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Pulping reality

By Alan Moran - posted Friday, 30 January 2009

Developing a pulp mill in Tasmania has been a 25-year saga that remains unfinished.

Back in 1983, the Wesley Vale proposal launched the career of Christine Milne and placed the green movement at the political centre of power. That proposal was founded on a peerless set of environmental guidelines that had been negotiated by the Industry Minister, Senator Button and endorsed by the CSIRO.

At that time, the Machiavellian Senator Richardson was in charge of the environment portfolio and the Labor Party was anxious to maintain its green credentials. Into this brew Treasurer Paul Keating, showing his limitless conceit, considered he could squeeze out a few more concessions from the applicants. Button assured his colleagues that further demands would cause the prospect to collapse and was proven correct. He left it to a temporarily humbled Keating to deliver the news that investors in Australian resource projects were now subject to sovereign risk.


Once the Wesley Vale mill window was closed it took 20 years before a further viable business proposal could be developed with the current plan fostered by Gunns at Bell Bay.

Aside from finding markets, finance, equipment and labour - the conventional complexities behind any turnkey project - Gunns also has to satisfy a government agency that is fundamentally opposed to business development other than creation of mythical "green" jobs. And two decades of environmental activism has brought a massive inflation in the number and complexity of the conditions governments impose on new pulp mill applications.

Gunns is required to comply with an incredible list of 48 different criteria on each of 16 modules that constitute the environmental conditions. That means a total of 768 individual environmental approvals on which politicians and bureaucrats can find fault. In announcing the Government's decision, Environment Minister Peter Garrett indicated that 720 of the Commonwealth requirements have been accepted, with 48 remaining. On top of these, the company also needs to obtain a legion of local and state government approvals.

Steering an environmental proposal through the shoals of government processes is proving to be a Herculean task for any company to undertake. The conditions required of the mill are not only numerous but also include requirements that its discharges are cleaner than the river that carries them and contain far fewer dioxins than drinking water.

The considerable barriers to development Australia has erected are testimony to the distance we have travelled in rejecting new, commercially oriented investment. The demonisations and costs, delays, and uncertainties imposed on the proposed mill have spooked prospective lenders, with the original financial supporter, the ANZ Bank, walking away from it. Not surprisingly, Gunns has been unable to tie down alternative sources of finance.

With such a prominent and controversial project, the Environment Minister, Peter Garrett would be subservient to the control of Kevin Rudd's office. In Rudd's absence, Julia Gillard, as Acting Prime Minister, has demonstrated a total misunderstanding of the decision paralysis that follows from an incomplete specification of the costs a government approval will entail. She said, "More work needs to be done, Minister Garrett made that perfectly clear yesterday. But construction can start." Garrett himself has only added further confusion when he said that a decision to reject might expose the Government to claims for compensation. This suggests that Garrett would like to create circumstances under which Gunns, rather than the government, takes the initiative to cancel the project.


Predictably, the opponents of the mill focus on bogus matters of pollution and the alternative ventures it allegedly closes off.

Emotively huge numbers like "30 billion litres" and "100 toxic substances" are promoted without addressing their context; residues from the project are trivial in relation to the area in which they are to be discharged and would impose far less environmental harm than if the output were to be produced anywhere else in the world.

The green industries the mill is said to close off will as usual prove to be mythical - and in any case presumably including tourism which green policies would strangle in carbon taxes. Meanwhile a genuinely productive investment is denied and a warning is given to others that activists will markedly raise the costs of doing business if they consider ventures in Australia.

Australia's handling of environmental issues might be great political theatre but is a lousy way to run a country. Any proposed use of natural resources is now subject to an additional premium in terms of delays, paper-burden costs and uncertainties over whether previously envisaged requirements will be escalated in the course of the proposal's consideration.

This is denying us opportunities for development and wealth creation. And doing so in the context of a deteriorating world economic situation will sharply increase the penalties for our casual enhancements of sovereign risk.

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First published in ABC Unleashed on January 13, 2009.

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About the Author

Alan Moran is the principle of Regulatory Economics.

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