Province promises N.B. forest report by April after seven years of missed deadlines
Green leader says department first promised report in 2016 and raps lack of ‘annual plan’
Tom MacFarlane, the deputy minister of natural resources and energy development, acknowledged that his department has missed several deadlines it gave itself, starting in June 2016, to finish and publish the report.
He made the new commitment after Green Leader David Coon hammered the department for repeatedly promising the report and then not delivering it.
"Delay after delay after delay after delay," Coon said during a meeting of the legislature's public accounts committee.
"The question is, Mr. MacFarlane, what is it you don't want the members of the public and this legislature to know about the state of our forest?"
No annual plan
Earlier in the morning, Coon also forced MacFarlane to admit that the department had not published an annual plan listing its objectives — a plan required under provincial law to be posted on the department's website.
"I'm not aware as to why we haven't published an annual plan," MacFarlane said.
He said the department has been using a mandate letter from Premier Blaine Higgs as a guide — though he didn't realize that mandate letters are kept confidential by the current government.
"I guess I thought they are made public centrally, and I'm told they are not public," he said. "But we have not produced an annual plan."
Mandate letters are given by a new premier to each new minister and their department, outlining the government's priorities.
Liberal premier Brian Gallant made them public for the first time in 2014 but current Premier Blaine Higgs has reverted to not releasing them.
The province's Accountability and Continuous Improvement Act requires departments to publish annual plans laying out their objectives for each fiscal year.
That allows the department, MLAs and the public to compare the plan's objectives to results laid out in a subsequent annual report.
Why plan is needed
With a report but no plan, Coon said, "it's extremely difficult for us to do our work in holding the department accountable in how it uses tax dollars if we don't know what those goals and objectives in the plan are."
The act says departments "shall" prepare an annual plan to "set out the goals and objectives" during a given year and establish "a strategic direction," then "identify objective performance measures" for those goals.
It also says the minister for the department "shall make the annual plan public by publishing it on the department's website" within three months of the start of the fiscal year.
'Delay after delay after delay after delay,' said Green Party Leader David Coon of a forest report promised seven years ago. (Jacques Poitras/CBC)
On the state of the province report, Coon said the last one was in 2008 and pointed out the auditor general recommended in 2015 that the department issue new versions more frequently to report on how forests are being managed for ecological sustainability.
Coon said the department committed to a new report by June 2016, told him in 2017 it was "coming soon," assured him in 2019 that it would be tabled in the legislature in 2020, and in 2021 told him it would be ready that summer.
He said there was then another promise it would be done in 2022.
"Certainly there's been a number of things that have impacted our ability to deliver that report," MacFarlane said.
"I can promise you that that report is in draft form right now and we are anticipating to get that out this fiscal year."
Department has other priorities
He blamed "limited staff" for the delay and a focus on other more important programs.
"I can apologize for missing our targets and notions of the past, but certainly we've been prioritizing a lot of our initiatives," he said.
"It's limited resources that we have, and we try to make sure that we're focused on the items that require the highest priority."
Assistant deputy minister Chris Ward added that the raw data that would be used in a state of the forest report is available on the department's online open data portal.
"There's no hiding data," Ward said. "For those that are interested in data, it's online."
The discussion with Coon over missed deadlines is the latest in a series of exchanges between the Green leader and the department.
- N.B. receiving less than nothing on softwood pulpwood after Crown timber royalty changes
- 'Conservation is a priority,' minister tells skeptics of land protection plan
In 2020 he chided MacFarlane for the department for not having produced an emissions-reduction strategy three years after the release of the province's climate change plan.
During that session, department officials also said New Brunswick would miss its goal of having 2,500 electric vehicles on the province's roads by the end of 2020. There were only 429 at the end of 2019.
On Wednesday, MacFarlane was able to report that the province is on track to meet its next EV target of 20,000 by 2030.
He said supply chains were a problem until last fall but are showing signs of improvement now, with more electric vehicles available for sale now and federal and provincial rebate programs helping to spur sales.
"We're seeing our numbers increase significantly so we're very hopeful that holds," he said.
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NB Forest report
"thars A lot of trees"
Hit print and it's miller time!
Me too
New Brunswick goes quiet on whether forest companies really face $50M royalty hike
Minister mum on whether major increase announced in July is as large as first claimed
What caused the shift is not entirely clear, and so far provincial officials are not answering questions about it.
In a letter released last week criticizing a CBC News story that showed royalty rates on softwood pulpwood are being lowered by the province, Natural Resources and Energy Development Minister Mike Holland said most types of wood taken from provincially owned forests carry higher prices than last year, and forestry companies are paying more.
"Let me be clear, this new fee structure will result in tens of millions of dollars in additional revenue for the province of New Brunswick," says the three-page open letter signed by Holland and released publicly last Friday.
"Total timber royalties could top $100 million."
That's a subtle but potentially significant revision of earlier estimates that the province would receive $50 million this year from increasing royalty rates.
Natural
Resources and Energy Development Minister Mike Holland released a
letter last week suggesting higher timber royalties "could top $100
million" this year. An estimate he gave in July was millions more. (Jacques Poitras/CBC)
According to government budget documents, "forest royalties" for the current year were originally projected to reach $68.1 million prior to the change in royalty rates.
Reaching $100 million instead would require $32 million in additional royalty revenue, not $50 million, and in Holland's new letter hitting that lower target is only phrased as something that "could" happen.
Questions to Holland's department about whether the original estimate of companies paying $50 million more for Crown wood this year is still valid or has been revised downward have gone unanswered since last week.
Additional questions about whether the original estimate might have been a miscalculation or misstatement or whether royalty rates were ultimately set lower than first planned have also received no response.
New
Brunswick Finance Ernie Steeves updated his budget numbers in a
first-quarter report in August, but the document included no projections
on revenue increases expected from increased timber royalties. (Jacques Poitras/CBC)
In early July, Holland gave multiple interviews to New Brunswick media outlets to announce royalty rates were increasing by $50 million this year.
According to Holland at the time, average royalty rates for companies taking wood from provincially owned forests would be climbing $10 per cubic metre. Multiplied over the five million cubic metres or more companies take for mills each year in New Brunswick, he put the expected revenue increase at $50 million.
"We've instigated an increase for this year, a fairly significant increase," Holland told CBC News. "It could project up to $50 million worth of additional revenue to the province for this fiscal year."
Similar stories appeared in other media outlets in the province, all mentioning the $50 million figure.
However, when new royalty rates took effect in August, the average increase of $10 per cubic metre was not apparent in the regulations.
Single
large trees like this spruce in the Pocologan watershed often carry
multiple royalty rates when found and cut on Crown land. In New
Brunswick this year large trunks used for making softwood lumber have
had royalties increase, but rates on pulpwood made from the smaller tree
tops have gone down. (Submitted by Ben Sweet)
It is a difficult issue to track exactly because in addition to adjusting rates, the province condensed what had been 38 separate timber royalty categories into 20. Despite that, it appears clear enough that average royalties have not increased by the $10 amount quoted in July.
According to figures compiled by the New Brunswick Forest Products Commission, about 60 per cent of the wood taken from Crown land in New Brunswick is spruce, pine and fir tree "roundwood" sent to sawmills and cut into lumber. The average royalty on that material has increased about $9 per cubic metre.
A further 25 per cent of the wood cut on Crown land is poplar and other hardwood used for pulp, and royalties on most of that increased just $2.32 per cubic metre.
Combined, those royalty increases should be worth about $30 million in new revenue if companies cut at normal levels, but it is difficult to see where an additional $20 million would come from.
Some smaller volume species taken from provincial forests like hardwood sawlogs did see royalty charges jump more than $10 per cubic metre, but others fell well below that amount, including softwood pulpwood, which had its royalty rate cut.
In his letter, Holland said he is "serious" about getting "the maximum value for our Crown lands for all New Brunswickers. Whether that includes $50 million increased timber royalties this year, or some lesser amount his department won't say.
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"In a letter released last week criticizing a CBC News story that showed royalty rates on softwood pulpwood are being lowered by the province, Natural Resources and Energy Development Minister Mike Holland said most types of wood taken from provincially owned forests carry higher prices than last year, and forestry companies are paying more.
"Let me be clear, this new fee structure will result in tens of millions of dollars in additional revenue for the province of New Brunswick," says the three-page open letter signed by Holland and released publicly last Friday."
Methinks Minister Mikey doesn't like Mr Jones poking holes in his stuffed shirt N'esy Pas?
Let's see:
Kyle said Holland was a disgrace.
Rather than rebut that statement, your response was that McKenna was a disgrace.
Logical inference is that you were making a parallel comparison between Holland and McKenna.
N.B. receiving less than nothing on softwood pulpwood after Crown timber royalty changes
Timber royalties in New Brunswick increased in August but with one notable exception
The New Brunswick government reset timber royalties as promised last month but not all charges to forest companies went up as the province has been suggesting, including to MLAs last week.
In one case, royalties levied for cutting softwood pulpwood on Crown land have been slashed to levels so low the wood is now effectively being made available for less than free to companies that cut it.
Liberal finance critic René Legacy said that is a surprise to him, especially since MLAs on the legislature's public accounts committee put questions about timber royalties to the Department of Natural Resources and Energy Development just last week.
"We were in committee asking questions and there was no indication this was happening," said Legacy.
René
Legacy, the Liberal MLA for Bathurst West-Beresford and the party's
finance critic, says he is surprised government forestry officials did
not disclose during their appearance before MLAs last week that softwood
pulpwood timber royalty rates have been cut. (Jacques Poitras/CBC)
"We never seem to get the complete picture."
According to new regulations filed Aug. 30, the province reset what it charges forest companies to cut trees in publicly owned forests. Most royalty rates on most types of wood have increased but with exceptions.
Amounts the province charges forest companies for spruce, fir and jack pine pulpwood cut on Crown land dropped more than half in August from $7.59 to $3.40 per cubic metre.
Other softwood species used for pulp, like red pine, also fell to $3.40 per cubic metre but from a previous level of $5.50.
Royalty is now less than fee paid to companies
A royalty of $3.40 is too low to generate net revenue for government because of a $3.90 fee the province is required to return to forest companies on every cubic metre of qualifying wood they cut on Crown land. That includes all pulpwood.
The "licence management service fee" is listed in regulations as "compensation for forest management expenses" that companies incur looking after Crown forests on behalf of the province.
Because the management fee owed by the province to companies on every cubic metre of softwood they cut for pulp is now 50 cents higher than what the province gets back in royalties, it has become a net loser on softwood pulp that companies take on Crown land.
That amount varies annually but over the last five years companies have been cutting between 150,000 and 260,000 cubic metres of softwood pulpwood from Crown holdings.
Most
softwood pulpwood in New Brunswick ends up in J.D. Irving Ltd. mills,
such as the company's Saint John pulp mill, after passing through JDI's
chipping operation in Sussex. (Robert Jones/CBC)
The cut in royalty charges on softwood pulp was not mentioned by government forestry officials last week when Legacy and Progressive Conservative MLA Ross Wetmore both asked questions about the subject at the public accounts committee.
Chris Ward, assistant deputy minister of Natural Resources, told Wetmore simply that "higher timber royalty rates" in the province had taken effect.
'Looks to me like a quid pro quo'
Green Party Leader David Coon, who was also at the committee hearing, was also unaware that royalty rates on softwood pulp had been cut.
He worries that will force private sellers of softwood pulp to lower their own prices or lead forest companies to bypass private sellers in favour of accessing more softwood pulp from Crown land.
"It's dreadful. It's another big impact on woodlot owners," said Coon, who wondered if it was done to quiet criticism among forestry companies about rates increasing on other types of timber.
"It looks to me like a quid pro quo."
Most softwood pulpwood in New Brunswick, including most of the softwood pulp cut on Crown land and by smaller woodlots, goes to J.D Irving Ltd.'s Sussex wood chipping facility.
Natural
Resources and Energy Development Minister Mike Holland announced in
July timber royalties in New Brunswick would be increasing. There was no
mention of decreases also happening. (Jacques Poitras/CBC)
The company's vice-president of communications, Anne McInerney, referred questions about the royalty changes to the province.
In a written statement, the department said softwood pulp is a small percentage of wood cut in New Brunswick and that prices paid to private sellers of softwood pulp are already depressed with the lower royalty rate following that trend, not leading it.
"The softwood pulpwood market has been relatively weak and the Department of Natural Resources and Energy Development has seen significant volume of material either left in the woods during harvest operations or used instead as roundwood biomass," said the statement.
"The Department expects this new rate to better reflect fair market value and result in better utilization of this resource."
The department also said other higher-value wood with higher royalty rates are cut at the same time as softwood pulp, earning more than enough so "the Crown is never losing money."
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Surging lumber prices generate better prices for New Brunswick trees — in Maine
Sellers claim stagnant timber royalties keep wood a bargain for local mills
Linda Bell, the general manager of the Carleton-Victoria Forest Products Marketing Board in Florenceville, N.B., said prices being paid for saw logs at mills across the border are up to 70 per cent higher than in New Brunswick. That makes the longer hauling distances and increased paperwork required to serve U.S. mills worthwhile, she said.
"What we're seeing in Maine is is an increased demand and increased pricing," said Bell, who estimated a quarter of softwood cut by private sellers in her area is now leaving the province.
"The price of lumber is up and their markets are really good."
Pleasant River Lumber in Maine is one of the companies buying softwood from New Brunswick to run its mills (Pleasant River Lumber/Facebook)
Prices for lumber in North America have almost tripled since August and are nearing record levels set last spring.
A series of shocks to lumber supplies, including historic flooding in British Columbia in November and Russia's invasion of Ukraine, have taken turns roiling markets.
Russia is a significant global exporter of softwood lumber.
Much of its trade is with China, but tightening sanctions on Russia have "goosed" nervous lumber markets that were already elevated, according to wood product analyst Dustin Jalbert, who is with the online commodity price reporting service fastmarkets.com.
Wood
product analyst Dustin Jalbert said a number of factors have been
pushing lumber prices higher for months with the Russian invasion of
Ukraine the latest event making traders nervous. (Submitted by Dustin Jalbert)
"Russia is probably the largest softwood timber resource on the planet and there's a lot of lumber production," Jalbert said in an interview.
"This Russia Ukraine situation is only adding to the fear out in the marketplace that there's not going to be enough building material supply as we head into the prime home-building season."
In New Brunswick, forestry companies have been setting revenue records during the pricing bumps, but those who cut and sell trees have complained for more than a year that little of that bounty has been making its way back to them or flowing to the province.
New Brunswick mills are supplied mostly from timber cut on publicly owned Crown land.
Russia
is a major lumber exporter and sanctions imposed on the country
following its invasion of Ukraine have caused worry in lumber markets. (Maksim Levin/Reuters)
Private sellers contend that because the New Brunswick government does not raise the price it charges for trees to match rising lumber prices as most provinces do, prices they can charge mills as a result are kept artificially low.
"When they're getting subsidized rates from Crown and a lot of their supply comes from Crown they don't need our wood," said Bell.
"Therefore, the price is down and the demand is just not there."
Last month Statistics Canada reported New Brunswick forestry companies rode elevated prices for a variety of wood products, mostly lumber and plywood, to a record $2.6 billion in sales in 2021.
Softwood
logs are loaded for processing at the J.D. Irving Ltd. sawmill in
Chipman. New Brunswick wood product mills made a record $2.6 billion in
2021 but paid the same timber royalty rates they did in 2016. (Gerard Sirois/GNB)
That was $1.3 billion higher than sales in 2016 even though prices charged to forest companies by the province for the use of Crown wood in both years were identical.
That's different from most provinces, which move what they charge for trees up and down with the price of lumber to connect the value of trees to the value of goods they are turned into.
In British Columbia, timber royalties have more than doubled in three years as lumber prices have risen.
B.C. has made $558 million more from timber royalties than it was budgeting this year alone, and those royalties are set to jump again on April 1, when rates are next updated.
Next door in Alberta, timber royalties change even faster. They have jumped five times since September and in March hit prices four times higher than what New Brunswick is currently charging.
"Timber dues rates are based on the current market prices of forest products," the province explains on its website.
"These charges ensure Albertans receive fair compensation for the use of publicly owned forest resources."
Historic
flooding in British Columbia in November that paralyzed transportation
routes such as Highway 7 at Ruby Creek is one of several factors that
have been pushing lumber prices up for the past seven months. (B.C. Ministry of Transportation and Infrastructure)
Last year, New Brunswick Natural Resources Minister Mike Holland criticized timber royalty systems that rise and fall with lumber prices even though every province west of New Brunswick uses some form of floating charges.
Holland said New Brunswick's "stable steady" approach, where it set rates back in 2015 and has not changed them since, has been better over the long term.
"I've explained it several times that if we had to follow that model of chasing the commodity from 2015 that Alberta did, because of the significant swings not just high but low, there would been over $50 million over that five-year period that we as New Brunswick would have left on the table," Holland told reporters last spring.
But that analysis no longer holds.
Alberta timber royalties have averaged more than double New Brunswick's in the last year because of high lumber prices. They would have raised $100 million more than New Brunswick rates could raise had they been used instead.
That means over the last six years New Brunswick's royalty system raised $50 million less from forestry companies than Alberta's system would have.
Natural
Resources and Energy Development Minister Mike Holland said last year
that New Brunswick made $50 million more over five years from timber
royalties than if it had tied rates to lumber prices like Alberta. Over
six years the amount has flipped to $50 million less. (Jacques Poitras/CBC)
Holland's office did not immediately respond last week to a request for comment about the current resurgence in lumber prices or whether the province might reconsider its position not to tie the price of trees in some way to the price of lumber, given revenues other provinces have been raising.
Bell hopes the province does consider it.
She said higher prices New Brunswick sellers are getting for their logs in Maine than they can get at home tells her prices locally are artificially low.
She believes higher timber royalties imposed during strong lumber markets would be affordable for companies, raise more money for the province, and let local sellers charge amounts similar to what other jurisdictions pay.
"They have no Crown wood. They're on an open market," Bell said about the trade for logs in Maine.
"We're seeing pricing closer to fair market values there, than what we see in New Brunswick."
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