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ENVIRONMENT-AUSTRALIA: Pulp Mill Doomed as Bankers Back Off

Stephen de Tarczynski

MELBOURNE, Jun 8 2008 (IPS) - Recent developments in the ongoing saga of the controversial and yet-to-be-built pulp mill in Tasmania’s Tamar Valley may have swung the issue in favour of the mill’s opponents.

The resignation of Tasmanian Premier Paul Lennon – whose government provided substantial support to Gunns Limited’s proposed pulp mill – on May 26 came amid increased speculation that the AUD two billion ( 1.92 billion US dollar) mill’s chief financier, the ANZ bank, was to pull out of the prospective deal.

Then, in a statement, ANZ confirmed it “will not be participating in the provision of project financing for Gunns Limited’s proposed Bell Bay Pulp Mill in Tasmania”.

Opponents of the pulp mill’s construction have raised concerns regarding the environmental impact – including the destruction of native forests, the impact of effluent from the mill on water and marine life, air quality and greenhouse gas releases – as well as economic effects, particularly in the tourism, fisheries and agricultural sectors.

Paul Oosting, a campaigner with The Wilderness Society, which unsuccessfully challenged the former Howard government’s process of approving the mill in the Federal Court last year – the mill also received the approval of Tasmania’s state government – told IPS that he supports ANZ’s decision.

“We believe it’s the right decision and all bankers should take a long hard look at why the ANZ has made this decision,” says Oosting.

While ANZ says that “due to client confidentiality” it will not be discussing the reasons behind its refusal to fund the mill, Oosting argues that the venture is highly risky.

“It involves the logging of high conservation value forests in Tasmania, for instance, which are huge carbon sinks. In an age of climate change, that’s a huge financial and environmental risk,” he says.

In February, ANZ released its forests policy, stating that it would not support projects involving the logging of high conservation value areas.

Oosting says that financial risks, including the mill’s viability regarding competition from South America and problems associated with the global credit crunch and the high Australian dollar, were also likely to have played a part in the bank’s decision.

But he says that public outcry was also influential. The Wilderness Society had been planning a major protest in Melbourne in June against ANZ.

“I think the ANZ and any other financier would be very concerned about reputational risk. The majority of Australians are opposed to Gunns’ proposed pulp mill and the public have been extremely active in their opposition,” says Oosting.

Lindsay Hesketh, from the Australian Conservation Foundation (ACF), also welcomed the bank’s decision. He told IPS that ongoing community concerns regarding the environmental impact of the mill was partly responsible.

“It is proposals of this type, I think, that are bringing banks to a much greater scrutiny of their environmental credibility,” says Hesketh.

He argues that Lennon’s decision to step down after four years in Tasmania’s top job was partly due to the perception of the former Premier being a major supporter of the mill. Hesketh says that the government’s willingness to support the project in terms of infrastructure and other resources made Lennon’s position “untenable.”

Lennon introduced new legislation to Parliament last year in which a government-appointed consultant would have replaced the state’s Resource Planning and Development Commission (RPDC) – a statutory body responsible for environment reporting and assessing projects of state significance.

Allegations were made that a Gunns lawyer was involved in the drafting of the legislation. More recently, Lennon was considering having Tasmanian taxpayers fund a AUD 60 million (57.72 million US dollar) water pipeline to the mill, an idea that Tasmania’s new Premier, David Bartlett, has dismissed.

A local opinion poll released in the week before Lennon’s resignation indicated that his support among Tasmanian voters had dropped to a 17 percent approval rating.

But despite these setbacks, Gunns appears determined to press on. The company rejects claims that the mill will be environmentally damaging. It argues that the dioxins in the mill’s effluence will be minute, that it will produce “green” electricity and that no old-growth timber will be used.

Gunns also says that the mill will be of economic value to Tasmania, arguing that it will pump an extra AUD one billion (0.96 US dollars) in taxes into state coffers while providing 3,500 new jobs in construction and 1,600 jobs for the life of the mill.

Additionally, Gunns rejects speculation that the ANZ’s pullout means the end for the mill. In a statement released on May 29, Gunns’ chairman Jon Gay said that the pulp mill is not dependent on the ANZ’s participation for the project’s financing.

Gay says that there has been strong international interest in financing the pulp mill.

Oosting told IPS that he does not expect Gunns to obtain financing easily. “I don’t think that given the financial risks and the huge reputational risk associated with the project that any bank would enter into funding Gunns’ proposed pulp mill lightly,” he says.

The Wilderness Society is now working with BankTrack – a network of civil society organisations and individuals which monitors how deals made by financiers affect people and the planet – which welcomed ANZ’s decision.

“This is a welcome example of a financial institution taking a responsible approach towards social and environmental issues and we sincerely hope that ANZ’s Australian and international peers would follow suit,” says BankTrack’s Jeni Tasheva.

“We’re working together (with BankTrack) to ensure that all banks globally are well-informed of the risks associated with this mill,” says Oosting.

Hesketh is also circumspect when considering the mill’s chances of being built.

While he says that Lennon’s resignation and ANZ’s refusal to fund Gunn’s proposal have reduced the likelihood that the mill will be built, he argues that “it’s a matter of ongoing vigilance to ensure that supporters are actually understanding the gravity of the risk that they’re facing.”

“The potential for it to be built is always there whilst the company continues to advocate its proposal. The danger is always there that it will go ahead in its current form,” Hesketh told IPS.