A New Brunswick government official said on Monday (5-23-22) that the government is preparing to increase what it charges forestry companies for timber coming off of Crown-owned lands. Current royalty rates on New Brunswick timber were set in July 2015.
In an interview on Monday, New Brunswick’s Minister of Natural Resources and Energy Development Mike Holland said New Brunswick’s seven-year-old timber royalties are too low given what’s happened with the price of lumber. Holland added that two years of elevated lumber prices convinced him royalty rates on Crown timber are not adequately compensating the province for what it supplies industry.
“We need to be able to move forward and put together systems that are good for all concerned and reflect where that [lumber] pricing winds up,” Holland stated. “When lumber goes from 200 dollars per thousand board feet to 1600 dollars … we need to create some sort of a mechanism that reflects that, as far as it relates to the benefit to the province.”
For the last two years, record lumber prices have been enriching New Brunswick forestry companies but have done little to raise revenues for those who supply the trees the lumber is made from. Slightly more than half of the wood New Brunswick forestry companies use in their operations is owned by the province. The rest comes from a variety of sources, including industry’s own forest holdings and thousands of smaller independent suppliers.
Earlier this month, Statistics Canada (StatsCan) reported lumber production in March in New Brunswick was worth $180.7 million, a record for that month. That raised total lumber production for the fiscal year ended in March to $1.6 billion; this is $700 million more than New Brunswick forest companies made from lumber in the 2020 fiscal year, but without paying any more in timber royalties to the province for the wood it used.
According to New Brunswick budget and public accounts documents, the province earned an estimated $70.3 million in royalties and fees on Crown trees in the 2020 fiscal year but $68.1 million in the year just ending in March, despite the increased earnings they made possible.
Holland said New Brunswick will not necessarily adopt royalty rates on Crown timber that change monthly or quarterly to match rising and falling lumber prices, the way some provinces do, but he acknowledged New Brunswick royalties have fallen out of step with current lumber prices.
“When a new normal is established, you know, our systems must reflect that,” Holland said. “I have never been a fan of chasing commodity pricing … but when we see prices move in a direction, when you get to a baseline you’ve got to catch up with that.”
Exact details on the size of the increase and its implementation remain extremely limited. Holland said details of the new plan are to be released within a month.
FEA compiles the Wood Markets News from various 3rd party sources to provide readers with the latest news impacting forest product markets. Opinions or views expressed in these articles do not necessarily represent those of FEA.
New Brunswick forest companies using publicly owned trees to face higher charges