Committee Reports::Report No. 21 - A review of state expenditure on The Forest and Wildlife Service::17 October, 1986::Appendix


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Committee Reports > List of Committees > Dáil > 1986 > Committee on Public Expenditure > Report No. 21 - A review of state expenditure on The Forest and Wildlife Service

Appendix (iv)

LETTER TO THE CLERK TO THE COMMITTEE FROM THE DEPARTMENT OF FISHERIES & FORESTRY

I refer to your letter of 31st January, 1986 regarding the contracts between my Department and the timber processing factories at Clonmel and Scarriff.

I regret that I cannot supply copies of the actual contracts between the Department and these companies since they contain commercially confidential information relating to the operations of individual companies which would normally be withheld from publication and as such these documents fall into the categories of documentation referred to in paragraph 78 of the Guidelines approved by the Government relating to the provision of information to Oireachtas Committees.

However, in order to assist the Committee as far as we can I am happy to supply the following general information about the contracts in question.

Contract for the Supply of Wood Between the Forest and Wildlife Service (FWS) of my Department and Medite of Ireland Ltd., Clonmel

Background:	In the 1970s three of the country’s four pulpwood-using industries closed as a result of the recession following the oil crisis of 1973/74. These were Munster Chipboard in Waterford; Irish Board Mills thy and the Clondalkin Pulpmill. The fourth industry, Chipboard ., Scarriff was also in financial difficulties and being funded by Foir Teo until it was restructured in 1981. The closures referred to created a very serious situation for the thinning of and dis of pulpwood from State forests. Failure to thin would have had silvicultural repercussions and would have adversely aff production of quality sawlog which was and still is the p of the State Forestry Programme. It was therefore a major ment for the IDA and FWS to secure one of the largest medium de fibreboard manufactures in the world to set up a plant in fill the vacuum created by the closure of three pulpwood s and to manufacture a high valued board product mainly for based on the use of pulpwood and sawmill residues.
	The arrangements for the new Company included the negot long-term contract between the FWS and the Company of which ... following are the salient features.
Date of Contract:	18th March, 1981.
Duration:	20 years.
Type of Wood:	Pulpwood i.e. trees not exceeding 14cm diameter.
Species:	Spruce, Lodgepole pine.
Quantity:	Up to 400,000m’ annually from FWS but the company is obliged to seek at least 25% of their requirements from sawmills and private growers provided such supplies are suitable and competitively priced.
Price:	The disclosure of pricing arrangements is prohibited by a non-disclosure provision in the contract. However, the price for pulpwood is positive and conforms favourably with market prices for similar material. There are provisions for price review by both parties to the contract.
Breaches:	There are provisions in the contract to protect both parties in the event of breaches of contract.

Agreement for Supply of Wood Between the Department (FWS) and Finsa Forest Products Ltd. Scarriff

Background:	In November, 1983 the chipboard plant at Scarriff which had got into financial difficulties in the 1970s and which was restructured during 1981 with State involvement eventually collapsed and was put into receivership. The IDA and FWS with the assistance of the Irish Timber Council succeeded in attracting the Finsa consortium from Spain to set up in Scarriff and continue the manufacture of chipboard there. These arrangements included the conclusion by the FWS of a long-term timber supply contract with the firm. The following are the main features of that contract.
Date of Contract:	30 May, 1984.
Duration:	10 years at least.
Type of Wood:	Pulpwood i.e. trees not exceeding 14cm diametre.
Species:	Spruce and Pine.
Quantity:	Of the total estimated supply requirements of the firm of 150,000m³ FWS is to supply up to 85,000³ annually - the balance being provided by sawmillers and private growers.
Price:	The disclosure of pricing arrangements is prohibited by non-disclose provisions in the contract. However, the price for pulpwood is positive and compares favourably with market prices for similar material. There are provisions for periodic price reviews.
Breaches:	There are provisions to protect both parties in the event of breaches of contract.

I wish to apologise for the delay in replying to your letter.

Yours sincerely

P. Whooley

LETTER TO THE CLERK TO THE COMMITTEE FROM THE DEPARTMENT OF FISHERIES & FORESTRY

I refer to your letter of 12 March, 1986 regarding the pulpwood supply contracts with Medite of Europe Limited, Clonmel and Finsa Forest Products Limited, Scarriff. I fully appreciate your Committee’s interest in the pricing arrangements for pulpwood supplied by this Department under contract to the two companies in question but as I explained in my earlier letter there is a binding contractual clause about non-disclosure of information in each of the contracts which is a constraint on the amount of information that the Department can disclose in the matter without risking breach of the relevant provisions of the contracts. I have sought and obtained legal advice on this matter which confirms that to disclose the information sought could be deemed to amount to a breach of contract.

With regard to the first two questions in your letter I would like to reply as follows:-

When in my earlier letter I said that the price of pulpwood sold under the contracts was positive, I meant that it was not a subsidised price and was thus a positive absolute price. The prices were negotiated between the parties to the contracts when they were being drawn up and naturally as the contracts are long-term ones, those prices may vary from time to time from the market prices of pulpwood sold otherwise by the FWS. The latter prices vary depending on the market demand for the material at any time and also reflect the geographical location of the timber and the end-use to which it is put. As indicated in my earlier letter there is provision under the contracts for periodical reviews of the contract prices by the parties to the contracts.

As regards the third question in your letter I regret that for the reasons stated in the first paragraph I am not at liberty under the terms of the contracts to give the information requested as to do so would clearly enable the contract prices to be derived by simple deduction because of the relatively limited outlets for pulpwood sales outside of those contracts. Neither is it possible for the Department to supply particulars of comparable UK and European prices because the Department does not have access to the terms of contracts involved there and would not therefore be in a position to say whether it was comparing like with like.

With regard to the control measures in operation for timber supplied under the contracts there are strict procedures in operation both in relation to the felling of pulpwood in the forest and its removal by the companies hauliers. Forest managers closely monitor harvesting operations within their forests and a ticket system controls removals from the forest. For each load leaving the forest a ticket is completed in quadruplicate. The local forest manager keeps one copy, the haulier keeps another and further copies are provided for the company and FWS headquarters in Dublin. Each ticket is subsequently matched with a weight docket produced at the mills weighbridge. Facilities are provided by both companies for the inspection of weighing and sampling procedures. Regular spot checks are carried out to authenticate the control procedures. There are also provisions in the contracts governing breaches of the contract and their rectification.

I would like to explain for the information of the Committee that these long-term commercial contracts (including the pricing arrangements set out therein were negotiated in the context of attracting suitable pulpwood industries to this country involving large-scale capital investment, long-term employment opportunities and guaranteed outlets for the increasing volume of pulpwood becoming available from State forests as outlets for such material were not available in the country. The negotiations with Medite and Finsa were conducted in consultation with the relevant Departments concerned and with the approval of the Government.

I also wish to refer to your oral request last evening for the attendance of official (s) of this Department at a meeting of the Committee on Wednesday next 2nd April to discuss, we understand a “Report of an Advisory Panel on Public Expenditure - Forestry Group” and to confirm that the Department will be represented at the meeting. However I must point out that a copy of the draft report in question was only received in this Department at 6 p.m. last evening and then only in response to an oral request by the Department for information the to what the Committee proposed to discuss with officials - which information the Department is obliged to seek in advance under the provisions of paragraph 5 of the Guidelines for Civil Servants appearing before Oireachtas Committees. It is not possible in the time available particularly with the intervention of the Easter holidays and other commitments of staff to have the draft report examined by the Department to enable the officials to comment at the meeting on the many complex issues raised therein. Also I wish to say that the officials concerned are not at liberty to discuss at the meeting policy recommendations of the Forestry Review Group referred to in the draft report since these are already under examination by the Department and the Minister prior to their consideration by Government in due course.

Finally I have to say that the Department is concerned to note that at no stage during the preparation of this draft report was it asked for or afforded the opportunity of giving views on the several issues affecting its activities dealt with in the report or even at this late stage afforded the necessary time to examine it before appearing at the Committee. Indeed the Department is also very perturbed that it only learned accidentally late last evening of the existence of the report. It would be appreciated if you would bring the contents of this letter to the notice of members of the Committee.

Yours sincerely

P. Whooley

Secretary

LETTER TO THE CLERK TO THE COMMITTEE FROM THE DEPARTMENT OF FISHERIES & FORESTRY

I wish to refer to your letter of 7 April about the pulpwood supply contracts between the Minister and Medite of Europe Ltd. and Finsa Products Ltd. The clause of the contracts to which you refer reads as follows:-

“Non-Disclosure

The Minister shall not and shall use his best endeavours to ensure that his servants and agents shall not disclose to any third party other than to any other Department of State any information in connection with the Purchaser’s processes, trade secrets, financial affairs or other confidential information.”

The clause is part of the original contract in each case. In the Medite contract it is Clause II and in the Finsa contract it is Clause 10.

LETTER TO THE CLERK TO THE COMMITTEE FROM THE DEPARTMENT OF FISHERIES & FORESTRY

I refer to your further letter of 5 June about the contracts between the Minister and Medite of Europe Ltd and Finsa Products Ltd in regard to the supply of pulpwood. I regret that for the reasons set out in my previous letters to you on this matter, particularly the contractual obligations involved and the terms of the guidelines approved by the Government for Departments in their dealings with Oireachtas Committees, the Department is not in a position to accede to your Committee’s request.

Yours sincerely

P. Whooley

Secretary

LETTER TO THE CLERK TO THE COMMITTEE FROM THE DEPARTMENT OF FISHERIES & FORESTRY

I am directed by the Minister for Tourism, Fisheries and Forestry to refer to a query by the Committee on pulpwood supply/demand and to confirm the following details.

The Medite plant has a maximum capacity to use approximately 400,000 cubic metres of pulpwood annually. Under the contract the company must seek at least 25% of its pulpwood requirements from domestic sources other than the Forest and Wildlife Service.

The Finsa plant has a capacity to use approximately 150,000 cubic metres of pulpwood annually. The Minister has contracted to supply up to 85,000 cubic metres.

The mills have not purchased their full entitlements under the contracts and pulpwood sales to the companies amounted to 23% and 37% of all pulp sales in 1984 and 1985 respectively.

Yours faithfully

M.A. Hackett

	Fisheries Service
	Forest and Wildlife Service