[Table of Contents]
6. PERFORMANCE BONDS
ALASKA
Performance bonds are not used as part of forest practice legislation.
BRITISH COLUMBIA
Under the Forest Practices Code Act, and the Security for Forest Practice Liabilities Regulation, the holder of an agreement under the Forest Act or the Range Act may be required to provide security for performance of the holder's duty (Security for Forest Practice Liabilities Regulation).
CALIFORNIA
There is provision for performance bonds to be posted but, apparently, it is little used. Some counties require performance bonds; for example, in Monterey County, a bond of U.S. $5,000/mile (approx. $7,000/mile Canadian) or U.S. $50,000 (approx. $65,000 Canadian) (whichever is less) is required to cover repair of public roads.
FINLAND
A deposit was required to guarantee the regeneration of the private forests, but this requirement was removed from the Private Forest Act in 1991. Deposits are also not required for forest activities occurring in state forests. However, performance bonds may be introduced when the 1996 General Forestry Act is legislated (J. Heino, pers. comm.).
GERMANY
Federal Republic of Germany
No performance bonds are specified in the Federal Forest Law.
Baden-Wurttemberg
Section 69 of the Forest Law grants the Administrative Forest District the authority to demand a bond from forest owners who wish to convert their forest to another land use. Permission must be received if forest land is to be converted to another land use. The conversion may be permanent, which rarely receives permission, or temporary. Bonds would apply to the temporary land conversion situation and are used to guarantee reforestation following the project.
Bavaria
No performance bonds are required by the State Forest Law.
NOVA SCOTIA
Companies are not required to post performance bonds prior to commencement of operations.
ONTARIO
Policy requires that mechanisms be employed to protect the Crown's interest with respect to any Crown charges (stumpage, area charges, wood measurement charges) that may develop from the harvesting of Crown timber. This security is achieved in a number of ways:
- prepayment of stumpage and area charges; used mainly with small sales;
- partial payment of stumpage (i.e. 20%) in advance with the possibility of future prepayments; used with small commercial operators;
- area charges on smaller licences (i.e. Productive forest area under licence 9.0 sq. km or less) are always required to be paid in full in advance of licence issuance;
- having the licensee enter into tri-partite holdback arrangements with the mills to which the harvested timber will be sold. The receiving mills holdback (out of payment for wood received from the licensee) a predetermined amount - usually stumpage plus 10%. These (heldback) amounts are then remitted directly to the province and credited to the respective licensee's account (usually on a monthly basis or more frequently, whatever the arrangement);
- requiring the licensee, as a condition of licence issuance to provide a collateral deposit, in an amount of $1000 to $10,000, sometimes more, prior to licence issuance; this has been done with the smaller licensees or other licensees with poor records of payment;
- large licensees that have major capital (mill) investments are not usually required to provide a deposit, unless there has been a poor record of payments for stumpage owing;
- these amounts may not cover outstanding amounts owing, especially for the larger licences, and if the deposit is applied to that owing, the licensee is still responsible for unpaid amounts plus a new deposit of new replacement licences are to be issued;
- The deposit was required to be in the form of either cash or acceptable bonds which were either bearer bonds or had been signed over to the province in case there was a need to cash the bonds (Graham, pers. comm.).
OREGON
Performance bonds are not used. However, persons requesting a stay of operations under 629-55-150 of the Oregon Forest Practice Rules must post a bond of at least U.S. $15,000 (approx. $20,000 Canadian).
SWEDEN
If a large portion of a forest holding is to be harvested or if harvesting is occurring in an area difficult to regenerate or in a selected valuable broadleaved forest the land owner may be required to deposit a monetary sum with the National Board of Forestry to ensure monies for reforestation are available. The deposit is required before harvesting occurs.
The request for a deposit often comes from the district office and is submitted to the County Forestry Board. The deposit amount is decided by the chief of the County board after a review of the report prepared by the employee responsible for implementing the Act. The County Forestry Board will make a calculation based on the real cost of reforestation, which is approximately 1000 SEK (approx. $200 Canadian) per ha. The size of the deposit is then discussed with the forest owner. Deposits can only be requested for areas that will be planted. Natural regeneration areas are exempt.
TASMANIA
No provision for bonding or licence deposits in connection with forest practices regulation.
UNITED KINGDOM
Performance bonds or licence deposits are not required, although grants can be reclaimed or withheld as a sanction against owners who break the terms of their contract with the U.K. Forestry Authority. Woodland Grant Scheme payments are made in stages, and each stage is dependent on satisfactory compliance with the contract.
U.S. FOREST SERVICE (REGION 6)
Performance bonds are used for logging, road building and other contractors.
VICTORIA STATE
Performance bonds are not required in relation to the Code specifically, but do relate to some produce licences (Leonard, pers. comm.).
WASHINGTON
Performance bonds are not used as part of forest practices legislation.
WESTERN AUSTRALIA
Buyers of logs under Contract are required to lodge substantial securities (Clarke, pers. comm.).
