Forest Network Ensay Plantation Objection

Part 2 - Additonal Letter Sent to Councillors

20-08-07

TO : East Gippsland Shire Mayor and Councillors

RE : Planning Application Permit No. 329/2007/P

(Proposed Plantation at 1119 Buchan-Ensay Rd, Reedy Creek)

I have lodged an objection to a planning application for a plantation in Reedy Creek ( Planning Application No. 329/2007/P, 1119 Buchan-Ensay Rd). I am writing now to raise some issues with the Council that were outside the immediate scope available to me in that objection.

As I wrote in my objection, I am not opposed to plantations in principle but, I am concerned about the “what, where, how and why” of their establishment.

I have read the East Gippsland Planning and Development Strategy 1997-2010, and the East Gippsland Planning Scheme. These documents do not appear to address the issues around plantation development in any adequate detail.

With so much capital and energy being expended on establishing plantations in the region it would appear to be an expedient time for Council to revisit the issue with a view to establishing a more specific vision for how and where the plantation industry will grow in the region.

Rather than let the industry develop in an ad-hoc manner at the whim of proponents, Council should develop a plan that would protect existing stakeholders, and help plantation developers identify suitable areas and the scale and type of plantation that would be acceptable to all parties.

Research has already conducted into identifying the areas suitable for plantations. By comparing these maps with existing land use and infrastructure it should be possible to assess the impact of plantation establishment and devise measures to mitigate those impacts.

Before I expand on these ideas, I would like to raise some issues that I excluded from my objection because they were beyond the scope of what was addressed in that planning process. Although these points relate directly to the permit application in question, they also have broader ramifications.

Macquarie Forestry Services (MFS) have applied to plant an area of 270 ha but I understand, and it appears likely, that they will target other properties in the area for acquisition so as to make their operations in the area more cost effective. I was told that MFS and Midways P/L (MPL) had told other locals it had spoken to that they intend to acquire 5000 contiguous acres locally.

Given that the locality is untried in terms of it's capacity to physically sustain plantations at commercial production levels, and given that the economic viability is uncertain due to the long distance to processing facilities, it seems possible that MFS may, at some time, abandon attempts to grow Blue gum or other single species crops in the area.

The local Eucalypt species have taken around 90 years to reach 20 metres height so it seems reasonable to assume that Blue gum may also fail to thrive, or even reach the targets required for commercial viability. If this happens, the damage to Sandy Creek may be irreversible and the changes to the landscape values and aesthetics may take tens, if not hundreds of years to undo.

MPL, who will manage the site on behalf of MFS, have indicated in the permit application that they believe local rainfall to be around 775mm p.a., but local knowledge suggests 600mm p.a. is more around the correct mark and, that the last twenty years have seen many occasions when total annual rainfall was nowhere near that mark even.

MFS may have access to funds that allow it to experiment but other landowners in the vicinity won't have the same luxury if the experiment fails. At least some of the changes brought about will be permanent for all intents and purposes for those whose energy is being invested in the area for the long run.

There has been rapid growth in the total area of farm land being converted to grow plantations across the state. Council needs to consider whether this proposal complies with, and is sympathetic to, Council's broader planning and development vision for the region. The expansion of an already extensive industry into new regions will have significant impacts. Council will need to have clearly defined strategies and enforceable policies to ensure that expansion of the plantation sector occurs in a manner that is not detrimental to other/existing stakeholders.

The trend of plantation establishment using Managed Investment Schemes (MIS) will transform the agricultural and cultural landscape in Australia. Investors seeking to take advantage of tax benefits invest in timber and pulp production. These tax benefits were conceived and implemented by government to compensate for the long time frame involved in timber production. MIS were seen as a mechanism to attract funds to develop the plantation sector in line with the 2020 Vision. One consequence of this policy strategy, intended or otherwise, was to see huge areas of privately owned farm land transferred to corporate ownership. The investors may pay for the establishment of plantations initially but the corporations have been acquiring ownership of the land.

Companies like MFS are charging investors up to $9000/ha for plantation establishment and management costs over one rotation. The actual costs to the companies are more likely to be around $1600/ha over the same rotation. After one rotation the plantation companies have payed out the investors and own the land outright. If plantation companies so desire they can remove the investors from the equation altogether after one rotation. The astonishing profitability of this industry is obvious. Obviously the profitability, no matter how astounding, is not a crime but the issue is the impact this conversion of land use has on other landholders and local residents and councils. The returns available to plantation companies growing pulp for paper must make those who undertake traditional and trivial agricultural pursuits such as food production green with envy!

As I mentioned earlier, this particular permit application is for an initial planting of just over two hundred hectares, but we have heard that MFS and MPL plan to develop a plantation estate of 2000 hectares locally in the short term and 20,000 hectares in wider East Gippsland by 2019. It is not hard to see how this will be achieved when in the last quarter of the financial year just gone “a total of $17.7 billion was invested into superannuation through Macquarie vehicles, with $5 billion of this coming in during the last week of June alone.”

MFS and it's investors may be happy to seek ever higher returns on their investments but the implications of such large areas coming under corporate control should not be underestimated by the local council and community.

There are some sound reasons to question the sustainability of the MIS fueled expansion of the plantation sector. This sector has generated a 'gold rush' mentality in recent times but the projected profitability has been repeatedly shown to be overly optimistic.(1)

There is also a question as to how well this sector will survive a predicted global glut of timber and pulp from plantations. Burgeoning global production from plantations could radically cut the price for plantation products on world markets. Many of the anticipated returns were based on assumptions made before explosive growth in the sector.(2)

What will happen if governments dismantle MIS and similar schemes? What will happen if the market price for plantation products collapses or declines markedly? Where do the corporate land owners turn for profit then? How will they make their money?

(More on MIS - See Attachment 1)

It has been suggested that the MIS managers may be viewing carbon trading as their next cash cow. Plantations may become more profitable as carbon sinks rather than as sources of timber and pulp. (3)

The fatal flaw in the 'plantations as carbon sinks' argument, and one that is yet to be exposed in my opinion, is the failure to incorporate “cradle to grave” economic and environmental accounting for the full cycle of plantation products.

In the instance of Blue gum plantations, the argument is that trees grown for ten years absorb carbon from the atmosphere. The fact that is conveniently overlooked is that Blue gum plantations of this age class (which makes up the bulk of the plantation estate) are almost universally woodchipped for paper or cardboard production.

Leaving aside the fact that much of the carbon stored in the roots, crown, bark and foliage is left behind at harvest to be burned or rot, it is almost inevitable that within a short period of time these paper products will end up as waste in landfill sites.(4)

“The organic waste dumped in a landfill site will decompose with time. Assuming a relatively impervious surface below the waste, the waste will become waterlogged and decomposition will be basically anaerobic (in the absence of oxygen). This will lead to a production of mostly methane gas from the waste. This methane will slowly work its way up through the waste and be vented into the atmosphere. Should there be efficient draining of the site, then there will be a mixed form of decomposition, anaerobic producing methane lower down and aerobic decomposition producing carbon dioxide nearer the top of the heap.”

http://www.habmigern2003.info/biogas/Landfill-sites.html

“Methane (CH4) is a greenhouse gas that remains in the atmosphere for approximately 9-15 years. Methane is over 20 times more effective in trapping heat in the atmosphere than carbon dioxide (CO2) over a 100-year period and is emitted from a variety of natural and human-influenced sources.”

http://www.epa.gov/methane/

In this light, plantations as carbon sinks are seen as, at best, completely ineffectual if not counter-productive and, at worst a blatant scam.

If plantation managers were genuine in their desire to use plantations to offset carbon emissions any harvesting would not compromise the ecological integrity of the site and the products derived would have a scientifically predetermined longevity designed to ensure net carbon capture.

With these question marks hanging over plantations as a viable long term land use, it poses the question; how easily the land could be returned to traditional agricultural practices like cropping and livestock if tree growing is abandoned?

I can think of at least two issues that might arise if land formerly used for plantation was returned to conventional farm uses. The combination of deep ripping (tilling), and decaying slash and other harvesting residues in the cultivated soil, could create unstable conditions that pose a physical risk to livestock. In addition, the contamination from forestry chemical residues might pose problems for the safety of food crops for some years.

As either plantation growers or traditional agriculturists, it is doubtful that stewardship of the land and management practices by absent corporate landowners and investors would be of the same quality as that of someone who invests their life's work in it. The fundamental imperative of the corporations will be to maximise profit. All other considerations, be they social or environmental, will be subordinate to this objective. Where family farms have been managed with a view to intergenerational equity and sustainability, corporate farms will be managed for short term commercial gain. We all know that Macquarie CEO Allan Moss doesn't earn his $33 million a year by being a thoughtful and considerate neighbour. I know which I would prefer as neighbours and community, and that is family owned farms as opposed to transnational agribusiness and global funds managers.

With so much uncertainty around the desirability and future of growing broadacre monocultures for fibre, it may be wise for councils to take a precautionary approach by discouraging large aggregations of land under corporate ownership.

There is a fashionable faith based notion around that only the market can determine the most profitable and efficient land use. If anyone of us actually believed this we would stand by while the Macquarie Banks of the world have their way with us. Clearly this is an absurd proposition.

It is apparent that EGS Council is best placed to mediate and implement the compromise required to accommodate the needs of local residents, interested third parties and corporations like Macquarie Bank.

To this end, I believe there are various ways Council can help individuals and communities deal with the juggernaut bearing down on them. EGS Council can learn from the social, financial and environmental disasters that have beset other regional communities and councils who failed to act decisively in response to the plantation sector's rapid expansion.

Responses available to East Gippsland Shire Council :

Identify and map suitable land – Undertake inventory to identify the area of land suitable for plantation growing.

Identify existing uses on land identified in the inventory as suitable for plantation - Assess the social, economic and environmental impacts on local and regional scales of converting those areas to plantation. Plantations will often compete with other land uses because they target high rainfall areas with good quality soils. Because of the capital and tax benefits available to the plantation sector they will often have an advantage over other agricultural sectors.

Set maximum plantation footprint – Set maximum area to be planted out as plantation in East Gippsland as a whole. This will help maintain a diversity and balanced distribution of land uses and possibly prevent other agricultural pursuits being forced out of East Gippsland entirely (because of the higher price plantation developers can offer for land).

Set maximum plantation footprint for each area – Along with a maximum regional footprint for plantations, Council should consider a local maximum plantation area in each sub-region to ensure economic diversity and prevent domination by the plantation sector.

Set maximum area for each block of plantation - as deterrent to large aggregations and consequent negative impacts.

Compensation – Council should seek recompense for plantation related roading. Council can utilise provisions in the State planning scheme to recover increased costs associated with maintaining tracks used by trucks and machinery involved in the plantation sector.

Council should also investigate avenues that would see plantation companies fund Council, or independent third party monitoring of forestry operations in plantations. The Code of Practice for Timber Production may be a well intentioned document but without monitoring and penalties to deter breaches of the Code it is worthless. Council may be able make COPTP monitoring, and the funding of such monitoring, a condition on the granting of planning permits for plantations. Council monitoring of operations, and conditions attached to permits may even extend beyond the purview of the COPTP.

To ensure compliance with the COPTP, and any discretionary conditions attached to planning permits for plantations, Council may be able to penalise breaches of the COPTP (where the adherence to the COPTP is a condition of a planning permit) under the provisions of the Planning and Environment Act 1987, Sec 127, which specifies fines of up to $120,000 (1200 penalty points) "Where no penalty has been expressly provided for an offence under the Act."

Council should also actively discourage plantation companies from removing existing infrastructure on the land plantation companies have bought or leased for the purpose of plantation growing. Plantation companies have been known to remove infrastructure such as houses and sheds to “maximise the area available for planting”. Conveniently, these actions also serve to minimise the rates payable on a property. Any reduction in the rate base impacts on other ratepayers who, to make up budgetary shortfalls, may end up paying higher rates as a result. Any reduction in the rate base may also limit or diminish the type and quality of services Council is able to offer.

The removal of infrastructure also impacts on potential future land uses. For instance, the removal of homes and sheds would deter potential purchasers intent on other agricultural pursuits which tend toward a 'live-in' lifestyle if the property were to be placed on the market.. The flow on effects may also affect land values on surrounding properties.

To discourage the removal of infrastructure, Council could make the preservation of infrastructure a condition of planning permits or, even if the infrastructure is removed, the value of the asset could be incorporated into the rates assessment for the duration of the land use (as plantation) regardless of changing (land) ownership.

One way to manage the growth of the plantation sector would be to facilitate partnerships between plantation companies and existing agricultural industries and landowners. Council could act as a intermediary to identify and co-ordinate these potential partnerships. One significant advantage of this approach would be that it would negate the need for corporate buyouts of farms. Other benefits would include desirable social and environmental outcomes.

Council could start a register for landowners who are within the areas identified as suitable for plantation development and willing to enter partnerships with plantation companies.

It seems likely that Gippsland Private Forestry Inc. (a not-for-profit industry development organisation that promotes sustainable, commercial private forestry development in Gippsland.) may have already identified land suitable for plantations and would be a valuable resource if farmers considering partnerships needed independent information and advice.

Plantation companies could consult the Council register when looking for new areas to plant. This would expand the number of options available to plantation companies. They would not be restricted to the small number of suitable properties that are for sale. It would also reduce negative impacts, such as the fragmenting of communities, that occur when whole farms are bought and converted to plantation. If ownership of the land remained with existing landowners, some of the problems that arise from large areas having absentee landlords would also be eliminated.

With commercial agreements between farmers/landowners and plantation companies it is likely that plantation companies could acquire access to areas of land that would be large enough to achieve scales of economy without completely dominating local landscapes.

The model determining the layout and area of the plantation could use a method similar to “Whole Farm Planning” used by Landcare. The process would begin with a rough target, e.g. 20% of a property, and base planting around geographical and practical considerations. By planting out drainage lines, existing internal fence lines and common property boundaries with commercial tree species, it should be possible to utilise enough land to make tree growing feasible without compromising the productivity and profitability of the primary agricultural purpose.

If several landowners on contiguous titles agree to participate in a project of this type the economic viability is further enhanced and the other benefits also compound.

Landcare projects have shown that land restoration, if done properly, can actually improve the productivity of a property even though some land is excised from the primary commercial purpose.

The benefits for the farmers include:

it would cost them nothing,

it should raise the land's value and productivity,

improve aesthetic appearance of the property and,

it may also diversify income streams for the farm if they are able to get a decent return from growing trees in partnership with plantation companies.

This scheme could result in significant areas of land being ecologically restored if the model implemented incorporated generously scaled riparian strips, drainage lines and genetic corridors made up of indigenous species that would not be logged or sprayed.

This aspect could actually benefit plantation companies because it would be a genuine form of carbon sequestration (as opposed to the dubious types of carbon sequestration criticised earlier). These carbon sinks would have lucrative economic value in their own right for the plantation companies.

With carbon sequestration and trading schemes likely to come under increasing scrutiny and regulation with regards to their efficacy in actually achieving their intended purpose, this system would meet the requirements of any certification scheme.

Outside of the zones managed specifically for carbon sequestration and other environmental services, a variety of indigenous and native species could be grown for sawlogs or pulpwood on the other parts of the land committed to timber production.

The issue of chemicals and fertiliser use would still need to be looked at and resolved to the satisfaction of the various parties. This aspect is one of the few areas that is potentially problematic with a possibility of conflicts on interest.

It is also conceivable that this system may evolve into 3 way partnerships if bodies such as
Landcare and the Natural Heritage Trust Fund were bought on board. The significant expertise and resources of these agencies would be advantageous and their participation could lead to financial input that may also help to defray costs.

I believe that timber and pulp products derived from the production system described here would have enormous market advantages over contentious product systems in both the native forest sector and the plantation sector as it is now (based on industrial scale broadacre monocultures).

With consumers demanding ever higher environmental standards during production, timber and pulp from this system would fetch premium prices and attract the interest of the growing number of companies with preferential buying policies based on environmental and ethical considerations.

The 2020 Vision, MIS and similar initiatives have seen government policy have a wide variety of negative consequences. With the ramifications of these policies now coming to light it is time for a wide ranging review of planning laws and guidelines, regulation, taxation arrangements and other financial incentives related to the plantation sector. All levels of government need to be cognisant of the current situation and implement reforms that will restore a balance whereby the rights and needs of local communities are respected.

In the absence of leadership from the federal and state governments, local councils become the only practical vehicle to facilitate and shape the development of a socially, economically and environmentally sustainable plantation industry. I urge East Gippsland Shire Council to develop a coherent vision and policy framework for the development of this industry before it is too late. By clearly defining the standards Council expects from plantation developers, and by offering useful tools and adequate deterrence where necessary, it is more likely that this sector will actually be of benefit to, rather than a detraction from, the region.

(1)- “There is now irrefutable evidence that the claimed value of the resource has been grossly overstated, that the volumetric predictions are absurdly optimistic and that the only beneficiaries will be prospectus sellers making commissions and plantation managers who are able to acquire effectively free land as result of the nature of the schemes. “

Kim Booth MHA Tasmania - A Submission To

REVIEW OF TAXATION TREATMENT OF PLANTATION FORESTRY (link)

“The following points warrant highlighting:-

(i) In most cases, the freehold ownership of the land vests with the Responsible Entity or its related entity, not the investor.

(ii) It costs around $1,600 per hectare to establish Blue Gums. This is a robust figure. The

remaining $7,400 of the original $9,000 per hectare investment is devoted to other matters, including prospectus costs, the purchase of land by the Responsible Entity, sometimes payments of commissions to the financial planners of the investors, and profit.

(iii) There are emerging indications of plantations in some cases achieving growth rates –Mean Annual Increments – less than the rates suggested in the Product Disclosure Schemes for the hardwood plantation MIS. For instance, in one case an MAI below 18 m3 p.a. has been reported. Furthermore there are, in Victoria at least, identifiable instances of MIS plantations being established on land in rainfall areas of below 650mm p.a. which is the minimum feasible rainfall indicated in the PDS of the largest MIS operator.

(iv) Real rises in land prices have occurred in high rainfall grazing and cropping land, and land for part-time or non-commercial farming activity. Profitability of cropping, dairying, beef production and non-agricultural influences all play a part in such real rises in land values. Hardwood plantation schemes too have played a part in that land that has been planted to forestry has been acquired by outbidding potential, profitable, competing uses.

(v) Warnings of an impending over-supply in the hardwood chip markets are being made in

some quarters, most notably by Clark (2005). Other analysts disagree with this judgement.”

Public policy and managed investment schemes for hardwood plantations (link)

Patrick Mackarness and B Malcolm

“In a 2003 report of the MIS industry, ASIC:

Questioned the commerciality of these schemes.
Stated that at times the quality of disclosure was poor and/or absent.
Said the schemes occasionally provide inappropriate or misleading advice.
Said schemes made payments of high commissions in excess of norms, for retail investment schemes.
Found that the tax benefit was the most dominant reason for people entering into these schemes.
Found that of those surveyed, 42% stated that the tax advantage was the major attraction of primary production schemes, followed distantly by the requirement for future income (26%). “

Why I don't invest in trees By David Cornish (link)

(2)- FAO (2001) estimated that between 1990 and 2000 the global plantation estate expanded by 143.4 million ha.

Australia's looming hardwood chip glut - Judy Clark, ANU

http://www.daff.gov.au/__data/assets/pdf_file/0011/98048/pres_7_clark.pdf

From the UN Food and Agriculture Organisation

(It's worth noting that these statistics quote 2000 and 1995 figures respectively. The growth in the global plantation estate has continued at a phenomenal rate so the potential impact of a glut on the value of plantation products can only have increased)

(3)- “Surprising as it may seem, Argentinian and Uruguayan authorities seem to have forgotten that grassland soils are rich in organic matter, which means that they constitute huge carbon reservoirs. The effect of plantations on these reservoirs is uncertain and presumably negative. Instead of dreaming of risky forestry megaprojects, a useful contribution of countries located in the temperate region to curbe global warming would be to conserve soils and grasslands --with the additional positive effect on biodiversity and water conservation.”

http://www.wrm.org.uy/actors/CCC/sinks7.html

(4)- “Millions of tonnes of household waste are collected each year, with the vast majority disposed of in landfill dumps. The composition of MSW varies according to the location and type of the collection service. In 1994, the average composition of Australian MSW was found to be 46% putrecibles (decaying organic matter), 24% paper, 26% plastic, glass and metal, and 4% "other" (ERDC, 1994). The biomass resource in this MSW comprises the putrecibles, paper and plastic and averages 80% of the total MSW collected.

...At these landfill sites the gas produced by the natural decomposition of MSW (approximately 50% methane and 50% carbon dioxide)... “

http://www.rise.org.au/info/Res/biomass/index.html

“According to the 1990 Update by the EPA, paper and paperboard account for 40 percent by weight (34 percent by volume) of the municipal solid waste (MSW) in the United States. This is projected to increase to 48 percent (weight) by the year 2010. “

http://ohioline.osu.edu/cd-fact/0135.html

Attachment 1

Managed Investment Schemes

“We have concerns about the impact MISs have had on family farms and the way agriculture is practised in Australia. It has become apparent that the people who develop these schemes and those who invest in them do so for the up-front tax deductions. These people do not seem to be interested in the longer term profitability of some of these schemes, which is why we have concerns about the schemes’ impact on agriculture.

If you are investing in these schemes for their up-front tax deductibility, you may not be that interested in the sustainability of the scheme or of the particular agricultural enterprise. And I am deeply concerned that some of the crops being invested in are in fact unsustainable in particular areas. Growing olives, for example, where irrigation is needed, using large amounts of water, may be unsustainable in the longer term in certain areas. “

http://www.rachelsiewert.org.au/500_parliament_sub.php?deptItemID=98

“MIS plantation forestry destroys or severely impacts farms, neighbours, local economy, environment, jobs, health, water, and social viability of our rural municipalities. “

http://tasmaniantimes.com/index.php/weblog/comments/eric-abetz-and-farmers/

“My analysis of the economic impact is that for every 10,000 hectares of high rainfall farming country lost to blue gums, the local economy is $27 million worse off if it is grazing country and $361 million worse off if it is currently dairy country. “

http://www.eurekareport.com.au/iis/iis.nsf/ak/awKYiS?opendocument

“ROB LEISHMAN, VICTORIAN DAIRY FARMER: Why should the big business people in the cities pay no tax or pay a lot less tax by investing in something that's not going to pay and the working people of this country have to prop the country up because the country's got to be kept going? And the people that can just dodge it, to me, it's one of the biggest bottom-of-the-harbour schemes we've ever seen.

BERNARD BAXTER, VICTORIAN DAIRY FARMER: We're starting to see the likes of Collin Street farmers if you like coming back in and reacquiring the land into an industry that isn't self-sustaining on it's own, it can't stand on it's own two feet like the dairy industry can.

DON JOWETT, NATIONAL TREE FARMER OF THE YEAR, 2002: It's just a joke. We're building billionaire land owning forestry companies who really aren't worried about productivity. Most of the investors only own the trees on the land and some of them, as I said, will have good crops, some will have bad crops, But it's the land factor that is where the capital that the investment appreciation has been made and the companies are going to benefit because all that land has been paid for out of the profits from the investor. “

http://www.abc.net.au/4corners/content/2007/s1890870.htm

Extracts from submission to the Review of Taxation of Plantation Forestry by John Hayward : “With the land use change has also come degradation. As other land improvements are subject to valuation for council rates purposes, these fixtures, such as fences and outbuildings are normally destroyed by purchasing plantation managers. After two rotations of pulpwood, most soils are too depleted for a third, leaving any succeeding farmer with the unfeasible burdens of removing stumps, restoring fertility, neutralising the soil acidity, and replacing basic infrastructure.

The intensive establishment of thirsty plantation cultivars in a catchment can result in a drop of up to 40-50% of catchment yield, after an initial period of rapid run-off and erosion. Tasmania is now seeing permanent creeks becoming seasonal. Even more alarming is forestry’s aerial spraying of highly toxic herbicides and pesticides, such as Atrazine and alpha-cypermethrin, in those catchment with negligible government monitoring or regulation. Tasmania’s already high cancer rate is reported to have increased by 37.6% in the 1976-2000 period. It appears only a matter of time before sufficient causality between these chemicals and diseases is established to enable legal actions to be mounted. “

http://www.treasury.gov.au/contentitem.asp?ContentID=1000&NavID=