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STANDING COMMITTEE ON RURAL AND REGIONAL AFFAIRS AND TRANSPORT
24/07/2008
Carbon sink forests

CHAIR —I welcome the representative from AusCarbon Pty Ltd via teleconference. Before we go to questions from the committee, do you wish to make a brief opening statement?

Mr Broad —Yes, I do. Good afternoon, senators. Thank you for the invitation to speak to this inquiry and to answer questions. I would like to speak firstly as a farmer, a pastoralist, and secondly as a director of AusCarbon. For most of my working life of over 30 years I have farmed wheat, sheep and cattle in the midwest of the wheat belt, which is approximately three hours north of Perth, and also been a pastoralist in the Murchison region, which is about eight hours north of Perth. I am passionate about rural Australia and proud to be a fifth-generation farmer and grazier.

The introduction of forest carbon sinks to the wheat belt areas of Australia is a win-win-win situation for all stakeholders. From a farmer’s perspective, it offers another industry that will complement existing farming practices. In the more marginal areas where cropping has become unviable, forest carbon sinks offer the best possible land use. Some of these areas should never have been cleared. It gives the farmer an alternative cash flow and could end up even replacing the never-ending drought assistance packages. The tax deduction for establishment costs are crucial as the capital required up front is significant and, after years of lean times, there is not a lot of spare money in the bush. Forest carbon sinks will offer a significant impact on the local environment as well as reducing excess CO2 from the atmosphere. It breaks my heart to see the amount of topsoil that blows away every year in my area and, of course, here in the west, salt encroachment onto productive land is a real issue.

From AusCarbon’s point of view, we are planting a variety of locally-sourced, endemic, mixed species, which is helping to build biodiversity back into the region. Our vision statement is: ‘Building the community carbon cycle.’ By this, we mean that, by increasing the vegetative biomass and thus increasing the amount of carbon stored, there will be a significant flow-on of benefits, economically, environmentally and socially, and this gives a win-win-win result for the community. Thank you.

CHAIR —Thank you, Mr Broad. As a Western Australian senator, it is very pleasing to hear that positive opening statement from you. We have certainly heard some interesting submissions today but you are a farmer and pastoralist, and you have entered into this scheme already—I am right there, aren’t I?

Mr Broad —That is correct. We became accredited a month ago through Greenhouse Friendly, but back in February we took the punt and, on a 3,000 hectare farm, we started planted out seedlings at the beginning of June.

CHAIR —And how many hectares have you dedicated to carbon capture?

Mr Broad —On each property we are dedicating approximately 80 per cent of the farm, depending on its viability in terms of our modelling. But we would like to leave at least 20 per cent of all arable, viable, cropping and grazing land to normal agriculture.

CHAIR —Sorry; you wish to leave 80 per cent?

Mr Broad —No, 20 per cent—and these are of course in the areas that are already marginal. We are talking about the 300 to 350 millimetres rainfall average areas.

CHAIR —I did notice in your opening statement that you said that a lot of this land should never have been cleared in the first place.

Mr Broad —That is correct.

CHAIR —I find that very interesting. That is very informative, Mr Broad. We will now go to questions from other senators.

Senator MILNE —Thank you very much for your opening statement. I wish to raise a couple of issues. You mentioned a moment ago that the rainfall in the areas that you have planted out to date was about 350 millimetres. One of the issues we have concerns about is the displacement of rural communities by large-scale plantation development in higher rainfall areas. Do you have any reason for saying that you are in the 350 millimetre band? Or would your intent be to expand into areas of higher rainfall? What about issues of interception of water by the establishment of plantations—or are all your plantings biodiverse?

Mr Broad —All our plantings are biodiverse. Our particular economic modelling only allows for these marginal areas. The way we do our biodiversity projects will not allow us to encroach into the higher rainfall areas. We are looking at $500 a hectare and below, for us to make it economic. That is part of our vision statement: to rebuild these communities from which, as I have witnessed over the last 30 years—as everyone has witnessed—people have been moving to the cities because they have just become unviable. So we are proposing that our model will allow both to coexist and in fact be enhanced by getting vegetation back out there.

Senator MILNE —I certainly appreciate that, and that is certainly a very worthwhile aspiration. My concern here is with the price of land. You said that you have done an economic model based on $500. But, with large emitters and the aviation industry, for example, now coming into the market big time with large capital funds, what is to stop huge investment driving up the price of land all over the place in order to access it for the offsets which they can get more cheaply by planting plantations than by reducing their emissions at source?

Mr Broad —I am just a bit unsure as to the focus of your question, I am sorry.

Senator MILNE —The issue here is that, on the face of it, what you are doing could be complementary to higher rainfall areas and higher value crops, in the sense that you are looking at marginal land at a lesser land value.

Mr Broad —Yes.

Senator MILNE —What I am saying is that the land market will be seriously distorted with the onset of the Carbon Pollution Reduction Scheme because it will allow the aviation industry and the coal industry—the coal generators in particular—to invest in land for carbon sequestration as opposed to investing in changing how they operate at their generator or, in the aviation industry, how they run their aircraft, therefore driving up the price of land. That is what I am talking about.

Mr Broad —Sure. I guess it just gets down to a basic economic decision. At $20 or $15 a carbon credit, those higher rainfall areas will not be economic, I believe. If you were talking $50 a carbon credit, that might be. I am not actually that familiar with the higher rainfall areas; I have lived all my life in these other areas. So I am not sure if I can answer that question.

CHAIR —Mr Broad, in what area is your property?

Mr Broad —We are in the north-eastern corner of the wheat belt in Western Australia. The wheat belt runs from, say, Kalbarri right down to Esperance.

CHAIR —So are you out Wubin way?

Mr Broad —Yes, that is correct—north of Wubin by about 150 kilometres.

CHAIR —Thank you. So near Paynes Find?

Mr Broad —Paynes Find is, of course, in the rangeland, but, yes, we are a bit north of there.

CHAIR —Thank you very much for that. Sorry, Senator Milne.

Senator MILNE —So, Mr Broad, is it your intention to work in partnership with existing landholders, or to buy out existing landholders?

Mr Broad —A bit of both. For instance, this first farm we have purchased outright. The farmer’s son is staying on—he is living in the homestead—and he is going to be a contractor for the local area. That family has chosen to sell out because they were finding things too tough and they have ceased farming. But the son is staying on in the community with his family. It is our intention to look at each case as it presents. Obviously, leaving 20 per cent of these marginal farms to opportunity cropping and grazing will allow a family to remain in the area and look after, say, three or four of our properties.

Senator MILNE —And in terms of your economic plan, your forward plan, for your company, what is your aspiration in terms of the amount of land you would like to own and have under management?

Mr Broad —Over the next 10 years we would like to have 160,000 hectares of these marginal areas in the wheat belt under our planting.

Senator MILNE —Thank you.

Senator JOYCE —So, really, the benefit that you obtain is that you are also part of the cash flow—that you have the capacity to farm as well as to get the benefit of the carbon sink—is that correct?

Mr Broad —That is correct.

Senator JOYCE —What sort of country do you put the carbon sink trees on?

Mr Broad —We will be selecting 20 per cent of each property, each parcel of land, that will basically give us the best economic return. So, in our country out there, it is the sandy red loams that will recoup, and, generally, the other parts of the properties that have become unviable for cropping and grazing. So that is what we will be putting down to trees.

Senator JOYCE —And you can clearly identify which—obviously, you can; this is a loaded question—is the less applicable country for farming, and that is the country you are more likely to use for the carbon sink?

Mr Broad —That is correct.

Senator JOYCE —That is not a hard task is it—to identify that type of country?

Mr Broad —Not at all, especially having lived in the area all my life. Plus, with the satellite photos there are these days, you can pretty much map out from them as well.

Senator JOYCE —Especially trawling through stuff like Google Earth and using the types of software that clearly identify soil types and vegetation types?

Mr Broad —That is correct.

Senator JOYCE —I imagine that you would have, as we do in Queensland, tree-clearing guidelines and everything like that, where you have to follow certain rules and regulations?

Mr Broad —Sure, yes. WA has a total clearing ban—over one hectare per year—so we are very aware of any local regulations.

Senator JOYCE —And they can monitor that almost to the square metre, can’t they?

Mr Broad —That is correct.

Senator JOYCE —So there is the capacity, if the government wished to, to identify where we can have a win-win situation where we are not imposing on better agricultural land, which you have. At this point in time, you would be able to identify less prime agricultural land and say that that is the stuff there that you have the capacity to use the deduction for?

Mr Broad —That is correct.

Senator JOYCE —That is basically one of the things we have been advocating. At this point in time, they say, ‘Oh, they’ll never use up prime agricultural land, because the market won’t let it happen.’ The market might not let it happen now, but it may change later on. We are just saying: to stop the threat of using up prime agricultural land, there is the capacity and there is the technology, which farmers—and I am one myself—know how to use, which can clearly identify the sort of country that you would be only too happy to have a carbon sink on because that would be the best, optimum use for the land, as opposed to what the market allows. Where you are putting your carbon sink is the best, optimum use for that land—that is, out of all your alternatives, the best, optimum use is that—and that still gives the capacity to be growing grain and also using some of the place for grazing et cetera.

Mr Broad —That is correct. That is our argument, yes.

Senator JOYCE —Thank you.

Senator O’BRIEN —Mr Broad, is it fair to describe the land that you—with others, I assume—are considering planting the oil mallees on as very marginal agricultural land?

Mr Broad —Yes.

Senator O’BRIEN —You describe the rainfall as 350 millimetres. Is that a good year or a bad year?

Mr Broad —Over the last 30 years, this country we are looking at had less than 350 millimetres; closer to 300 millimetres. It is right on the edge of the rangelands, right down the Western Australian wheat belt.

Senator O’BRIEN —Is that the limit of the range where you might be successful with those plantings?

Mr Broad —With our economic modelling it is, at this stage. That is what we are focusing on, yes.

Senator O’BRIEN —For the benefit of the Hansard, can you just explain how it would work for a farming entity to take, say, 80 per cent of their property and plant it to oil mallees and survive.

Mr Broad —It depends on what sort of contractual agreement it is. We have a joint venture arrangement, or we have a direct purchase, or we have a leasing arrangement, so it could get very detailed, but basically our argument is for the farmer to stay there and to benefit from any upward movement in future carbon price.

Senator O’BRIEN —Who invests the money?

Mr Broad —It depends. If the farmer has any spare at this stage, they would put a bit in. They have got the land, so that is a fairly good contribution. And then obviously we, with our other joint venture partners, would put in the capital costs.

Senator O’BRIEN —So it would be a bit like sharecropping, would it?

Mr Broad —I guess so, yes. You could call it that.

Senator O’BRIEN —Your modelling is based on a carbon price of $7 to $9, is it?

Mr Broad —That is on the very low end of our scale. We have not sold any at that price—put it that way.

Senator O’BRIEN —What have you sold it at?

Mr Broad —We have not yet. We are still negotiating for prices above that, between $10 and $20—put it that way.

Senator O’BRIEN —And your modelling is showing that it will be viable for farming enterprises in that region?

Mr Broad —Yes, it will be. As I think Andrew Grant mentioned previously, there is a two- to three-year time lag with the trees and with the growth, so by year 4 we are looking at a return for everybody.

Senator O’BRIEN —As compared to a grain return, if you can get one?

Mr Broad —Yes. The first three years it would not compare, but I think by year 4 it will compare very favourably, and of course, in the 20 years, from say five to 15 years, the trees will do very well compared to other farming practices.

Senator O’BRIEN —In what other parts of the wheat belt would you expect this model to be picked up in Western Australia?

Mr Broad —I would say any part of the wheat belt that fits our criteria of soil type, price per hectare and rainfall. Over Australia, I think there are seven million hectares that would—that is just off the top of my head, but I think it is in that vicinity, where the marginal areas are. I am not familiar with a lot of the eastern states, because they have different rainfall patterns, but there is a fairly large area available, I believe.

Senator O’BRIEN —I presume you are saying that the market viability of this will determine whether farmers will want to enter into it or not.

Mr Broad —That is correct.

Senator O’BRIEN —Thanks.

CHAIR —Mr Broad, do you have any mates around the area following suit?

Mr Broad —No, we have not as yet.

CHAIR —I suppose there would still be a bit of scepticism around—would that be fair?

Mr Broad —There is a lot of noise about what is meant to happen and what should happen, but at this stage we are just going quietly along doing our first property to try and prove the concept, if you like, in that area. There is a lot of interest from our neighbours. In fact, some of the neighbours are already saying, ‘Count me in for next year.’

CHAIR —That is tremendous, Mr Broad. I have one last question. Is there an airstrip near your property?

Mr Broad —Yes, I am sure there is!

CHAIR —Is there a viable airstrip? That did not make me feel any more comfortable, Mr Broad! Put it this way: there could be?

Mr Broad —Yes, absolutely.

CHAIR —I am serious. I just want to know whether there is an airstrip—

Mr Broad —Yes, there definitely is.

CHAIR —it is not a loaded question—if someone were to come in.

Mr Broad —No, there is. Morawa town site is only 40 kilometres away. There is an RFDS strip there.

CHAIR —As there are no other questions from the committee, I wish you all the best, Mr Broad. Thank you very much for your time.

Mr Broad —Thank you.

[2.43 pm]