Tom Baxter Pulp mill subsidies: transport just the tip of the iceberg .

Richard Flanagan and Lindsay Tuffin are rightly concerned by the latest transport subsidies promised from the public purse for the benefit of Gunns Limited and its pulp mill.

But let’s not miss the wood for the trees. The pulp mill’s total taxpayer subsidy will far exceed $110 million, overwhelming the economic case Gunns made for the mill – a case apparently accepted by Malcolm Turnbull.
Yet even (then) Minister Turnbull’s own Department’s Environmental Economics Unit, concluded in its analysis of Gunns’ economic modelling (my emphasis added):

“In conclusion, the analysis as it is presented is reasonable on the basis of the model used, the publicly available assumptions and data used.The above comments indicate a number of areas of potential concern regarding the robustness of the results as well as potential risks if significant public funding is used to support the project. In addition, if it is assessed that will be upstream and/or downstream environmental impacts that may affect other industry sectors then further economic analysis would be required to present a broader assessment of the overall economic impact of the project.

Environmental Economics Unit
22 June 2007”.

Somehow, the Department’s Recommendation Report (para 71) to Minister Turnbull converted that conclusion to:

“71. Economic factors are addressed in Section 2.4 of the Preliminary Documentation. A report was produced by the Environmental Economics Unit of the Department (EEU) (Attachment 9). The EEU report concluded that the analysis presented on behalf of Gunns was reasonable on the basis of the model used, the publicly available assumptions and data utilised. The CGE model used in this project is widely accepted as a credible model for examining this type of major project development. However, while the model attempts to include all aspects of the economy it is still only a model and does not completely replicate all activities occurring in the actual economy.”

Notice anything missing? Like the EEU’s concern regarding robustness “as well as potential risks if significant public funding is used to support the project.” Such subsidies are not merely ‘potential risks’ – they are fundamental foundations of the project. Read some of the excellent economic modelling done by Associate Professor Graeme Wells for the Tasmanian Roundtable for Sustainable Industries Project.

And who deleted the EEU’s additional warning of “upstream and/or downstream environmental impacts that may affect other industry sectors” requiring further economic analysis? For a few examples of such impacts, see the Departments paragraph 74 below.

The department’s Recommendation Report concluded its three paragraph treatment of economic matters:

“73. There is also substantial support in the community for the proposal because of the economic and employment benefits that would arise. ….”

That sentence does not reconcile with the immediately following paragraph 74:

“Social

74. From the public comments received, it would appear that there is a large proportion of the local community who are concerned with the operation of the pulp mill in the area, particularly in regard to air quality issues and the association of this mill with forest harvesting in Tasmania. Some members of the community have stated that the construction of the mill will lead to a tarnishing of the ‘clean and green’ image of Tasmania as a source of healthy agricultural products such as wines, cheese and seafood. Concern has been expressed about the project altering tourists’ appreciation of local foodstuffs and wine in George Town, Launceston and the Tamar Valley. According to the Tasmanian Government’s report (ITS Global, 2007, Attachment 10), while a visual impact is unlikely, odours and emissions may be considered unpleasant by some tourists. However, the report considered that tourism and industry con co-exist successfully, as they already do in the local area and region.”

What of the Recommendation Report’s claim of “substantial support in the community for the proposal”? That flies in the face of over 31,000 submissions, mostly opposed, after Minster Turnbull released his Department’s proposed approval decision and conditions. Then, in October 2007, as The Australian reported on 1 Nov:

“A BACKLASH against Gunns pulp mill has toppled Launceston Mayor Ivan Dean and his deputy and seen a number of anti-mill candidates elected to northern Tasmanian councils.

Mill opponents yesterday hailed the results of Tasmania’s local government elections as proof of widespread opposition to the mill, to be built in the Tamar Valley north of Launceston.

As well, a plebiscite held with the council elections in Hobart showed 76per cent opposition to the mill among voters in the state capital. …”

Far from “substantial support”, that’s a tale of two cities (not to mention many other Tasmanians) strongly opposed to one powerful company’s pulp mill.

In deciding whether or not to approve the mill, and what conditions to attach to an approval, Malcolm Turnbull was required by the Environment Protection and Biodiversity Conservation Act 1999 (Cth) s 136 to consider:
• matters relevant to listed threatened species, listed migratory species, and Commonwealth marine areas; and
• economic and social matters.

In so doing he was required to take into account a number of factors listed in s 136(2). These include the principles of ecologically sustainable development, as defined in the EPBC Act s 3A. The principles of ESD and a number of other mandatory requirements appear to have received mere lip service in Malcolm Turnbull’s reasons for his decision.

A correct Commonwealth approval process befitting the scale and long term impacts of this project would have examined environmental, economic and social matters far more rigorously and comprehensively than occurred.

The environmental evidence alone (beyond the scope of this article) warrants review (both judicial and political) of Malcolm Turnbull’s 50 year approval for Gunns’ Tamar Valley pulp mill. The brief examples above suggest that Minister Turnbull’s consideration of economic and social matters also contained fundamental flaws.

References:
(links embedded above)

Department of the Environment and Water Resources, Environmental Economics Unit, Minute 22 June 2007
http://www.environment.gov.au/epbc/notices/assessments/2007/3385/pubs/att-b9.pdf.
Department of the Environment and Water Resources, Recommendation Report prepared for EPBC Project 2007/3385 August 2007
http://www.environment.gov.au/epbc/notices/assessments/2007/3385/pubs/recommendation-report.pdf.
Matthew Denholm, ‘Gunns backlash swings council votes’The Australian 1 November 2007
http://www.theaustralian.news.com.au/story/0,25197,22682743-5006788,00.html.
October 2007 council election results to which Denholm’s article refers are at:
http://www.electoral.tas.gov.au/pages/LocalGovernmentMain.html.
Richard Flanagan, ‘Now is the time for turning’ Address to Stop the Pulp Mill Rally, Franklin Square, Hobart, 17 November 2007, Tasmanian Times November 2007
http://oldtt.pixelkey.biz/index.php?/weblog/article/now-is-the-time-for-turning/.
Lindsay Tuffin, ‘Kevin Rudd’s $110 million gift to Gunns pulp mill’, Tasmanian Times 21 November 2007
http://oldtt.pixelkey.biz/index.php?/weblog/article/100-million-labors-promised-gift-to-gunns/.
Tasmanian Round Table for Sustainable Industries Project, Sustainable development in Tasmania:
is the proposed pulp mill sustainable? August 2007
http://www.lec.org.au/campaigns.html#roundTable.

Tom Baxter
Lecturer in Commercial Law
School of Accounting & Corporate Governance
University of Tasmania
Email: [email protected]