I have a collection agency that just started hounding me. The same agency had a negative report placed on my credit report last year. I had it removed because it is WELL over the statute of limitations. Now, months later, I get a letter saying that collection proceedings will be initiated if payment is not made.

Can I issue a cease and desist letter to this collection agency? The debt in question originates in Alberta and is about 10 years old.

Just because it is out of the SOL does not mean they can't bill you and bill you for the rest of your life, They may just not actually sue you in court.
Being out of the SOL does not mean you still don't owe them, only they can not use court action. But they may do all other billing actions, of sending you bill after bill after bill. Asking for the money

What exactly is the full extent of "collection proceedings" after the SOL has passed? Garnishment of wages?

No, after the SOL, they can not get a judgement, or garnishment or attachments or anything, they can send you a bill every day if they want for the rest of your life, they can call you ( unless you send them notice not to contract you by phone)

The full extent of collection proceedings after the SOL is billing you till there is no trees in the forest to make paper.

So there really is no need to even answer this letter stating that they will commence collection proceedings then since we barely have enough to get by with our 6 kids and ourselves? Just ignore them and all we will see is the occasional letter now and then with empty threats?

So, is that correct? If I ignore the letter stating that they will pursue collection proceedings then they can only pester us. There is no required need for me to contact them about the letter since the debt in question is statute bareed?

If you are sure it is out of the SOL, most likely this is a fishing letter hopeing you will say or write something to re-affirm the debt that wold allow them to restat the SOL and take you to court.

If you now it is outside the SOL, I most likely, and this is just what I would do, write them, and basically state you have no knowledge of this debt ( never admit you owe anything) and tell them not to contact you further on the debt.