Japanese Company to establish Carbon Credits.

State Forest Board visit

November 26, 1999 Tumut & Adelong Times

Plans by one of the world's largest power companies to establish new planted forests in the local region to combat global warming and gain carbon credits were outlined to members of the new State Forests Board during their first visit to the Tumut area this week.

The Tokyo Electric Power Company Inc (TEPCO) has reached an agreement where it will plant 500 hectares of pine on State Forests owned land at Nanangroe next year. At the same time it will develop a similar holding of hardwood on the North Coast.

The Board members, former Federal Minister for Primary Industries and Energy John Kerin, Neill Inall, Professor Ann Henderson-Sellers, and State Forests' chief executive Bob Smith (the other two Board members were unable to attend) were informed the Japanese company TEPCO intends to increase its pine plantation within NSW by up to 20,000 ha over the next ten years, together with a matching amount of hardwood plantation.

The actual annual planting rate will be subject to annual review and consultations between TEPCO and State Forests.

The Board was told that whilst the initial nine investment by TEPCO would be on land being made available, and managed by State Forests, it was anticipated land for the additional new greenhouse forests would be leased from rural landowners, generating new income and employment opportunities.

The Nanangroe property, to the north east of Tumut, and inside Gundagai Shire, covers an area of around 3600 ha, of which 1060 ha has already been planted. The three Board members were able to view the 98/99 plantings and the TEPCO 2000 planting area during their visit on Tuesday, part of a busy itinerary during which State forest staff were able to showcase this and other initiatives in the local region.

These included the Adjungbilly Timbers hardwood processing plant operated by Bill and Mike Kingwell, second thinning operations, the Blowering Nursery, and the CSR sawmill.

The familiarization tour, covering the biggest softwood growing and processing region in Australia, and the fourth largest in the southern hemisphere, was a resounding success.

A dinner on Tuesday night was attended by some 60 people, including State Forests personnel from various parts of the State, customers, contractors, and local government representatives.

A number of issues were raised during the social intercourse, including the perennial one of the future possibility of forestry land owned by State Forests being rate-able.

The Board itself held its meeting on Wednesday prior to lunching with Hume region staff. And it was clear the Board members present were enthused about the lead which State Forests is taking in the carbon credit arena.

TEPCO and other major companies are becoming more and more aware of carbon trading. Whilst it is a new area, and a structural market is still being developed State forests is assisting in bringing forward the necessary protocols", said John Kerin.

He said NSW had taken a lead in promoting a forest investment opportunity that directly addressed the objectives of the Kyoto Protocol.

The Board said for potential investors, combining the value of carbon dioxide offsets with returns from traditional forest products made greenhouse forests in NSW an attractive and practical response to the issue of global warming.

They said it would be of increasingly particular relevance to power companies throughout the world, providing an effective way to supplement domestic actions to reduce greenhouse gas emissions.

At the same time opportunities were there for landholders to enter into arrangements, either by leasing land along the lines of the State Forests annuity scheme, or participation with corporations as a joint venture.

With State Forests not buying land, the carbon credit initiative in future will depend on private land becoming available. Under the State forest annuity scheme land is leased from landholders on an annual rental of 5 - 6% of the land value.

Whilst TEPCO is the first to enter into agreement with State Forests a prospectus has been issued for large scale investors and a number of organizations have expressed their interest in writing already.

Carbon credit trading has been few and far between to date, but as the accounting system is perfected, and various pools of credits are accumulated it appears certain it will becoming something of a "new commodity" in the international trading system.

"State Forests is ahead of the pack at this point and carbon dioxide offsets will be of increasing relevance", said Mr Kerin.

Mr Kerin said the visit had been most informative and interesting, providing Board members with an appreciation of the relevant roles of State and Federal Governments, Local Government and State Forests, particularly in the area of roads.

He said the point had not been missed on the Board as to the need for NSW to change certain regulations to cater to new technology, such as the air-bag suspension systems used in other States.

He also pointed to the opportunities of combined industry/tourism.

At the nursery. Mr Kerin said he enjoyed the opportunity to look at State Forests' operation first hand. "Rather than just getting a bit of paper in Sydney telling us what happened. These tours provide the Board with the chance to look at the work on the ground, so to speak," Mr Kerin said.

"State Forests wants us to get around to all the major forestry sites - last time we looked at the area around Coffs Harbour on the north coast exploring hardwood plantations and annuity schemes.

"This is an exciting time for the Tumut region and its timber industries with the Visy Mill now under construction and so it's a good time for the Board to be having a look at just what is going on down here."

Mr Kerin said the next challenge for State Forests was to fulfill its agreement with Visy to provide around 400,000 tonnes of pulpwood from plantation thinnings in the area.

"We're also establishing an additional 20,000 hectares of plantation in this area as part of the Visy deal, as well as encouraging local private landholders, such as farmers, to establish plantations under joint venture schemes."

Mr Inall also commented on the opportunities for farm people to adjust their operations by investigating the longer term alternative of timber production.

"Forestry is becoming increasingly important, including the area of salinity management where a "credits" system is also being investigated not dissimilar to the carbon credit scheme, he said.

The dinner on Tuesday night proved an enjoyable social affair, attended by a wide range of people associated with the timber industry and local government representatives from Tumut, Tumbarumba, Gundagai and Holbrook.

Amongst them were the four regional State Forests managers from Hume, Monaro, Macquarie and Northern, senior divisional managers from Albury, a number of timber harvesting and haulage contractors, timber processing customers including CSR and Visy Industries, representatives of the Forest Industry Council, the chairman of the Riverina Highlands Vegetation committee, the regional manager of State and Regional Development.

The current State Forests Board, appointed by the Minister for Forests Kim Yeadon last August, is elected for a two year term and operates on a part-time basis.