Forest regulations put Ernslaw One expansion projects on hold

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Forest owner Ernslaw One says the government's planned regulation of the industry may stall four projects it is considering to expand the firm's processing capacity.

The potential powers the government is seeking – to intervene in the log sales and contracts of forest owners – are "absurd" and go against any sensible business practices, chief executive Paul Nicholls told Parliament's environment select committee yesterday.

The lack of detail in the bill and the open-ended scope of the proposed regulations, means any consideration of expansion at the firm's pulp and timber operations near Tangiwai will be "on-hold" until the company has a good handle on the impacts of the scheme. By officials' own admission, that detail may be two years away, he said.

Nicholls told BusinessDesk he would now struggle to recommend the projects, which could potentially lift the capacity of the combined Tangiwai operations over five years from about 660,000 cubic metres a year now to a million cubic metres a year.

"We will put all of those on hold until we fully understand how this bill could be implemented," he told the committee.

"Honestly - if the government wants this level of control of how logs are grown and sold in New Zealand then they should buy the forests and manage it themselves."

Submitter after submitter have told the committee the consultation on the Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill has been farcical and its rushed implementation under Budget urgency an abuse of process.

Even those who favour improving the standard of advice to small forest owners – one aspect of the bill - say the scheme is more likely to increase costs than improve log prices for growers.

And they say Forestry Minister Shane Jones' bid to try to ensure a predictable flow of logs to domestic processors is an effort to fix a problem that doesn't exist.

Grant Dodson, chief executive of Dunedin City Council-owned City Forests, told the committee the industry had been "ambushed" by the minister and the bill.

"This is not a log supply issue. This is purely a pricing play," he told the committee.

The bill "is an absolute disaster for the industry and it cannot proceed in its current form."

Forestry is the country's third-biggest export earner after dairy and meat and brings in more than $6 billion a year from shipments of logs, panels, timber and wood pulp.

About 35 million cubic metres of wood is harvested annually, of which about 15 million cubic metres is processed here.

Kaingaroa Timberlands chief executive Robert Green said the firm updates its harvest profile quarterly and monthly based first on what its local customers need.

About 60 per cent of its harvest is sold domestically and that volume has increased by about 750,000 tonnes – 40 per cent – during the past five years.

But Green said forestry is a "breakdown" industry. Every component of the wood flow needs to be used and the company needs access to export markets to ensure it can sell the full range of log grades coming out of its harvest.

The potential restrictions on that from the bill could have "significantly negative impacts" on the industry, he said.

Whangarei-based NZ Forestry manages a harvest of about 500,000 tonnes a year.

Managing director Jeremy Waldegrave said firms like his play an important role for domestic mills by aggregating harvests of smaller lot holders.

While there may be cases of landowners being poorly advised on harvest options and timing, that would be a "minute" percentage within the total volumes of the sector.

Some forest owners, he noted, could also be "self-defeating" in the choices they made to harvest at short notice, or to harvest to meet cashflow needs, rather than maximising the value of the harvest.

He did not believe there was a log supply issue in Northland, but he said the more specialised nature of some mills has restricted the size and quality of logs that some can take.