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Carbon sink forests

CHAIR —Welcome. Thank you very much, gentlemen, for making yourselves available at short notice and coming in a lot earlier. Do you wish to make a brief opening statement before we go to questions?

Mr Purcell —I will take advantage of that. I have been the chairman of the group Property Rights Australia for some four years. I have an unfortunate habit of becoming involved in voluntary organisations that I see as suffering some injustice. I guess that is because of my background. In partnership with my brother—and I still have a portion of it—I had a property in Central Queensland where we had a lease signed by the government for 30 years. We had only used seven years of that and it was resumed by the Queensland government for further subdivision of properties. That land would now be worth $5 million or $6 million, which I could probably put to some use, but I do not have that opportunity. I have represented industry organisations in the beef cattle industry for some 36 years, which is about half of my lifetime, so I do have some understanding of that and some sort of record in that representation.

In the paper you had before you yesterday, and you have it before you today, I would just like to point out that of the 46 points that are in there I would not like people to read them in isolation. I know that you would have read the document. Do not read it in isolation, otherwise you may come away with the impression that we are in favour of taxation advantage to absentee landlords. We certainly are not, and that will come out in our discussion here today.

Phillip Sheridan, who has introduced himself, has degrees in agriculture and has worked in New South Wales and the Northern Territory. He has had dirt under his fingernails. He operated road transport in New South Wales, which I think is to his credit. In his spare time he got a Bachelor of Law and now operates in this city and has been of great assistance to Property Rights Australia. If I could say this: I know I do not know it all. In my representations, I refer to people who do know a lot about the issue, and Phillip Sheridan is basically the author of the document that you would have received. Thank you.

CHAIR —Thank you, Mr Purcell. Mr Sheridan, congratulations. Anyone can have a degree but not everyone can have a heavy vehicle drivers licence, so I congratulate you.

Mr Sheridan —I sense there is another with one on the committee, Senator Sterle.

CHAIR —That is correct. Mr Sheridan, would you like to make a brief opening statement?

Mr Purcell —No.

CHAIR —On that we will go to questions.

Senator BOSWELL —I have read your document and I was disturbed by paragraph 31, which I think is out of sync with the rest of your submission. It says, ‘The maximum amount of carbon per hectare should be encouraged with tax benefits.’ I thought that was a distortion of your overall submission. When I read your overall submission I came to the conclusion that it was firmly against any tax deduction either for MISs or for this carbon sink legislation. Am I correct in assuming that?

Mr Sheridan —Yes. There is no mention of MISs because, as far as we saw it, that was beyond the scope of this committee and this legislation. But we do understand that it may have a similar effect to the MIS. The point in paragraph 31 is that if the government takes the purely rational view that there is a need to sequester carbon in forest sinks then it should be determined which forests—being the species—on which land and in which area they are the most efficient eaters of carbon, I think I have heard it said here today. Otherwise, the change in land use or the whole conceptual background behind carbon sinks is not being explored and used properly.

Senator BOSWELL —This Senate committee is taking evidence on carbon sinks and other like schemes which would include MISs. As far as MISs and the pastoral industry are concerned, have MISs had an impact on the pastoral industry? Have you lost any land in the pastoral industry to MISs?

Mr Sheridan —In an attachment to our submission there is a copy of an article from the Courier Mail from 2007, I think. That was not an MIS but it was an example of how this scheme would work. It was Rio Tinto that paid a grazier out at Charleville $1 million for a 3½ thousand hectare tree planting permit. That is not an MIS but that was a dry run before—

Senator BOSWELL —That was more of a forerunner of the carbon sink legislation, I would think.

Mr Sheridan —Exactly

Senator BOSWELL —You have heard the previous person giving evidence and he was suggesting that carbon could even get up to $70 a tonne. I would think that if it did go that high, it would be probably better growing carbon sinks than growing cattle.

Mr Sheridan —Absolutely.

Senator BOSWELL —Then I see in your submission that you are making the comparison of carbon sinks with land for food producing.

Mr Sheridan —Yes, and I think that that has been the view of quite a lot of these submissions to the committee. It is a fundamental change and if the government of the day decide that that is to be the change and that this country is to produce carbon and food in whatever ratio, well that is the benefit of government and it is the government’s job to make laws. If that is the way they want to go, then that is the way they want to go. But it seems that this has been done in quite a rush and that the environmental fundamentals in terms of what is to be planted where seem to be sheeted home to the states and catchment authorities which may or may not have any capacity, let alone legislative power, to deal with these sorts of things. The thrust of this submission is that if that is what the government decide to do—change agriculture from food and fibre to carbon—well, so be it, but it must be done at maximum efficiency.

I saw in the transcript of the hearings in Canberra that Dr Polglase and CSIRO were not certain which species or which locations or what the sequestration game was. It just seems to be going in a terrible rush to enable what essentially will be the current carbon polluters—and I go back to that Courier Mail article—Rio Tinto and the like, being given a tax advantage to establish carbon sink forests—of what species we do not know and at what sequestration rates we do not know. Therefore what the carbon benefit is we really do not know. But the negative impacts of it in terms of the competition for land for food and fibre and water will be known and quite easily quantified. That is the danger we see in it. This tax advantage is going to be given to people who will—and I noticed the senator’s comment earlier—get it twice. They will get the tax advantage then they will get the profit from the carbon credit that is generated from that carbon sink. That is a market that landholders especially in Queensland have been shut out of.

Mr Purcell —Adding to that, already the productive land in Queensland is under immense pressure from the mining industry—coal, gas and other mining. It is coming onto the Darling Downs and it is already up in the Peak Downs area in Central Queensland, and there was talk about it being on the Liverpool Plains in New South Wales. We are going to finish up in this country with a lot of holes and very few productive areas—

Senator BOSWELL —And we will have a lot of trees too—a lot of holes and a lot of trees.

Mr Purcell —Yes. One thing I know about it is that we produce some very good primary products in this country and I know that if you keep going we are going to be facing in this country a shortage of food. I know that there is a percentage worked out—we can export a lot of that stuff or maybe we will keep it for ourselves. There are food riots happening in the world right now and I think that we have got an obligation to use the country to its best advantage for something that is going to last for the long term and certainly not just be a short fix or a get-rich-quick program.

Senator BOSWELL —There is very little land in Queensland, apart from agriculture land that has been cleared, where you could grow trees. Because of state land agreements and land revegetation legislation you could not just go out and grow trees anywhere. A lot of land is tied up in Queensland already. Could you give us your views on that?

Mr Sheridan —As I understand it, if someone has freehold land that has been cleared there would be very little—and I stand to be corrected—

Senator BOSWELL —If it has been cleared—

Mr Sheridan —If it has been cleared, there is very little impediment to someone setting up any sort of forestry plot.

Senator BOSWELL —But for the remainder of Mr Purcell’s station he might have some land that he cannot clear. It would be impossible then to go and use that land as a carbon sink forest.

Mr Sheridan —Given that it is impossible to go now and clear land for any purpose, no it is not possible under the current legislation to go and clear land. For instance, if we go back to the Peter Alan example, it is not possible to go and clear an area of mulga trees and then replant them with whatever the most efficient carbon sequestration species is. That is one of the problems we have with the entire concept. Whilst land clearing has been banned in almost every state in Australia, and certainly in Queensland, there may be then a net loss, for instance, if a hectare of mulga that is currently not able to be cleared is a much less efficient sequester of carbon than a hectare of red gums, for instance. Then we have the problem with the inefficiency of that allocation that leads to the question: why can’t we then knock the mulga trees down if we are about sequestering carbon and replanting them with a superior species? It just seems that—and it is in our submission—because of the clearing ban, the carbon that was stored in these uncleared trees has been ceded to, or taken by, the Commonwealth in order to meet the Kyoto protocol carbon reductions. That carbon then is not able to be accounted for—unless you take the bit that has already been accounted for to Kyoto—and that carbon is sitting out there and nothing further can be done with it, and not only the carbon that exists, but the natural increase.

Mr Alan sold a 3½ thousand hectare permit that was due to be cleared but was not and we see in that article that the value of that was $1 million, which comes down to about $300 a hectare. That was the carbon value that Rio Tinto placed on that area over a year ago. As to the value of that per tonne, I cannot say, but it is assumed that it would be a fraction of what the carbon value per tonne might be under a mandatory system. So if the switch were taken at that low price of carbon then, as Senator Boswell pointed out, if carbon does go to $70 a tonne we will have a lot more switches going on. As I said, if that is the government policy, that is what governments are there to do—

Senator BOSWELL —But this is what the Senate inquiry is here for: to listen to you people and listen to the consequences of what will happen if this legislation is allowed to go ahead.

Mr Sheridan —As I said in the submission, the suggestion that they start bulldozers again in order to replace what trees might be out there with superior species might be met with outrage. But if what we are about is the most efficient use of land to sequester carbon, then that cannot be discounted.

Mr Purcell —I would like to raise the matter of the Vegetation Management Act in Queensland. In my view it is a blot on the history of the legislation in Queensland, and I have had a lot to do with it. The outcome of course is that there is a lot of potentially valuable and productive land locked up, and I say ‘locked up’ for political purposes rather than for environmental purposes. I would not like to see that happen in this instance. I repeat, it was a blot, particularly the administration of the act, on this state—and I could go on and on but I will not.

Senator BOSWELL —In a nutshell, you would be opposed to any form of tax break on acquiring land carbon sinks?

Mr Sheridan —Yes.

Senator BOSWELL —What about on some of the more degraded land?

Mr Sheridan —If we go back to the Alan example again, the one that is not too radical—it happened: if a farmer has an area of degraded land, obviously it is going to exhibit very poor rates of production for whatever they are trying to produce. Therefore the dollar value of the carbon sequestration forest going on that land would enable the switch to carbon to be much simpler. Landcare in the last 20 years has done magnificent work in trying to arrest the destruction of degraded land. Whether a restriction of this program on degraded land would provide enough carbon sequestration to make a difference I am unsure. My personal view is that this should be done to every acre of degraded land.

Senator O’BRIEN —So you are not saying that a landholder should be restricted as to what they can plant. You just do not think that there should be a tax break for carbon sinks.

Mr Sheridan —No. If it is going to be such a benefit, it should be able to stand on its own. If the difference between this thing getting going and not is the up-front tax deduction—which I saw in one of the submissions at the last sittings was estimated at 15 per cent of the establishment costs—if the whole carbon sink program is going to live or die on that, I suggest that it is not that healthy.

Senator O’BRIEN —Do you have the same view of, for example, accelerated depreciation for water storage or fodder storage or the like on a farm?

Mr Sheridan —I am not an expert on the taxation treatment of—

Senator O’BRIEN —It is a matter of public policy decision. It is not a matter of principle. That is what I am getting at.

Mr Sheridan —If the view is that accelerated depreciation allowance will enable the reconstruction or the fixing of degraded water transmission infrastructure and that will lessen the losses in the system, that is fine.

Senator O’BRIEN —It exists now. You get accelerated depreciation—I think it is three years—to construct a dam, if you can get a permit to construct it, that is.

Mr Sheridan —If you are permitted to.

Senator O’BRIEN —But that is the tax law at the moment. So you are not against that, as a matter of principle.

Mr Sheridan —No.

Senator O’BRIEN —It is a matter of choosing on a values basis what area you should direct the public benefit, tax wise, to these operations.

Mr Sheridan —The tax act and the taxation treatments of various investments are very useful tools for governments to implement policy and shift the direction of the economy.

Senator O’BRIEN —And they are very useful for the farm sector as well from time to time.

Mr Sheridan —Absolutely.

CHAIR —If there are no further questions—

Mr Purcell —Could I just say that planting of various species of timber on land that is not highly productive land has happened in Queensland already, and you can see it by driving up and down the main highway. It has a very damaging effect on the land. You can see that, where there were creeks and gullies and things, they are now all silted up. I looked at some of the species that have been planted on better land and I thought, ‘Gee, that looks good,’ but I went through just recently and half the damn things have fallen over. Obviously they are not suited to the land. The point that my colleague has made is that you have got to make sure of what you are doing. Do you have something else to say, Phillip?

Mr Sheridan —In summary: if it is going to be done, it has got to be done properly, and the government has the most powerful tools to make sure it is done properly. I would hate to see you rush in and do it wrong and have to come and revisit it. As I said in that submission, I would hate to be in a position where the cure is worse than the disease, where we have to destroy the village in order to save it. As was pointed out in the previous submission, it is an extraordinary opportunity we are presented with and it would be quite easy to make a mess of it by rushing in in a hurry. This thing is going to hang around for a hundred years. I am not suggesting we take 99 years to do something, but a hundred years is a very long time and I do not think it should be entered into in 12 months so that someone somewhere can say, ‘Look what we’ve done.’

Mr Purcell —Thank you again for listening to us, Mr Chairman. Please study our submission. I think it is a good one. I really think that those of you that are in the position of making decisions on these things should hesitate, think it through and not put something around our neck if we do not know whether it is good, bad or indifferent. Let us make sure that we do it right, because it will, quite honestly, have the potential to damage our country for God knows how many generations if you get it wrong. When you are in that house of parliament and you are asked to put up your hand, think about what you are doing. Again, thank you for listening to us.

CHAIR —Thank you, Mr Purcell, and thank you, Mr Sheridan. That concludes today’s hearing. On behalf of the committee, I thank Broadcasting, Hansard, the secretariat and the witnesses, for the submissions we have received.

Committee adjourned at 12.14 pm