The New Brunswick government reinstated timber royalties as promised last month, but not all fees to forest companies were increased as the province suggested, including MLAs last week. In one case, the royalties collected for cutting softwood pulpwood on Crown land have been reduced to levels so low that the wood is now effectively less than free to the companies that cut it. Liberal finance critic René Legacy said it comes as a surprise to him, especially after MLAs on the legislature’s public accounts committee raised questions about timber rights at the Department of Natural Resources and Energy Development just last week. “We were on the committee asking questions and there was no indication that this was happening,” Legacy said. René Legacy, the Liberal MLA for Bathurst West-Beresford and the party’s finance critic, says he is surprised that government forestry officials did not disclose during their appearance before MLAs last week that pulpwood royalty rates have been cut. (Jacques Poitras/CBC) “We never seem to get the full picture.” Under new regulations tabled Aug. 30, the province is reinstating the fees it charges forestry companies to cut down trees in public forests. Most royalty rates for most types of wood have increased, but with exceptions. The amounts the province charges forestry companies to cut spruce, fir and pine pulpwood on land more than halved in August from $7.59 to $3.40 per cubic metre. Other softwoods used for pulp, such as red pine, also fell to $3.40 per cubic meter, but from the previous level of $5.50.
Royalties are now less than the fees paid to companies
A $3.40 royalty is too low to generate net revenue for the government because of a $3.90 fee the province is required to return to forest companies for every cubic meter of suitable timber they cut on Crown land. This includes all wood pulp.
The “permit management services fee” is referred to in the regulations as “reimbursement for forest management costs” incurred by Crown forest management companies on behalf of the province.
Because the management fee the province owes the companies for each cubic meter of softwood they cut for pulp is now 50 cents higher than the province gets back in royalties, it has become a net loser for the softwood pulp the companies get in Crown land.
This amount varies annually, but over the past five years companies have cut between 150,000 and 260,000 cubic meters of softwood pulp from Crown farms.
Most of the softwood pulp in New Brunswick ends up at JD Irving Ltd. mills, such as the company’s Saint John pulp mill, after passing through JDI’s shredding operation in Sussex. (Robert Jones/CBC)
The cut in softwood pulp royalties was not mentioned by government forestry officials last week when Legacy and Progressive Conservative MLA Ross Wetmore asked questions about the matter at the public accounts committee.
Chris Ward, deputy natural resources minister, told Wetmore simply that “higher timber royalty rates” in the province had come into effect.
“It seems like a quid pro quo to me”
Green Party leader David Coon, who was also at the committee hearing, was also unaware that royalty rates for softwood pulp had been reduced. He worries it will force private sellers of softwood pulp to lower their own prices or lead forest companies to bypass private sellers in favor of access to more softwood pulp from Crown land. “It’s terrible. It’s another big impact on forest owners,” said Coon, who wondered if it was done to assuage criticism among forest companies about growth rates in other types of timber. “Seems like a quid pro quo to me.” Most of the softwood pulp in New Brunswick, including most of the softwood pulp cut on Crown land and from smaller forest lands, goes to JD Irving Ltd’s wood chipping facilities. in Sussex. Natural Resources Development and Energy Minister Mike Holland announced in July that timber royalties in New Brunswick would increase. No reductions were reported. (Jacques Poitras/CBC) The company’s vice president of communications, Anne McInerney, referred questions about the rights changes to the province. In a written statement, the department said softwood pulp is a small percentage of logging in New Brunswick and that prices paid to private sellers of softwood pulp have already declined with the lower royalty rate following that trend, without to drive it. “The market for softwood pulp has been relatively weak and the Department of Natural Resources and Energy Development has seen a significant amount of material either left in forests during harvesting operations or used as roundwood biomass,” the statement said. “The Department expects that this new rate will better reflect fair market value and result in the best use of this resource.” The department also said other higher-value woods with higher royalty rates are cut at the same time as the softwood pulp, earning more than enough so “the Crown never loses money.”
