The Auspine – Scottsdale Saga
A report on the closure of Auspine’s Scottsdale Mill
By Geoff Law, June 2010
Synopsis
In September 2004, the softwood sawmilling company Auspine said that forestry workers
displaced if oldgrowth forests were protected could be employed in the softwood sawmilling
industry.
This statement was at odds with the views of Gunns, the Tasmanian Government and the Forest
Industries Association of Tasmania at the time, all of which supported further logging of oldgrowth
forests. Within four years, Auspine had lost its bid for a long-term contract to plantations necessary
for its operations; it had been 100% taken over by Gunns; one of its two Scottsdale sawmills had
been shut down with the loss of 120 jobs; and Auspine’s court case against Forestry Tasmania over
the allocation of the pine resource had been discontinued by the new owner, Gunns.
The company which had been awarded the long-term contract for the pine resource in dispute was
Forest Enterprises Australia (FEA). When the contract was announced, FEA did not have a sawmill
capable of processing the pine logs in question, but was said to have a more competitive long-term
business plan than that of Auspine. Little more than two years after commencing operations at its
new pine sawmill, FEA entered voluntary administration. In April 2010, its CEO was sacked and in
May its sawmill was put up for sale.
The Auspine saga raises questions over decisions by government and the accountability of Forestry
Tasmania and its joint ventures.
The Federal and State Governments appear to have discriminated in favour of FEA and against
Auspine in the allocation of industry-development grants. FEA received $7 million for
development of a sawmill and over $200,000 for treating pine products. Auspine received $585,000
for subsidised transport of pine logs – but only after the controversial resource allocation was
made. This was part of a one-year ‘rescue package’ in which logs from remote, dispersed
plantations were allocated to Auspine. This contrasts with the much more generous grant to FEA
for the purposes of establishing long-term infrastructure.
The disputed resource – pine plantations on State Forest in north-east Tasmania – are owned by a
joint venture with 50% Forestry Tasmania ownership. Forestry Tasmania’s Managing Director,
Bob Gordon, was part of the board of directors that allocated the long-term contract on the resource
to FEA instead of Auspine. Under the Forestry Act, Forestry Tasmania is obliged to consider local
employment when allocating resources. However, Mr Gordon told a Parliamentary inquiry that his
responsibility as a director on the board of the joint venture was to the joint venture, and that,
despite his involvement, Forestry Tasmania played no part in the controversial Auspine/FEA
decision. Auspine’s attempt to test this in the courts was scuttled when Gunns took over Auspine.
This has left a cloud over Forestry Tasmania’s accountability regarding decisions covering large
tracts of public land and the resources on that land. 42% of Forestry Tasmania’s plantations are
under joint ventures or lease arrangements. If Mr Gordon’s testimony to the inquiry is correct,
Forestry Tasmania officers need not be constrained by the Forestry Act when allocating resources
from this land. This is an erosion of the ability of Tasmanians to hold to account those who manage
public resources.
1
Meanwhile, the Auspine/FEA decision has caused significant adverse impacts in Scottsdale. The
details of and reasons for the decision are concealed behind commercial-in-confidence barriers.
Approximately 120 direct jobs have been lost, and local-government representatives have told a
parliamentary inquiry of a legacy of uncertainty, suspicion and distrust in the town, with concern
about whether the decision was fair, legal or objective.
The details of the Auspine Saga appear to justify an investigation by Tasmania’s new Integrity
Commission. The Commission should assess the commercial reasons for the decision; determine
whether decisions about resources managed under Forestry Tasmania joint ventures are made in a
transparent, accountable and effective manner; whether there was discrimination against Auspine
because of its statements about oldgrowth forests in 2004; whether there was discrimination in
favour of FEA by decision makers and, if so, whether that discrimination was legitimate; and how
to ensure that future decisions about public resources are made in a fashion that does not invite
suspicion of hidden agendas and ulterior motives.
The Auspine Saga
The recent woes of a little-known forestry company
have once again raised serious questions about the
way in which decisions about Tasmanian timber
resources are made. Trading in the shares of Forest
Enterprises Australia (FEA), a publicly-listed
company that processes and exports wood from the
Tasmanian port of Bell Bay, was suspended on 24
February 2010 after the company failed to
renegotiate a loan of about $200 million with its
financiers.1 Earlier, the company’s share price
plummeted to 4.5 cents after suffering a $14.1
million half-yearly loss.2 On 14 April 2010, FEA
announced to the Australian Stock Exchange (ASX)
that it had gone into voluntary administration.3 On 19
April, the company’s receivers sacked CEO, Andrew
White, along with 22 other employees.4 And in May
2010, a major asset of FEA, its Bell Bay sawmill,
was put up for sale.5
This decision is, in our view,
unprecedented in Australian
history. We want to know how it is
that a company that has been
operating in Tasmania for over 35
years employing over 300
Tasmanians, a company that has
just doubled its investment in
Tasmania, would come to be faced
with the closure of its mills when it
offered to at least match the price
offered by any rival bidder...
Yet FEA is the same company which, in early 2007, was granted resources needed by another
company, Auspine, for its two large pine sawmills in north-east Tasmania. At the time of the
resource allocation, FEA did not even have a mill capable of–processing
the disputed
resource.
Andrew Jakab,
Chief Operating
Auspine, on the other hand, was already employing over 300Officer,
people.Auspine,
The highly
controversial
19 March 2007
decision generated outrage in the local community, mystified many observers, led to suspicions of
hidden agendas, and eventually caused the closure of one of the Auspine sawmills with the loss of
120 jobs. A Parliamentary inquiry into the decision heard questions of conflict of interest involving
a former Deputy Premier and criticisms of a lack of accountability and transparency by Forestry
Tasmania.
Supposedly, FEA was granted the contract over the disputed timber because its business model was
more ‘competitive’ than that of Auspine. 6 On 4 May 2010, however, FEA’s receiver said that the
company’s “… business model was unable to fund its existing cost base”. 7 The official reasoning
for removing Auspine’s resource base – and putting over a hundred forestry workers out of a job –
was now in tatters.
Given the controversy, criticisms and suspicions that surrounded the Auspine decision, it’s worth
looking at the saga in detail.
2
In 2004, Auspine was a publicly-listed softwood sawmilling company which owned one
Tasmanian sawmill based at Scottsdale which employed about 150 people. Auspine’s sawmill
coexisted with another softwood sawmill at Scottsdale of comparable size and employment run by
Frenchpine, whose main product consisted of more specialised timber products used for joinery.
The resource relied on by both mills consisted of some 46,500 ha of plantations of Pinus radiata in
north-east Tasmania. These pine plantations had been established by the state on State Forest for
the purposes of job creation in north-east Tasmania. However, in 1999 the status of those
plantations changed. After privatisation of 50% of the plantation resource (not the land), a joint
venture was established between Forestry Tasmania and Grantham Mayo van Otterloo (GMO), a
Boston finance company.8
The resultant joint venture, called Taswood Growers, engaged yet another company, Rayonier, to
manage the plantations. Decisions about the use of wood from those plantations were now to be
made according to a complex arrangement between Forestry Tasmania, GMO and Rayonier.
In August 2004, the Australian Prime Minister, John Howard, called a federal election and on 3
September raised the issue of logging in Tasmania’s oldgrowth forests. He said:
I would like to see – and I think most Australians would like to see – an end to the logging of
old growth forests, but it must not be at the cost of throwing hard-working Australians and
their communities on the scrapheap.9
Auspine entered the debate, saying the company could employ forestry workers displaced from
oldgrowth logging if it were given the necessary resource security to enable investment to occur.
Auspine’s Chief Operating Officer, Andrew Jakab, said the softwood industry could invest up to
$450 million to expand and upgrade its operations. This would have involved significant expansion
of Scottsdale’s softwood sawmilling operations. The Australian newspaper quoted Mr Jakab as
follows:
Mr Jakab said the state’s softwood industry stood ready to invest hundreds of millions of
dollars in new plant and technology however it could not do this with the short-term
contracts being offered by Forestry Tasmania, the 50% plantation owner. ‘We are being
drip-fed resource. Forestry Tasmania represents a monopolistic supplier – the industry has
no choice (but) to take what it is given.’ He said Forestry Tasmania allowed the export of
whole logs for quick profits when better management would enable more value and more
jobs to be created in Australia.10
On 22 September 2004, Jakab appeared on the front page of the Hobart Mercury complaining that
he could not get a meeting with Premier Paul Lennon to outline Auspine’s expansion plans. “We
have not had a very good response from the Premier,” Mr Jakab is reported as saying.11 It was only
after this publicity that a meeting was arranged.
Auspine’s stance on oldgrowth forests was in direct contrast to that of other major players in the
Tasmanian logging industry, including the Forest Industries Association of Tasmania, Timber
Communities Australia and Gunns, all of which were urging both major political parties not to
change the Tasmanian Regional Forest Agreement (RFA).12
This division within the Tasmanian timber industry was brought into sharp focus when Gunns’
executive chairman, John Gay, was reported in the Mercury as having made a statement saying
that Auspine’s comments “have been extremely damaging to themselves and to their future in
Tasmania”.13
In December 2004, less than two months after the federal election, it was reported that Gunns’
retail outlets were no longer stocking or promoting Auspine products. It was reported that Gunns’
catalogue of early September 2004, before Auspine’s comments were made, featured the Auspine
logo, whereas the catalogues of October and November did not. Jakab was quoted saying that no
3
explanation had been given for Gunns’ move, but that it was a “remarkable coincidence” that the
decision came immediately after Gay’s warning.14
In May 2005, the Tasmanian and federal governments signed a Supplement to the RFA. The new
agreement protected certain areas of oldgrowth forests and provided over $210 million for the
forestry industry, including funds for new hardwood plantations, for intensifying forest
management, for new forestry roads and infrastructure, for country sawmills, for public relations
and for training. Of this package, only $10 million were allocated to the softwood industry.15 This
seemed miserly treatment of an industry keen to expand its operations by using non-contentious
plantation resources. It suggests that even the state and federal Governments themselves had not
been appreciative of Auspine’s foray into the oldgrowth debate.
In mid-2005, a tendering process for the north-east pine plantation resource owned by Taswood
Growers was initiated by Rayonier.16 Shortly afterwards, in October 2005, Auspine purchased
100% of Frenchpine. With both of the state’s big softwood sawmills located in the heart of the
plantation resource, and with over 300 people employed in regional Tasmania, Auspine’s claim for
a long-term contract for the pine resource seemed compelling. The timber company which had
pursued a direction compatible with protecting oldgrowth forests appeared to have a prosperous,
job-creating future which could set an example to other parts of Tasmania’s logging industry.
But there were other claims on the pine plantations Auspine so desperately needed.
Taswood Growers, the owner of that resource, and Rayonier, the manager, were engaged in the
lucrative trade of selling softwood logs on the export market. Taswood Growers’ Mr Ian Jolly, in
March 2007, would tell a Parliamentary inquiry that the export market “is so much more attractive
to us financially than the domestic market.”17 Forestry Tasmania – being a joint owner of Taswood
Growers – was a beneficiary of these whole-log exports.
And in late 2005, there came an additional major player with a potential interest in the northern
Tasmanian softwood resource – Gunns’ pulp mill. Previously, Gunns had indicated no interest in
softwoods for the mill. However, in May 2005 Gunns changed its project scope to include
softwood as part of the resource.18
Gunns' draft Integrated Impact Statement (IIS), released the following year, said that softwoods
would comprise 10% of the overall input – that is, up to 400,000 m3pa, a significant quantity for a
small state with limited and dispersed plantations of softwoods. The IIS was silent on the source of
softwoods for the pulp mill; they were simply lumped in with plantations (most of which provide
hardwood). Gunns said its wood could flexibly come from three sources – its own land, other
private land, and State Forest.19
In September 2006, the stakes were raised when another player entered the bidding process.20
Forest Enterprises Australia (FEA) owned and operated a woodchip-export mill and a small
softwood milling operation at Bell Bay, some 72 kilometres by road from Scottsdale. It announced
its intention to construct a major new softwood mill based on the same resource that Auspine’s
sawmills relied upon. According to contemporaneous sources, FEA’s proposed mill, after
construction, would employ about 100 workers – some 200 fewer than employed by Auspine.21
So there were now four major players interested in consuming large quantities of northern
Tasmanian softwoods: Auspine with its expansion plans; FEA which did not have a major pine
sawmill; Taswood Growers with its log exports; and Gunns. In theory these were different
categories of logs, with Gunns after pulpwood, Auspine after much higher-grade logs, and
Taswood Growers exporting a variety of qualities. But in practice, the lines between different
grades of log are fuzzy and fluctuate according to demand and supply.
Meanwhile, Auspine’s negotiations with Rayonier had dragged on. They had even been suspended
in March 2006, due to the imminent state election. Auspine expressed frustration in an open letter
published in the Examiner in March 2006. The open letter complained that Auspine had been
negotiating for a long-term contract for six years without success; that Auspine was prepared to
4
pay a higher return than Rayonier could achieve on log exports; that Rayonier had rejected seven
offers from Auspine and Frenchpine without making ‘a single commercial counter offer containing
fair market prices’; and that Auspine was prepared to submit its offers to independent assessment.
The open letter also expressed concern at the export of ‘hundreds of thousands of tonnes of
sawlogs’ by Rayonier over ‘recent years’. It ended with the catch-cries of ‘Log Security = Job
Security’ and ‘Exporting Logs = Exporting Jobs’.22
With the support of the Construction Forestry Mining and Energy Union (CFMEU), Auspine’s
workers rallied in Scottsdale on 10 March 2006. Speakers addressing the 1000-strong crowd
expressed concern at the slowness of the tendering process.23 It certainly seemed to present a stark
contrast to the way in which native-forest-consuming entities such as Gunns and Ta Ann24 had
been treated by Forestry Tasmania and the State Government.
Upon learning on 27 November 2006 that Rayonier, agent for Taswood Growers, was seriously
entertaining bids for the softwood resource from FEA, Auspine wrote to Rayonier offering to
match the price and non-price offers made by FEA or any other bidder. Auspine also stated firmly
its view that ‘the wider employment and other economic implications’ should be a major factor in
any decision allocating a resource from State Forest. In December, Auspine increased its bid by $5
a tonne for pruned sawlogs.25
But on 29 January 2007 came a bombshell. Less than five months after FEA’s initial expression of
interest, and only two months after Auspine’s offer to match FEA’s bids, Rayonier announced that
agreement had been reached to provide FEA with 290,000 cubic metres of softwood logs per
annum for 10 years.26 Auspine had been left out in the cold.
The announcement dismayed Auspine, the community of Scottsdale, local politicians, the Dorset
Council, and Auspine’s workers. Jakab later condemned the deal in forthright terms:
This decision is, in our view, unprecedented in Australian history. We want to know how it is
that a company that has been operating in Tasmania for over 35 years employing over 300
Tasmanians, a company that has just doubled its investment in Tasmania, would come to be
faced with the closure of its mills when it offered to at least match the price offered by any
rival bidder, only to have that wood awarded to a company unable to process the total
volume of wood, who represents that it will create up to 100 permanent jobs when and if it
was able to complete a new mill capable of processing that wood in 14 months' time. 27
Months of heated public debate followed.
In February 2007, a scathing socio-economic impact study of the decision was released by the
Dorset Economic Development Group saying the impacts would likely include:
 Potential loss of 296 direct jobs with a multiplier flow on of up to 800;
 Direct annual employee wage and salary losses exceeding $16m with a multiplier
increasing to $26.5m;
 Production loss of $80m per year;
 $1.5m per annum reduction paid to suppliers, 80% located in Dorset or Northern region
of Tasmania;
 60% of the job loss from Scottsdale alone: over 90% of employees lived in the
municipality, and 55% of employees had a predominant skill – timber milling;
 Significant enrolment decline in three primary schools in the municipality (1996-2006).28
Attempts were made by the Tasmanian Government to improvise short-term assistance for
Auspine. In March 2007, Premier Lennon promised Auspine a ‘12-month supply’ of softwood logs
from dispersed and distant sources, including plantations at Strahan, in southern Tasmania, and on
King and Flinders Islands.29 The potential knock-on effects of this deal attracted criticism. West
Coast mayor, Darryl Gerrity, publicly expressed concern about the impacts of log transport from
Strahan to north-east Tasmania on the state of West Coast roads and road-safety. And a Sheffield
sawmiller warned that up to 50 jobs could go from smaller mills if the deal went ahead.30 The
5
federal government was pressured to subsidise the greater costs of transport and eventually
promised $4 million.31
The Tasmanian Parliamentary Standing Committee on Environment, Resources and Development
examined the joint venture’s log-supply deal. The committee consisted of members from both
houses of the Tasmanian Parliament, including Bryan Green, a former Cabinet Minister and
Deputy Premier who from March 2004 to July 2006 had been the minister responsible for the
state’s public forests and for Forestry Tasmania itself.
Greens member Kim Booth raised questions of conflict of interest by Green as at least some of the
negotiations between Auspine and Taswood Growers had occurred under Green’s watch. Booth
argued that Green himself might have to be called as a witness. Liberal member Peter Gutwein
supported Booth but a motion that Green remove himself from the Committee was defeated six
votes to two (with Green himself voting with the noes).32
The committee heard evidence from all of the major players in the decision. Taswood Growers’ Ian
Jolly told the committee: "our assessment at the end of the day was that not only was the FEA a
better deal for us but it was a better deal for the softwood sector here because we could see it being
competitive into the future."33
The committee’s key witness, however, was Bob Gordon, Managing Director of Forestry Tasmania
and a director of Taswood Growers, the owner of the pine plantations. Gordon testified to the effect
that the Forestry Tasmania directors on the board of Taswood Growers did not have to consider
employment when deciding how to allocate resources – even though such consideration was
necessary under the Forestry Act:
Mr GORDON - Forestry Tasmania as a corporate body has no role in the recent softwood
joint venture process. It only has a role as an owner that has nominated three people to be
directors. Forestry Tasmania as such has no role in the decision-making process of the joint
venture.
Mr GUTWEIN - Are you telling us then that those people being appointed by Forestry
Tasmania to sit on Taswood Growers board need have no regard for any of the statutes that
Forestry Tasmania is obliged to operate in accordance with?
Mr GORDON - I am saying that once those people are on the softwood joint venture board
they are no longer Forestry Tasmania, they are directors of a company. There would be
thousands of companies in Australia where the shareholders elect directors but they have
been nominated by a major shareholder. Once you are a director of that entity your
responsibility is to the entity not to the shareholder that nominates you. And that is a matter
of company law in Australia and there are quite severe penalties for not acting in that
manner.34
This testimony went to the heart of the legal matters under consideration. It was a revealing
statement by the man heading up Tasmania’s publicly-owned forestry company, Forestry
Tasmania, a 50% owner of the disputed resource – a resource which lay on publicly-owned Crown
land. He seemed to be saying that, during their deliberations on the board of a Forestry Tasmania
joint venture, officers of Forestry Tasmania had no obligation to comply with the Forestry Act, a
provision of which obliged Forestry Tasmania to consider local employment impacts when
allocating resources on State Forest.
Gordon’s interpretation was backed up by the Tasmanian Solicitor-General, who also gave
evidence to the Committee. His evidence said: “It follows that, in acting as members of the Joint
Venture Board, the Forestry Tasmania nominees were not subject to any statutory requirements
imposed upon Forestry Tasmania, and in particular not those of s.12A of the Forestry Act”.35
This opinion, however, differs with that of Michael Stokes, law lecturer at the University of
Tasmania: “Therefore, in my opinion, Forestry was bound to consider the employment implications
6
of its decision in the Auspine Case if the wood in question was from State Forest or Crown land. If
the wood was from private land, it had no such obligation.”36
The difference of opinion left a cloud of uncertainty over Forestry Tasmania’s role, responsibilities
and accountability in the Auspine / FEA decision.
In further evidence to the committee, Auspine’s Andrew Jakab claimed that the plantation resource
had been overcut in the early part of the decade to provide logs for the lucrative export market; that
Auspine had received misleading information from Rayonier and Taswood Growers regarding
forecasts of available resource; and that it had based its investment decisions – such as purchasing
Frenchpine – on this ‘misleading’ information. On over-cutting, he said: “it is our submission that
the over-cutting of mature trees in the early part of this decade, particularly for the export market,
was a major contributor to the problem that I have outlined to you today.”37
Jakab’s evidence corresponded with the observations of forester Frank Strie, who in 2006 and 2007
wrote to Tasmanian Times and several members of Parliament about what he regarded as
overcutting of the north-east pine resource managed by Rayonier.38
Representatives of the Dorset Council said that the loss of the 310 Auspine jobs would have a
‘disastrous’ effect on the municipality, potentially destroying 28% to 35% of the area’s
employment. The Council’s testimony said “there has continued to be an evasiveness and distinct
lack of willingness to divulge answers to questions raised as to the legality, fairness, objectivity or
justification of the decision that was made”. It was also testified that the decision:
…has seriously raised in the community the question of other/hidden agendas,
subjectiveness, personality conflicts or other information that may have contributed to this
decision. There is, in my view, a great deal of uncertainty over the process's fairness and
ultimate justice, particularly in the latter stages, over this final decision… I cannot reconcile
in any way that a correct objective, commercial, economic or social decision for Dorset or
Tasmania has been made.39
The Committee’s recommendations were weak, simply calling for greater clarification of the
impacts on local communities when joint ventures are undertaken and for an amendment to the
Forestry Act to clarify the definition of ‘consideration’ of local employment impacts and how that
consideration is to be demonstrated.40 Over three years later, in June 2007, these changes have yet
to be enacted.
The loss of its resource caused Auspine’s share price to fall. The company was ripe for takeover.
In May 2007, Gunns announced a bid to take over Auspine.41 Following initial hesitations and
rejections, Auspine announced on 23 May that it was officially for sale. By the end of the month,
Gunns had purchased 25% of the company. In June it raised $50 million from a new share issue,
and by the end of August it had acquired majority control of Auspine.42
In the meantime, the beleaguered softwood company had begun to fight back. On 8 June 2007,
Auspine commenced proceedings in the Tasmanian Supreme Court seeking to set aside the longterm wood-supply contact between Rayonier and FEA.43 Auspine alleged the joint venture’s
decision was in contravention of Section 12(a) of the Forestry Act, which says: “The corporation
(Forestry Tasmania) must treat the level of employment deriving from the use of public forest
resources as an important consideration when examining options for competing claims for Crown
wood including the provision of wood supply agreements.”44
On 16 August 2007, the company commenced additional proceedings, this time in the Federal
Court under the Trade Practices Act alleging anti-competitive conduct, including price fixing, on
the part of Forestry Tasmania, Taswood Growers and Rayonier.45 Auspine said its Tasmanian
Supreme Court action had been prepared by a ‘highly regarded’ legal team and appeared confident
its court actions would be successful.46
7
But Auspine remained the subject of a determined takeover bid. In January 2008, Gunns completed
its purchase and on 29 January, the company was de-listed from the ASX.47 Auspine had
effectively ceased to exist.
In February 2008, FEA’s softwood sawmill and fibre-processing plant at Bell Bay became
operational and began receiving softwood logs from Taswood Growers.48 Later that year, Gunns
announced it was now a substantial shareholder of FEA with 17.9% of FEA shares.
In June 2008, Gunns announced that Auspine’s legal actions against Forestry Tasmania, FEA and
Rayonier were now ‘settled’ and would not proceed.49 The very next month, Gunns announced the
‘consolidation’ of sawmill jobs and the closure of Auspine’s original sawmill, with the loss of
about 120 Scottsdale jobs.50 Federal assistance for transport was terminated that same month.
Thus, over the course of less than a year and a half, two major sawmills employing over 300
people had their resource allocated to a different, more distant mill employing a third as many
workers. Gunns, the main processor of oldgrowth forests in Tasmania, acquired the adversely
affected mills, shutting one down, and receiving subsidised logs for the other. Gunns also became
the principal single beneficiary of the re-allocation of the north-east softwood resource, having
acquired a major share in FEA. A significant player in the Tasmanian timber industry which had
supported the protection of oldgrowth forests had been taken over by Gunns, its oldgrowth stance
neutered.
The commercial justification for the decision by Taswood Growers, and therefore its Forestry
Tasmania directors, remains murky. The bids for the resource by Auspine and FEA have not been
made public so there is no way of comparing them. Auspine’s offer to match FEA’s bid, however,
remains on the public record.
The Auspine saga raises significant issues and questions about the management and allocation of
public resources in Tasmania.
First is the lack of transparency regarding allocation of resources 50% owned by the public and
occurring on public land. Forestry Tasmania, when part of a joint venture, claims to be under no
obligation to consider local economic, employment or social issues in making decisions. This came
as a revelation to the Scottsdale community in the Auspine case. Had this consequence been more
widely understood prior to the establishment of the joint venture, there may have been strong local
resistance to the move. Forestry Tasmania’s managing director, Bob Gordon, said that the
employment considerations were taken into account when the corporation entered into the joint
venture back in 1999. However, the joint-venture’s Auspine decision created deep local suspicion,
resentment and mistrust because the justification for axing local jobs has remained hidden behind
‘commercial-in-confidence’ barriers.
Second is the lack of public accountability of Forestry Tasmania when operating as part of a joint
venture. Evidence to the parliamentary committee said that Forestry Tasmania can legally escape
obligations under the Forestry Act every time it enters into a joint venture. This is an extraordinary
level of unaccountability by the GBE and cannot be what Parliament intended when it enabled
joint ventures to occur. It is a disturbing situation given that 42% of plantations on State Forest are
owned by Forestry Tasmania joint ventures or under leasing arrangements.51 Clearly, Tasmanians
are steadily losing control over resources they once owned.
Significant legal question marks remain over whether Forestry Tasmania did, in fact, act within the
law by failing to consider employment as part of the resource allocation. The opinions of the
Solicitor-General and university law lecturer Michael Stokes were at odds. Auspine’s attempt to
test the issue in court was scuttled by Gunns’ takeover.
Was the joint-venture Auspine decision the best one for the Tasmanian community as a whole? It
clearly suited the goals of FEA, Forestry Tasmania and Taswood Growers. However, the negative
impacts on other parts of the Tasmanian economy have been significant. They include the loss of
120 sawmill jobs; very serious economic and social impacts in Scottsdale; the expenditure of
8
taxpayers’ funds subsidising inefficient and environmentally unsound transport of logs from the
West Coast to Scottsdale; impacts on other mills which may have been deprived of the Strahan
resource; and the loss of community trust in the processes that allocate publicly-owned resources.
Do Forestry Tasmania officers such as Bob Gordon have a conflict of interest in serving on the
Board of Taswood Growers? Forestry Tasmania’s statutory responsibilities should have compelled
it to pay serious consideration to Auspine’s workers. But Gordon argued that his responsibility as a
director on the Board of Taswood Growers was to the joint venture only. How desirable is it that
the Managing Director of a major government business enterprise should wear multiple hats by
representing competing interests?
The entire justification for the establishment of the joint venture in 1999 has been seriously
damaged. The part privatisation of a public resource on public land removed major decisions from
Tasmanians and put them into the hands of a foreign private company, GMO, whose obligations
were not to Tasmanians but to shareholders. Hundreds of thousands of tonnes of logs have been
exported to mills in other countries. Credible claims of mismanagement, including overcutting of
the north-east pine plantations, have been made. Government Ministers have failed to investigate
such allegations.
The elimination of Auspine and one of its mills from the Tasmanian timber industry has aroused
suspicions that the company was deliberately punished by those in power because of its statements
on oldgrowth forests during the 2004 federal election.52 Certainly, the response of the Tasmanian
Government to Gunns’ demands for a speedy approval of its proposed Tamar Valley pulp mill was
in stark contrast to the Government’s treatment of Auspine during the protracted negotiations over
the north-east plantation resource. Auspine was promising major investments but receiving only a
‘drip-feed’ of resource before that resource was taken away.
Other decisions appear to indicate preferential treatment of FEA over Auspine by government.
Between 2005 and 2007, the Australian Government gave FEA $7,067,125 for ‘purchase of plant
and equipment, mobile equipment and a range of supporting civil, building and electrical work
upgrades to upgrade sawmill & kiln drying plant.’ This came from the Tasmanian Community
Forest Agreement’s Forest Industry Development program. No allocation from this program was
made to Auspine. FEA also received $225,000 under the softwoods program for 'installation of a
treatment plant to enable chemical treatment of pine products at the company's Bell Bay mill.’
Auspine is listed as a recipient of $585,000 to subsidise 150,000 m3 of sawlogs from Strahan,
Flinders Island and King Island. But this came after the January 2007 decision to allocate the
disputed resource to FEA. It was part of a one-off, politically expedient band-aid solution, rather
than for the development of long-term infrastructure, as received by FEA.
Now, in June 2010, the Auspine/FEA decision seems doubly questionable. Despite generous
government support and a long-term wood-supply contract, FEA is on the brink of total collapse,
with its sawmill for sale and its CEO sacked. Gunns itself – a significant shareholder in FEA – has
suffered plummeting profits and share prices.53 In late May 2010, John Gay retired from the
company, with its share price at 10% of 2007 levels.54 The performances of FEA and Gunns seem
to stand in contrast to that of Auspine prior to 2007, when its mills were operating reliably in
Scottsdale, using logs cut locally, employing 300 local people directly, and doing so without
government hand-outs.
The impacts of the Auspine decision on regional employment, on the economy of Scottsdale, and
on public trust have been severe. A company that supported protection of oldgrowth forests has
been eliminated; a major sawmill has been closed and two others face an uncertain future; 120
people have lost jobs; and the company allocated the disputed resource is now in voluntary
administration, with jobs ‘terminated’ and assets for sale. Tasmanians have the right to ask how
decision-makers in Government and Forestry Tasmania could get things so wrong. It seems to be a
case crying out for investigation by Tasmania’s new Integrity Commission.
9
The Commission should compare the bids by FEA and Auspine for the north-east pine resource;
assess whether Forestry Tasmania acted in accordance with the Forestry Act; determine whether
the joint venture is consistent with the Forestry Act; investigate whether Forestry Tasmania staff
on the board of Taswood Growers had conflicts of interest; determine whether Auspine’s remarks
in support of oldgrowth protection in 2004 had any bearing on the company’s ultimate fate; assess
the environmental effects of decisions about allocation of pine resources, including whether there
has been overcutting of plantations in the north-east and on the west coast; assess whether FEA
received unjustifiable preferential treatment over Auspine in the allocation of government grants;
and determine whether the entire log-supply deal should be revisited.
In the meantime, it appears that the decision could be revisited in a different way. In November
2008, Gunns sold 33,000 ha of South Australian pine plantations formerly owned by Auspine. A
Gunns spokesperson attempted to reassure workers at the South Australian mills, also formerly
owned by Auspine, with the statement: “All that has happened is the resource has changed
hands — it will still need to be milled.”55 Given that it was GMO which bought the plantations,
the workers could be excused for being nervous about their future. They need only look to the
north-east Tasmanian town of Scottsdale for an indication of what GMO’s ownership of their
mills’ resources might bring.
Some Scottsdale residents say the town is dying.56 Yet surrounding the town is a massive resource
of pine plantations established using public funds for the purpose of generating local employment
in the timber industry. It must be distressingly perplexing for the townsfolk of Scottsdale to see
logs from those plantations trucked away from their struggling town on a daily basis. With 42% of
Forestry Tasmania’s plantations owned by joint ventures or under leasing arrangements,
Scottsdale’s plight could well be replicated in other Tasmanian timber towns, if we don’t learn
from these mistakes and ensure sound and forward-thinking allocation of public plantations
resources in the future.
Post-Script
On the 18th of October 2010, Gunns Limited made a statement to the stock exchange in regards to
softwood sawmilling57. Gunns announced that the company had agreed with the Receiver and
Manager of FEA to acquire the Bell Bay softwood sawmill.
Gunns has identified significant synergies and production cost savings that would be
obtained through processing the combined FEA and Scottsdale softwood sawlog volumes
through one modern and efficient mill. The combined facility will process approximately
450,000 tonnes of sawlog annually with projected annual revenue of $85 million. Gunns
ASX Statement, 18 October 2010
In the same announcement to the stock exchange, Gunns also announced its plans to close the
Scottsdale (Ling Siding) softwood sawmill within 4 months.
The Scottsdale closure will occur regardless of whether Gunns acquires the FEA mill.
Gunns has assessed the softwood sawlog volume available to the Scottsdale mill, as well
as the mill’s operating cost structure, as unviable in both the short and long-term and
unsustainable as a continuing business. Gunns ASX Statement, 18 October 2010
In the statement, and in subsequent media coverage, Gunns indicated the company’s intention to
look for the retention of some of the Scottsdale mill employees at the Bell Bay facility.
10
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1
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2
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Limited – Price Query’.
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3
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5
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6
Joint Standing Committee On Environment, Resources And Development, Parliament Of Tasmania, Joint Venture
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7
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10
Bernard Lane, The Australian, ‘Plantation deal vital for new jobs’, 20 September 2004
11
Ellen Whinnet, The Mercury, ‘$450-million man finds no takers’, 22 September 2004
12
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13
Michelle Paine, The Mercury, ‘Gunns boss lays it on the line to sawmiller’, 20 September 2004
14
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15
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16
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18
Gunns Limited Proposed Bleached Kraft Pulp Mill in Northern Tasmania, Revised Project Scope, 9 May 2005
19
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20
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21
Joint Standing Committee On Environment, Resources And Development, Parliament Of Tasmania, Joint Venture
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22
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23
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24
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11
25
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Jakab, Chief Operations Officer, Auspine, March 2007, Parliamentary Standing Committee On Environment,
Resources And Development, Parliament Of Tasmania, Joint Venture Log Supply Deal (2007) Environment,
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26
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27
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28
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29
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30
Auspine wants Govt help to log west coast forests, ABC News, 2 April 2007,
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31
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32
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33
Joint Standing Committee On Environment, Resources And Development, Parliament Of Tasmania, Joint Venture
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34
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35
Joint Standing Committee On Environment, Resources And Development, Parliament Of Tasmania, Joint Venture
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36
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37
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38
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Minister for Economic Development and Resources, to F. Strie. 18 August 2006
39
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40
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41
Hopkins, P. (16 May 2007), The Age: Gunns takes aim at Auspine in $332m takeover
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42
Australia's Gunns Takes Majority Control of Auspine, 23 August 2007. High Beam Research.
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43
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Australia Limited and Rayonier Australia Pty Ltd as agents for the sellers announced on 29 January 2007.’
44
Tasmanian Consolidated Acts, The Forestry Act 1920, http://www.austlii.edu.au/au/legis/tas/consol_act/fa1920139/
12
45
Letter, Auspine to ASX (Company Announcements Office), 16 August 2007: ‘Auspine proceedings in the federal
court of Australia alleging that certain sellers of softwood sawlogs in Tasmania were engaged in anti-competitive
behaviour, including price fixing’
46
Letter, Auspine to ASX (Company Announcements Office), 8 June 2007: ‘Auspine commences proceedings in the
Supreme Court of Tasmania seeking to set aside the long term log supply agreement between Forest Enterprises
Australia Limited and Rayonier Australia Pty Ltd as agents for the sellers announced on 29 January 2007.’
47
Wotnews, http://wotnews.com.au/news/Auspine/?
48
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49
Sawmills stoush settled, ABC News, 16 June 2008.
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50
Scottsdale softwood mill closing, ABC Rural Report, http://www.abc.net.au/rural/regions/content/2007/s2292856.htm
51
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52
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http://www.tasmaniantimes.com/index.php/article/the-auspine-fallout
53
Gunns half-year profit down by 98 per cent, ABC News, 22 February 2010
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54
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2010. http://www.asx.com.au/asxpdf/20100527/pdf/31qkd6r6t9sjx5.pdf
55
Gunns sells former Auspine plantations, The Border Watch, 26 November 2008.
56
Tasmanian voters stake out support for local timber industry. ABC public affairs, AM. 18 March 2010.
http://www.abc.net.au/am/content/2010/s2849140.htm
57
Gunns Ltd. “Tasmanian Softwood Sawmilling” Company Announcements Platform – Australian Securities
Exchange. 18th October 2010.
13