21 March, 2007

THE AGE: A cut above

Andrew Darby
The Age, March 21, 2007

Timber giant Gunns has spooked the Lennon Government into fast-tracking its $1.4 billion pulp mill. But that's the Tasmanian way.

You need to understand the way things are done in Tasmania to see why Australia's largest-ever timber industry project could fall over like a house of cards in a gentle breeze. Leave aside any notions of pragmatic decisions based on calm reflection. Set up instead a permanent chasm, a deep ravine in the political landscape, with the timber industry on one side and greens on the other. Remember the island's tiny, two-degrees- of-separation business and political worlds, its obsession with the notion of the one, giant industrial project that will secure its future, and repetitive history of disputes over these developments.

And remember also that this is the nursery of the granite batsmen David Boon and Ricky Ponting, and of the firebrand novelist Richard Flanagan. Count on the refusal of some individuals to be bullied.

All of this may help mainlanders understand that the $1.4 billion Gunns pulp mill is more what Tasmanians might call a "rum 'un" - a strange character - than "a ringtail roarer", their term for a certainty. For more than three years, Tasmania's biggest home-grown company, Gunns Ltd, has been trying to complete its transformation from Launceston-based sawmiller and hardware store to global competitor in production of the universal paper stock, bleached kraft pulp.

Gunns employs 1700 people and has a $700 million annual turnover. Before a share price decline, it was valued at more than $1 billion on the market. From the contracted tree fellers in the bush, to the woodchip loaders and the counter staff at its stores, Gunns is there. The company reaches throughout Tasmania.

When Premier Paul Lennon paid for $100,000 of renovations to his graceful but ancient sandstone house in the country, a Gunns subsidiary, Hinman Wright Manser, did the work. When the mill project in the Tamar Valley, north of Launceston, was announced, Prime Minister John Howard went to Tasmania to commit $5 million to ease Gunns' task of assessing it.

And when old-growth logging in Tasmania blew up as an issue in the last federal election campaign, timber industry interests dominated by Gunns spent nearly $486,000 on political advertising.

After the Howard Government won with a forests policy backed by Gunns executive chairman John Gay, the company donated $45,000 to the Liberals in Tasmania, and $20,000 to the party's associated Free Enterprise Foundation. It gave nothing to Labor over the same period.

Little surprise that when Gunns began to make noises in January about pulling out of the normal statutory assessment process for its giant mill, the Premier interrupted his leave to get on the highway to Launceston, to Gay's office.

Unusually in Australian corporate life, Gay is both chief executive and chairman of Gunns. He is the one who travels the globe, meets the politicians, strides the shop floor and fields the media.

Endearingly awkward of speech, evidently respected by his employees, he grew up in timber, drives a modest European car and farms for recreation. Gay is also a tiger of an opponent. Back in the 1980s, he took on a royal commission, refusing to be browbeaten when Gunns came under attack because its then chairman, Edmund Rouse, had used money on deposit with the company to attempt to bribe a state MP, and thereby buy a parliamentary majority. Though other witnesses folded, Gay sat like a rock, unscathed.

Also to appear in the box at the time under adverse questioning were two other men who are now Gunns directors, businessman David McQuestin, and the former Liberal premier Robin Gray.

In Tasmania, being what it is, there is further symmetry to this history: Gray's fall from power 18 years ago was hastened by his handling of the failed Wesley Vale pulp mill project put forward by Gunns' predecessor, North Broken Hill.

Under the present Gunns board, the company remains a fierce defender of its beliefs, and plays hard. It is pursuing a highly controversial damages case against 15 individuals and evironmental organisations. Already two statements of claim have been thrown out by the Victorian Supreme Court.

According to the Wilderness Society, the actual damages claimed in the third statement - the financial losses caused, rather than the exemplary damages sought - are far outweighed by the legal costs so far awarded against Gunns.

"What we're sick of is the malicious damage some people are doing to us," Gay said of the pursuit. "We will continue to chase that down to the nth degree."

Then last year, as the pulp mill assessment moved to its critical stages, Gay started to come up against Tasmanian characters much like himself.

The chairman of the state's Resource Planning and Development Commission, Julian Green, was the ultimate legal-minded public servant, deeply experienced and dismissive of the limelight.

Green was blunt with Gunns. At a commission public hearing called to consider the company's confusing 7000-page, $11-million submission, Green suggested that perhaps Gunns might like to do it again.

When the Lennon Government began to stick its nose into the process through a "cheer squad" it called the Pulp Mill Taskforce, Green had had enough. Assessment panel member Warwick Raverty resigned when the taskforce brought up past work that might be perceived as biased, and Green followed.

Unfortunately for Gunns, his replacement as commission chairman did not appear to be any more helpful to the company. A retired judge, Christopher Wright, a stickler for procedure, refused to meet Gay privately for discussions.

He also criticised Gunns for its repeated failure to meet deadlines set by the commission, pushing out far beyond May a decision on the mill's approval.

"It has become quite apparent that due to accumulated delays, all or most of which appear to have resulted from Gunns' failure or inability to comply with their own prognostications, or the panel's requirements, that timeline can no longer apply," Wright said.

At first Gunns tersely agreed to a new timetable set by Wright that would not have seen a decision on the project before November.

But behind the scenes, the Premier was seeking something quite different. At a meeting with Wright in late February, Lennon proposed plans to introduce special legislation and abandon public hearings to speed up assessment of the mill.

"I was gobsmacked, to be perfectly honest," Wright said. After thinking about it, he offered his resignation. Faced with this additional highly embarrassing loss, Lennon backed down. But Gunns remained dissatisfi ed. On March 14 it formally withdrew from the commission process. "We have tried to have discussions with people during this process and, from within the Government and RPDC, have never been able to talk to anyone," Gay told the ABC. "They have said: 'we can't talk to you' and obviously at the directions hearing Mr Wright said that he can't talk to me.

"I have offered to put a project which would add value to the forests and add value to Tasmania, that I can't talk to anyone about. We cannot continually run a process which has not got any timelines."

Each six-month delay would add $60 million to the cost of the project, Gunns calculated, as a result of bank commitment fees, financial hedging costs and additional construction costs. Instead it "required" a process that delivered a decision by June 30. It was time for the Premier to hit the road to Launceston again.

He put forward a plan to take the proposal, now ballooned to a breathtaking 9000 pages, through State Parliament.

A relaxed Lennon recounted his Sunday evening visit to Gunns' office where he met Gay. The Premier laid out his plan, Gay "withdrew, presumably to consult others in the company", and came back an hour later to agree.

Lennon said that essentially the mill had failed at the commission because of the organisation's inability to determine a final timetable. "Investors need certainty, and the process did not supply certainty. This process has to end now by August 31."

But he confirmed that he had an understanding with Gunns that the project would be unchanged from the one that fell short in the commission. Dr Raverty, the Victorian organic chemist whose resignation from the assessment panel started the cards collapsing, is convinced that on existing data, the mill will not be environmentally acceptable at its site in the Tamar Valley.

Raverty said Gunns was yet to show that its airborne emissions would fall within prescribed limits, in an airshed already notorious for poor quality. Gunns had also left open the option of using a bleaching process not used by any other pulp mill in the world.

"You would have to worry that the process is going to get out of control some days and produce highly toxic organochlorines. If that happened, Australia would be in breach of its international obligations under the UN Convention on Persistent Organic Pollutants."

Lennon is confident that consultants employed by the State Government will be able to make the project comprehensible to state MPs. The mill would meet stringent environmental guidelines, or be rejected, he said. "If it doesn't meet the emission limits, I won't be voting for it."

Having abandoned the process that he previously endorsed, Lennon apparently faces fewer difficulties in getting the project through the Parliament. Less than half-way into a fouryear term, he has political time on his hands, and a secure lower house majority.

In the state's upper house, conservative independents and Labor MPs, who could be expected to be kind towards the project, predominate. Their sensitivity to lobbying is legendary. More immediately, Lennon faces heavy political criticism over his attempt to sway Wright.

As the Tasmanian Greens leader Peg Putt surveyed the special treatment awarded to the party's longtime foe, she said: "This is not in the public interest. This is in Gunns' interest. In the final wash-up, Parliament is set to make an entirely political approval after a second-rate charade."

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