With woodchip giant Gunns in administration, environmentalists are hopeful its Tasmanian pulp mill project will be abandoned
The collapse of Gunns, the Australian woodchipper, is likely to spell a halt to the company’s controversial A$2.3bn ($1.5bn) Bell Bay pulp mill project in Tasmania’s Tamar valley. The mill had been subject to vociferous multistakeholder opposition (as Ethical Corporation has reported in the past).
The company went into receivership in September after losing support of its lenders, amid one of the worst downturns in the woodchip industry’s history.
Some analysts say the best chance for creditors remains the potential sale of the stalled pulp mill project. But environmental campaigners argue any buyer would find a rescue very difficult given the project’s chequered history.
“I don’t think it was ever a viable proposition in the first place, and economically it was dead a long time ago,” says Vica Bayley, Tasmanian campaign director at the Wilderness Society.
Bayley says it would be impossible to build and operate the mill in an environmentally sensitive way. “There is no company in the world – whether it has an environmental or a socially responsible operation or not – that can pick up the pieces.”
No investors
Gunns has seen successive potential investors come and go over the years. Sodra, a collective of 50,000 plantation forest growers in Sweden with Forest Stewardship Council certification, said it was looking at the project in 2009, but a deal was never struck.
Then in early 2012, hopes that Singapore-based New Zealander billionaire Richard Chandler would rescue Gunns were dashed after the company said it failed to meet Chandler's “social licence” criteria.
The economics have certainly been stacked against Gunns. Mark Korda of KordaMentha, the firm appointed to deal with the firm’s collapse, says several factors triggered Gunns’ demise, including a global oversupply of woodchips, overspending on R&D for the pulp mill and the high Australian dollar.
“I think the Greens have a view on the pulp mill, but I wouldn’t blame them for Gunns going broke,” he says.
“Good directors and managers get a lot of difficult projects set up in mining or elsewhere, and it’s up to management and the directors to convince people that this is good for the economy, can protect the environment and can generate wealth,” Korda says.
Robert Eastment, an independent timber industry analyst, says prolonged multistakeholder opposition to the pulp mill was certainly a factor in Gunns’ downfall. But political wrangling at both the federal and state level essentially posed a sovereign risk to foreign investors.
Both the federal and state minority Labour governments are held together by support from the Greens, leading to a very difficult political climate for prospective investors.
“You can’t keep on pretending that by doing deals with politicians who will bend the rules about assessment and image you are going to get community support for a project. It won’t happen,” says Australian Greens leader Christine Milne.
“No one actually looking at winding up this company is going to find any value in an approval permit for which there is no social licence.”
The Wilderness Society is calling for the pulp mill to be scrapped. “Whether it’s the receivers themselves or the big banks and investors, the right thing to do is abandon this project,” Bayley says.
“Whereas until September, that call could only be made by Gunns, since it was the responsible entity, now the receivers, banks and investors must deliver a socially responsible outcome.”