Fraught with danger

“BUILDING A PULP MILL IS NOT A SOLUTION” is a report published by CommSec, the Commonwealth Bank’s online broker. It very clearly and concisely describes Gunns’ pulp mill as economically unviable.

It describes the pulp mill as a project that is “fraught with risks”, uncompetitive and a “desperate” bid to find new markets for woodchips.

This report reinforces views expressed by leading economists and environmental campaigners that the proposed pulp mill is a poor investment for Tasmania. It is clearly NOT part of the restructure desperately needed by the timber industry. The urgency of this restructure was recently highlighted by the revelations of an industry in crisis with reductions to Gunns’ woodchip exports and the ensuing plight of forest-based contractors.

The downturn in demand for old growth woodchips has long been predicted. The writing has been on the wall for well over a decade, since Japanese paper companies began to invest in eucalypt plantations around the world. Hundreds of thousands of hectares of these plantations are maturing now and preferred by Japanese papermakers.

Consequences are real and serious

There is a lesson to be learnt in the winding back of woodchip contracts. Whenever Tasmania relies on a monopoly producer selling a low value, bulk commodity into a world market, we are vulnerable to external forces that are well out of our control. It is clear from the woodchip experience that the consequences are real and serious.

Sadly this lesson is being ignored and the pulp mill is held out by some as a saviour to the dying woodchip industry.

Yet this report by CommSec clearly highlights why a pulp mill is no knight in shining amour to our forest industry. Significantly, it is proposed to be built and operated by the same monopolistic woodchip company now accused of failing timber workers. Realistically, for Tasmania and its timber workers, Gunns’ pulp mill represents an expensive leap out of the frying pan into the fire.

The CommSec analysis shows that Tasmanian pulp would be some of the most expensive in the world. The challenge faced by any new pulp mill in today’s global pulp market is staying competitive with the booming South American pulp industry. That industry enjoys the benefits of cheap woodchips, labour, chemicals and manufacturing.

Last gasp attempt

That’s the economics, our pulp would be top of the cost ladder. Environmentally it would be on the bottom rung, locking in consumption of Tasmania’s native forests for 30 years and consuming up to four million tonnes of woodchips each year. That means ongoing clearfell and burn across the Tasmanian landscape.

This pulp production could be in addition to the export woodchip industry. Gunns told shareholders in last year’s annual report that they intend to access “the pulp market in addition to its current woodchip markets”. Obviously, those woodchip markets are now slipping away and for Gunns, the pulp mill is a last gasp attempt to maintain a market for the oldgrowth forest woodchips the rest of the world no longer wants.

It’s clear that Gunns want to have their cake and eat it too, woodchip AND pulp. But what is more disturbing is the fact that they appear to tell the public otherwise. Just look at their website where they still claim, “… woodchips that were exported will now be processed within Tasmania to produce pulp”.

The proposed pulp mill will use a polluting process. Chlorine bleaching is a poor choice of technology in an era where there are alternatives available and there is a global eco-awakening and booming environmental awareness.

In a time of oversupply, this expensive, dirty pulp will be the first to be rejected by overseas purchasers. Like we see today with the unfolding woodchip crisis, Gunns could drop the baby, leaving loggers in the lurch and Tasmania with an expensive white elephant.

A big gamble

The CommSec report confirms that Gunns’ pulpmill is a big gamble for investors. But a gamble on the pulp mill is not just a gamble for Gunns. With many millions of dollars of taxpayer money being poured into the project and our forests on the chopping block, this is a gamble for all, unborn included.

The uncertainty of the pulp industry and the volatility of the global pulp market highlight the fact that government subsidies and corporate handouts to prop up this pulp mill represent a gross misuse of taxpayer money.

Direct public subsidies to the pulp mill so far include:
• $60 million from the federal government for the East Tamar Highway, described by the federal Forestry Minister as ‘paving the way for the pulpmill’.
• $6 million from the state government to the Pulp Mill Task Force;
• $2.4 million (first installment of $5m) from the Federal Government to Gunns for development of the pulp mill.

The Meander Dam and Basslink are two pertinent examples of governments using taxpayer money to prop up ventures that would otherwise be uneconomic. While these fail many tests — planning assessment, environmental and/or financial — they are pushed ahead with the knowledge or assumption that the taxpayer will always be there as the buffer between survival and sinking.

Our children will be taxed with the responsibility and burden of undoing the mistakes that are made today. Whether a dam, mill, power cable or clearfell, we owe it to them to employ the precautionary principle now and set up the clean, green future they have the opportunity to realise.

Tasmania deserves to push through this mentality of corporate welfare and development at all costs. In an era where families and individuals find it hard to make ends meet, it is grossly indulgent of governments to use taxpayers’ funds to prop up the risky fantasies and pet projects of the big end of town.

Vica Bayley
The Wilderness Society

Earlier: Gunns: You read it here first

What the Greens say:

Peg Putt MHA
Greens Opposition Leader
Thursday, 1 June 2006

PUBLIC SUBSIDY OF PULP MILL IN CHEAP STUMPAGE PRICES

Ministerial Evasion Through Weasel Words

The Tasmanian Greens believe that an ‘in-principle’ agreement for a lower than usual price for pulpwood supply from public native forests to Gunns’ proposed pulp mill has been agreed, effectively giving a subsidy from the public purse in order to make the mill economic.

Greens Opposition Leader and Shadow Treasurer Peg Putt MHA was scathing of the evasive ‘weasel words’ used by the Minister for Forests in Parliament in relation to the Head of the Pulp Mill Task Force’s statement that CommSec had overestimated stumpage at $10-$12 per tonne, the Minister’s claim that nothing is finalised being a statement of the obvious since any in principle agreement is never final.

“It is clear from the statements of the Head of the Government’s Pulp Mill Task Force on stumpage prices that an ‘in-principle’ deal for a public subsidy through a lower than usual price for native forest pulpwood has been agreed for the proposed pulp mill, but the Minister is evading confirming this situation,” Ms Putt said.

“If the stumpage royalty of $10-$12 per tonne for native forest pulpwood was an overestimate in the CommSec report as stated by the Head of the Pulp Mill Task Force, then a lower price must have been agreed ‘in-principle’, no matter the Minister’s weasel words that this agreement is not finalised.”

“Of course such an agreement would never be final until an approval was given, but an understanding would already be in place to allow Gunns to calculate the viability of the project for their own purposes and for their Integrated Impact Statement.”

“The Lennon government must come clean on the public subsidy flagged by Mr Gordon in his claims regarding the price of wood to be supplied to Gunns’ Pulp Mill.”