Federated Farmers is agnostic about how landowners use their land but argues government policies are ‘screwing the scrum’ in favour of forestry, and in particular radiata pine being planted for carbon credits only. The result is that many thousands of hectares of sheep and beef production land is being swallowed up.
Feds is in the process of developing a policy on forestry issues, with the aim of ending up with recommendations to government on how it might even up the playing field, and put into practice its stated support for ‘right tree, right place’.
The Federation’s National Council is due to meet on 2 March to make decisions on both He Waka Eke Noa, and on a forestry policy. A draft position paper on forestry has been sent to Provincial Presidents for their feedback. It runs to nearly 50 pages but some of the issues are outlined in this article.
The draft paper starts out by acknowledging forestry has an important place in the New Zealand landscape but adds that when afforestation is driven by interventionist government policies that distort land use “then the long term economic, social, and environmental impacts for regional communities and for New Zealand as a whole are potentially large and largely irreversible”.
Beef + Lamb New Zealand has also expressed concern about the unbridled ability of fossil fuel emitters to offset their greenhouse gas emissions by planting trees on productive sheep and beef farms. An independent report commissioned from Orme & Associates and published in December shows that in the first six months of 2021, 14,219 hectares of sheep and beef farmland were purchased with the intent for planting into trees (11,585 hectares of exotic planting and 2,634 hectares of planting of natives for honey). This data is provisional and is expected to be higher, given there is a long lag in farm sales being formalised. This comes on top of the 28,159 hectares purchased in 2020, 24,864 hectares of which was purchased for exotic forestry.
Over 80 percent of the whole farms sold into forestry were in clear pasture, compared to 65.7 percent across the 2017-20 period. Additionally, there has been an increase in the amount of land sold in the Low and Moderate Erosion Susceptibility Classifications.
The report also shows sales moving into new areas, including clusters of sales starting to emerge in regions such as Otago.
The draft Feds position paper says blanketing land in increasingly fire-prone pine trees is already having an impact on many rural communities.
“Widescale forestry conversion … with no one resident on the property… encourages criminal activity such as cannabis growing, illegal hunting and livestock rustling. The loss of resident farming families means that school bus routes stop, rural schools close and local farming communities drop to unviable numbers.
Sequestration issues
The paper notes a key benefit of the He Waka Eke Noa emissions pricing options recognise more forms of stored carbon sequestration than the ETS currently does. But a disadvantage is that under these options the sector itself must pay via increased levies. Unlike Government grants (such as the One Billion Trees fund) or the ETS, the He Waka Eke Noa scheme does not gather revenue from the public sector or from non-agricultural sectors but requires that farmers themselves pay for the sequestration being recognised.
While individual farmers will likely benefit, once the auditing, verification and administration costs are considered the sequestration scheme will be a net cost to the agricultural sector.
“The core policy challenge for Federated Farmers is ‘How to return land use policy settings to ones that are agnostic while also promoting the recognition of the sequestration occurring on farms, both via the ETS and He Waka Eke Noa?’,” the draft paper says.
What about the RMA?
The RMA could help act as a temporary hand brake on new farm conversions to permanent carbon farming if central Government made permanent carbon farming in exotic trees a non-complying activity. This could be achieved through a carefully drafted national environmental standard, or by amending the existing NES-PF.
This would not address the wholesale conversion of productive land for rotational carbon farming. These issues are better managed by amending the ETS and removing the OIO special forestry test. Rotational carbon farming would be caught by the NES-PF. Therefore, the playing field could be further levelled by addressing known deficiencies with the NES-PF and inequities in how different land use activities are rated in the Rating Valuations Act. The NES-PF currently grades land into green, orange, and red classes (based off erosion susceptibility), with the red zone requiring restricted discretionary resource consent. The red zone could be amended to include productive farmland, such as LUC 1-4.
Council income
Rates revenue from forestry land is relatively low especially compared to farmland. This is because forestry is mostly located in isolated areas with rugged topography, which is usually lower value land. Forestry land, unlike farmland, also has little or no alternative best use for valuation purposes (i.e., the land can’t be easily converted back to farmland or subdivided into lifestyle blocks).
The value of trees on forestry land is not included in rating values because they are not considered ‘permanent crops’. Combined with a lack of improvements on forestry land (e.g., buildings and other structures), this means that even where capital value systems are in place forestry land is in effect rated overwhelmingly on its land value.
Last July Feds requested information from councils on the amounts of rates paid by each valuation category for the 2020/21 year. Of 40 councils which separately reported rates from forestry land, $14 million was paid by forestry or only 0.6% of total rates revenue. In contrast agricultural and horticulture land paid $324 million or 14.1% of total rates revenue.
This disparity would not be remarkable if forestry land did not receive much benefit from or impose much cost on councils. But this is not the case, even compared to neighbouring hill country sheep and beef farms. Roading is the most obvious example where forestry truck movements impose considerable costs on local road networks, especially (but not only) during harvest. Other council activities where forestry imposes direct costs include flood protection, flood clean-up of downstream waterways and coastal areas, regional and district planning and regulation, weed and pest management, not to mention general contributions to the running of councils.
Only some councils attempt to address this through rating differentials where forestry land pays a multiple of the rate in the dollar compared to the base, which is usually residential ratepayer.
Federated Farmers advocates for greater use of rates differentials on forestry land and we will continue to do so. But differentials are regarded as a sticking plaster, and they are only in place in a few areas. Last year Gisborne District Council put a remit to the Local Government NZ conference calling for the Valuer General to amend legislation to allow local government to address growing disparities between the rating valuation of forestry land and other land uses. The remit was passed with 81% support.
According to a media report last year, the rateable value of pastoral land more than halved over time after being converted to forestry. Analysis conducted by Federated Farmers in 2019 on loss of rates revenue from all drystock land being converted to plantation forestry found huge impacts for two hypothetical councils – 27% and 22% reductions. Reductions of that size would have huge implications for council finances and would put more of the rating burden onto other ratepayers.
Potential solutions include that councils be required to have forestry rates differentials, that the value of trees be rateable as per permanent crops (putting them on the same basis as horticultural trees) increasing forestry land’s capital values and (all other things equal) their rates, and/or the value of forestry emissions units be rateable.