Without his Crown land lease, Arvid Nottveit wouldn’t be able to make a living raising cattle.
Nottveit and his family run Tribar Ranching Co., a cow-calf operation at Peonan Point, Man., and they rely on a Crown lease of 9,600 acres. Here on a 25-mile-long peninsula on the northern edge of Lake Manitoba, the family has ranched since 2000.
“We have only 400 acres of deeded land, and if we were to lose that lease, our 400 acres would be virtually worthless,” says Nottveit.
While they have run upwards of 600 head in the past, flooding in 2011 marred the land so much that it hasn’t fully recovered. They’ve had to downsize their herd to about 400 head as a result, though they’ve had to pay the same rental rate on land that they can’t fully use.
A century ago, there was only a small cabin on the lakeshore, with trails through the bush leading to this remote location. Through the decades, those who worked this land drained swamps for hay fields, picked rocks and put up fences to create a sustainable cattle operation. It was the previous leaseholders, Nottveit explains, who were responsible for making this ranch more accessible, and it would be difficult to assign all that a monetary value if the lease was to change hands.
“They were instrumental in getting the road in. They were instrumental in getting the power and getting the phone in. Now you’re just supposed to give that all away?”
The possibility of losing his lease, and with it his livelihood, became all too real last fall, when the province of Manitoba announced new regulations to the Agricultural Crown Lands (ACL) lease program. Many beef producers have claimed several of the changes to the program will create financial instability and uncertainty for those relying on Crown leases, and leaseholders like Nottveit have expressed their concerns with how the modernization will affect the long-term viability of their operations.
“With the primary use of agricultural Crown lands being for forage, Manitoba Agriculture and Resource Development was looking to increase the utilization of the lands to support growth of the livestock industry in a sustainable manner, by using market forces to encourage efficient and innovative uses of the agricultural Crown lands,” says John Neufeld, public affairs specialist with the Manitoba government.
As well, the ACL program was modernized in part as a requirement of Manitoba’s entry to the New West Partnership Trade Agreement. To be part of this agreement with British Columbia, Alberta and Saskatchewan, it was necessary for the province “to make a number of legislative changes that affected the ACL program,” Neufeld explains, which “afforded the opportunity to review and modernize the ACL program.”
Stakeholder and public consultations on the program’s modernization began in 2018. Manitoba Agriculture and Resource Development held several meetings with leaseholders and organizations including Manitoba Beef Producers, Manitoba Bison Association, Keystone Agricultural Producers, and Manitoba Forage and Grasslands Association. The consultation process continued into 2019, with the department reaching out to rural municipalities and Indigenous communities, as well as requesting written comments from current leaseholders.
Manitoba Beef Producers (MBP) submitted comments to the provincial government last spring, with suggestions such as offering leaseholders the first right of renewal if terms were shortened, continuing the family and unit transfer systems and using an open auction allocation system.
“Throughout the consultation process, it was apparent that there were disparate stakeholder views held regarding the administration of agricultural Crown leaseholders,” says Neufeld. “The modernization process became focused on balancing the needs of existing leaseholders, potential leaseholders and program objectives.”
Nottveit was invited to and attended one of the meetings for leaseholders and also took part in a conference call. However, he was surprised when the new regulations were announced on September 27, 2019.
“The changes that came up weren’t even discussed amongst us,” he says. “Based on the questions that the government was asking us, I thought they just wanted to figure out a way to increase the lease fees.”
The new regulations include: an increase in rental rates; decreasing lease terms from 50 to 15 years; allocation by open auction; removal of unit transfers (later amended to allow family transfers); leaseholder eligibility extended to Canadian residents outside Manitoba; and the province no longer purchasing land improvements made by the leaseholder at the end of a term.
Leaseholders made their shock and anger known immediately, filling town hall meetings to capacity across the province in early October. Local newspapers detailed the concerns of outraged producers who wanted to know the rationale behind these changes to the program.
Leaseholders concerned about financial burden, uncertainty
Neufeld stated that the open auction system is the result of stakeholders requesting a more transparent process for lease allocation during the consultation process. The first of these auctions were held in November and December of last year.
Some producers disagree. Not only could the shortened lease term create uncertainty for leaseholders, many of whom will find the majority of their land base on the auction block at the end of their term, they argue it will create financial instability for their operations.
“Your lenders probably aren’t going to consider that as a good source of security,” says Nottveit. “That lease would not necessarily be secure, and that would affect their ability to pay their mortgage on their deeded land.”
Not being first in line to renew when their lease is up is another issue for producers. “Without that first right of renewal, there’s the potential after 15 years to lose this land that producers have utilized and maintained for a long period of time, especially in some of the areas up in the northern communities,” says Carson Callum, MBP’s general manager.
The increased rental rate is also drawing the ire of leaseholders, predicted to rise from $2.13 per animal unit month (AUM) to $7 per AUM or more once fully implemented.
“The forage rental rate had been artificially held for a number of years while review of the methodology was underway,” says Neufeld.
The new rental rate is to be calculated based on a formula that takes into consideration forage capacity, prices for 500- to 600-lb. steers and heifers from the past three years and the provincial rate of return.
Some producers feel this formula doesn’t consider the varying costs of production in different regions of the province.
“If you’re trying to raise cattle up in The Pas or somewhere up there, you’re going to have some costs of production that someone in Teulon, just outside of Winnipeg, is not going to have,” says Nottveit.
In the case of unit transfers, the province stated these were removed because some leaseholders were allegedly using the transfers to inflate their operations’ value. However, ranchers with 90 per cent or more of their land base consisting of Crown land argue that without their lease, their deeded land is of little value, which may jeopardize their retirement plans.
This change includes a grandfather clause, allowing for one unit transfer for legacy leaseholders, limited to the remaining term. Nottveit predicts this could be an issue for potential buyers.
“If I sold it five years from now, they’d have… about nine years left on their lease, and then they would have to attend a public auction to pay for the right to have it for another 15 years,” he says. “So you can understand how hesitant someone may be to purchase all the improvements here basically and potentially purchase our 400 acres with all the buildings on them if they didn’t know what it was going to cost them to keep that lease for another 15 years.”
Instead of the province purchasing land improvements, outgoing leaseholders will either have 30 days to remove their improvements or will have to sell them to the new leaseholder. However, it’s up to the two parties to negotiate the value of improvements after auction.
Some parcels of land require a large investment for improvements, making it even more important to be fairly compensated. For Nottveit’s ranch, they’ve had to manage predators and clear trails and fence lines in winter. Proper drainage is required for flood-prone areas, and road conditions at different times of the year can make it challenging to bring cattle in.
“If I said to you, ‘there’s a pile of rocks in that bush over there, I want to be paid by you for all the rocks that I picked,’ how are we going to decide how valuable that is?”
First right of renewal on the table
As soon as the new regulations were announced, MBP brought forth its concerns to the provincial government. In a statement released October 2, 2019, the association indicated its intention to lobby the province on issues such as allowing both family and unit transfers, first right of renewal and using a rental rate formula that “recognizes market conditions and does not place an undue financial burden on the producers during the transition to the new formula.”
While MBP was originally in favour of removing the 4,800 AUM cap per leaseholder, Callum says that during the association’s annual general meeting in February, “our membership gave us direction to ask the government to re-implement a higher AUM cap per leaseholder, which we are investigating further in our ongoing consultation discussions.”
In response to producer concerns, then-agriculture minister Ralph Eichler announced in October that legacy leaseholders would be given the first right of renewal, rather than going straight to auction. This amendment is pending, however, as regulatory changes require a 45-day consultation period.
While this is the only amendment to be formally announced at time of writing, MBP continues to lobby for other amendments to the new regulations, such as the reinstatement of unit transfers.
“One of particular importance, especially if you think about the COVID-19 situation and the financial challenges that’s going to lead to for many producers, we’d like to see a more gradual increase in the new rental rate formula,” says Callum.
Informed access — requiring those who come onto Crown lands for recreation to inform the leaseholder before setting foot on the land — is also something MBP wants to see in the new regulations.
“We’ve been pushing for this for a number of years, even before the modernization of these changes,” he says. “It’s not only a concern for the people using that land but it’s also a biosecurity concern for the animals on that grazing property.”
Conflicting views on effects on profitability
The province is optimistic that the new regulations will have a positive impact on Manitoba’s producers and the beef industry in general.
“The modernization initiative is expected to contribute to the growth of the livestock sector by optimizing forage production, thereby allowing Manitoba farmers to remain competitive in the livestock industry,” says Neufeld.
“The use of an auction process to allocate these leases ensures that all producers have an opportunity to participate in a fair and transparent allocation process. Using the new market-based formula for setting the forage rent will ensure that Manitoba is using a fair rental rate that will stand up to potential trade challenges from all of our domestic and international trading partners.”
Callum is hopeful that the first right of renewal amendment will be included in the next round of regulatory changes.
“We want this program to be as predictable and as affordable as possible for producers in the province to really allow them to maintain their financial sustainability,” he says. “I think if we are able to access the full first right of renewal for these Crown land leases, I think that would ease some minds.”
He would also like to see this extended to all leaseholders, particularly to assist young producers. “They need to have some assurances, even when they’re speaking with some of their lending institutions, that they will have these leases and can utilize them in their operation for a longer period of time.”
Without amendments, however, many leaseholders are uneasy about the future profitability of their ranches.
“The rationale for why they made these changes seems to be that they wanted to better utilize Crown lease. They wanted to grow the beef herd in Manitoba,” says Nottveit. “I said this to the deputy minister: By raising the cost of production for leaseholders, you feel that that’s going to stimulate us to run more cattle?”
Nottveit is discouraged by what he sees as a lack of interest by governments in the realities of family operations and producing food in Canada.
“There are many sectors in the economy that the government subsidizes and the government supports, and if the government doesn’t put money into healthcare, they realize later on that it costs society way more money later on. Sometimes it’s hard to see the return in investment, but think of this pandemic now. Think of the fact that what I’m actually doing is producing food,” he says.
“We’re over an hour to our closest grocery store — there’s nothing here, and if I don’t have the lease I don’t have a job or a livelihood,” he continues. “My land is beautiful lakefront property, but to me, I can’t make a living here.”