VicForests in middle of battle over possums and timber

23 February 2014

IN the next few weeks the State Government will make a decision which is likely to seal the fates of leadbeater’s possums and Victoria’s native forest timber industry.

The possum, a cute critter and since 1968 Victoria’s faunal emblem, is in a bad way. No one is sure how many of them managed to survive the Black Saturday bushfires, which, according to official estimates, burned 45 per cent of the area kept for its protection and 34 per cent of its potential habitat. The State Government puts its numbers between 3750 and 11,250, which sounds dire, but is better than the earlier official estimate, which until its rediscovery in 1961 was zero.

Unfortunately for the possum, it shares its habitat with another endangered species, the native forest timber industry. Again, relying on official estimates, VicForests, the government-owned entity which manages the logging of the state’s native forests, sources 70 per cent of its annual ash timber supply from within the range of the leadbeater’s possum. More importantly, some say this area is the most — indeed some would argue only — profitable part of VicForests’ logging activities.

In other words, saving the possum is unlikely to be compatible with saving the native forest timber industry. Like the possum, the native forestry numbers have been in steep decline too.

According to Australian Bureau of Agricultural and Resource Economics and Sciences data, in the decade to 2012, annual native sawlog production fell by 45 per cent and pulp wood — the stuff that ends up in the chipper — by 30 per cent.

As for VicForests financial statements, the best that can be said for them is that they are not as bad as they used to be.

According to its latest annual report, last year it took in $104.5 million from the sales of forest products, with other income taking its revenue to $106.3m.

Alas, its expenses came to $105.3 million, meaning all up, its net profit was only $802,000 — which, while pretty dismal, is still better than the $96,000 it lost the year before.

VicForests hasn’t paid a dividend to the Victorian Treasury, i.e. the taxpayers, since 2007.

Indeed, it has only managed to pay a dividend twice since it was established in 2004. Across its eight years of existence it has reported an after-tax profit of only $12.3 million. But even that you can take with a grain of salt, as over the same period it has received government grants of $24.7 million.

Keep in mind too that VicForests can borrow money at subsidised rates from the Treasury Corporation of Victoria, whereas its private competitors, who grow trees on plantations, cannot. (Incidentally, its private competitors also have to pay for the land they grow trees on — and the council rates on that land — whereas VicForests does not.)

But as bad as these numbers are, the fact is they probably don’t reflect the true losses to the taxpayer of continuing to log native forests. For starters it doesn’t include the cost of fixing roads that logging trucks damage, nor the loss of water that disappears from dams and irrigation systems into regenerating forests after logging. Or more controversially, the cost of fighting the fires loggers sometimes start — something I predict we are likely to hear more about after this summer’s events.

Getting back to the possums, Cabinet will soon consider a report from an advisory group which includes such possum-friendly folk as the boss of the Victorian Association of Forest Industries and representatives of VicForests, established to consider ways it can be saved “while maintaining a sustainable timber industry”. The report has gone to Environment Minister Ryan Smith and Agriculture Minister Peter Walsh. What it says, we’ll have to wait and see.

Government sources say that the two men take a different view of what should be done. Smith is believed to support the creation of a Central Highlands National Park to save the possum, while Walsh is prepared to accept a small area be set aside to save the timber industry. His line of argument with his colleagues is expected to be that this is a jobs issue, which in an election year should trump other considerations. The Government claims the industry employs 2300 people, but it is unclear how many of those jobs depend entirely on native forestry, rather than a mixture of native and plantation timber. The largest employer, with 900 jobs, is the Maryvale paper plant, which has indicated in the past it would be happy to shift to chips from plantations. VicForests itself only employs 114 people.

Normally, the smart money would be on “Walshie” to get his way. The Agriculture Minister has earned a reputation for winning internal battles. In a Smith vs. Walsh fight it would be no contest. The wildcard, though, is Treasurer Michael O’Brien and his department. O’Brien is unlikely to be impressed with an industry whose subsidies are retarding the growth of the private enterprise plantation industry. The possum may yet triumph over the loggers.

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