Forestry deal prompts concerns over soil conservation and log processing

Last updated 05:00 17/05/2014

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The Greater Wellington Regional Council says the sale of cutting rights to its forestry estate to an overseas buyer should not have any impact on the public or local timber industry.

But some local sawmillers and iwi say the sale could well have an impact on log supplies and erosion control.

The council has sold cutting rights to 5430 hectares of forests in Wellington and the Wairarapa to US company Resource Management Service (RMS).

Although the price was not disclosed, LJ Hooker agent Warwick Searle said it was more than the $28.5 million valuation and exceeded the $31m debt the council was carrying for managing the forests.

The level of overseas interest had been very high, he said.

Council chairwoman Fran Wilde said the sale process had been transparent, and the result was good news for ratepayers.

"They [RMS] are taking the downside risk so if the bottom falls out of the timber market, we're covered because we're able to pay off our debt attached to those forests."

Other upsides were that the council still owned the land, and had ensured it could still be used recreationally.

"They have to manage the cutting, so on weekends and public holidays there can still be public access."

Because most of the logs were already exported, Wilde did not think the move would have much impact on local sawmillers.

But Adam Gresham of Kiwi Lumber, which has a mill in Masterton, said his firm had been buying some of its logs from the council and it would be talking to the new owners.

He said in general, there was a growing concern that foreign forest owners were ignoring local millers.

"Some of these owners, we're concerned their [only] interest is exporting the logs and not making the logs available to domestic processors, even at the same price. It's something the Overseas Investment Office should stipulate."

Local iwi also had concerns. Regardless of who got the cutting rights, soil conservation was crucial, said Ngati Kahungunu ki Wairarapa environmental manager Ra Smith.

"While trees mature and will need cutting, the main reason for the trees here is in terms of soil conservation.

"It's still much-needed, especially given the erosion-prone soils those forests are in."

The council should also look at planting more native species, he said.

Peter Clark of forestry consultancy PF Olsen said people should not be surprised that the cutting rights had gone to a foreign buyer, because it was an investment that suited pension funds.

"Forests are incredibly capital-intensive investments. They tie up a lot of money for a long time, so the type of investor they suit are those with long-term money, not too much borrowing and long-term need for that money."

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The New Zealand Super Fund was starting to buy forests and "we do have KiwiSaver, of course, but that's spread over many funds, and we don't see much activity - any activity, to be frank - from the KiwiSaver managers to invest in forests."

The regional council's estate covers 12 forestry blocks including land in the Akatarawa Saddle and Puketiro near Wellington, and Hiwinui, Stoney Creek and Tauanui in the Wairarapa.

- Wellington

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