Tiwi Islands Inquiry Minority Report

Senator Rachel Siewert – Australian Greens

Introduction

The Australian Greens support the development of a sustainable economy on the Tiwi Islands – one that supports and enhances the Tiwi way of life, respects their living culture, and sustainably manages their land and water resources for the future.

We are not convinced from what we have learnt through this inquiry that logging and plantation operations on the Tiwi Islands have been sustainable, have made best use of Tiwi natural resources, or have delivered an appropriate level of community benefit. The evidence presented to the inquiry also leads us to believe that the harvesting and exporting of woodchips from Melville Island may not be as profitable as predicted in the foreseeable future, and in the meantime additional capital is required to undertake plantation management.

The evidence presented to the committee strongly suggests that the environmental management of the logging and plantation operations has been flawed from the outset, and that avoidable and inexcusable damage has been caused to Melville Island's natural environment. Given the current state of play of these operations and the absence of a solvent project manager, we urge the Environment Minister to take all steps necessary to ensure that all the existing environmental management requirements are fully met.

We are led by the weight of evidence to conclude that the logging and plantation operation on Melville Island was designed and operated from the outset with the financial objectives of the operators (initially Australian Plantation Group, later Great Southern Limited) as the priority. We remain concerned that the best interests of the Tiwi Islanders came a poor second to this narrow commercial imperative, and the venture has not delivered to them the strong and sustainable cornerstone industry it promised.

There remain other serious questions concerning the management of the logging and plantation operations on the Tiwi Islanders that were raised but could not be answered by this inquiry. The Australian Greens believe that these issues warrant further examination and exhort the Australian government to pursue these outstanding issues.

The evidence presented to the committee on the establishment and management of the plantation – including the choice of species, the rate of planting and the ongoing management regime – suggests that the Melville Island venture did not reflect best practice in ensuring the development of a commercial product at a competitive rate. There are indications that as a result of poor planning and management the harvest in 2013 may not be as profitable as was hoped and, given the state of the market for this kind of product, may not deliver as substantial a return to the Tiwi as hoped.

The committee inquiry failed to resolve the circumstances by which the sale of native timber hardwood logs (referred to as "red Tiwi') arising from the clearing undertaken to establish the plantations has failed to deliver a return of any note to the traditional owners.

We believe that a forensic financial inquiry is urgently needed to uncover the details of operations and expose relevant facts, including: the extent of taxpayer money spent on infrastructure and support; the circumstances in which native hardwood logs were exported, where they were sent to and what profit (if any) was received by Pirntubula on behalf of Tiwi traditional owners; the likely market value of 40,000 tonnes of red Tiwi logs; and what other companies or interests profited from the venture.

A sustainable future for the Tiwi Islands requires a comprehensive and inclusive process to facilitate appropriate planning for future development. Such an approach should be based on a careful examination of what kind of development is suitable for the environment and the community of the Tiwi Islands. It should not result simply from an ad hoc response to one-off proposals from particular interest that may in future prove to be unprofitable and unsustainable.

Environmental performance and management

The Australian Greens believe the environmental management of the forestry project was flawed from the outset, and that avoidable and inexcusable damage has been caused to Melville Island’s natural environment as a result. The Greens strongly urge the Federal Environment Minister to ensure that all existing environmental requirements are met in light of the current absence of a solvent project manager.

We believe that there should be no further clearing of native vegetation for additional plantations on the Tiwi Islands, and the remediation plan (that was written following the breaches of the EPBC conditions) should be made available for public comment before it is implemented.

The committee received evidence that:

Approval for logging and plantation was granted in 2001 subject to conditions requiring buffer zones to protect threatened species.
The buffer zones required by the original approval were smaller than those recommended to the Tiwi Land Council by NT government scientists in a report from 2000. This report outlined two options for conservation on Melville Island in the event of a logging and plantation project. One of these included a substantial tract of national park on the east of the island in conjunction with buffers around significant habitat. The other was larger buffers to be implemented in the absence of any national park. The eventual buffer zones approved by Minister Hill were in fact the size of the smaller exclusion zones, but without the supplementary national park area.[1]
GSL/Sylvatech contacted DEWHA in April 2006 and reported that they may not be in compliance with their conditions and that they were doing or had done a voluntary audit.’[2]
DEWHA took over a year to establish the extent of the breaches of conditions[3]. It was eventually found that while clearing for the plantations, Great Southern employees cleared areas within the buffer zones that had been established to protect identified threatened species and habitats.
A variation of the conditions was agreed to by the minister in October 2008.
The variation comprises two streams: remediation and offset activities. It requires a payment of $450,000 per year for three years from Sylvatech to Tiwi Land Council. This money is to be used by the Tiwi Ranger Program to undertake the offset projects including feral animal and weed control, burning regimes and monitoring listed flora species.
There is a bond of $1 million which has been secured to ensure the implementation of the remediation plan.
As of August 2009 the implementation plans for both remediation and offset had been written with the Department for approval[4] but were not yet public.
Since the hearing at which much of this information was presented, the receivers of GSL, McGrath Nicol, have terminated all leases on the Tiwi Islands, citing the operations as ‘commercially unviable’[5]. It is now unclear:
- Who will pay the annual $450,000 for the ranger program, and
- Who will be responsible for ensuring the remediation and offset programs are carried out.
It was noted in hearings that in the event of a change of ownership of the project, the Minister would have to approve the transfer – however, as far as we are aware, this approval has not yet been sought.
Prior to the breaches, GSL was funding the Tiwi Ranger Program[6]. However, since the new conditions were imposed, including funding for Tiwi Rangers to undertake offset activities, GSL has ceased its previous financial support for the Tiwi Ranger Program – meaning that the $450,000 for the ranger program is not all additional funding, with a proportion of it replacing existing funding for the rangers.
There has been no assessment of the potential or actual hydrological impacts of the logging and plantation operations despite the fact that a dramatic erosion event has occurred at Tarracumbi Falls since commencement of the clearing for plantation[7].

Logging and plantation operations

The Australian Greens are concerned that the weight of evidence presented to the committee suggests that the logging and plantation operation on Melville Island were designed and operated from the outset with the financial objectives of the operators (initially Australian Plantation Group, later Great Southern Limited) as the priority.

The Australian Greens remain concerned that the best interests of the Tiwi Islanders came second to the commercial interests of the proponents. In our view the logging and plantation operations undertaken at great financial and environmental cost of Melville Island have not delivered benefits to the traditional owners and their communities that are commensurate with the cost to them and their land. It has not delivered to them the strong and sustainable cornerstone industry that they were promised and had every reason to expect they would receive. The Tiwi now find themselves having to take over managing the plantation and must take on the financial risk and seek additional funding support this venture.

The committee received evidence that:

The establishment of 5,000 hectares of plantation in the space of three years was unusually rapid. Best practice in establishing a comparable commercial plantation under similar circumstances (with little relevant experience of particular species in a particular landscape) would involve initially planting small areas to allow foresters to gain an understanding of the response of the species to the local conditions. This would allow them to test their management parameters and confirm commercial viability, as well as undertaking further breeding and selection to improve local yields[8].
The stem and branch form of the Melville Island Acacia mangium is not immediately good for commercial production, with many trees having forks, crooked stems or coarse branches. Such poor form is common when genetically unimproved ‘wild’ seed is used in Acacia mangium plantations elsewhere. These form deficiencies reduce the return at harvest due to reduced yield and the extra cost of delimbing and debarking prior to chipping for export at age 8 to 10 years[9].
The seed used to establish the Melville Island plantations was taken from native or ‘wild’ stocks rather than the ‘domesticated’ varieties that have recently been developed[10].
Great Southern Limited was motivated to buy Sylvatech, and hence the plantations, by cheap land rental[11].
There have been comments made about the fact that ‘only’ 5% of Melville Island has been cleared for plantation, however, what is not notable about these comments is the fact that the most productive parts of the island have been cleared for these plantations[12].
The receivers of GSL, McGrathNicol have stated in a circular to investors: “The Tiwi Islands operations are commercially unviable” and have arranged for the leases with the Tiwi Land Council to be terminated[13].
MIS schemes, of which this is one, are not market-regulated and create excess product. ‘The grower-investor demand is driven by demand for tax minimisation not wood market realities, so overplanting and collapse are inevitable’[14]
The woodchips from Melville Island are of a lower quality than those from mainland eucalypt plantations, requiring more wood for the same amount of pulp and additional bleaching for paper production[15]
The global market for woodchips is being flooded with product and many producers are scrambling for markets, there is no guarantee of a market for this product[16]

Funding and Finances

Significant concerns were raised during the inquiry as to whether the plantation and logging operations on Melville Island were or could ever be commercially viable. Conflicting information and evidence was presented to the committee such that on the basis of the evidence provided it was not possible to establish with any certainty what financial returns had been achieved to date and what the prospects where for the future profitability of this venture.

The Australian Greens remain concerned by the relatively low number and scope of employment opportunities delivered to date by this venture. The level and kind of employment opportunities it has delivered do not appear to be commensurate with the large costs, the high level of financial risk, and the impacts of the logging and plantation operations on the land and natural resources of the Tiwi.

The Australian Greens believe that a full forensic financial inquiry must be established to uncover the details of:

The extent of taxpayer money that has been spent on infrastructure and support for this project,
The reasonable market value for the 40,000 tonnes[17] of Red Tiwi logs,
What profit (if any) was received by Pirntubula on behalf of the Tiwi Traditional Owners from the export of native hardwood logs, and
Which other companies or interests received profits from these exports.

The committee received evidence that:

Tiwi Land Council is currently seeking $80 million to cover the costs of managing the plantations up to harvest in 2013[18]. It is not clear if an application has been or will be made to the Aboriginals Benefit Account for some or all of this money.
$4,295,000 from the Aboriginals Benefit Account was spent on the construction of Port Melville[19].
In addition to this, $66,000 was given to the Tiwi Land Council for a scoping study to assess the Tiwi people’s involvement in expansion of logging and plantation operations, and $2,000,000 was allocated to the Tiwi Islands Shore Council for the purchase of earthmoving and road building equipment[20]
There are still 40,000 tonnes of Red Tiwi logs on the wharf at Port Melville[21]
‘Great Southern has chosen a relatively high wood yield assumption in preparing its overall prospectus document to present to grower investors and get the project over the line in terms of financial viability. However, it appears that when it prepared its estimates of likely income to the Tiwi Islanders from gross harvest proceeds it used a significantly lower wood yield estimate—in other words, this has the effect of dampening the expectations of Tiwi Islanders as to the actual amount of money they will receive.’[22]

Native Logs

The Australian Greens believe this inquiry has failed to uncover the circumstances that have led to traditional owners receiving little if any income from the sale of the native timber hardwood (‘Red Tiwi’) logs cleared to establish the plantations.

The committee inquiry failed to resolve the circumstances by which the sale of native timber hardwood logs took place. We believe that a forensic financial inquiry is needed to uncover the details of operations and expose relevant facts.

The circumstances in which native hardwood logs were exported remain unclear. The inquiry was unable to establish where these logs were sent to and what profit (if any) was received by Pirntubula on behalf of Tiwi traditional owners. There remain significant gaps in the account that can only be resolved by a forensic financial examination of the circumstances surrounding these timber exports.

The committee received evidence that:

In 2005, Pentarch proposed establishing a permanent saw mill at Port Melville to process the 25,000 tonnes of stockpiled D grade sawlogs. The logs were assessed by CSIRO wood scientists as a ‘viable resource ... with strong market potential’. The proposal involved training 6-9 Tiwi Islanders to operate the mill and exporting the wood ready for use as floorboards or decking. The plan was shelved when Great Southern took over interest in the Melville Island operations[23].
This sawmilling operation would have provided traditional owners with an ‘opportunity to establish their own sustainable small business’ and that ‘there are existing examples of this business model working using the same resource as on Melville Island’[24].
It is highly likely that these valuable logs were exported to Asia and entered the commercial market in China and elsewhere[25].
The committee was told that ‘timber harvested...from the clearing or from the plantations is shared on a fifty-fifty basis’ between the Tiwi Land Council and Great Southern[26].
There is apparent confusion as to whether actual losses or merely loss of projected income has been incurred by traditional owners through the process of the export of native logs[27].
At previous Senate Estimates hearings John Hicks, representing the Tiwi Land Council, responded to a question from Senator Crossin about income derived from the sale of the native timber logs, saying: ‘If you had asked me the question on Monday, the answer would have been nil. We had a loss of $600,000. If you ask me today, before we left Darwin we ascertained that $75,000 would be received for this shipment and that is the first money that has been made by the Tiwi for sale of timber.’[28]
At hearings in May when this loss was mentioned, Mr Hicks did not dispute the suggestion that there was a loss to the Tiwi Land Council of $600,000, his words were: ‘the evidence was given to us by Great Southern about the losses...the question is: how did the other landowners learn about the loss we made with timber?’[29]
The exchange regarding the $600,000 loss at the August inquiry contributes to the lack of clarity around these arrangements:

Senator SIEWERT—We might as well start with the $600,000 loss that TLC sustained from the various attempts to export so-called red Tiwi. Can you clarify: there was a $600,000 loss to TLC, wasn’t there?

Mr Hicks—No. This is all part of the dilemma. The Tiwi Land Council is a statutory authority quite unable to enter into commercial arrangements of any description. There was a $600,000 loss incurred by the commercial identity of the Tiwi landowners, Pirntubula Pty Ltd. It was in fact $610,000, I think.

Senator SIEWERT—That was to Pirntubula.

Mr Hicks—Yes. The timber that made the loss was the timber that was transferred from the Northern Territory government to this identity called Pirntubula Pty Ltd. The arrangements that the landowners, in their commercial identity, made were to sell this timber and ship it out. You heard earlier from Mr Maluish about the huge increases in shipping costs. That was a significant reason for the loss. The statements that we received from Sylvatech were around $610,000, a loss made on three barge shipments.[30]

...

Senator SIEWERT—How did it come to be that Pirntubula bore the cost of the $610,000 loss and not Sylvatech or the forestry company, whichever name it was under at the time? Why was it that Pirntubula made the loss?

Mr Hicks—Sylvatech made a loss, too. The loss was made on Sylvatech having to pay contractors to harvest it, having to pay people to ship it and having to set up markets in southern China to sell it. At each point of those negotiations they made a loss. That was their real loss, as conveyed to us in financial statements, of $610,000. Pirntubula did not wear a loss, in the sense that we were gifted the trees by the Northern Territory government. So there was no loss other than a loss of expectation that we would make a lot of money, which Pirntubula did not.

Senator SIEWERT—Who made the loss of $610,000? Was it Pirntubula or Sylvatech?

Mr Hicks—The $610,000 loss was made by Sylvatech.

Senator SIEWERT—But you told me earlier that Pirntubula made the loss.

Mr Hicks—Yes. The asset was to be sold in order that Pirntubula would make some money. Pirntubula presented these trees for harvest by Sylvatech with the expectation of making a profit—and they would not have entered into the arrangement unless they anticipated making a profit. They made a loss.

Senator SIEWERT—Sylvatech made a loss.

Mr Hicks—Sylvatech made a $610,000 loss on this particular transaction.

CHAIR—The expectation was, as with all good commercial deals, that it would be profitable and Pirntubula would have received a share of the profits?

Mr Hicks—Absolutely. It was a fifty-fifty arrangement that Sylvatech would harvest and we would enjoy 50 per cent of the profits from that particular milling transaction. In the event, the fluctuations in the Australian dollar and in the shipping rates were the two cataclysmic events that Sylvatech anticipated would get better; in fact they got worse. Finally, in the hands of Great Southern, they terminated the export as being an absolutely non-profitable proposition. But Pirntubula made a loss in expectation. We did not carry a loss of $610,000.[31]
The Tiwi Land Council did not address this issue in its submission, with no more than a single reference to it: ‘Regrettably, attempts to sell hardwood logs have also resulted in losses’[32]
It is unclear whether this is due to information not being provided by Sylvatech or other companies involved in the export of the logs.
This statement also appears to contradict the statement quoted above from Senate Estimates, where Mr Hicks notes the first money that has been made by the Tiwi for the sale of timber ($75,000).

Governance

The Australian Greens are concerned by some of the issues raised in evidence about governance and decision-making processes on the Tiwi Islands and the ongoing exclusion of women. We have some concerns about the manner in which decisions about financial investments have been made and the future of their investments in forestry.

The committee received evidence that:

In 2006 a petition of over 500 Tiwi Islands Traditional Owners signatures was submitted to Mal Brough, (then Indigenous Affairs Minister). The petition called for the resignation of John Hicks and an inquiry into the Tiwi Land Council and Pirntubula. Minister Brough immediately ruled out an inquiry.[33]
The member of the Land Council who organised the petition was controversially sacked from the Council seven months after it was tabled in Federal Parliament, reportedly because he had spoken in opposition to the Great Southern operation on Melville Island[34]
In 2007 a petition was signed by 100 Tiwi women stating: ‘Our call is to stop clearing Tiwi land’[35]
Concern was expressed to the committee about the exclusion of women from decision making processes and structures, with one witness stating that "The Tiwi Land Council governance structures and practices currently in place are (and have for the last 30 years always been) grossly discriminatory towards women"[36]
The committee also heard that "at least some of the senior Land Council men express the view that decision making about Tiwi land is “men’s business” and therefore women should not serve on the Tiwi Land Council"[37]
There is not an agreed process for determining the meaning of ‘benefit to the Tiwi people’ with relation to the distribution of harvest royalties.
There has been a commitment from the Department for Families, Housing, Community Services and Indigenous Affairs to assist the Tiwi Land Council with discussing this and with developing a distribution process, however, there is no established timeframe for this at this stage.[38]
The process for distribution of royalties has not been made clear to traditional owners. There is dissatisfaction with the inequity of distribution of money via the Tiwi Land Council:

Mr Kerinaiua— The thing with Great Southern is that we are not getting much money that we would love to get; we are only getting a little peanut money. It is not feeding all the Tiwi people, it is only certain people. With the money the land council is getting, only certain people get lump sum money from the royalty money. Other families get less. That is why I asked the land council many, many times if they could tell me who distributes the money and where the money is going to. I have asked that many times.[39]

Alternative options

The Australian Greens believe a sustainable future for the Tiwi Islands requires a comprehensive process to facilitate planning for future development. This must be based on what is suitable for the area rather than merely responding to proposals that may in future prove to be destructive and unprofitable.

The committee received evidence that:

‘Until recently, there were opportunities to pursue reduced emissions from deforestation and degradation (REDD) on 4200 hectares of Tiwi Islands forest. The paper estimated that the Tiwi Islands forests that were logged by Great Southern Plantations in 2008 could have been worth up to $110 million under a REDD scheme under the Gold Standard of the voluntary carbon market.’[40]
As noted previously, a small-scale saw milling operation to process the 40,000 tonnes of hardwood currently stockpiled on the wharf at Port Melville was assessed by CSIRO as commercially viable[41]
Community based forestry with Forest Stewardship Council certification could be established to supply local demand for timber and may be extended to external markets[42]
‘The Tiwi Island arts related businesses are some of the most significant and successful in Australia, with a truly extraordinary output per capita. A population of just 2,500 has produced 5 successful businesses/art centres on the islands providing training, workshop, equipment and gallery space, selling to visiting tourists as well as to outlets around Australia and internationally.’[43]
Football is a highly popular and successful activity on the Tiwi Islands and many Tiwi Islanders leave the islands to play football elsewhere in Australia. The Tiwi Bombers football team had a sponsorship arrangement with Great Southern and was the primary recipient of the only acknowledged profit from the sale of native timber logs.[44]
Ngarukuruwala, a musical project involving women from Bathurst Island has great potential for the women and girls of the islands: ‘As the football has created an important and successful source of role models and ambition for young Tiwi boys, the renewed interest in song through the female elders' involvement in Ngarukuruwala has the potential to do the same for young Tiwi girls.’[45]

Recommendations:

That, as a matter of priority, relevant Federal and Northern Territory agencies work with the Tiwi Land Council and Tiwi Islanders to:
1. Undertake an adequately resourced research project to determine the most appropriate process for rehabilitating the plantation area; and
2. Consider the provision of financial and technical support to ensure the full range of employment and rehabilitation opportunities is explored and that ongoing management of the area is undertaken.
That the Federal Environment Minister ensures that all existing environmental requirements are met.
That there should be no further clearing of native vegetation for additional plantations on the Tiwi Islands.
That the remediation plan to address environmental damage in breach of the EPBC conditions for the project should be made available for public comment before its implementation.
That the actual and potential hydrological impacts of the plantation operations be assessed, with specific attention to the management of erosion and other associated land management issues.
That the Commonwealth establish a full forensic financial inquiry into logging and plantation operations on the Tiwi Islands to uncover the details of:
1. The extent of taxpayer money that has been spent on infrastructure and support for this project,
2. The reasonable market value for the 40,000 tonnes of Red Tiwi logs,
3. The circumstances surrounding the export of native hardwood logs, where they were exported, to whom, at what rate of return,
4. What profit (if any) was received by Pirntubula on behalf of the Tiwi Traditional Owners from the export of native hardwood logs, and
5. Which other companies or interests received profits from these exports.
That the Commonwealth provide training and support in governance to develop capacity and decision-making processes on the Tiwi Islands, with particular attention to the inclusion of women and fiduciary issues.
That the Commonwealth facilitate a comprehensive planning process to direct future economic and community development on the Tiwi Islands.

Senator Rachel Siewert
Senator for Western Australia

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