Forest companies in New Brunswick use publicly owned trees to face higher fees

For the first time in nearly seven years, the New Brunswick government says it is preparing to increase the fees it charges forestry companies for their use of publicly owned trees.

Details are scarce, including the size of the increase under consideration.

But in an interview on Monday, Mike Holland, the secretary of natural resources and energy development, said two years of rising timber prices had convinced him that royalty rates on crown timber were not adequately compensated by the province for what it provided to the industry.

“We need to be able to move forward and put together good systems for everyone involved and reflect on that [lumber] Pricing ends,” Holland said.

“When lumber goes from $200 per thousand feet to $1,600… we need to create some kind of mechanism that reflects that, as far as the benefit to the county is concerned.”

Minister of Natural Resources and Energy Development Mike Holland said seven-year-old New Brunswick’s timber yields are too low given what has happened with the price of lumber. (Jack Poitras/CBC)

Over the past two years, record sawn timber prices have enriched New Brunswick’s forest companies, but they have done little to increase revenue for those who supply the trees from which the lumber is made.

Slightly more than half of the wood that New Brunswick forest companies use in their operations is county-owned. 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 reported that March sawn lumber production in New Brunswick was worth $180.7 million, a record for that month. That brought total lumber production for the fiscal year ending in March to $1.6 billion.

That’s $700 million more than New Brunswick’s woodland companies made of lumber in fiscal 2020, but without paying the county more timber royalties for the lumber they used.

According to New Brunswick’s budget and public accounts documents, the county took an estimated $70.3 million in royalties and fees on crown trees in fiscal year 2020 but $68.1 million in the year ending March. Although the profits they made increased.

Lumber mills in New Brunswick have generated $3 billion in revenue over the past two fiscal years as lumber prices have soared. It’s $1.2 billion more than the factories that made in the previous two years even though the prices they paid for the crown wood they used haven’t changed. (CBC)

Holland said New Brunswick won’t necessarily rely on royalty rates on crown timber that change monthly or quarterly to match the rise and fall of sawnwood prices, as some provinces do, but he acknowledged that royalties in New Brunswick have fallen out of line with current lumber prices.

“When a new normal is created, you know, our systems have to reflect that,” Holland said.

“I’ve never been a fan of chasing commodity pricing…but when we see prices moving in a direction, when you hit the baseline, you have to catch up.”

Current royalty rates on New Brunswick lumber were established in July 2015. That year, North American sawn lumber prices averaged $282 per 1,000 panel feet, well below the $883 average over the past year.

British Columbia Finance Minister Selena Robinson released figures in February showing that timber ownership revenue in that province is $558 million over budget, as higher timber prices have driven up royalty rates. (Mike McArthur/CBC)

Last year in British Columbia, Canada’s largest forest province, royalty rates for the crown were more than triple what they were in 2015, as the government eager to share in the windfall financial gains. But in New Brunswick, prices have never changed.

This has confused the county’s forest industry watchers, who don’t understand why the county hasn’t raised the prices of its trees as timber companies make more and more revenue from them.

It has also frustrated those who sell their trees to mills and who have complained that they cannot get better prices while the government charges little fees.

“It looks like the situation is completely stunned,” Rick Doucet of the New Brunswick Association of Woodlot Owners said last fall.

“You could collect that money, put it in county coffers, and the mills themselves would still be doing well,” Doucet said. “So there was an opportunity to do something, and it’s totally baffling why they didn’t move on it.”

Adam Shebarsky is the president of the Acadian Timber Company. It is the third largest landowner in New Brunswick after the county and JD Irving Ltd. , but earlier this month Shebarsky told investors he had heard nothing of the county’s plans to raise tree fees. (linkedin)

Holland said his department has been studying what to do about timber royalties for more than a year, but industry insiders don’t seem to have had advance notice that a change is coming.

One of the largest tree sellers in New Brunswick is the Acadian Timber Corp. in Edmundston.

It is the second largest owner of New Brunswick’s woodland property from outside the crown after J.D. Irving and sells lumber to pulp and lumber processing plants.

Two weeks ago, its president, Adam Shebarsky, told investors on a conference call that the company had been pressing the county to charge more for its trees for some time, but she didn’t hear there was a plan to do so.

“There were some quiet conversations going on,” Shebarsky said. “The constant pressure is there but nothing is official yet.”

Sawn timber prices fell as much as 35 percent in futures markets last week, and although the Netherlands acknowledged the boycott could have made more money from higher timber prices over the past two years, had it moved sooner, he said that It took time to develop a comprehensive policy that would operate in New Brunswick.

“I feel very strongly that we took the right approach,” Holland said.

“We did exactly what we said we would do. Examine the turbulent situation and come up with something systematic about the other party.”

Holland said details of the new plan would be released within a month, he said.

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