V LIST OF FIGURES................................................................................................................................................... VII LIST OF TABLES .................................................................................................................................................... VII INTRODUCTION ..................................................................................................................................................... 1 BACKGROUND ....................................................................................................................................................... 1 DETERMINATION .................................................................................................................................................... 2 METHODS .............................................................................................................................................................. 4 EQUATION DESCRIPTION ........................................................................................................................................... 4 RESULTS ................................................................................................................................................................. 6 VARIANCE WITHIN TENURE OBLIGATION ADJUSTMENT .................................................................................................... 6 VARIANCE WITHIN SPECIFIED OPERATIONS ADJUSTMENT ................................................................................................. 7 VARIANCE WITHIN ESTIMATED WINNING BID ................................................................................................................ 7 DISCUSSION: ........................................................................................................................................................ 10 COMPLIANCE AND ENFORCEMENT: ............................................................................................................................ 10 BLENDING RATES .................................................................................................................................................. 10 GUIDE TO STUMPAGE DETERMINATION ...................................................................................................................... 12 POSSIBLE ALTERATIONS TO THE SYSTEM...................................................................................................................... 13 CONCLUSION ....................................................................................................................................................... 14 REFERENCES ......................................................................................................................................................... 15 APPENDIX 1 - EQUATIONS USED .......................................................................................................................... 17 ESTIMATED WINNING BID ....................................................................................................................................... 17 SPECIFIED OPERATIONS ADJUSTMENT ........................................................................................................................ 17 TENURE OBLIGATION ADJUSTMENT ........................................................................................................................... 17 VOLUME PER HECTARE (VPH) ................................................................................................................................. 17 MARKET LOGGER COST .......................................................................................................................................... 18 APPENDIX 2 -TABLE OF BASIC SILVICULTURE COSTS............................................................................................. 19 APPENDIX 3 - AVERAGE NUMBER OF BIDDERS BY FOREST DISTRICT .................................................................... 20 APPENDIX 4 - ROAD MANAGEMENT COSTS EXPLAINED ....................................................................................... 21 ROAD ESTIMATE FLOWCHART .................................................................................................................................. 22 APPENDIX 5 - LIST OF LOW GRADE FRACTIONS .................................................................................................... 25 APPENDIX 6 – BLENDING RATES CALCULATIONS .................................................................................................. 26 Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  vii | P a g e    List of Figures  FIGURE 1: STUMPAGE DETERMINATION FLOWCHART. ADAPTED FROM "MARKET PRICING SYSTEM - COAST", BY THE REVENUE BRANCH, 2004. (REVENUE BRANCH, 2004) ......................................................................................................................... 3 FIGURE 2: THE SENSITIVITY OF MARKET LOGGER COST BASED ON CHANGING FRACTIONS OF VOLUME HARVESTED BY HELICOPTER. ............ 6 FIGURE 3: RELATIONSHIP BETWEEN THE ESTIMATED WINNING BID AND FRACTION OF HARVESTED VOLUME THAT IS CEDAR OR CYPRESS .. 7 FIGURE 4: THE RELATIONSHIP BETWEEN ESTIMATED WINNING BID AMOUNT AND THE FRACTION OF VOLUME TAKEN BY HELICOPTER OR SKYLINE HARVESTING SYSTEMS ............................................................................................................................... 8 FIGURE 5: A GRAPHICAL REPRESENTATION OF THE RELATIONSHIP BETWEEN THE ESTIMATED WINNING BID AND FRACTION OF THE STAND THAT IS HARVESTED BY HELICOPTER. ........................................................................................................................ 9 FIGURE 6: ROAD ESTIMATE FLOWCHART. ALL INFORMATION IS ADAPTED FROM THE COAST APPRAISAL MANUAL. TABLES DESCRIBED WITHIN THE CHART CAN BE FOUND ON THE FOLLOWING PAGE ................................................................................................. 22 FIGURE 7: BLENDING BLOCKS CALCULATIONS PAGE. THE NET VOLUME SHOWN IS A REDUCTION OF 1/3 OF THE GROSS VOLUME, AND THE AVERAGE STAND SELLING PRICE IS I GRADE DOUGLAS FIR PRICES FOUND MARCH 5TH 2015. ................................................ 26  List of Tables  TABLE 1: DESCRIPTION OF A HYPOTHETICAL LOGGING BLOCK. LOGGING COSTS WERE ESTIMATED AND ARE ARBITRARY FOR THIS EXERCISE. 11 TABLE 2: BLENDING OF STUMPAGE RATES ACROSS TWO BLOCKS. ALL VARIABLES WERE KEPT CONSTANT EXCEPT FOR THE ONES THAT ARE AFFECTED BY AN INCREASE IN HELICOPTER LOGGING ACTIVITIES .SEE APPENDIX 6 – BLENDING RATES CALCULATIONS FOR AN EXPLANATION. ................................................................................................................................................. 11 TABLE 3: REVENUES AND PROFITS SHOWN FOR EACH LOGGING METHOD EXAMINED. .................................................................. 12 TABLE 4: STUMPAGE SAVINGS EXPRESSED AS A CHANGE PER PERCENT OF INCREASE OF THE INDICATED VARIABLE. .............................. 14 TABLE 5: TABLE OF BASIC SILVICULTURE COSTS. NOTE. REPRINTED FROM “COAST APPRAISAL MANUAL,” BY TIMBER PRICING BRANCH, 2014.(TIMBER PRICING BRANCH, 2014) ............................................................................................................... 19 TABLE 6: AVERAGE NUMBER OF BIDDERS BY FOREST DISTRICT. NOTE. REPRINTED FROM “COAST APPRAISAL MANUAL,” BY TIMBER PRICING BRANCH, 2014.(TIMBER PRICING BRANCH, 2014) .................................................................................................. 20 TABLE 7: ROAD COST ESTIMATES EXPRESSED IN CANADIAN DOLLARS PER KILOMETER OF ROAD LENGTH. NOTE. REPRINTED FROM “COAST APPRAISAL MANUAL,” BY TIMBER PRICING BRANCH, 2014.(TIMBER PRICING BRANCH, 2014) ........................................... 23 TABLE 8: LOG BRIDGE ESTIMATES EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS. NOTE. REPRINTED FROM “COAST APPRAISAL MANUAL,” BY TIMBER PRICING BRANCH, 2014. ...................................................................................................... 23 TABLE 9: PERMANENT/PORTABLE BRIDGE COST ESTIMATES EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS. NOTE. REPRINTED FROM “COAST APPRAISAL MANUAL,” BY TIMBER PRICING BRANCH, 2014.(TIMBER PRICING BRANCH, 2014) ................................ 24 TABLE 10:METAL PIPE CULVERT ESTIMATES EXPRESSED IN CANADIAN DOLLARS. NOTE. REPRINTED FROM “COAST APPRAISAL MANUAL,” BY TIMBER PRICING BRANCH, 2014.(TIMBER PRICING BRANCH, 2014) ............................................................................ 24 TABLE 11: LIST OF LOW GRADE FRACTIONS GROUPED BY 3 LETTER DISTRICT CODE AND TWO LETTER SPECIES CODES. NOTE. REPRINTED FROM “COAST APPRAISAL MANUAL,” BY TIMBER PRICING BRANCH, 2014.(TIMBER PRICING BRANCH, 2014)........................ 25 Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  1 | P a g e   Introduction Stumpage is the purchase price payable on each tree harvested on crown or publicly owned land (Collins English Dictionary, n.d.). Since BC consists of 95% publicly owned forests, the rate that the province sets for stumpage can have huge implications on the overall provincial economy. In 2013, provincial stumpage revenues totalled 533 million dollars, 20% of which were collected from coastal operations (Barnes, 2014). The stumpage system in BC has a reputation for being confusing and inherently, there is usually the need for a qualified professional to prepare all of the appraisal submission data on behalf of the licensee and one to conduct all of the calculations on the behalf of government. This paper is not intended to downplay the systems complexity; rather, it is aimed at providing the reader a bird’s eye view of how the system works. By breaking each equation down, the goal is that by the end of this paper, the reader will be able to understand how the coastal BC stumpage appraisal system works. Background Stumpage in BC was first developed in 1884 through the Timber Act (BC Ministry of Forests, 2012). Recently, through various disputes with the United States over whether or not our system provided the industry with subsidies, we now find ourselves with what is considered to be a Market Pricing System (MPS) for determining stumpage rates (Grafton, Lynch, & Nelson, 1998). This current stumpage system was implemented on the coast starting February 29th, 2004, with the central concept of appraisal lying in the auctions of standing timber to determine market value (Revenue Branch, 2004). The MPS uses data obtained from timber sales auctions, and then determines the price of a similar stand from the selling price. The calculated price of a stand is then used in conjunction with the coastal appraisal manual to determine a suitable stumpage rate. This type of auction is considered to provide a transaction evidence pricing system and is the provinces’ response to subsidy accusations (Revenue Branch, 2004). The core concept of the MPS is that with more auctions, the price for a stand of timber will become closer to the actual market price.    Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  2 | P a g e   Determination There is a four step process in order to calculate market stumpage rates for new cutting permits or timber sales. The initial step is to determine the characteristics for the timber in question. Some of the parameters measured here are the tree species, location of permit, harvesting system to be used and topographical considerations (Revenue Branch, 2004). All of the information provided for this step must be supplied by the licensee or BCTS and therefore they must incur the cost of the initial data collection. The data is found by a field crew, placing cruise plots on the land base and compiling the data on a computer program.  The second step in the stumpage determination process is to calculate what is referred to as the Estimated Winning Bid (EWB). The estimated winning bid is a lengthy equation with a total of 15 variables, all of which are calculated from the data provided in first step of the process. The complete process of determining the EWB will be further explored in the methods section of this paper.  The third step in this process is determining the final estimated winning bid (FEWB). This is different than the EWB calculated in step two since the FEWB calculation takes into account the estimated costs of specified operations(SOA) (Revenue Branch, 2004). For example, if your harvesting system is helicopter single standing stem selection, there is a specified operational allowance of $37.78/m3 to allow for the added costs (Timber Pricing Branch, 2014). The fourth and final step in stumpage determination is to calculate the market stumpage rate. This depends on the type of cutting authority area, whether it is a BC Timber Sales (BCTS) auction or a licensee applying for a stumpage appraisal. If it is a BCTS auction, the final estimated winning bid is multiplied by 0.7. This is done in order to provide the bidding process with a starting point. This upset stumpage rate is the rate that is applied to all bidders in the process regardless of what their bid is. Once the upset stumpage rate is determined, the bidding process begins with what is called the bonus bid. The highest bonus bid wins the auction and that rate is added to the upset stumpage rate to give the market stumpage rate. For licensees that are applying for a stumpage appraisal or reappraisal, the final estimated winning bid discovered in step 3, is used in conjunction with any tenure obligation adjustments (TOA) that may be applied to determine the final market stumpage rate.   Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  3 | P a g e    Figure 1: Stumpage determination flowchart. Adapted from "Market Pricing System - Coast", by the Revenue Branch, 2004. (Revenue Branch, 2004)  Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  4 | P a g e   Methods Equation Description As described below in Equation 1, there are 15 variables alone in the estimated winning bid equation. The first step in describing the stumpage system then must be to define the variables to be used in the equation itself.   𝑬𝑾𝑩 = [−26.64 + 0.681 (𝐴𝐿𝑃𝐶𝑃𝐼𝐹) + 17.37(𝐶𝐸𝐷𝐴𝑅𝐶𝑌𝑃𝑅𝐸𝑆𝑆) + 12.06(𝐷𝐹𝐼𝑅2𝐺) −0.243(𝑆𝐿𝑂𝑃𝐸(1 − 𝐻𝐸𝐿𝐼)) − 32.25(𝐻𝐸𝐿𝐼) + 9.71 (𝑉𝑃𝐻1000) + 3.55(𝐿𝑛(𝑃𝐼𝐸𝐶𝐸𝑆𝐼𝑍𝐸)) −0.0758(𝐿𝑂𝐶𝐴𝑇𝐼𝑂𝑁) − 5.41(𝐺𝐴𝑀𝐵𝐷𝐼𝑆𝑇400) + 1.17 (𝐿𝑛 (𝑉𝑂𝐿100)) + 9.94(𝐶𝑅𝑈𝐼𝑆𝐸) +1.57(𝐷𝐼𝑆𝑇𝐴𝑉𝐺𝑁𝐵𝐼𝐷) − 5.18(𝐼𝑆𝑂𝐿𝐴𝑇𝐸𝐷) − 3.29(𝐿𝑈𝑀𝑃𝑆𝑈𝑀)] ∗ 𝐶𝑃𝐼𝐹 Equation 1 above shows the full extent of the estimated winning bid equation (EWB), taken directly from the coast appraisal manual. The variables are all defined in the glossary of terms found at the beginning of the paper. The estimated winning bid equation has several variables that are dependent on licensee input. Those variables and their respective sensitivity analyses will be examined later.   The next equation to look at is the specified operations (SOA) calculation. This calculation doesn’t have a distinct equation described in the Coast Appraisal Manual, but equation 2 covers all of the necessities for the calculation.  Equation 2: Specified operations adjustments equation. Adapted from the Coast Appraisal Manual, Timber Pricing Branch, Jan 2014; retrieved Jan 2015 from https://www.for.gov.bc.ca/ftp/hva/external/!publish/web/manuals/coast/2014/Coast2014JanMaster.pdf 𝑺𝑶𝑨 = 𝑆𝑘𝑦𝑙𝑖𝑛𝑒 + 𝐼𝑊𝑇 + 𝐶𝑙𝑎𝑦𝑞𝑢𝑜𝑡 + 𝐻𝑆𝑆𝑆𝑆 + 𝑆𝑡𝑢𝑚𝑝𝑖𝑛𝑔 + 𝐶𝑟𝑜𝑤𝑛 𝑀𝑜𝑑.+𝐸𝐵𝑀 The first variable of the specified operations adjustments equation is an adjustment made for blocks that need to use a skyline harvesting system. The only condition for this adjustment is that the block must have a straight-line distance, from the landing to the back-line boundary, of 600 meters or greater. Once this is proven, the adjustment is calculated as an addition to the volume logged by helicopter in the estimated winning bid equation. The next variable is the allowance for inland water transport (IWT). Equation 1: Estimated winning bid equation. Source: The Coast Appraisal Manual, Timber Pricing Branch, Jan 2014; retrieved Jan 2015 from https://www.for.gov.bc.ca/ftp/hva/external/!publish/web/manuals/coast/2014/Coast2014JanMaster.pdf Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  5 | P a g e   Equation 3: Tenure obligation adjustment equation. Source: The Coast Appraisal Manual, Timber Pricing Branch, Jan 2014; retrieved Jan 2015 from https://www.for.gov.bc.ca/ftp/hva/external/!publish/web/manuals/coast/2014/Coast2014JanMaster.pdf This is an allowance for any towing that must occur on any inland water source (lakes, rivers etc.) and must be approved by the regional manager. Next is the allowance for operations within the Clayquot Sound area. This is to help with the different management strategies that occur there and is a fixed adjustment of $6.11/m3. Next is the allowance for helicopter single standing stem selection (HSSSS). This adjustment is applied for all blocks where helicopter single standing stem selection harvest systems are the only harvest method available in the cutting authority area. The adjustment is fixed at $37.78/m3. Stumping is an operation adjustment to increase the amount of stump lifting that occurs as a post-harvest method of site preparation. This, again, is a fixed adjustment of $1,114.00/ha. Crown modification is done when a professional deems it necessary for the protection of the remaining stand after harvest. This adjustment is measured as the sum of the cost of all trees needing modifications, $48.48 per old growth coniferous stem and $21.16 per second growth coniferous stem, divided by the total net cruise volume of the block. The last variable is an allowance for the ecosystem based management (EBM) processes that occur on the mid and north coast, thus, the cutting authority area must lie within those Coast Forest Region boundaries. The adjustment for this management strategy is fixed at $2.75/m3 (Timber Pricing Branch, 2014). The next equation used in determining a final stumpage rate is then dependant on whether or not the cutting authority area is a BC timber sale or not. If it is not a BC timber sale, the tenure obligation adjustments (TOA) must now be calculated. The definitions for the variables associated with the following equation can be found in the glossary of terms section.  𝑻𝑶𝑨 = [𝐹𝑃𝐴 + 𝐿𝑉𝐶 + 𝑅𝐷 + 𝑅𝑀 + 𝑅𝑈 + 𝐵𝑆1 − 𝐿𝐺] ∗ 𝑅𝐹𝑀 −𝑀𝐿𝐶 The tenure obligation adjustment is a value used to help forest licensees improve the management of their forested lands. The TOA is now subtracted from the final estimated winning bid, and if the result is more than $0.25 then this is now the new market stumpage rate for the cutting authority area in question. If it is less than $0.25, then the market stumpage rate is $0.25/m3.  On a BC timber sale, the tenure obligation adjustment equation isn’t used, as the tenure obligations are put on the BC government. Instead, the indicated stumpage rate is now obtained by subtracting the Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  6 | P a g e   Figure 2: The sensitivity of market logger cost based on changing fractions of volume harvested by helicopter. specified operations cost from the estimated winning bid, and then multiplying that by 0.7. Again, if this rate is less than $0.25, then a value of $0.25/m3 will be used, if not, the end result of the previously described mathematical operation will be used. This rate is now the upset stumpage rate that is brought to the bidding table. Upon successful bidding, the winning bid amount (the bonus bid) is now added to the upset stumpage rate in order to obtain the new market stumpage rate for the cutting authority area. Results To determine how effective the current stumpage system is, a sensitivity analysis has been conducted on all variables that can be managed, as these are the most likely to be the cause of a change in the market stumpage rate. This section will go through the 3 main equations of stumpage determination and look at how each variable can be changed and what happens to the market stumpage rate at the extreme values. Variance Within Tenure Obligation Adjustment Looking at the tenure obligation adjustment equation, there is only one real variable that can be altered, that is the market logger cost (MLC). This can be done by changing the amount of volume that is logged by helicopter. By keeping all other variables constant, we see a negative, linear relationship with a slope of -.74 (Figure 2). This concludes that for every 10 percent of volume that is added to the helicopter harvesting method, there is a reduction of $0.74 in the market logger cost. This reduction in market stumpage rate is due to the MLC being comprised of mostly road costs, and therefore, as you decrease the amount of conventional logging, the need for roads decreases and so does the MLC.  y = -0.74x + 7.05 -2024680 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1Market Logger Cost ($/m3 ) Fraction of Volume harvested by Helicopter Relationship between MLC and Volume Harvested by Helicopter Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  7 | P a g e   y = 2.2407x - 2.0932 05101520250 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1Estimated Winning Bid Rate ($/m3 ) Fraction of stand that is Cedar or Cypress Sensitivity of EWB based on Changing Cedar or Cypress Content Figure 3: Relationship between the Estimated Winning Bid and Fraction of Harvested Volume That is Cedar or Cypress Variance Within Specified Operations Adjustment The next equation to examine is the specified operations adjustment (SOA) calculation. There is only one variable that can be manipulated in this equation, and it is the adjustment made for skyline activities. This can be done by adding areas associated with skyline harvesting, the only criterion for the adjustment is that the landing has to be at least 600 m straight-line distance to the nearest boundary, and the wood must be harvested by skyline. Since skyline operations are so rare and unique, this variable cannot be manipulated on its own, and therefore, the only affect a manager can have on it is blending skyline operations with other harvesting. Blending rates will be examined in the discussion section.  Variance Within Estimated Winning Bid The last equation to examine is the estimated winning bid equation. This calculation has four variables that can be managed by the licensee to produce a preferred market stumpage rate. The first of which is the percent of cedar or cypress present in the net cruise volume. This can be adjusted by adding or excluding cedar/cypress heavy blocks into the cutting authority area.  Figure 3 shows that there is a positive linear relationship between the estimated winning bid amount and the percent cedar or cypress content in the stand. For every 10 percent of increase in cedar/cypress content, there is an associated increase in estimated winning bid of $2.24/m3.  The next variable to examine is how changing slope can affect the end result.   Through calculations with the EWB equation, we can determine that there is a negative linear relationship between slope and Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  8 | P a g e   EWB. This states that by increasing slope one percent, and keeping all other variables constant, there is a $0.31/m3 savings on the estimated winning bid rate. The next variable to examine is the amount of volume that is allotted to helicopter or skyline harvesting systems.  As shown in Figure 4, there is a negative linear relationship between the estimated winning bid amount and the percent of the land base harvested by skyline or helicopter. For every 10 percent of area added to this variable, there is a change of $2.41/m3. The final variable to look at in the estimated winning bid equation is the volume per hectare variable, VPH. As shown in Figure 5, there is another negative relationship between the estimated winning bid amount and the fraction of the stand that is harvested by helicopter. This is relationship shows that there is only $3.66 to be gained by placing an additional ten percent of the volume should be harvested by a helicopter.  Figure 4: The relationship between estimated winning bid amount and the fraction of volume taken by helicopter or skyline harvesting systems y = -2.4065x + 7.0387 -25-20-15-10-505100 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1Estimated Winning Bid ($/m3 ) Fraction of Volume Harvested by Helicopter or Skyline EWB Sensitivity to Changing Fractions of Helicopter and Skyline Harvest Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  9 | P a g e   All of the variables examined can be easily managed by a knowledgeable professional and leaves the door open for blending rates in order for areas to be appraised with a favorable stumpage rate. Blending stumpage rates is a legal practice that takes a qualified professional that is knowledgeable in the field, as it requires an in-depth understanding of the appraisal system. This process will be examined in the discussion section.     Figure 5: A graphical representation of the relationship between the estimated winning bid and fraction of the stand that is harvested by helicopter. y = -0.3658x + 4.9781 00.511.522.533.544.550 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1Estimated Winning Bid ($/m3 ) Fraction of stand that is logged by Helicopter EWB Sensitivity to Changing Fractions of Helicopter Harvest  Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  10 | P a g e   Discussion: Compliance and Enforcement: Ultimately, the burden of enforcing correct stumpage determination is placed solely on the provincial government, legislated through the Forest Act. Under part 7, section 105 of the Forest Act, it states that the stumpage rate must be determined by an employee of the ministry of forests, lands and natural resource operations, at a time specified by the minister and in accordance with the policies and procedures put forth by the minister (Queen's Printer, 1996). This is a major constraint as man power within the compliance and enforcement branch has been significantly cut back, even with the amalgamation of Ministry of Forests with Ministry of Lands and Natural Resource Operations.  As stated in the 2012 year-end report from the compliance and enforcement branch, there is approximately 170 staff working in the entire province trying to enforce legislation on everything from harvest planning to recreational and range land uses. In the same year-end report, it states that of the 8117 inspections that were conducted that year, only 1906 were road and harvest inspections, which is what stumpage inspections are lumped into (MFLNRO, 2012a). Since the provincial annual allowable cut was set at 78,119,241 m3 in 2012, it leaves just one inspector responsible for over 450,000 m3 of harvest, which is seemingly very difficult to manage (MFLNRO, 2012b).  A failsafe built into the Forestry profession is the professional reliance required by the governing body, the Association of British Columbia Professional Foresters (ABCFP).  In the ABCFP code of ethics, section 4.4 states very clearly that a professional forester must not misrepresent facts, and if infringed, the violator is subject to remedial actions authorized under the Foresters Act (ABCFP, 2009). The Foresters Act states that any offence is subject to punitive action, which includes, but is not limited to, suspensions, discharge from the profession and/or a fine no less than $1000.00 (Queens Printer, 2003).  Blending Rates As previously discussed, licensees will blend stumpage rates in order to make non-profitable cutting authority areas into ones that produce marginal profits or break even. In order to properly display this information and provide an unbiased analysis of this process, a theoretical stand of timber will be examined to demonstrate the application of this process. The areas to be examined will consist of two Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  11 | P a g e   separate stands of identical timber, one composed of 100 hectares of conventionally logged timber, and the other having 33.33 hectares of timber to be harvested by helicopter (Table 1).  Table 1: Description of a hypothetical logging block. Logging costs were estimated and are arbitrary for this exercise. Logging Method Area (ha) m3/ha Total Volume (m3) Logging costs ($/m3) Total Costs ($) Helicopter      33.33                          600.00                    20,000.00   $ 100.00   $2,000,000.00  Conventional    100.00                          600.00                    60,000.00   $ 60.00   $3,600,000.00  Blend      133.33                          600.00                    80,000.00   $  70.00  $5,600,000.00   Table 2 shows that the helicopter block would have a market stumpage rate of $3.59/m3 if evaluated by itself. After the helicopter blocks have been blended with the conventionally logged blocks, it now gets appraised at a new rate of $0.25/m3, the lowest possible stumpage rate.  Table 2: Blending of stumpage rates across two blocks. All variables were kept constant except for the ones that are affected by an increase in helicopter logging activities. See Appendix 6 – Blending Rates Calculations for an explanation.  Helicopter Conventional Blended EWB ($)  $                    51,451.95   $                            72.20  -$       22,724.49  SOA ($)  $                                   -     $                                   -     $                       -    TOA ($) -$                     3,600.11  -$                   11,736.13  -$       14,277.22  Stumpage ($)  $                    47,851.83  -$                   11,663.93  -$       37,001.70  Market Rate ($/m3)  $                              3.59   $                              0.25   $                   0.25    The result identified in table 2 is primarily due to the change in the volume per hectare, or VPH, variable as it decreases as more area logged by helicopter is added. Table 3 shows the increase in profits after stumpage was applied.     Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  12 | P a g e   Table 3: Revenues and profits shown for each logging method examined. Logging Method Net Volume (m3) Selling Price ($/m3) Revenues ($) Stumpage Costs ($) Profits ($) Profit Per Volume ($/m3) Helicopter 13,333.34 $95.53   $1,273,733.97   $47,851.83  -$774,117.86  -$38.71 Conventional 40,000.00  $95.53   $3,821,200.19   $10,000.00   $211,200.19  $3.52 Blended 53,333.34  $95.53   $5,094,934.16   $13,333.34  -$518,399.17  -$6.45  The profit per unit volume is identified in Table 3 in the last column as this is a standard measure used in the industry. This measure was used to show the effect of stumpage on end profits in each scenario. As shown, the block logged exclusively by helicopter is producing very negative profits, more than $40/m3 fewer profits than the block harvested conventionally. Once that block was blended with the conventional block, it produced only $200,000 more profits, but that equated to a $32/m3 gain when compared to the helicopter harvest on its own. This goes to show that blending rates of high cost areas (ie. areas logged by helicopter) with low cost areas (ie. areas logged by ground based system) is beneficial both from an economic and a sustainability standpoint. By harvesting the more expensive areas sooner, the area manager mitigates the need to go into these places when they are required to legislatively through their annual allowable cut. Instead, the manager can take a little loss now by blending the rates of the two harvesting systems, rather than taking the larger loss in the future.  Guide to Stumpage Determination The main focus of this paper is to give the reader an in-depth understanding of how stumpage is determined in the BC forestry sector. The flowchart found in on page 3 was produced by the author, but adapted from the revenue branch of the provincial government and can be found in the market pricing system manual for the coast. This flowchart is the most user-friendly way of showing how the whole system works and can be used by forest professionals to be sure that they followed the proper steps. Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  13 | P a g e   Possible Alterations to the System One of the main issues surrounding stumpage evaluation in any situation, is who pays for stand management between each harvest period. It is currently stated in BC legislation that the licensee is responsible to meet stocking standards, or green-up, until the stand reverts back to the government (McWilliams & McWilliams, 2009). Therefore, for BC timber-sales, the responsibility for planning and reforestation activities is placed on the government (BCTS, 2013). This is reflected in the current stumpage system by excluding those sales from the tenure obligation adjustment equation. In a paper published by Henry Spelter titled, “If America Had Canada’s Stumpage System”, he talks about a different way to address the burden of the cost of silviculture. He does this through the use of an escrow account, which licensees can withdraw from as actual costs are incurred (Spelter, 2006). The balance of the escrow account comes from a fee imposed at the time of final harvest paid by the company/licensee responsible for harvesting the timber. This small change could take some of the difficulty that currently surrounds stumpage calculation, and make the calculations for licensees and BCTS tenures more consistent.  Another alteration that is a little more radical than shifting the cost of forest management is shifting the whole appraisal system to a type of taxation on harvesting. Paying a fixed percent of harvest revenues would eliminate the main inefficiency of market pricing, the need for a large enough pool of data to base all other estimations on (Athey, Crampton, & Ingraham, 2002). The loss of complexity isn’t advantageous in all aspects. Taxation systems bring the loss of a complex model that can deal with the differences in extraction and processing costs that are inherent with different sections of land.        Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  14 | P a g e   Conclusion The current stumpage system in British Columbia is the Provinces response to the subsidy allegations made by the United States, and it currently operates as a function of market strength, as it is modelled as a result of the sale of timber. Only 20% of all timber harvested in the province is inputted into the pricing model, as this is the portion of timber that the BC Timber Sales (BCTS) office is responsible for selling (MFLNRO, 2014). To be a more efficient system that indicates the actual market price of timber, BCTS has to account for more than just 20% of the AAC, whether that be through the evaluation of licensees profit on their timber to find a fair market price, or through take-back and reallocation to the BCTS program. Stumpage in British Columbia can be a difficult process to comprehend and therefore, the main emphasis of this paper is to provide the reader with a guide to stumpage determination. To do this, each step of the determination process was examined for possible stumpage rate management opportunities, and then, summarized in the results section. Through equation rearrangement, the following table was found on possible stumpage effects: Variable Slope of Line Effect on Stumpage per Percent Increase ($) CEDARCYPRESS 2.24 + 0.22 SLOPE 3.31 - 0.33 HELI 2.4065 - 0.24 VPH 0.3658 - 0.37 Table 4: Stumpage savings expressed as a change per percent of increase of the indicated variable. Using the three stumpage equations, it has also been determined that with the use of a qualified and competent professional, blending rates to produce a favorable market stumpage rate is very possible. This should be done in situations where if rates were not blended, harvesting activities would not be conducted as they would operate at too much of a loss. The final aim of this paper was to provide the reader with a simple flowchart to stumpage determination. This flowchart can be found in on page 11, and it provides a visual guide to how stumpage is determined. This flowchart has been adapted from a chart originally prepared for the MPS information paper prepared by the timber pricing branch of the Ministry of Forests.   Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  15 | P a g e   References  ABCFP. (2009). Code of ethics. Retrieved February 7, 2015, from http://www.abcfp.ca/regulating_the_profession/bylaws/documents/Code%20of%20Ethic_2013.pdf  Athey, S., Crampton, P., & Ingraham, A. (2002). Reserve prices, stumpage fees, and efficiency. Unpublished manuscript.  Barnes, A. (2014). 2013 economic state of the B.C. forest sector. Victoria: Competitiveness and Innovation Branch.  BC Ministry of Forests. (2012). Timber tenures in british columbia. Retrieved 01/10, 2015, from https://www.for.gov.bc.ca/ftp/hth/external/!publish/web/timber-tenures/timber-tenures-2006.pdf  BCTS. (2013). Sustanable forest management certification strategy. Unpublished manuscript.  Collins English Dictionary. (n.d.). Stumpage. Retrieved 01/10, 2015, from http://dictionary.reference.com/browse/stumpage  Grafton, R., Lynch, R., & Nelson, H. (1998). British columbia's stumpage system: Economic and trade policy implications. Canadian Public Policy-Analyse De Politiques, 24, S41-S50. doi:10.2307/3551878 McWilliams, J., & McWilliams, E. (2009). A review and analysis of the effect of BC's current stocking standards on forest stewardship. (Commissioned Paper). Vancouver: Association of BC Forest Professionals.  MFLNRO. (2012a). Annual report for year ended March 31, 2012. Unpublished manuscript.  MFLNRO. (2012b). Provincial linkage AAC report. (Year-end Report No. APTR043). Victoria: Queens Printer.  Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  16 | P a g e   MFLNRO. (2014). Discussion paper: Area-based forest tenures. Unpublished manuscript.  Forest Act, Revised Statutes of British Columbia, U.S.C. 157 (1996).  Foresters Act, Statutes of British Columbia, U.S.C. 19 (2003).  Revenue Branch. (2004). Market pricing system - coast. (). Victoria: BC Ministry of Forests.  Spelter, H. (2006). If america had canada's stumpage system. Forest Science, 52(4), 443-444-445.  Timber Pricing Branch. (2014). Coast appraisal manual. ( No. 202188). Victoria: Ministry of Forests, Lands and Natural Resource Operations.     Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  17 | P a g e   Appendix 1 - Equations Used  Estimated Winning Bid    Equation 1: Estimated winning bid equation. Variables are all defined in the glossary section 𝑬𝑾𝑩 = [−26.64 + 0.681 (𝐴𝐿𝑃𝐶𝑃𝐼𝐹) + 17.37(𝐶𝐸𝐷𝐴𝑅𝐶𝑌𝑃𝑅𝐸𝑆𝑆) + 12.06(𝐷𝐹𝐼𝑅2𝐺) − 0.243(𝑆𝐿𝑂𝑃𝐸(1 −𝐻𝐸𝐿𝐼)) − 32.25(𝐻𝐸𝐿𝐼) + 9.72 (𝑉𝑃𝐻1000) + 3.55(𝐿𝑛(𝑃𝐼𝐸𝐶𝐸𝑆𝐼𝑍𝐸)) − 0.0758(𝐿𝑂𝐶𝐴𝑇𝐼𝑂𝑁) −5.41(𝐺𝐴𝑀𝐵𝐷𝐼𝑆𝑇400) + 1.17 (𝐿𝑛 (𝑉𝑂𝐿100)) + 9.94(𝐶𝑅𝑈𝐼𝑆𝐸) + 1.57(𝐷𝐼𝑆𝑇𝐴𝑉𝐺𝑁𝐵𝐼𝐷) −5.18(𝐼𝑆𝑂𝐿𝐴𝑇𝐸𝐷) − 3.29(𝐿𝑈𝑀𝑃𝑆𝑈𝑀)] ∗ 𝐶𝑃𝐼𝐹 Specified Operations Adjustment Equation 2: Specified operations adjustment equation. All variables are described in the methods section, under equation description. 𝑆𝑂𝐴 = 𝑆𝑘𝑦𝑙𝑖𝑛𝑒 + 𝐼𝑊𝑇 + 𝐶𝑙𝑎𝑦𝑞𝑢𝑜𝑡 + 𝐻𝑆𝑆𝑆𝑆 + 𝑆𝑡𝑢𝑚𝑝𝑖𝑛𝑔 + 𝐶𝑟𝑜𝑤𝑛 𝑀𝑜𝑑.+𝐸𝐵𝑀  Tenure Obligation Adjustment Equation 3: Tenure obligation adjustment. All Variables are described in the glossary section. 𝑻𝑶𝑨 = [𝐹𝑃𝐴+𝐿𝑉𝐶+𝑅𝐷+𝑅𝑀+𝑅𝑈+𝐵𝑆1−𝐿𝐺] ∗ 𝑅𝐹𝑀 −𝑀𝐿𝐶  Volume Per Hectare (VPH) Equation 4: Volume per hectare (VPH) equation used in the EWB equation 𝑉𝑃𝐻 = [1 − (𝐻𝑆 + 𝐻𝑆𝑆𝑆𝑆)] ∗ 𝑁𝐻𝑆𝑉𝑃𝐻 + (𝐻𝑆 + 𝐻𝑆𝑆𝑆𝑆) ∗ 308       Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  18 | P a g e   Market Logger Cost  Equation 5: Market logger cost equation to be used when the volume of second growth in the cutting authority area is less than 80 percent of the total net cruise volume  𝑴𝑳𝑪(< 𝟖𝟎) =[7.40 ∗ (1 − 𝐻𝑊)− 𝐵𝐶𝑇𝑆]1 − 𝐿𝐺+ 𝐶𝑇𝑆𝑆𝑂  Equation 6: Market logger cost equation to be used when the volume of second growth in the cutting authority area is equal to or greater than 80 percent of the total net cruise volume  𝑴𝑳𝑪(≥ 𝟖𝟎) =[6.32 ∗ (1 − 𝐻𝑊)− 𝐵𝐶𝑇𝑆]1 − 𝐿𝐺+ 𝐶𝑇𝑆𝑆𝑂               Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  19 | P a g e   Appendix 2 -Table of Basic Silviculture Costs    Table 5: Table of basic silviculture costs. Note. Reprinted from “Coast Appraisal Manual,” by Timber Pricing Branch, 2014.(Timber Pricing Branch, 2014)    Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  20 | P a g e   Appendix 3 - Average Number of Bidders by Forest District   Table 6: Average number of bidders by forest district. Note. Reprinted from “Coast Appraisal Manual,” by Timber Pricing Branch, 2014.(Timber Pricing Branch, 2014)    Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  21 | P a g e   Appendix 4 - Road Management Costs Explained   Road development can be expressed in two ways, either tabular or non-tabular rates. Non-tabular rates cover all of the following projects; construction and upgrading of main access roads, road construction where side slopes exceed 150 percent, road construction with two or more gullies in a 300 m section that are at least 10 m deep, end haul construction, switchbacks with over 10 000 m3 excavation volume needed to meet designed grade percent, road sections that have banks with rock faces exceeding 7.5 m in vertical height, and/or projects approved by a regional manager. Tabular rates cover everything else, but are mainly concerned with simple developments (single span bridge, simple culverts etc.). To determine the total development cost for a road, follow the road estimate flowchart found on the following page. Once it is determined, the total development cost has to be prorated between the licensee and the Crown, since the Crown portion of the road development cost may be used in the appraisal or reappraisal of the cutting authority area. The proration is calculated in the following formula: Equation 7: Proration of road development costs shared between the Crown and applicant. Costs are expressed in $ and volumes are m3. Source: Coast Appraisal Manual. Retrieved February 12th 2105  It should be noted that a non-tabular road estimate is a complex process and requires a lot of knowledge about road engineering and the available materials in the area. This process should be carried out by a professional who is well versed in the field and should refer to the Coast Appraisal Manual for all aspects of the cost estimate formulation.             Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  22 | P a g e     Road Estimate Flowchart  Figure 6: Road Estimate flowchart. All information is adapted from the coast appraisal manual. Tables described within the chart can be found on the following page 23 | P a g e    Table 7: Road cost estimates expressed in Canadian dollars per kilometer of road length. Note. Reprinted from “Coast Appraisal Manual,” by Timber Pricing Branch, 2014.(Timber Pricing Branch, 2014)  Table 8: Log bridge estimates expressed in thousands of Canadian dollars. Note. Reprinted from “Coast Appraisal Manual,” by Timber Pricing Branch, 2014. Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  24 | P a g e     Table 9: Permanent/Portable bridge cost estimates expressed in thousands of Canadian dollars. Note. Reprinted from “Coast Appraisal Manual,” by Timber Pricing Branch, 2014.(Timber Pricing Branch, 2014)  Table 10:Metal pipe culvert estimates expressed in Canadian dollars. Note. Reprinted from “Coast Appraisal Manual,” by Timber Pricing Branch, 2014.(Timber Pricing Branch, 2014)  Coastal BC Stumpage An in-depth explanation of the BC coastal stumpage determination process Jordan Yano  25 | P a g e   Appendix 5 - List of Low Grade Fractions   Table 11: List of low grade fractions grouped by 3 letter district code and two letter species codes. Note. Reprinted from “Coast Appraisal Manual,” by Timber Pricing Branch, 2014.(Timber Pricing Branch, 2014)   26 | P a g e   Appendix 6 – Blending Rates Calculations   Figure 7: Blending blocks calculations page. The net volume shown is a reduction of 1/3 of the gross volume, and the average stand selling price is I grade Douglas fir prices found march 5th 2015. 

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