4:.jL., ), '4-C,k L)'1/U? 4 ½ ,1 çt.17 I, -if H44 -'I r - I,z J i'!EJi1 p t.; J -I 2009 4, OMMISSION 3 t.' 'i1-'$-& (-'1'.' 'kfl- t'-;'t-;;4C "I jb 1. 'c1L - 4'-- cq.-;"4*! 4 F,) .ri .."..-v' q-, 1 ti. -#--.i: '.. a-t report annual 3rss1 ',: ,-:t' ,.. FOREST PRODUCTS A.y t4t;!-1 jj't,tYfl J t:-C.tfl'.Lt- --'&4 V -. ; : FPC cjf .7 U) j!: :11t?igI:;}t.?ttL1. .4..;;.-4,tJ...!f2'T;..sv. I rfj14. 4;'- D ;. t. -. - t 4Cr.t2!i Xa -' 411., 1;- -1 - 1' -- 1. It. -: - a r forest products commission annual report 2008/09 HON TERRY REDMAN MLA MINIS T ER FOR FORES T RY In accordance with the provisions of the Financial Management Act 2006, we hereby submit for your information and presentation to Parliament, the Annual Report of the Forest Products Commission for the financial year ended 30 June 2009. Eva Skira Dr Paul Biggs Chair General Manager 27 August 2009 %''a - Cs4 - '5 '1 -'4 C PA 1 forest products commission annual report 2008/09 From The Chair 4 Executive Summary 6 Organisational Structure 7 Commissioners 8 Committees 9 Executive management 11 Overview Of Agency 12 Objectives 13 Segment analysis 14 Performance management framework 14 Agency Performance 15 South West forests 15 CON T EN T S Arid forests 15 Mature plantations 15 New plantations 16 Plant propagation centre 16 Strategic Tree Farming project 16 New industry development plans 16 Strategic Tree Farming project performance report 16 Farm forestry education project 17 Forest industry survey 17 Farm forestry development officers 17 Transitional support for private forestry development committees 17 New contracts 18 Bioenergy development 18 Plantation Energy Australia 18 WA Biomass Pty Ltd 18 SpiritWest Bioenergy Pty Ltd 18 Tender process for low grade native forest logs 18 Significant issues impacting the agency 19 Science and resources 20 Resources and planning 20 Tree breeding and seed technologies 21 Carbon projects 21 New plantations 21 Mature plantations 21 Arid forests 21 Sandalwood 21 Collaborative research 22 2 Contents Australasian Forest Genetics Conference 22 Appendices 97 Forest health 22 Appendix 1 Partners in research 22 Trends in the area of native forest harvested by the Commission (hectares) 97 Cooperative Research Centre for Forestry (CRC Forestry) 22 Appendix 2 Environmental service markets 23 Areas of coniferous (pine) plantations as at 31 December 2008 (hectares) 98 Disclosures And Legal Compliance 24 Appendix 3 Statement of Compliance with Public Sector Standards 24 Areas of broadleaved (eucalypt) plantations as at 31 December 2008 Certification of performance indicators 25 (hectares) 99 Compliance with relevant written laws 25 Appendix 4 Legislation impacting the Commission 26 Areas of sandalwood (Santalum.spicatum and S. album) Environmental Review 28 plantations (hectares) as at 31 December 2008 99 Environmental policy 28 Appendix 5 Strategic tree farming project 29 Log production by the Commission from Crown land Environmental management 29 and private property in 2008/09 100 Groundwater monitoring 29 Appendix 6 Carbon sequestration 30 Native forest sawlog production by the Commission in 2008/09 101 Environmental incidents 31 Compliance with Forest Management Plan 2004-2013 31 Appendix 7 Native forest chiplog production by the Commission 101 Key Performance Indicators 33 Certification of Key Performance Indicators 33 Appendix 8 Key Performance Indicators 34 Native forest fuelwood production by the Commission 101 Appendix 9 Regional Development And Employment 38 Sandalwood production by the Commission from Crown land 101 Our People 38 Recruitment 39 Appendix 10 Training 39 Strategies and Targets 102 Organisational restructure and cultural change 39 Glossary 103 Leadership development 39 Occupational safety and health 40 Acronyms 103 Code of conduct 40 Contact Details 104 Promotion and consultation 41 Expenditure 43 Financial Review 44 Certification of the financial statements 44 Independent audit opinion 45 Income statement 47 Statement of changes in equity 48 Balance sheet 49 Statement of cash flows 50 Notes to the financial statements 51 3 forest products commission annual report 2008/09 he Forest Products Commission continues to manage a number of initiatives to achieve an “environmentally sustainable and commercially viable forest products industry providing T economic and social benefits to the people of Western Australia”. On a positive note, the Commission continued a significant planting program during 2008 which saw the conclusion of plantings as part of the Strategic Tree Farming initiative, targeting salinity and environmental outcomes. Through this program the Commission has planted 18,000 hectares of sharefarms over five years. The Commission is developing expertise in carbon sequestration markets with a significant planting program during winter 2009, following the signing of a carbon offset project with Synergy. The Commission has built a bank of globally-recognised experience in carbon sequestration over a number of years, signing its first program with BP Kwinana Refinery in 1998. Also related to expanding carbon markets, the Commission began supplying logging residues from plantations to an Albany-based pellet manufacturer. The pellets are destined for export to Europe FROM TH E CH AIR for use in electricity generation. 1 The Commission, along with forest industries, communities and Government is collaborating on options to enhance the long-term viability of wood supply from South West forests to industry. Productive outcomes from this work are expected by the end of 2009. Financially, the past 12 months has been a challenging time for the Commission and its customers. Revenue decline has been experienced across all sectors, including native and arid forests and plantation timbers. The impacts of the Varanus Island gas explosion on the Commission’s customers followed by the effects of the global financial crisis resulted in depressed timber markets and lower revenues for the 2008/09 financial year. The Commission incurred costs from three major bushfires in plantations north of Perth and in the South West and these also had an adverse affect on revenue. In the interests of the State, the Commission ‘stood aside’ from complying fully with its contractual obligations, allowing for burnt timber from private plantations to be processed first before it lost all its value and could no longer be utilised. The State Government contributed $15million in equity to assist the Commission in managing the costs of the wildfires and the impact of gas shortages caused by the Varanus Island gas explosion. The incipient moves to establish a national sequestration trading scheme has the potential to be of significance for Western Australia and is expected to render assistance with further developing the forestry industry. 4 From the Chair During the year, the Board and Senior Executive reviewed its major strategic objectives in the context of both challenges in traditional wood and timber markets and potential growth opportunities in various derivative wood products. The Commission is continually looking at maximising the revenue derived from all parts of the forest resource to ensure a sustainable industry in which all forestry values are recognised and counted, including timber, energy, carbon, environmental and social values. The year saw further movement in the Board of the Commission. Chairman David Taylor retired at the end of his term on 30 June 2009 and did not seek re-appointment as he had relocated to the eastern states for family reasons. On behalf of the Board and all staff of the FPC, I would like to thank David for his leadership over the past three years during a time of further growth of the Commission. The end of July 2009 saw the terms of Ray Curo and Nick Oaks come to a close after nine years on the FPC Board. Both Ray and Nick were inaugural members of the first Board and their contribution and assistance to the Commission over that period has been significant and greatly valued by all their colleagues and staff. I would like to thank them for their wise and considerable deliberations. I would also like to welcome Karen Gadsby as a new member of the Board. I would like to thank all Senior Executive and Commissioners for their contribution during the year. Dr Paul Biggs has again shown outstanding leadership as General Manager of the organisation. Finally, on behalf of the Board, Management and staff of the Commission I would like to record our appreciation of the support received from both Ministers over the financial year, Hon Terry Redman MLA and Hon Kim Chance MLC (retired). We are grateful to have their constructive and invaluable advice to assist us in progressing the aims of the Commission and forestry in Western Australia. Eva Skira Chair 5 forest products commission annual report 2008/09 uring the past financial year, the Commission rolled out a systematic program of staff training and development with emphasis on a culture of teamwork across the organisation. This D program recognised the critical importance of Commission staff to the success of the organisation. Simultaneously as the year developed, the qualities of our people became more important and also ever-more visible. In her report, the Chair has covered the financial impacts of the Varanus Island incident, wildfires and the economic conditions faced by the Commission in 2008/09. The way in which the Commission responded to those challenges is a reflection of the quality of the agency’s people. In tough conditions, one really sees the calibre of the individuals and the value of the teamwork which epitomise the agency. When industry was forced into shutdown during the gas shortage, Commission staff working with harvesting and transport contractors had to reschedule operations, often on a daily basis and with less than twelve hours notice. Their efforts skillfully managed the reduced and fluctuating demand for log products to businesses with access to intermittent gas supplies.