New Brunswick

Forest sector avoids extra duties after U.S. probe into property taxes on private timberland

New Brunswick forest companies will not be hit with extra duties from the United States because of low property taxes charged on privately owned timberland in the province.

New Brunswick assesses, taxes privately owned forests at $100 per hectare

New Brunswick forest companies avoided extra duties from the United States after a Commerce Department investigation into cheap property taxes on private timberland. (Shane Fowler/CBC)

New Brunswick forest companies will not be hit with extra duties from the United States because of low property taxes charged on privately owned timberland in the province.

In a decision released last week, the U.S. Department of Commerce ruled New Brunswick assesses forest properties for taxes too low at $100 per hectare but not low enough to trigger extra duties on forest products.  

Mike Legere of Forest NB, an association of provincial forest companies, welcomed the news.

"It's another allegation we've been able to refute the same as we're going to continue to try and refute the other allegations of subsidy in New Brunswick," said Legere.

"The decision is consistent with what you see in much of the U.S. state jurisdictions." 

New Brunswick has assessed and taxed private timberland to be worth $100 per hectare since 1994, well below what the properties routinely sell for on the open market.  

A collection of U.S. lumber companies have been arguing the tax treatment is a clear government benefit to private owners of timberland and wanted duties assessed on forest products entering the United States from New Brunswick because of it.

New Brunswick has assessed and taxed private timberland to be worth $100 per hectare since 1994. (CBC)

The case being considered in Washington was narrowly focused on North American Forest Products (NAFP) of Saint-Quentin, but it was feared an adverse ruling in the case would quickly engulf all New Brunswick forest companies and private owners of timberland.  

The value of land and trees

In its decision, the Commerce Department agreed New Brunswick forest properties are worth several hundred dollars per hectare more than they are assessed and taxed for but accepted an argument from the province and NAFP that most of that value is in the trees.

New Brunswick does not count the value of crops when it assesses farmland and argued the same principal should apply to the forests, a position the Commerce Department eventually adopted. 

"We agree with the GNB's [Government of New Brunswick] and NAFP's argument," the decision explained. "We have calculated an average value of timberland property in New Brunswick exclusive of the value of standing timber." 

North American Forest Products in Saint-Quentin was picked by U.S. lumber companies to test whether low property taxes on private forests in New Brunswick can be declared an unfair subsidy. (CBC)

Using an old New Brunswick highway expropriation case from Charlotte County decided in 2005, the Commerce Department concluded that 22 per cent of the value New Brunswick forest properties is in the land and 78 per cent is in the trees.

Using that ratio it concluded the $100-per-hectare assessment of forest properties by the province was still too low, but not low enough to bother with. It calculated a duty to penalize the difference would collect just $1 for every $10,000 of forest products crossing the border and declared the amount "de minimis" or too trifling to impose.

'A negligible subsidy rate'

In a statement, New Brunswick government spokesperson Jennifer Vienneau said the province was pleased with the finding of a "negligible subsidy rate" on NAFP and by extension other New Brunswick forest companies.

"This is a further indication that New Brunswick does not unfairly subsidize its softwood lumber industry," wrote Vienneau.

There is an estimated 2.8 million hectares of privately owned forest in New Brunswick.

There is an estimated 2.8 million hectares of privately owned forest in New Brunswick — an area five times the size of Prince Edward Island. It represents more than 70 per cent of all private property in the province

Over one third of that land is owned two forestry companies, J.D. Irving Ltd. (728,000 hectares) and Acadian Timber Corp. (308,000 hectares). The rest is owned by an assortment of 40,000 companies and individuals in both large and small blocks.

Although assessed for taxes as being worth $280 million, the market value of all privately held forest land in New Brunswick is likely something closer to $2 billion.

About the Author

Robert Jones

Reporter

Robert Jones has been a reporter and producer with CBC New Brunswick since 1990. His investigative reports on petroleum pricing in New Brunswick won several regional and national awards and led to the adoption of price regulation in 2006.

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