The Gunns Issue

The Government has got itself into a right pickle over the latest forestry deal, and all of its own making.  In fact it would be laughable if there were not so many livelihoods at stake and taxpayers’ dollars at risk.

To understand the present situation, let us go back to last year, when Gunns made its unilateral decision to walk away from native forest harvesting and processing.  At that time it had a number of sawmills and other plant in Tasmania, as well as operations in Western Australia and Victoria.  CEO Greg L’Estrange made the announcement at a forest conference in Victoria last year, soon after Premier Bartlett announced his ill-fated “ROUND TABLE” to end forest conflict for good.

The decision by the company to exit native forests came as a complete surprise to its workforce, to forest contractors dependent on the company for their livelihood, to Forestry Tasmania, with which it had take-or-pay contracts, and to the general citizenry of Tasmania, including its parliamentarians.

L’Estrange gave as his reason “market forces”, and that the demand for his company’s products from native forests had fallen dramatically.  In particular he cited a collapse in the overseas woodchip market as a key driver for his company’s decision.  However, it was also in his company’s interest to exit native forest activity because he could then paint his company in a new light, totally plantation compliant, and thereby more attractive to offshore investors, which had become nervous as a result of an unremitting campaign of sabotage by the Wilderness Society and other conservation groups.

However L‘Estrange has gone much further than representing the narrow interests of his own company.  He has made the point that the entire industry in Tasmania should exit native forests as a matter of some urgency and has taken steps to encourage such a result.  The sale of the woodchip plant at Triabunna, in which conditions were placed on the new owners, is a prime example of this fact.  A most curious deal, considering the price, the buyers and the conditions of sale, where the plant could only be re-opened on the company’s say-so, and subject to “structural change” in the industry.

To me it is of interest that other woodchip suppliers throughout Australia have not been confronted with the same “market conditions” as Gunns, that they have been able to continue to sell their product offshore, and that the market remains strong for other native forest products.  Sawmillers are not complaining about the market.  So to say that market forces have caused a change in the industry is not really true.  The Premier should ensure she is fully briefed on the state of the market for all forest products before buying such a line.

At the time L’Estrange made his announcement to exit native forests, his company held a number of take-or-pay wood supply agreements with Forestry Tasmania.  His decision had nothing to do with any change in government policy  – it was a company decision pure and simple.

Such a decision was reinforced in April this year by a letter from the Gunns Board “handing back” their contracts.  To voluntarily exit the industry suggests walking away from pre-existing commitments, and as such, I suspect there is a good argument for Forestry Tasmania to be seeking recompense from the company for breaching these contractual commitments, and also to extinguish the wood supply agreements with the company.

We now come to the matter of the government signing the Intergovernmental Agreement (IGA) under which compensation monies would be made available by the Commonwealth to pay out forest contactors and sawmillers who wish to voluntarily leave the industry.  Note however that Gunns made its decision long before this time, and as such I suspect should not really be entitled to any compensation.

The company argues it has “residual rights”, but the paramount position is that it had already made its decision to leave.  Such “residual rights”, being an obligation to negotiate in good faith regarding any renewal, but with no obligation to reach any agreement, should be small indeed.  Especially considering it has an outstanding debt to FT of around $25 million.

I, like many others in the community, are now intrigued that the company has its hand out for compensation and that it has to date rejected a government offer to assist it, seeking more.  Intriguing also is the support from the Greens for such a payment to be made, and a question remains in my mind if this is in fact a quid pro quo for the Triabunna deal.  And even more amazing is the seeming approach of the government suggesting it might be prepared to pay an even higher figure than that which has already been offered, and rejected.

And while all this is happening, the forest protests continue.  What peace in our forests?

I can only conclude an extraordinary exhibition of arrogance from this company.  It has been arrogant in its dealings with the local community, with its workforce, with the forest industry generally, with its principal supplier Forestry Tasmania and with the Tasmanian parliament, which has gone the extra mile to encourage the success of its Tamar Valley pulpmill project.

To destroy an entire industry, to ruin the livelihoods of so many people, to place so many rural communities in jeopardy and then seek compensation for doing so, quite takes my breath away.

The Federal Government has promised compensation to forest contractors to exit the industry.  This is a fair cop as Gunns has essentially halved the industry by its unilateral decision.  However, the State Government is being led by the nose.  It should walk away from this deal in its entirety, and revert back to the Regional Forest Agreement, from which this debacle first commenced.