602 



FORESTRY AND IRRIGATION 



November 



of a portion of the stumpage cash-in- 

 advance locks up a large amount of 

 capital (or credit) which should nor- 

 mally be used in the development of 

 the business. This prevents the par- 

 ticipation in the competion of persons 

 or corporations having no surplus 

 capital (or credit) over and above 

 what would be sufficient to conduct 

 a lumbering business on the plan of 

 paving for their raw material when 

 they require it. This unfair discrimi- 

 nation in favor of the large capitalist 

 as against others of less but sufficient 

 means cannot but have an undesirable 

 effect on the prices realied, in that it 

 limits the number of persons in a po- 

 sition to compete. 



Increased Cost of Inspection 

 It greatly increases both the cost and 

 the time required to make an adequate 

 inspection of the tract offered, in that 

 the prospective purchaser must esti- 

 mate the amount as well as the value 

 of the stumpage offered before he is 

 in a position to bid on the proposition. 

 This again limits the competition to 

 the detriment of the interests of the 

 public. 



(3) Cost of Raw Material Uncer- 

 tain The estimates of the amount of 

 available stumpage which can be made 

 by prospective buyers being neces- 

 sarily only approximate, this method 

 of sale introduces a large speculative 

 element in the cost of the raw material. 

 As a matter of fact, an operator pur- 

 chasing under the bonus system never 

 knows what his raw material actually 

 costs him until the logging of the tract 

 has been completed. 



2. From the standpoint of the prov- 

 ince as seller : 



(1 and 2) That the bonus system 

 of auction operates disadvantageously 

 to the province in that it causes much 

 irregularity in the forest revenues has 

 already been commented upon ; as has 

 also its undesirable tendenc)^ to limit 

 the number of competitors in a posi- 

 tion to bid at timber sales. 



(3) Large Losses to Revenue In 

 the absence of accurate knowledge as 

 to the amount of standing timber on 

 a limit, the purchaser must bid on the 



basis of an amount which he is confi- 

 dent is there and availably located, 

 after discounting for all uncertain fac- 

 tors. Should there prove to be twice 

 or three times as much merchantable 

 timber found before he is through cut- 

 ting as has repeatedly occurred the 

 difference between the market of this 

 "found" timber and the nominal 

 stumpage dues finds its way into the 

 pocket of the operator instead of the 

 provincial treasury, as would have 

 been the case had the amount of the 

 dues been the consideration deter- 

 mined by public competition. 



A similar condition obtains on limits 

 on which the right to cut extends or is 

 extended over a long period of years. 

 Advances in market prices, together 

 with changes in uses, methods of man- 

 ufacture and means of transportation, 

 are constantly adding to stumpage 

 values. These influences, together 

 with the natural increment by growth, 

 have made valuable much timber 

 which because of its small size or un- 

 favorable location was thought to be 

 wholly unmerchantable at the time of 

 the sale, and as such failed to have any 

 influence on the amount of bonus paid. 

 The whole value of this timber belongs 

 in equity to the province, but under 

 the bonus system of sale the nomi- 

 nal stumpage dues only, representing 

 in many cases but a small fraction of 

 the market value, reach the treasury. 



On the other hand, it is true that if 

 the amount of merchantable timber 

 should prove to have been overesti- 

 mated by the purchaser and he should 

 fail to find as much as he paid for, the 

 province stands to gain at the expense 

 of the lumberman. Such a contingency 

 is rare indeed, and is quite as unde- 

 sirable as the reverse. 



(4) Bonus System Means Close 

 Cutting Quite overshadowing any 

 objection which may be taken to the 

 bonus system of sale, from the stand- 

 point of present revenue returns dis- 

 cussed above, is its baneful influence 

 on the future production of the forest. 

 Its whole tendency is toward clean 

 cutting as contrasted with the opposite 

 tendency where the amount to be paid 



