Record high lumber, panel prices drive Alberta stumpage fees to new heights

Record high lumber, panel prices drive Alberta stumpage fees to new heights

CALGARY — Record high prices for lumber and construction panelling are creating a resource revenue boost for the coffers of the Alberta government, partly making up for huge declines in oil and gas returns.

Coniferous stumpage fees — paid by forest companies for evergreen wood such as pine or spruce harvested from Crown land — have nearly doubled to $67.31 in September, from $36.56 per cubic metre in August.

That’s more than eight times the $8.27 per cubic metre assessed in September 2019 and far exceeds the recent high of $40.25 reached in June 2018 during the last big North American lumber price spike.

“Right now, industry is definitely thriving and it’s good news for the 40,000 people whose jobs depend on forestry,” said Brock Mulligan, spokesman for the Alberta Forest Products Association.

The industry generally supports the Alberta stumpage system as fair, he said, adding that the main constraint on production growth in the province is availability of wood fibre.

“We think the system is a pretty accurate reflection of the market and it provides an appropriate return to both sides, one party being the people of Alberta who own the resource and the other being the forest companies who manage the resource, harvest it and manufacture the product,” said Mulligan.

The increase in stumpage fees is linked to high lumber prices caused by lower inventories and production cuts amid economic uncertainty during the COVID-19 pandemic, said Justin Laurence, press secretary to Alberta Agriculture and Forestry Minister Devin Dreeshen.

“It is also expected that prices will reduce to more historical levels when supply and demand begin to even out in fiscal Q4 (early 2021), resulting in Crown revenue also coming back down to historical levels,” he added.

In a report this week, CIBC analyst Hamir Patel pointed out that Alberta’s market-based stumpage system is the “most reactive” to near-term lumber prices because it is adjusted monthly based on North American prices.

The increase in fees undermines U.S. claims of government subsidization of the industry in Canada, he said. The Americans continue to collect softwood lumber import tariffs despite a recent World Trade Organization ruling against them.

“The Alberta system has attracted increased scrutiny from the U.S. Department of Commerce during the current trade dispute … for allegedly keeping stumpage rates too low,” said Patel.

“That argument certainly has no merit in today’s strong wood products market with surging log costs as wood products prices reach extreme highs in the current environment.”

Alberta stumpage fees are now about $46 per cubic metre higher than those set in June in B.C., he said.

B.C. resets its stumpage fees annually, with occasional adjustments.

The increase in coniferous wood stumpage fees will penalize Alberta’s softwood pulp mills which aren’t seeing the same increases in pulp prices, the report says, while the province’s hardwood pulp mills are unaffected.

Timber royalties and fees generated about $99 million for the Alberta treasury in fiscal 2019-20, a decrease of 21 per cent compared with the previous year’s $126 million as prices for lumber and panelling fell in early 2020.

By comparison, non-renewable resource revenue from oil, natural gas and coal totalled $5.9 billion in the 2019-20 fiscal year in Alberta.

In its recent fiscal update, the province cut its 2020-21 non-renewable revenue forecast by $3.9 billion to just $1.2 billion because of low oil prices linked to affects of the pandemic.

This report by The Canadian Press was first published Sept. 4, 2020.

Dan Healing, The Canadian Press

Business

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

(Black Press file photo.)
Red Deer city council holds closed-door discussion about proposed aquatics centre

Recommended design, cost and location won’t be made public until next spring

A community gathering space was created in front of the new Red Deer Culture Services Centre before the 2019 Canada Winter Games. (Advocate file photo).
Red Deer’s Culture Services Centre to get additional $4.6 M in renovations

It’s one of many capital projects approved by city council

Alberta’s chief medical officer of health, Dr. Deena Hinshaw, reported an additional 1,307 COVID-19 cases Tuesday. (Photo by Chris Schwarz/Government of Alberta)
Central zone up to 1,249 active COVID-19 cases

Red Deer sits at 257 active COVID-19 cases

Mayor
Mayor Veer appointed as Honorary Lieutenant-Colonel

Red Deer Mayor Tara Veer has been appointed an Honorary Lieutenant-Colonel by… Continue reading

Const. Jason Tress
Mountie testifies another RCMP officer sexually assaulted her at 2012 party

Former Mountie on trial for sexual assault in connection with incident in northwestern Alberta

Idyllic winter scenes are part of the atmosphere of the holiday season, and are depicted in many seasonal movies. How much do you know about holiday movies? Put your knowledge to the test. (Pixabay.com)
QUIZ: Test your knowledge of holiday movies and television specials

The festive season is a time for relaxing and enjoying some seasonal favourites

Team Manitoba celebrate after defeating Team Ontario to win the Scotties Tournament of Hearts in Moose Jaw, Sask., Sunday, Feb. 23, 2020. Curling Canada wants Calgary's Canada Olympic Park to be a curling hub for the season's top events. THE CANADIAN PRESS/Jonathan Hayward
CP NewsAlert: Calgary facility set to become curling hub during pandemic

CP NewsAlert: Calgary facility set to become curling hub during pandemic

Toronto FC coach Greg Vanney watches late in the second half of the team's MLS Cup soccer match against the Seattle Sounders on Sunday, Nov. 10, 2019, in Seattle. Vanney has stepped down as coach of Toronto FC. THE CANADIAN PRESS/AP Photo-Elaine Thompson
Toronto FC coach Greg Vanney steps down, says it’s the right time to move on

Toronto FC coach Greg Vanney steps down, says it’s the right time to move on

Hamilton Forge FC's Giuliano Frano (8) heads the ball against CD Olimpia's Jorge Benguche (9) during Scotiabank CONCACAF League 2019 second half soccer action in Hamilton, Ontario on Thursday, August 22, 2019. Forge FC looks to win its way into the Scotiabank CONCACAF Champions League on Tuesday when it takes on Haiti's Arcahaie FC in the quarterfinals of the CONCACAF League, a 22-team feeder competition that sends six clubs to CONCACAF's elite club tournament. THE CANADIAN PRESS/Peter Power
Forge FC loses penalty shootout to Haitian side in CONCACAF League quarterfinal

Forge FC loses penalty shootout to Haitian side in CONCACAF League quarterfinal

Public health must balance science and society: former top doctor

Public health must balance science and society: former top doctor

California boat captain indicted in fire that killed 34

California boat captain indicted in fire that killed 34

President Donald Trump participates in a video teleconference call with members of the military on Thanksgiving, Thursday, Nov. 26, 2020, at the White House in Washington. (AP Photo/Patrick Semansky)
Trump headed to Georgia as runoff boost, but also a threat

Trump headed to Georgia as runoff boost, but also a threat

Flames and exhaust trail behind a Long March-5 rocket carrying the Chang'e 5 lunar mission after it lifted off at the Wenchang Space Launch Center in Wenchang in southern China's Hainan Province, early Tuesday, Nov. 24, 2020. China launched an ambitious mission on Tuesday to bring back material from the moon's surface for the first time in more than 40 years — an undertaking that could boost human understanding of the moon and of the solar system more generally. (AP Photo/Mark Schiefelbein)
China spacecraft lands on moon to bring rocks back to Earth

China spacecraft lands on moon to bring rocks back to Earth

FILE - In this March 16, 2020, file photo, vials used by pharmacists to prepare syringes used on the first day of a first-stage safety study clinical trial of the potential vaccine for COVID-19 rest on a lab table at the Kaiser Permanente Washington Health Research Institute in Seattle. An influential scientific panel on Tuesday, Dec. 1, is set to tackle one of the most pressing questions in the U.S. coronavirus epidemic: When the first doses of COVID-19 vaccine become available, who should be at the front of the line for shots? (AP Photo/Ted S. Warren, File)
US panel: 1st vaccines to health care workers, nursing homes

US panel: 1st vaccines to health care workers, nursing homes

Most Read