The Public Lands Modernization (Grazing Leases and Obsolete Provisions) Amendment Act updated the province’s grazing disposition rental rates and fee framework. This framework determines how the amount of rents and fees grazing disposition holders pay to the government for the use of public lands are set.
The framework was last updated in 1994 and is built on outdated assumptions and data. The formula was not responsive to changes in costs of cattle operation or cattle market variability. Specific concerns included:
- substantial changes in the average weight gain of cattle due to breeding and genetic improvements
- use of outdated forage values based on scientific understandings from the 1950s
- use of outdated zones originally intended to encourage the settlement of northern Alberta
In the development of the new framework, the Government of Alberta worked closely with stakeholders to acknowledge the stewardship efforts of disposition holders, and ensure that the new framework was transparent and fair. The change to a grazing rental framework based on cattle markets better reflects the economic reality of managing a disposition, while ensuring Albertans get fair value for the use of the province’s resources.
The government will be supporting range sustainability by proactively investing 30% of grazing disposition rental revenue above $2.9 million into rangeland sustainability initiatives. Work is underway to determine how these funds will be allocated.
New rates and phase-in
Grazing dispositions affected by the new rental rate changes include:
- grazing leases (GRL)
- grazing licences (FGL)
- grazing permits (GRP)
The new rental rate changes do not affect the following disposition types:
- forest reserve grazing permits
- head tax permits (HTP)
- provincial grazing reserves (PGR)
These dispositions have a different fee structure due to differences in disposition holder rights and requirements.
Under this framework, there are 2 grazing rental rate zones based on the transition of the boreal region of the province, an area that incurs higher costs on grazing dispositions. The North Saskatchewan River is the dividing line between the south (Zone 1) and north (Zone 2).
The implementation of the new rental rate structure aligns with the cost of holding a grazing disposition and market fluctuations – so when cattle markets are down, so are rental rates.
Although rent will fluctuate on an annual basis, there is a minimum grazing rent charge:
- $2.30 in Zone 1
- $1.30 in Zone 2
As cattle markets rise, the rental increases and the formula captures a progressively greater share, with rates tied directly to market prices and producer profit. To address any changes during implementation, the new rental will be phased in over a 5-year period. The phased in rate will be based on an increasing percentage of the calculated yearly rate. The phase in percentages are found at:
The following outlines the proposed financial changes to disposition holders for 2020.
Table 1. Phased in rate changes for 2020
|Previous zone||New zone||New minimum rate (per Animal Unit Month)||Old minimum rate (per Animal Unit Month)||2020 Phased in rate (per Animal Unit Month)|
In 2020, the application fee to transfer a grazing disposition to someone else is a flat charge of $3,150. This fee applies across the province.
The previous assignment fees created an artificial disparity between different areas of the province. The previous fees did not reflect the actual costs of government administration, nor did they align with how assignment fees are administered on other public land dispositions.
All other public land dispositions assignable under the Public Lands Act are subject to a flat rate assignment fee of $3,150. In the old form, assignment fees were based upon a calculation of the number of Animal Unit Months (AUM) assigned to the grazing disposition multiplied by the rates as prescribed in the Public Lands Act.
Grazing rental formula
To support the development of the grazing rental formula, the Government of Alberta engaged MNP LPP in 2016 to conduct an independent survey of direct financial and in-kind costs incurred by Alberta’s grazing disposition holders.
The rental formula calculates rates based upon the profitability of operating a grazing disposition while taking into account factors such as market prices, transportation, operating costs and labour costs. The purchase of yearling cattle in the spring, average steer weight gain, and sale price in the fall are included in the model.
These inputs are gathered from actual market reports (available from Canfax), and periodic cost surveys. Although there is considerable variability in how cattle operations and grazing dispositions are managed across the province, this standard model was chosen to provide consistency. The model reflects the grazing industry’s profitability and is based upon real market data and real costs reported by disposition holders.
Table 2. Key calculations used to determine rental rate
|Net revenue calculation1||Canfax steer prices
(Market prices: 850 lb sale cost minus 650 lb purchase cost)
Weight gain from purchase to sale
|Net revenue earned by rancher from cattle grazing on lease|
|Operating cost calculation||Direct costs
|Operating costs incurred by rancher whose cattle graze on the lease
Return on investment (ROI) is calculated for the lease
|Rental rate calculation||Return on investment (ROI)
Rental rate tiers2, including minimum rent
|Public lands grazing lease rental payment|
For further details on grazing rental formula calculations, inputs and outputs, see:
- Grazing rental rate formula overview (PDF, 295 KB)
The Government of Alberta is working on developing a framework for the Dedicated Revenue for Rangeland Sustainability Initiatives.