Delays in boosting timber royalties saved N.B. forest companies millions

Government delays in setting up higher timber royalties in New Brunswick last summer to take advantage of elevated lumber prices helped forest companies escape millions of dollars in extra charges on wood they were cutting on public land at the time.

Budget figures released this week show forest companies are likely to pay $92.8 million in timber royalties by the time the current fiscal year ends March 31. 

That's a record amount for New Brunswick but well below the $118.1 million government was originally suggesting higher fees would bring in when they were announced last spring.

Jason Hoyt, a communications officer with the Department of Natural Resources and Energy Development, said a number of issues have led to timber royalties coming in below target, including rate increases that were set up by the province too late to reach the expected amounts.

"The new royalty rates were put in place in September," said Hoyt.

New Brunswick first decided to raise royalties it charges on timber last May, following two years of elevated lumber prices and record, multi-billion dollar sales by New Brunswick sawmills.

Just over half of the trees cut into lumber by New Brunswick mills are publicly owned.

In July, New Brunswick Natural Resources Minister Mike Holland gave interviews predicting higher new rates would raise an extra $50 million in revenue for the province, on top of the $68.1 million it had originally budgeted to receive under old rates.

"We've instigated an increase for this year, a fairly significant increase, " Holland told CBC News, adding it could mean "$50 million worth of additional revenue to the province for this fiscal year."

Delays meant $1 million a week in royalties

But after deciding to raise timber royalties sometime in May, the province spent most of June working out how high they should go. It then had to obey a required 60-day waiting period in July and August prior to the new fees being imposed.

The delays helped to save forest companies about $1 million per week in higher royalty fees.

"The Crown Lands and Forests Act does not allow retroactive charges to rates," said Hoyt.

"Therefore, timber that was harvested before September was charged the older royalty rates." 

Current projections are for timber royalties to end the year $25.3 million short of Holland's original expectation.

Hoyt said there were other problems in the woods responsible for some of that, including bad weather and a shortage of contractors and truck drivers that led to fewer trees being cut although he did not give a specific figure.

"There was significantly less volume harvested on Crown land this year than projected," he said.