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Priority 1: A Productive, Competitive and Sustainable Timber Industry

Action 1: Provide long-term access to public native forest timber resources

Action
 Intent
1.1 We will continue to maintain and enhance Victoria’s world-standard forestry management practices.
 Ensure that Victoria’s sustainable forest management framework remains world-standard and that timber industry operations comply with standards established in Victoria’s policy and legislative framework.

To achieve these outcomes the Government will:
  • Implement as a priority a new strategic approach to biodiversity management that appropriately balances the conservation of biodiversity with the supply of timber and other commercial forest products to generate socio-economic benefits for Victorian communities.
  • Review the Sustainable Forests (Timber) Act 2004 as part of introducing a simplified legislative system that delivers outcomes of clarity, efficiency, security and sustainability to the State and the native timber industry.
  • Provide clarification of the respective roles and responsibilities of key Government agencies that are involved in the native timber industry.
  • Streamline and align the various regulations that VicForests is required to comply with, in order to provide a simplified, linear framework to improve accountability for performance and minimise risk.
  • Undertake ecological thinning in reserves, parks and water catchments to improve environmental outcomes including water yields.
  • Review rotation lengths for fast growing native species such as mountain Ash.
  • Work with VicForests and other key stakeholders, where appropriate, to improve the community’s understanding of Victoria’s native forest industries.
1.2 We will clearly and transparently identify and map the areas of State forest in eastern Victoria available for timber production.
 DSE, in conjunction with VicForests, will:
  • Undertake a complete review and update of forest management zoning in eastern Victoria.
1.3 We will provide VicForests with a secure basis to maximise the longterm economic returns to Victoria from the harvesting of timber and allow industry to realise a competitive return on investments, support capital upgrades, and drive innovation.
 To improve VicForests ability to manage Victoria’s productive forests for longterm sustainability and increase certainty for the Victorian timber industry the Government will:
  • Review the Sustainable Forests (Timber) Act 2004 and introduce a simplified legislative system to deliver clarity, efficiency, security and sustainability to the State and the native timber industry.
  • Provide VicForests with the ability and incentive to actively manage the productivity of its timber resources, with the security to realise commercial and other benefits of these activities in the long-term.
  • Ensure VicForests can utilise sales mechanisms that are appropriate, commercially prudent and enable VicForests to offer long-term contracts (see Action 3.1).
  • VicForests will still be required to manage its ongoing timber sales in line with prudent commercial practice and appropriate risk management.
  • VicForests will continue to offer a variety of resource supply tenures to its customers reflecting the risk profile of its timber supply and the nature and scale of industry investments.
1.4 We will strengthen industry confidence by ensuring that changes in State Government policy that affect timber supply, are not unduly afforded force majeure status.
 To provide security and certainty to the Victorian Timber Industry the
Government will:
  • Recognise that while force majeure clauses are normal commercial practice, they are not intended here to shield the Government from the consequences of its own actions.
  • Maintain the position that in the event that any changes in Victorian Government policy relating to native forests restrict or limit the supply or availability of timber resources, VicForests will use its best endeavours to comply with its contractual obligations on equivalent commercial terms. VicForests will only avail itself of the force majeure provision as a last resort.
  • Where changes in Victorian Government policy relating to native forests prevent VicForests from complying with its contractual obligations in respect to the supply of timber resources, the State will indemnify VicForests against any claims arising from its failure to comply with those obligations.
  • Explore the use of mechanisms for compensating VicForests’ customers and harvest and haul contractors for impacts on contracts held with VicForests which are a direct result of changes in Government policy.

Action 2: Improve estimation and communication of sustainable harvest levels from public native forests

Action
 Intent
2.1 VicForests will implement improvements to the methodology used to estimate sustainable harvest levels from public native forests in eastern Victoria.
 VicForests will:
  • Become solely responsible for calculating the volume of timber that can be harvested sustainably from Victorian public native forests.
  • Determine the location and timing of timber harvesting operations.
  • In estimating sustainable harvest levels, comply with the sustainable forest management framework to ensure that the variety of uses and values of State forests are maintained and enhanced, and the long-term productivity of these areas is preserved.
  • Refine the estimated sustainable harvesting level to take into account the impact of the fires that occurred in February and March 2009
  • Determine future sustainable harvest levels in an open and transparent manner that reflects best-practice, taking into account bushfire risks by incorporating methods to account for impacts on both quantity and quality of timber yields.
As the regulator, DSE will:
  • Monitor and enforce VicForests’ compliance with Victoria’s sustainable forest management framework.
  • Reconcile the gross area of the coupes harvested by VicForests with the area allocated to it.
  • Audit VicForests to ensure VicForests’ estimation process complies with the framework for sustainable forest management.
2.2 Each year VicForests will hold annual ‘Resource Outlook’ briefings to provide industry with details on the amount, type and location of timber that is to be available for sale in the coming years.
 VicForests to clearly describe future resource availability to assist industry plan for timber purchases and capital investment.

VicForests will continue to:
  • Conduct an annual ‘Resource Outlook’ briefing for industry, Government and community stakeholders, which will provide a forecast of resource availability by type and region for the next 20 years.
  • Annually release information showing indicative log releases over time. This information will include probable auction profiles for the coming year (e.g. log volumes by grade, species and general location), medium-term resource outlook issues, and implications for the timing and resource availability for future auctions and other competitive sales mechanisms.

Action 3: Improve the sales system for native timber resource from public native forests

Action
 Intent
3.1 We will continue to offer timber resources through a range of transparent commercial processes.
 VicForests is required to undertake the sale and supply of timber resources from Victorian State forests on a commercial basis. While the Price Allocation Model (PAM) has been a key mechanism for selling native sawlogs, sales mechanisms other than the PAM may be appropriate and commercially prudent where market intelligence indicates there is a distinct lack of competition for certain resource and that the resource is limited or niche in nature.

VicForests will:
  • Continue to sell timber resources from Victoria’s public native forests via a range of transparent commercial processes.
  • Review the PAM, taking into account the requirements of the VicForests establishing Order in Council, to deliver an improved commercially focused open and competitive sales system. The review will consider incorporating broader objectives into the sales system to promote long term security and sustainable investment in Victoria’s native forest industry, consistent with VicForests charter to maximise long-term economic returns to Victoria.
VicForests will consult with the Department of Treasury and Finance and the Department of Primary Industries on these issues.
3.2 We will seek national consistency
in the adoption of marketbased
mechanisms for log sales, governance and cost recovery for timber from public native forests.
 Consistent with National Competition Policy principles, the Victorian Government will actively encourage other States (and the Australian
Government) to increase market-based price discovery in their pricing of logs from public forests and end administered pricing.

This will ensure that Victorian producers are not disadvantaged in the short-term through competing with businesses provided with logs at comparatively low administered prices.

Action 4: Sustainably develop timber plantations

Action
 Intent
4.1 We will continue to recognise timber plantations as an ‘as of right’ crop-raising activity in the farming and rural activity zones.

The action clarifies timber plantations as a legitimate use of land in Victoria’s key agricultural zones.

Timber plantation operations that comply with the Code of Practice for Timber Production 2007 (the Code) should be able to be established without a planning permit in the Farming and Rural Activity Zones (clauses 35.07 and 35.08 of the Victoria Planning Provisions), consistent with other crop types. The Code is a key regulatory instrument for commercial timber production in Victoria, and compliance is required under the Victorian Planning Provisions. No other broad-scale agricultural activity operates under a legislated code.

DPCD amendments to the Victorian Planning Provisions, including the State Planning Policy Framework will include:

  • Amend clauses 35.07 and 35.08 of the Victorian Planning Provisions and any zone schedules in local planning schemes to remove the ability for planning authorities to require a planning permit to use and develop land for timber production in the Farming and Rural Activity Zones (e.g. for plantations greater than 40 hectares). This will achieve equitable regulatory arrangements consistent with other ‘as of right’ crops in these zones and recognises the Code’s role in addressing environmental sustainability requirements.
  • Amend the Victorian Planning Provisions to ensure that ‘ploughing, ripping and mounding works associated with establishing a timber production plantation’ are exempt from the permit requirements of overlays. As the Code establishes the environmental standard for timber plantations, permit requirements triggered by overlays for works in preparation for tree planting will, in most circumstances, no longer be necessary. We will continually monitor the requirements of relevant overlays to ensure no duplication or conflict.
  • Update the existing Victorian Planning Provision Practice Note for ‘Timber Production in the Rural Zone’, as necessary, to provide further statutory and strategic advice.
  • Review the planning permit decision guidelines at clause 52.18-4 to ensure no duplication or conflict, as the Code establishes the environmental standard for timber plantationplantations.
  • Amend the State Planning Policy Framework of the Victorian Planning Provisions (in particular clauses 17.07-1 and 17.07-2) to clarify current policy settings and remove ambiguity and duplication.
  • Amend clause 66.02-7 of the Victorian Planning Provisions, to remove the mandatory requirement to refer all permit applications for timber plantations to the Secretary of the Department of Sustainability and Environment. Other existing parts of the Victoria Planning Provisions are adequate to determine when a referral may be required.

We will work with industry and other key stakeholders, where appropriate, to improve the community’s understanding of Victoria’s productive, competitive and sustainable timber industry. The Victorian Government will assist industry and other stakeholder groups to provide relevant, accurate and up-to-date information about Victoria’s timber industry. Such assistance will typically rely on industry co-investment.
4.2 We will seek a national approach to market-based log sales, governance and cost recovery for timber plantations.
 Through national processes, such as updating Australia’s national forest policy objectives, Victoria will encourage other jurisdictions to correct the market distortions created by this situation, and seek a national approach to marketbased log sales, governance and cost recovery in the pricing of logs from timber plantations.

We will help create a more level playing field for Victoria’s timber plantation sector to compete nationally and improve the long-term viability and international competitiveness of Australia’s timber industry.
4.3 We will offer broad support for Australian Government taxation arrangements that support the comparative neutrality of timber plantations irrespective of rotation length.
 The Victorian Government will support Australian Government policy settings aimed at encouraging long-rotation timber plantation investments.

Action 5: Assist the timber industry to adapt to climate variability

Action
 Intent
5.1 We will develop evidence-based, economically efficient and environmentally sustainable approaches to address the impact of land-use change, including timber plantations, on the water resource (quality and yield).
 Victoria will:
  • Develop evidence-based, economically efficient and environmentally sustainable approaches to address any significant impacts of land-use change on water.
  • Take into account the broader benefits and impacts of plantations when developing the management tools to reflect Victoria’s socio-economic and physical landscape.
5.2 We will develop evidence-based, economically efficient and environmentally sustainable approaches to timber harvesting in Melbourne’s water catchments.
 DSE has evaluated various forest management options within the water catchments of Melbourne. This included the impacts of various rotation ages, harvesting regimes and silvicultural practices on water yields and timber resources within the catchments. The 2009 fires have affected a large area of Melbourne’s water catchments and DSE and Melbourne Water are doing further work to explore the effects of these fires.

In order to develop improved management arrangements for these areas, the Government will ensure that the following principles are applied:
  • Any technical findings must be based on sound and reputable evidence and science.
  • The impacts of alternative management scenarios will include assessment of the broader socio-economic benefits of such activity to the community (including financial cost).
  • Any proposals must recognise the joint and complementary nature of timber and water production from forests.
  • Any changes to current arrangements will not undermine existing log supply commitments to the timber industry, in terms of either quantity or quality.
5.3 We will respond to major biophysical risks posed by climate variability by improving forest management practices for public native forests and prioritising research and development that aids climate change adaptation in the plantation sector.
 As owner and manager of the public native forest estate, the Victorian Government will consider changes to its forest management practices to address areas of most pronounced risk. Measures might include:
  • Enhanced fire protection and community resilience activities.
  • Improving efficiency of salvage logging and further developing markets for damaged timber.
  • Replacing harvested species with alternative species or provenances from areas with climates more like the expected growing conditions.
  • Thinning regimes to extend the time that species can viably occupy their habitable ranges.
Changes to practices will be undertaken when considered to be in the public good; that is they are environmentally sustainable, economically viable and operationally feasible.

Successful and profitable enterprises exercise long-term business planning for managing the risks of climate variability. For some adaptive measures, further research and development is required. DPI will work with industry to facilitate this (see Action 10.1), including opportunities for collaboration with the private and tertiary education sectors.
5.4 We will continue to implement fire prevention strategies, and review these strategies in light of the outcomes of the Royal Commission into the 2009 bushfires.
 To meet future bushfire challenges, the Department of Sustainability and
Environment and its Networked Emergency Organisation partners, including VicForests, have been implementing Living with Fire: Victoria’s Bushfire Strategy. The strategy has introduced significant changes in the way Government and Victorians manage fire.

The Royal Commission into the 2009 bushfires has made recommendations to Government about the preparation and planning for future bushfire threats and risks, and existing fire prevention strategies. The Victorian Government has committed to implement all of the 67 recommendations of the Commission.