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

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.

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, unlike the annual settings in British Columbia.

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 due to lower prices for lumber and panelling in early 2020.

By comparison, non-renewable resource revenues from oil, natural gas and coal totalled $5.9 billion in the 2019-20 fiscal year in Alberta but the province cut its 2020-21 forecast by $3.9 billion to just $1.2 billion in its recent fiscal update because of low oil prices.

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Brock Mulligan, spokesman for the Alberta Forest Products Association, says the industry generally supports the Alberta stumpage system as fair, adding that the main constraint on production growth in the province is availability of wood fibre.

"Right now, industry is definitely thriving and it's good news for the 40,000 people whose jobs depend on forestry," he said.

"Also, it's at a time when Alberta's economy is not very good. It's pretty valuable to have a sector that is doing well."