Forestry at crossroads as landowners in dispute with Coillte

IFA says up to 100 landowners are unhappy with their contracts with Ireland’s national forestry agency

Forestry at crossroads as landowners in dispute with Coillte

By Stephen Cadogan

Forestry partnerships have hit a rock, with the IFA’s forestry committee chairman Pat Collins saying up to 100 landowners are unhappy with the partnership contracts they signed with Coillte since the 1990s.

Coillte has about 630 landowners in 695 farm partnerships, totalling about 12,800 hectares.

The counties with most partnerships are Galway and Tipperary with about 100 each.

Next come Kilkenny with 73, Cork with 62, Waterford with 44, and Wicklow/Dublin with 42.

There are about 30 partnerships each in Cavan, Clare, and Limerick.

They are land-lease partnerships in which Coillte plants and manages the forest until harvesting at the clear-fell stage. The partnership agreement terminates after 40 years or the date of clearfell, whichever happens first.

Landowner unhappiness has been simmering for some time, boiling over in public with irate landowners being interviewed by RTÉ Morning Ireland as well as by RTÉ News in February.

Last December, Coillte bosses appeared before the joint Oireachtas committee on agriculture, food and marine and promised that Coillte would write to all its landowner partners and gave a commitment to sort out problems.

In February, committee chairman Pat Deering summoned Coillte again to explain what was happening.

The RTÉ interviews in February featured Julie Murphy who said she has a forest partnership with Coillte for 90 acres in Co Kilkenny, and she accused Coillte of a “horrendous lack of transparency”. She wanted out of her contract so that she can manage her forestry herself.

Breda Dalton, also in Co Kilkenny, has 67 acres in partnership with Coillte. She said Coillte had not built any forest roads or thinned her forestry as expected. She said she was unable to get information from Coillte.

Noel Copley in Co Kilkenny has 64 acres in a forestry partnership with Coillte. He said Coillte has left him without any income from his land — despite the harvesting of more than 4,000 tonnes of forest thinnings.

According to IFA, some other landowners are unhappy with non-payment for thinnings; refusal by Coillte to contribute to the cost of insurance for fire and storm cover; poor management on some sites; lack of roadway construction and inspection pathways; confusion about marketing and management costs charged by Coillte; poor communications and responses to complaints.

Coillte says only about seven landowner partners are significantly dissatisfied.

In response to other complaints, Coillte says its forests are managed in a consistent and professional manner to the highest standards.

All Coillte forests — including those forests involving farm partnerships — are independently audited and certified as being well managed to both Forest Stewardship Council and Programme for the Endorsement of Forest Certification standard.

Coillte has said it has reviewed its contracts and is satisfied there are no cases where partners have not been paid what they are due, and Coillte is fulfilling all of its contractual obligations.

“All timber that is harvested has been and will be included in profit calculations that determine payments to the partners,” said Coillte forests managing director Gerard Murphy.

He told the Oireachtas committee that Coillte deducts a marketing charge based on direct costs of marking and measurement, which is about 2%, and well below the industry standard.

Since the 1990s, there have been seven partnership schemes with 35 variations.

Coillte bosses have described some of the different contracts. In some, the landowner is only due to get 1% of the profits from clearfell, typically where the landowner has been receiving significant payments throughout the full rotation of the crop.

Some get annuity payments to provide continuity of income after the 20-year forestry premium payments expire, until clearfell.

In about the 100 first contracts, according to Coillte, landowners were guaranteed an index-linked payment all the way through to clearfell.

Coillte strategy and business development director Bill Stanley told the Oireachtas committee: “Every single piece of timber harvested by a partnership, whether through thinning or clearfell, the latter of which has not yet happened, follows a fully auditable trail showing every element harvested, transported, delivered over the weigh-bridge and invoiced by our customers.

“No other forestry company can demonstrate that level of transparency and the new commercial statement gives our partners access to that transparency.

“We will show them the payments they have received and how they have been calculated, as well as the payments which are forecast to be received and how they are calculated. The case studies included in our opening statement demonstrate there is no question of Coillte taking a huge chunk of value at a cost to the partnership.”

“In the vast majority of partnerships, the partner or the landowner receives the majority of the value, and Coillte’s split is, on average, about 40%,” he said.

He indicated this analysis does not include what Coillte provides in the form of forestry management expertise, access to market channels to maximise prices, economies of scale, and forest certification that is almost beyond the reach of individual private forest owners, which adds a premium to the end product price.

Mr Murphy told the Oireachtas committee: “The commitment that we have given through our engagement with the IFA and others is that we are open to engaging with any of the partners where this is a source of anxiety and to considering, for example, replanting obligations and restructuring some of the elements of cash flow within the contract so that there is no risk of a negative cashflow at the partnership’s termination.”

Mr Stanley also informed the Oireachtas committee that Coillte’s own facilities are customers for 10% to 15% of the value generated from these forests, with the balance sold to independent sawmills that buy the material at market rates.

“Even the material purchased by Coillte’s own mill is bought at the same price as Coillte’s own material.”

Coillte has committed to improve communications with its farm partners.

From 2018 onwards, partners who are due to receive annuities in the coming years will receive an annual statement that includes payment information.

Coillte has also pointed out to the Oireachtas committee that all farm partners had access to their own independent legal advice at the time of contract formation and signing, and many of them were subject to detailed and extensive engagement with the partner’s solicitor.

The forestry company has revealed profits of €3.8m realised from forestry partnership thinnings.

However, it says it has paid out have paid out €70m, including €20.8m to landowner partners, and €30m to contractors for planting (which is covered by about €33m received in grants).

Mr Murphy said:

That does not include management, overheads and other costs in maintaining the forest on top of that. Currently, we have a significant outflow from the farm partnerships. We have a duty of care and we have invested significant amounts of money in the partnerships, and it is in our interest as well as in that of the partners that we get full value from the moneys we have put in.

In mid-February, the IFA national farm forestry committee met representatives from Coillte to discuss farm partnership agreements, and IFA national farm forestry chairman Pat Collins said it was a constructive meeting.

“There was genuine engagement from Coillte and a commitment to work with IFA to resolve the issues,” he said.

They agreed to meet again shortly to continue discussions to agree principles under which issues will be addressed, and to provide clarity to the farmers involved.

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