June 9, 2021
The New Brunswick government’s repeated defence of its decision to maintain bargain-basement royalty rates for Crown timber, despite soaring lumber prices, reveals a stunning lack of political will to act in the best interests of the people of this province.
“Alberta raised its royalty rates again this month for the 6th time this year, now charging a rate for large users more than 5x higher than the rate here in New Brunswick.
We have heard government officials insist on the need for stable, steady rates – rates that bear no resemblance to market demand. Meanwhile, other provinces are enjoying the benefits of millions of additional dollars from increasingly valuable Crown timber cut by forestry companies.
The extra dollars coming in from royalty windfalls are salvation for dealing with the rising costs and economic hardships caused by the pandemic. It’s difficult to think of a province that could use the additional funds more than New Brunswick. Yet, the government of Premier Blaine Higgs is sticking to its confounding position that maintaining the current royalty rate regime is best.
In Western Canada, governments are rightly benefitting from the soaring demand for wood.
In early June, Alberta raised its royalty rates again – as the CBC points out, that’s the sixth time this year, now charging a rate for large users that is more than five times higher than the rate here in New Brunswick.
BEST FOR WHOM?
New Brunswick’s royalty rate, then, is best for whom? It’s not hard to figure out. Clearly, this policy only benefits industry. It does not benefit taxpayers and it’s certainly not good for our community – the 42,000 private woodlot owners of New Brunswick.
The province isn't just missing out on millions of dollars in revenue for itself by not raising royalty rates, it’s setting a price ceiling for wood that blocks others from being able to get better prices for what they sell.
If this government really believed in the importance of fixed rates, how about insisting on stable rates in other areas, oil and gas for example? Earlier this year, the Higgs government pulled out of tax-sharing agreements on gas sales with 13 Mi'kmaq and Wolastoqey First Nations, insisting that the deals were “unsustainable and unfair.”
The premier called it “a two-tier tax system” that deprived schools, hospitals and other public services of much-needed funding.
“Our province can't afford to ignore it any longer,” he said.
TWO-TIER SYSTEM
Those words could easily be applied to Crown royalties and the fact that this government is not fulfilling its responsibility in protecting and valuing our most precious natural resource – our publicly-owned forests.
“More than HALF of the timber supplying New Brunswick mills now comes from Crown lands and only 16% from private woodlots.
We clearly have a two-tiered system in our forestry sector, with one set of rules to help the big companies and another set to keep everyone else on the short end of the stick. More than half of the timber supplying New Brunswick mills now comes from Crown lands and only 16 per cent from private woodlots.
There needs to be a return to private wood as primary supplier, as the province’s Crown Lands and Forests Act originally envisaged. Departure from that practice has led to nothing but trouble, including the constant and costly battles with the United States over softwood tariffs because of perceived subsidies in the heavy use of Crown timber. It continues to be a sore point in the latest round of lumber duties threatened by the United States.
‘PERPLEXING DECISION’
Perhaps no one said it better than CIBC Markets analyst Hamir Patel who wrote in a recent report: "Log prices in New Brunswick have been sluggish due to the provincial government's perplexing decision to leave royalty rates on Crown timber unchanged for the past six years."
"It seems like there's a landlord in the province that doesn't want to collect their rents," said Patel.
“It seems like there’s a landlord in the province that doesn’t want to collect their rents — Hamir Patel, CIBC Markets Analyst
Natural Resources Minister Mike Holland already has been caught out in his defence of the low royalty rates by incorrectly stating that while they’re not being raised for the current hot lumber market, neither are they lowered in depressed times. In fact, the province has lowered royalties in response to weak lumber prices, notably in 2008 and 2009.
In the past year, the price of lumber paid by consumers has more than tripled. The Crown timber royalty rate has remained unchanged since 2015.
MISSING OUT ON MILLIONS
There are, however, chinks starting to form in the government's armour. With more and more people shaking their heads over the government’s nonsensical position on royalties, there’s now a possibility the issue may be revisited if high lumber prices continue.
“How long will the Higgs government try to maintain the illusion that it’s OK for New Brunswick to miss out on the millions of extra dollars it could be taking in from fair royalties?
"The minister has recently stated that commodity prices can fluctuate,” a spokesperson for Mr. Holland said, “and if the cost of wood is to remain at these levels, long term, he would re-examine the file."
The big question now is how long will the Higgs government try to maintain the illusion that it’s OK for New Brunswick to miss out on the millions of extra dollars it could be taking in from fair royalties.
If you think this is something that needs to change, I urge you to contact the Premier and his cabinet to let them know this unfairness must end.
Thank you,
Rick Doucett President, New Brunswick Federation of Woodlot Owners