Gunns proposed pulp mill wood supply and a trail of broken commitments

Article for Business Spectator 29 May 2009 "Seeing the wood for the tree's"
Paul Oosting
The Wilderness Society (Tasmania) Inc

Wood supply to Gunns Ltd.’s proposed Tamar Valley pulp mill remains contentious two years after Gunns pulled out of the independent assessment of the project. Financial analysts are also pointing to the wood supply as a central issue. Just two weeks ago RBS questioned the profitability of the pulp mill due to the world pulp price and in part wood costs.

It is worth first briefly recapping the history of the project.

Wood supply to Gunns Ltd.’s proposed Tamar Valley pulp mill remains contentious two years after Gunns pulled out of the independent assessment of the project. Photo: Kipp Nunn

Mid 2007, Gunns pulled out of the Tasmanian independent assessment process for the proposed pulp mill, which was also necessary for the Federal Governments assessment. It later emerged that just weeks before Gunns abandoned the assessment process, the head of that process had drafted a letter to Gunns stating that the project was “critically non-compliant ”¹.

Empty rhetoric
Gunns had long claimed that the mill would not go ahead if it did not meet the requirements of the Tasmanian assessment. In June 2005 CEO and Managing Director of Gunns Ltd. said in an open letter to the public that “the reality is if Gunns Limited can not meet the rigorous guidelines (established by the Tasmanian assessment) we will not be permitted to build a pulp mill.”

This wasn’t the first commitment of Gunns’ to be broken. They originally committed to build a pulp mill using “Only world’s best technology utilising a low impact Total Chlorine Free (TCF)”². Now, of course, they plan to use chlorine dioxide bleaching, or Elemental Chlorine Free (ECF) as it is called.

Fast-track approval skips assessment
Having pulled out of the formal assessment process, special legislation to approve the pulp mill was passed through parliament. Gunns lawyers were involved in preparing the fast-track approval³. An outcome of Gunns' abandonment of the independent assessment was that there was never any assessment of the pulp mills impact on Tasmania’s native forests or verification of the wood supply.

Expert scrutiny on the wood supply continues
Before Gunns pulled out of the formal assessment an independent peer review report⁴ on the wood supply for the pulp mill found that Gunns falsely claimed “no intensification of forestry operations”. Further findings of the report included:

• that intensification of forestry activities could occur with the pulp mill development (therefore environmental, social, economic, and community impacts may occur and should be investigated);
• that there is insufficient breakdown of the plantation area available;
• that the IIS does not address issues of risk relating to wood supply, e.g. fire, disease, climate change or additional protection of native forests in secure reserves; and
• that Gunns has not followed normal practice in assessing environmental and operational risk.

Further, Dr Chris Beadle a professional forest scientist with 35 years' experience with the Cooperative Research Centre (CRC) for Sustainable Production and the CSIRO released a report serious failing in Gunns wood supply analysis. Dr Beadle found: 

“…due to a reliance in part on old forests and confidence that the plantation estate established in Tasmania by 2005 will be able to provide about 75 per cent of the wood supply (3 million GMt/year) by 2020.”

Confirmation that Gunns’ pulp mill would lock in the destruction of Tasmania’s native forests came in early 2008 with the release of the wood supply agreement between Gunns and Forestry. The wood supply deal commits the supply of 1.5 million tonnes of woodchips each year for twenty years⁵. Forestry Tasmania’s projections show that there will only ever be a maximum of 500,000 tonnes of these woodchips coming from plantations⁶. The balance, a minimum 1 million tonnes per year, must therefore come from native forests.

Plantations to be exported abroad
The situation is even worse if you examine the assumption that all of the available plantation estate would be diverted to Gunns’ pulp mill.

Innovest Strategic Value Advisors reported⁷ in 2007 that Japanese purchasers of woodchips are increasingly moving away from Tasmania’s native forests to plantation wood. Moreover, “Mitsubishi Corp. announced in 2004 that they would stop buying woodchips from Tasmanian old growth and high conservation value forests `as soon as possible'. Gunns have confirmed this shift away from native forest wood in their impact statement for the pulp mill stating that “Japan has an increasing preference for imports of plantation woodchips…⁸.” This makes it more likely that old growth and high conservation value forests will end up in the pulp mill wood supply.

Gunns’ impact statement also shows that their huge plantation resource at Hamphshire will be exported as woodchips for the life of the mill⁹. 

Alternatives available
A win-win outcome for Tasmania would be if Gunns instead pursued a totally chlorine free (TCF) pulp mill based 100 per cent on existing plantations at Hampshire, where Gunns has the bulk of its plantations. This would also be dependent on Gunns’ allowing the project to be properly assessed. A project like this would minimise job losses to other sectors such as tourism, farming, fishing and vineyards and would cause less environmental harm.

Confusing semantics of wood supply
Gunns has laboured the point that the native forests it uses will be ‘regrowth’. For example, in late 2008 the world’s tallest flowering plant was found in Tasmania. Centurion, a Eucalyptus regnans, is just under 100 metres tall. Centurion began growing in Tasmania well before Europeans arrived. This is an example of the kind of forest that Gunns classifies as regrowth and would be destined for the pulp mill.

If Gunns is serious about its public statements that the pulp mill will not have an adverse impact on Tasmania’s native forests they would immediately act to ensure that feedstock for the pulp mill comes solely from plantations. This is the minium that is required to give the community any confidence over the pulp mill’s wood supply following the company’s history of broken commitments.

1. http://www.theaustralian.news.com.au/story/0,25197,24677393-5006788,00.html

2. Gunns Winter News 2004 http://www2.gunns.com.au/plantations/newsletters/GunnsPlan_winterNews.pdf

3. http://www.theage.com.au/news/National/Greens-call-for-probe-into-proposed-mill/2007/04/03/1175366232094.html

4. URS Forestry Consultants report for the RPDC

http://www.rpdc.tas.gov.au/__data/assets/pdf_file/70709/RPDC_- _URS_preliminary_report_11-10-06.pdf 

5. http://www.forestrytas.com.au/assets/0000/0261/HofA_LTPSA_18_October_2007.pdf

6. http://www.forestrytas.com.au/news/2008/10/bright-future-for-forestry page 20

7. Innovest Strategic Value Advisors (2007) Paper and Forest Products.

8. http://www.gunnspulpmill.com.au/iis/supp/robert_de_fegely_ews.pdf

9. GHD. Northern Tasmania Pulp Mill Transport and Traffic Impact Assessment,  from Gunns IIS Vol 15