VZCZCXRO0189
RR RUEHPT
DE RUEHBN #0002 0060329
ZNR UUUUU ZZH
R 060329Z JAN 09
FM AMCONSUL MELBOURNE
TO RUEHC/SECSTATE WASHDC 4847
INFO RUEHBY/AMEMBASSY CANBERRA 3523
RUEHDN/AMCONSUL SYDNEY 2045
RUEHPT/AMCONSUL PERTH 1502

UNCLAS MELBOURNE 000002 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV SENV AS
SUBJECT: Tasmania: Controversial Pulp Mill Granted Extension 
 
Ref: A) 08 Melbourne 149, B) 08 Melbourne 144 
 
Summary 
------- 
 
¶1. (SBU) On January 5, federal Environment Minister Peter Garrett 
granted Gunns Ltd an additional 26 months to overcome ecosystem 
concerns surrounding its Tasmanian pulp mill.  While financing the 
A$2.2 billion (US$1.57 billion) project is likely to be the more 
significant obstacle, the extension means that the controversial 
pulp mill may again become an important issue in both the 2010 
federal and Tasmanian state elections.  The announcement is also 
further evidence that the Rudd government is focused on the economy, 
even if that means offending environmental groups.  End Summary. 
 
Conditional Approval Still Faces Important Obstacles 
--------------------------------------------- ------- 
 
¶2. (SBU) Australian media widely reported on January 5 that federal 
Environment Minister Peter Garrett granted logging company Gunns Ltd 
a conditional approval to move ahead with its planned pulp mill in 
Tasmania.  Before opening the mill doors, however, Gunns must 
overcome two obstacles.  First, it must submit further reports to 
the federal government by March 2010 on the run-off impact of the 
mill on the nearby Bass Strait's marine ecosystem.  Gunns' chief 
executive publicly stated that the additional studies will be 
completed within 15 months.  Second, and perhaps more significantly, 
Gunns must secure financing to the tune of A$2.2 billion (US$1.57 
billion).  Tasmania-based contacts believe that obtaining financing 
in a market characterized by depressed pulp prices and tight credit 
will prove to be the mill's largest challenge.  Uncertainty over 
environmental approvals will no doubt add to Gunns' financing woes. 
 
¶3. (SBU) Greens Senator Christine Milne publicly criticized 
Garrett's decision, claiming that he did not have the authority to 
grant even a conditional approval without first knowing the full 
environmental impact of the mill.  Other environmental groups 
complained that the conditional approval will extend a costly period 
of uncertainty in the Tasmanian economy.  During an introductory 
visit to Tasmania in early December by Consul General, both Premier 
David Bartlett (Labor) and Leader of the Opposition Will Hodgman 
(Liberal) touted the mill's economic benefits (reftels).  Only 
Tasmanian Greens leader Nick McKim opposed the mill, but noted that 
he might change his position if Gunns agreed to refrain from 
old-growth harvesting. 
 
Comment 
------- 
 
¶4. (SBU) Garrett's decision to grant Gunns additional time to 
procure environmental approvals pushes final decision on the 
controversial mill into the next federal and state elections.  In 
the 2004 federal elections, the Liberal Party won northern 
Tasmania's two swing seats by championing jobs over the environment. 
 The Australian Labor Party won these two federal seats in 2007 
after it backed the pulp mill.  Garrett's January 5 announcement 
means that the Gunns mill will likely figure largely again in the 
2010 federal elections as well as in the state elections where the 
mill has become shorthand for a broader environmental debate. 
 
¶5. (SBU) Comment continued: The decision to delay approval of the 
mill pending further evaluation illustrates not just the classic 
employment vs. environment conflict (the mill is a huge investment 
relative to the size of Tasmania's economy), but also highlights the 
pressures on Environment Minister Garrett who is known as a former 
die-hard environmentalist.  With frustration over the Rudd 
government's climate change white paper still lingering in recent 
memory, the January 5 decision is further evidence that the Rudd 
government is focused on the economy, even at the expense of further 
alienating environmental groups. 
 
GRANT