The Alberta government plans to re-jig the grazing lease framework for producers, a move that would increase rates but potentially quash future trade disputes with the United States.
With much support from the beef industry, the new framework would see producers begin paying a rate that will largely be based on the market price of cattle starting next year.
Producers have been paying a flat rate that hasn’t changed since 1994. The changes, which were tabled in Bill 16 today, need to be passed in the legislature before being implemented.
“This bill will ensure ranchers protect the environment and support the economy for generations to come,” said environment and parks minister Jason Nixon after tabling the bill.
The new rate would ensure government receives a stable amount of revenue, but it will fluctuate based on market prices.
The amount producers pay will depend their animal unit months (AUM), a figure that represents the amount of feed a 1,000 pound cow with a calf would eat in a month.
For example, the average producer operates with 231 AUMs, according to officials. If the formula were implemented this year, they would be paying about $500 more for their lease.
In 2016, when cattle prices were high, officials said the government would have collected $13.2 million rather than $2.9 million.
Producer groups have been encouraging the government to implement the new framework because of fears the United States could impose countervail duties.
In 1999, a U.S. Department of Commerce countervailing duty investigation identified grazing rental rates as a significant contributor to the subsidization of Canada’s cattle industry.
The province will be phasing in the framework over the next five years so that producers don’t see potential spikes in fees.
Twenty percent of the market price cost will be applied in 2020, which will change to 40 percent in 2021 and so forth until the full market price cost is applied in 2024.
As an example, producers in southern Alberta could be paying $2.73 per AUM in 2020.
In northern Alberta, producers could be paying $1.63 per AUM in 2020.
“The rates won’t go up drastically and it won’t cripple the industry,” Nixon said.
The fees are lower in northern Alberta because inputs are higher, he added.
However, no matter the price of cattle, the province will collect at least $2.5 million for general revenue.
Of any collected revenue above the $2.5 million, 70 percent will go into general revenue and 30 percent will go into a an initiative that supports rangeland sustainability, which Nixon said could be used for research, conservation efforts or water issues. He pointed to the United Conservative Party’s commitment of funding $1 million to the Alberta Riparian Habitat Protection Society’s Cows and Fish Program as an example of where the money could go.
Along with the framework changes, the province also wants to change assignment fees.
The province is proposing a flat fee of $3,150. Prior to this, producers have been charged per AUM, which in some cases could result in assignment fees as high as $23,500.
Producer groups have pushed to include goats in grazing leases, but the province says it has no plans to move in that direction.