New Brunswick Softwood Timber Royalties at Decade Low After System Overhaul

North American softwood lumber prices this summer have been hovering at levels almost 50% higher than they were eight or nine years ago. However, under a complex new timber royalty system set up earlier this year by the New Brunswick provincial government, forestry companies are currently paying lower royalties now for the timber the lumber is made from than they did back then, according to reporting by CBC News (7-19-23).

The overhaul in timber royalties was supposed to correct the former policy of charging forestry companies a flat rate for wood cut in public forests that failed to take advantage of a two-year explosion in international lumber prices.

The new royalty program is also creating concern among independent wood lot owners, who have long supported royalties that are tied in some way to markets. However, there is worry that the province has set its base rates too low and placed restrictions on the floating rate that will end up with forestry companies paying lower royalties than they used to, not more, as originally expected. The concern is this will undercut what private sellers will be able to charge mills this year for what they sell.

“When a new normal is established, you know, our systems must reflect that,” New Brunswick Natural Resources Minister Mike Holland said in May 2022 about the need for changes in royalty fees, according to CBC News.

To that end, Holland’s department created a new two-tiered system with a base rate paid on timber cut in public forests and a secondary floating rate that rises and falls monthly with the price of various wood-based commodities. “Over-performing markets equal higher royalties, under-performing markets equals lower royalties,” the province has explained in various presentations about the new system.