Economic Sustainability – I Think Not!

Context:

On 6 December 2012, I sent, inter alia, the following to the FT Bass District Manager:-

Quote: Please confirm that the reason the signs to the north and south of my entrance to my property on Highland Lakes Road – “Concealed Entrance, Logging Trucks Entering” – have been removed, is a clear signal that the TFA will be approved, that the Coupe BA388D will be listed as WHA, and that you spent $150,000 on a logging access road that was a total and clear waste of taxpayer monies. Unquote:

On 12 December 2012, I received in part this reply from said Bass District Manager:-

Quote: The signs on Highland Lakes Road were removed by Forestry Tasmania. These types of signs are often stolen so they were removed for safekeeping. The signs will be replaced closer to the time of timber harvesting.

Approximately 50% of the coupe BA388D is outside the tranche 1 area proposed for reservation as part of the Tasmanian Forest Agreement Bill2012 and would remain as permanent timber production zone land.Unquote:

Thinking Aloud:

This reply caused me to think about the IVGA process, the work of the ENGO’s, and the contents of Professor West’s report. In the West Report the subject Coupe BA388D was identified as FID 108 in that process, that it totalled 33.4 hectares in area, and was recommended for WHA listing.The lower area of 33.4 ha (as opposed to the coupe delineation of 40 ha) resulted from the exclusion of a small portion of the original FT Coupe in the north western sector due the perceived absence of European and Indigenous heritage and other HCF values.

This would leave only some 6.6 hectares of “unprotected forest” that might be considered by FT as being available for future logging activity, not the so called “half of the coupe”, as asserted by Bass District.

I thought, why would you bother to log such a small area, and given the inordinate cost exposure of FT to the preparation of logging access and other associated outlays, what would be the economic benefit?

Below is a preliminary estimate of the cost/benefit of logging the non- protected area of the coupe based on advice from a prior employee of FT with substantial knowledge of the coupe and its vegetation content.

Coupe Cost/Benefit Analysis:

In deference to perception of the Bass District Manager, I have based this analysis on his assertion that half of the coupe is not protected e.g. some 2 0 hectares

Based on harvesting/cartage rates as quoted in the 2001 link herein,

http://www.privateforests.tas.gov.au/files/attachments/marketreportpft1.pdf,

and direct information from a private individual personally involved in the HelshamThinnings Project of 1991, I estimate the cost/benefit equation of the 20 hectares that FT clams will not be WHA listed as a result of the TFA is as follows:-

Assume 30 tonne of peelers and 180 tonne of chip per hectare (Average from FT coupes over past 10 years).

This equates to 210 tonnes per hectare or 4100 tonnes total (600 tonne peelers, 3600 tonnes of chip logs)

[Note that a personal reconciliation of the stored logs (some 160, at an average of 2.2cbm/log) recovered from the logging access road , an area of circa 1.5 hectares in the heart of the coupe, is slightly less than the assumption being used in the analysis].

With revenue assumptions of:

• Peelers at $65 per tonne delivered to Smithton

• Chip logs at $12 per tonne delivered to ARTEC Bell Bay

Then

REVENUE = $82,200

With costs assumed as per below:

• Harvesting = $64,000 (based on average of $16/tonne, as per link above, probably now understated due they being 2001 levels)

• Cartage = $121,630 (2001 rates as per link above, 30 tonne loads, average 300 kmturnaround distances to Bell Bay/Smithton from Coupe)

• Roading = $75,000 to $125,000 (estimate based on knowledge of costforsimilar quality road created for a resources company in North West Tasmania)

• Management = $25,000 to $50,000 ( estimate for FPO’s, Planning, Administration, Overheads)

Then

TOTAL COSTS = $285,630 to $360,620

TOTAL LOSS = $203,430 to $278,430 or approx$10k to $14k per hectare

A total economic, social, and environmental disaster!

Let me assume that this coupe has special costs due distance from outlets (so halve the cartage cost to say $60,000); the access road cost is hardly normal due the location, the drainage issue to the Liffey, and the observant neighbour (a more normal cost might be say $25,000); and Management costs have been exacerbated by that same observant neighbour (a more normal $10,000 to that account).

Use this as the base, and assuming similar per hectare volumes and revenues, then one might calculate a per hectare loss of circa $4k to $5k per hectare.

http://www.forestrytas.com.au/uploads/File/pdf/pdf2011/2011_12_three_year_plan.pdf

On the basis of FT harvesting say 15,000 hectares per year (FT website plan for 2011/12 as per above link) their estimated loss would be circa $60 to $75million annually.

Ring a bell?