Options for operating efficiently and sustainably within forest water licence rules
Options for operating efficiently and sustainably within forest water licence rules
The report on economics value of water accounting and licencing options industry can propose. Develop spreadsheet application for forest industry to evaluate economics of responses to new water licencing requirements.
Uniquely, plantation managers have the opportunity to manage their forest and licenced water assets for economic and financial advantage and develop methods to efficiently operate within forest water licence regulations.
The objective of the project is to enhance the Lower LImestone Coast forest industry's capacity to understand options to effectively and profitably adjust to forest water licencing requirements, specifically:
The project evaluated financial and profit implications of alternative strategies to manage forest assets within water licence requirements including options to buy/sell/lease water rights when required or are excess to requirements.
Hardwood industry scenarios agreed to represent viable options for a forestry company with hardwood holdings in the WMAs of Coles include:
Pine industry scenarios agreed upon represent viable options for a forestry company with pine holdings in the Short WMA. Short was chosen becuase the larger pine inventory and large potential additional water constraint. The scenarios include:
The Lower Limestone Coast Water Allocation Plan (LLC WAP) was implemented to address the declining condition of ground water resources in the South East of South Australia. As part of the LLC WAP limitations on resource access for ground water using industries have been implemented to ensure long term water resource condition is maintained and to protect ground water dependent ecosystems. Commercial forestry is a significant land use in the area and has been identified as a major user of water resources in the region. The WAP requires that commercial forestry plantations now need to account for
their water use by holding forestry water licenses with sufficient allocation to support forestry activities.
The aim of this research was firstly to explore the likely economic consequences further water allocation reductions would have on forestry operations in the LLC and; with industry partners develop adaptation strategies and explore their economic basis.
The results indicate that for a hardwood plantation manager with assets in the WMA of Coles a 51 percent reduction in water allocation implemented after harvest of standing estates would result in a 13 percent reduction in NPV. This scenario assumes that land not replanted to hardwood would be converted to dryland agricultural production and leased.
The results showed that in all cases land should be converted to agriculture quickly, in this instance in one year, and back to full agricultural production as rapidly as possible.
The softwood industry scenarios were somewhat different in nature to the hardwood industry scenarios. The option to convert land to another land use is not considered in this modelling. Of interest to softwood industry partners was the option to extend rotation length, thereby delaying the implementation of any allocation cuts.
The results show that extending rotation length to 36 years would increase the NPV from the fixed rotation length scenario by approximately 3 percent. This comparison did not include a water restriction.
While the results presented in the final report show seemingly viable adaptation options for the forestry industry in response to the LLC WAP, they do not account for the effect on other factors such as the impact reduced timber volumes have on other variables.
The results are also contingent on the assumptions made regarding plantation ages, productivity and the costs and returns from forestry and agricultural enterprises.
Whilst research reported on here had a very specific objective, this project and second on biosecurity offered the UniSA business school the opportunity to develop industry capacity to evaluate a large range of diverse issues with economic dimensions within the forestry industry. It is hoped that the capacity and relationships being developed through the NIFPI framework will be able to be further developed into the future and employed on other problems with economic dimensions facing the commercial forestry industry.
Researchers: Jeff Connor, Courtney Regan, Jim O'Hehir, Will McKay, Sayed Iftekhar (Griffith University).
Collaborators: Australian Bluegum Plantations, Green Triangle Forest Products, OneFortyOne Plantations Ltd, PF Olsen, SFM Asset Management.
Dr Jim O’Hehir
General Manager: Forest Research Mount Gambier
Ph: +61 8 830 28997
E: Jim.O'Hehir@unisa.edu.au
Michele Cranage
Administrative Officer
Ph: +61 8 830 28902
E: Michele.Cranage@unisa.edu.au