Litigation had fundamental impact on VicForests’ financial results

Philip Hopkins

LITIGATION brought by environmental groups had a fundamental impact on VicForests’ financial results in 2022-23, the state government forestry body said in its 2022-23 Annual Report.

The chief executive, Monique Dawson, said VicForests had planned to harvest $112 million in timber, returning a margin of $27 million to be applied to the costs of delivering related government services. VicForests harvests native forest timber, sells the timber to processors and regenerates the forest coupes before returning them to DEECA to manage. Key processors in Wellington Shire are Australian Sustainable Hardwoods in Heyfield and Radial Timber in Yarram.

“Instead, VicForests harvested $17 million in timber and paid compensation of $110 million for undersupply to customers (compared to $7.5 million in FY2022) and $421 million to contractors who were not able to work (compared to $6 million in F22),” she said.

“This was entirely due to the impact of orders made in litigation brought by environmental groups.”

In 2022-23, VicForests sold 65,759.54 cubic metres of sawlog and 95,257.02m3 of pulpwood, representing about 17 per cent of planned sales, the annual report said. Firewood log sales were also reduced, totalling 16,767m3.

Market conditions for sawn hardwood continued to be strong despite a weakening in house construction.

“The tightening of log supply resulted in increased demand for the available sawn hardwood, which maintained the upward trend in sawn hardwood prices,” the report said.

“Prices paid by VicForests sawlog customers increased around 11-12 per cent over the 12 months.”

Ms Dawson said VicForests provided strong evidence that it had taken care to manage risks to threatened species, complying with the explicit regulatory rules developed by expert foresters over many years. These carefully balanced economic, social and environmental considerations were as required by the principles of ecologically sustainable development.

“Court orders imposing significant additional obligations, including requiring VicForests to identify and protect individual animals or plants, do not reflect this public policy balance,” she said.

As a consequence of the unsuccessful court outcomes, Ms Dawson refuted claims that its operations amounted to illegal logging.

“VicForests has complied with the Code of Practice for Timber Production in its operations and associated prescriptions to manage environmental threats,” she said.

“However, vagaries in the Code have meant that when raised before the Court, the Court has determined these measures, driven by science and research, to be insufficient and requiring more before timber harvesting operations can occur.”

VicForests accepted the Court’s decisions and complied with the interim and final orders. Legal costs for VicForests amounted to $5 million.

As a result of the Court orders, Ms Dawson said VicForests worked with the University of Melbourne and drone providers to develop and deploy a survey method that uses thermal imaging technology in conjunction with a normal RGB (red, green, blue) camera and spotlight. This enabled comprehensive night-time surveys to be conducted safely in the forest.

“We believe this work is at the cutting edge of survey technology and provides a pathway to comprehensive surveys for nocturnal animals that is efficient and effective – reducing the risk of injury to surveyors operating in difficult and often dangerous conditions,” she said.

Ultimately, Ms Dawson said VicForests returned a net loss of $60.1 million despite reimbursement of $149 million from government to fund customer and contractor compensation.

“This result includes the write-down of the value of native timber rights to zero due to the decision to cease native timber harvesting,” she said.

Mr Dawson said VicForests was proud that the independent audit of its operations showed that VicForests achieved an average 96 per cent compliance across four environment areas: environmental values in State forests, conservation of biodiversity, operational planning and record keeping, and coupe infrastructure for timber harvesting operations.

“The 96 per cent average compliance findings are a testament to the work our passionate staff undertake in Victoria’s state forests,” she said.

Ms Dawson said pleasingly, VicForests had maintained its certification under the Responsible Wood certification scheme under the PEFC certification system – the largest forest certification system in the world.

This included a transfer of accreditation to the latest Australian Standard for Sustainable Forest Management (AS/NZS 4708:2021) “These results are objective evidence that VicForests is a leading forestry company,” she said.

Community forest operations, which support more than 50 businesses or groups in regional Victoria, generated revenue of $0.3 million against a program cost of $1.2 million, the annual report said.

“The products include firewood and fencing materials, with high-quality timber being used for such product as bar-tops, furniture, appearance-grade cladding, specialised railway uses and musical instruments,” the report said.

“Operations are characterised by their low impact with a focus on the use of thinning and selection practices in most instances.”

Under the Reconciliation Action Plan, VicForests continued to establish formal agreements, partnerships and commercial arrangements with Traditional Owner groups, the report said. It worked closely with groups east of the Snowy River and the Gunaikurnai across East Gippsland in a Healthy Country Pilot Project.

“The purpose of this project is to establish a series of demonstration sites on culturally recognisable parcels of land where the forest has been restored using Traditional Owner knowledge,” the report said.

“Work commenced on our first site in early 2023 and continued at low scale without the removal of trees.”

Other key events for 2022-23 included:

-As part of the $10 million, four-year farm forestry program, 10 grants established 90 hectares of demonstration sites around Gippsland. A second round of grants targeted 50 successful applicants for 300ha of plantation woodlots, shelter belts and wide-spaced planting;

– VicForests supplied DEECA with about 2.3 tonnes of Alpine Ash, Mountain Ash and Messmate seed under the State Recovery Plan, in addition to the three tonnes supplied after the 2029/20 bushfires and 3.5 tonnes in 2021/22. Negotiations to extend the seed agreement with DEECA until June 2024 are continuing, but poor seed crops mean collection in 2023/24 will be much smaller;

-Blue Gum and radiate pine plantations were consolidated, including deer control to minimise browsing and destruction of seedlings, and further post-planting weed control;
-Opal Australia’s closure of its white paper production at the Maryvale Mill in the Latrobe Valley led to the last delivery of native hardwood pulplog, and;

-On May 23 2023, the government announced that commercial native forest harvesting would cease on December 31 2023.