Globally the P & P (Pulp & Paper) industry has a history of creating social upheaval, engaging in corrupt activities and subverting process (1). In this article I use data from a comprehensive pulp mill impacts study (2) to remind us of the impacts of plantations on rural Tasmanians.
In Tasmania, there is a growing discussion about plantations, and in particular whether we should or should not build some kind of plantation fed pulp mill to ‘rescue’ the forest industry and simultaneously save our forests. Any such rescue would ‘lock in’ the effects that plantations have, regardless of the type of mill that processes the wood, so understanding the implications of retaining our plantations could be important.
Economically, it seems that the money to be made from the pulp business is made by P & P operators who sell mills for billions as well as operate them under contract for hundreds of millions every year. By contrast, almost all of the risks are at the feedstock production and processing end which is also where most of the detrimental impacts are suffered by local communities and individuals who stand to get virtually nothing from the P & P activities.
Tasmania has to go into deep debt ($3 bn or so) by buying pulp mill hardware from Scandinavia, then use its resources to pay off that debt. The cash goes to Scandinavia, so it’s really an investment in that region. It’s the old story of ‘to the locals go the work and the woes, to the P & P industry go the spoils’.
Such a system results in support for P & P operations being organised through a small group of powerful interests who will be ‘winners’ in the business while a majority of taxpayers and others get the role of ‘losers’ whose role is to pay the P & P industry to prosper.
Exploring the yields of plantations reveals many serious problems. Given the long period for trees to grow (approx. 15 yrs), the relatively low yield per hectare (150+ tonnes) coupled with the amount of water taken from groundwater by each hectare of plantation (approx. 2 Ml/yr) and the relatively low prices received for pulp wood trees, the annual productivity of a hectare of land is woefully small (approx. $100-$200/ha/yr) after actual costs are deducted (e.g. $1,750 planting costs).
You’d do better to run free range chooks or pigs, sell firewood or blackberries.
Of course, pulpwood tree plantations in Tasmania have been funded by taxpayers and ‘mom & pop’ investors who have lost their savings in failed timber MIS which has resulted in even lower costs of plantation timber as timber buyers pay ‘fire sale’ prices.
Forestry Tasmania’s Wood Supply Agreement with Gunns reset the ‘floor price’ for chippable timber to $15 tonne delivered to the mill. Worse yet, in valuing our forests at such a low level, the government has made Gunns and our resources an attractive takeover target for foreign owners.
Private owners cannot compete with the Wood Supply rates so they’ll be in a position of being forced into ‘take it or leave it’ offers made for their wood. Without another market for their trees, and the potential for being charged rent if they overstay their tree contract, ‘investors’ are virtually stuck with selling to monopsony Gunns.
The result is that taxpayers, communities and small ‘investors’ will take all the losses. For the processor it means cheaper trees.
The low price for plantation pulp wood is essential to keep input prices as low as possible for P& P operators. Plantation operators have already had their Council rates reduced to a fraction of what others must pay, all to keep costs and wood prices at the lowest levels possible. The result is that Councils lose income and must either cut services or increase rates to everyone else. No worries though as long as the right people are going to gain.
Because it takes 4 tonnes of green lumber to get 1 tonne of pulp, any increase in the price paid for pulp wood trees has a 4x impact on the cost of producing pulp so the game is to keep the tree producers dependent on the big buyers so they have no negotiating power. In Tasmania, it’s a done deal.
The way the P & P industry avoids drawing attention to the dreadful returns from plantations is to ignore them and talk a lot about the benefits of a pulp mill. By talking countries into ‘investing’ in plantations, the volume of plantation wood becomes a justification for going into debt to purchase a pulp mill within a couple of decades.
The negative impacts of all of this has to be absorbed by people who get no benefits whatsoever from a pulp mill, while the positives flow to a few wealthy stakeholders who are rewarded for getting the entire thing off the ground – approvals, finance, legal exemptions and what have you.
This pattern of distributing costs to the wider population while benefitting some privileged group is known as ‘socialising the costs and privatising the benefits’.
Supplying a pulp mill requires large tracts of land to be devoted to tree production. This can be either native forest, or plantation timber or some mix. The large areas involved distribute the detrimental impacts over a wide area, unlike a mine which tends to be contained in a small area. In Tasmania some 3,000 sq km are already under plantation making Gunns one of the biggest landowners in the State and hence politically powerful. Much of that land was acquired via MIS in which taxpayers funded the biggest ever Australian land ownership transfer from small operators into corporate hands.
The P & P industry has learned that threatening native forests with logging is one good way to get community support for plantation expansion. It’s the P & P version of the protection racket.
Among the huge problems created by large area plantations is groundwater use by plantation trees that drain catchments over a wide area. As a result, farms and communities suffer losses of water volume and quality which can adversely affect food production, rural economies and community health. Tasmania’s reported 300,000 ha of plantations take 600 Gl of groundwater each and every year, more than all other water users combined. To keep mill input costs low plantation operators are not charged for that water which leaves irrigators and communities to absorb the costs and impacts.
As farmers sell up, so the various food processing concerns get pushed closer to their break-even point until they are forced to sell (e.g. McCains) causing even more farmers to want to get out as they lose their main buyer. Result – local rural recession but more cheap land for plantation operators.
Tourism and recreation operators lose business as tourists lose interest in looking at plantations and scarred hillsides. Wide area spray treatment of plantations, coupled with potential toxic compounds leaching from E. nitens trees (4), combine to make water quality questionable, possibly even toxic.
Detrimental impacts to communities and food producers are often very much in the interests of P & P operators because land values go down and make more tree plantations more affordable for them. A glance at a map will show that the Long Reach mill is at the centre of a circle whose circumference includes the Western Tiers, along with forests and plantations in the North East and North West. Because low input costs are vital to P & P profitability, it makes sense for the mill operator to ‘fill in the gaps’ around the mill with more tree plantations. Lots of stink, lower water tables and sundry unpleasantness means people selling up at low prices. Great for the mill – more trees closer – too bad for everyone else.
Wide area operations mean lots of heavy equipment and big trucks placed around the North of the state. That means lots of capital and capital risk. Solution – put the risk onto small contractors in the same way that plantation risk was placed on small investors and the taxpayer. Contractors cannot afford to lose business so they can be pressed into working long hours for lower rates in the knowledge that they have to pay off their rigs to avoid bankruptcy. Another benefit, desperate contractors will apply political pressure to ‘rescue’ them usually by government subsidising the forestry industry.
Moving up the value chain
As we move away from the plantation/forest supply scenario, there’s more money to be made but it’s kept in the hands of a very few people, basically the supply chain owners (Gunns) and pulp mill owners (?). Dry chips are selling for a bit under $200 tonne so there’s a better return for the chipper operator/shipper – in Tasmania’s case Gunns. With forest inputs at $15 tonne delivered, there’s reasonable money left as margin even after the chips have been dried.
Pulp is selling at around $650 tonne (3) so that’s another big increase in price. Unfortunately pulp equipment requires a massive capital investment that cannot be offset onto the public easily, although there’s little doubt that forestry would accept such an arrangement.
These then are some of the problems of supporting large areas of plantation in Tasmania.
Of course, the community’s role is to lie back and think of England while the industry has its way with our resources. When it started to look as though we’d figured out what was happening the blinds were drawn on the RPDC and the decision was left up to the P & P industry itself – Sweco Pic to be exact.
Now that it’s ended in tears, we’re being told that we’ve got to help forestry somehow. It’s our responsibility to see them alright.
The ‘out of the forest and into plantations’ call will not be easy to implement because most of the plantations are of wood that is unsuited for use as timber. Local expert George Harris has confirmed that testing shows very little use for the wood except as fibre. That means that forestry interests are going to rely on native forest access for many years to come (hardwood timbers take 50+ years to grow).
The real question is one that should have been studied long ago – is there a better use for land, water and forests than as supplies for a pulp mill?
Looking at the problems that face us today, from climate change to huge population increases, this writer believes that the answer is yes, and that the forest industry could easily grow by using the land for higher value operations that generate returns of thousands of dollars per hectare and deliver advantages to rural communities and others, while creating multiple jobs in many industries.
Why has forestry been drawn into wood chipping?
It seems there are several reasons including:
1) The attraction of owning vast areas of land for plantations at taxpayer expense
2) The power that comes with being a major landowner and industry
3) The ability to reduce investments and labour costs (only a chipper and shipper needed)
4) The (hollow) promise of big returns after justifying a pulp mill
5) The wish to look like the big boys in P & P (Poyry, Botnia, Sodra etc)
Forestry probably didn’t recognise a downside for their industry. They could see that the community suffered, but the proposition put to them appeared near bullet proof. Beer and bangers all round.
In fact, forest Actuary Naomi Edwards forecast many of the real problems in her RPDC submission and elsewhere, it’s just that no-one wanted to know the inconvenient truths. The idea of competing with massive forested countries like Brazil and Russia, when our prices were commensurately higher and we were relatively far from world markets, was always highly suspect. Now the entire forest industry is exposed to the vagaries of world fibre markets, fuel prices and currency changes and they don’t like the result.
I guess forestry hasn’t heard the ‘never put your eggs all in one basket’ nostrum.
The result of benefits only studies (i.e. without showing the impacts on so many people) have left Gunns project without the risk information for prospective financiers to carry out a proper ‘due diligence’ study of the project. Such a lack leaves financiers deeply suspicious. Result – no finance.
Sending people like John Gay, David Llewellyn and Michael Aird to present to European bankers might also not have produced the results hoped for.
The amount of paid propaganda, the deceptions, the corrupt processes, the distorted decisions, the lack of representation…all these and more are the result of trying to shoehorn a damaging project into a community that cannot afford the risks, losses and costs. They typify the international P & P industry’s actions elsewhere.
Continuing to support such a massive area of tree plantations carries many risks and impacts that require mitigation. Putting lipstick on this is hardly likely to change anything. We need fundamental change in our land and water use priorities to fix this mess.
Watch this space.
(2) Study took over a year to complete and was carried out to inform the community during the RPDC process (copy available thru TAP).
Mike is a complex systems consultant, change facilitator and executive/management coach.
Note. The author welcomes constructive criticism and new information that adds to our understanding of these issues and rejects personal vilification as a legitimate form of discourse.
Earlier on Tasmanian Times:
More Editor’s Choice: HERE