|March 26, 2003||Ministry of Forests|
NEW TIMBER PRICING SYSTEM
The province charges a fee – called stumpage – for Crown timber harvested by forest companies. In the absence of robust markets for standing timber and logs in British Columbia, government has had to determine stumpage prices administratively.
Setting stumpage rates this way has proven problematic and raised questions, domestically and abroad, about the accuracy of our administrative stumpage assessment system.
To help revitalize British Columbia’s forest economy, government will deliver on its New Era commitment to eliminate the "waterbed" and implement a market-based stumpage system that reflects global market realities and local harvesting costs. To accomplish this, the province will move to a new auction-based system for selling Crown timber. Under this system, about 20 per cent of Crown timber will be sold each year through hundreds of timber sales, which will vary in size and contain terms of up to four years. The timber will be auctioned by B.C. Timber Sales to the highest bidder. The auction results will be used to determine the stumpage rates of the other 80 per cent of Crown timber.
Prices received for auction timber will still require adjustments before they are applied to the timber harvested by licensees. Adjustments will be made for the responsibilities borne by licensees holding long-term tenures, but not by winners of auction sales. This adjustment is referred to as the "tenure obligation adjustment" and covers such responsibilities as planning costs, road-building, reforestation and investment and risks in forest management.
Information on prices bid at auction, timber characteristics and prevailing log-price data will be available so that potential bidders can make informed bids at auction sales.
Provincial stumpage revenues will rise and fall with the market. Over time, this system will ensure that the public receives the highest possible revenue consistent with a competitive forest industry. The system, along with the other elements of the revitalization plan, will also result in public timber going to the highest and best use within B.C.
By being more transparent than the existing system, the new timber pricing system will remove any illusion that B.C.’s industry is subsidized, and it may thereby help to open up access to the U.S. market.
Preparations to implement the new system are underway. Ministry and industry officials are working together on the design. It is expected that the new system will be ready to be implemented this summer, but the specific date will depend in part on discussions with the United States on the softwood lumber dispute.