Australia govt delays full approval of pulp mill

By Rob Taylor

CANBERRA, Jan 5 (Reuters) - Australia's government delayed full approval on Monday of a controversial A$2 billion ($1.4 billion) pulp mill that environmental groups say is a litmus test of its commitment to protecting its fragile ocean environment. Environment Minister Peter Garrett said he was still uncertain what impact outflows from the Gunns Ltd (GNS.AX) mill would have on seas north of Tasmania island, although he approved parts of the plan allowing construction to start.

Gunns has until March 3, 2011 to provide additional environmental information to continue the mill approval process, Garrett said.

Environment issues and fears of climate change helped decide the 2007 election which swept the centre-left government to power after almost 12 years of conservative rule.

The government is already under fire on its environment record, a key plank of its election campaign, after it announced a planned 5 percent cut in carbon emissions by 2020 under a new carbon trade regime, a much smaller target than initially anticipated by Green groups.

"National environment legislation requires that I take a precautionary approach to environmental protection," Garrett said in a statement.

"I am not satisfied, with that in mind ... that I can grant final approval for this mill without fully understanding its potential environmental impacts," said Garrett, a former rock star and environment campaigner who was head of the Australian Conservation Foundation.

Gunns plans to build the high-tech mill in Tasmania's Tamar River valley to boost the value of woodchip exports and reduce a A$2 billion deficit in forest products. Forestry is a major employer and economic driver in the island state.

According to Gunns, the mill will process about 3.2 million tonnes of woodchips to produce up to 1.1 million tonnes of pulp.

But protest groups say the picturesque Tamar is home to many vineyards and wineries, and is particularly vulnerable to any increased pollution they say the mill will bring.

Gunns shares fell over 7 percent after the government announcement and were last trading down 4.2 percent at A$1.13. The company said in a statement it welcomed Garrett's approval for the majority of the mill plan.

"We are now clear to begin construction on the mill, pending financial close," Gunns Chairman John Gay said.

"It will also be of benefit to the state economy, creating more than 2,000 jobs during construction and 1,600 new jobs during operation," he said.

Paul Oosting, an anti-pulp mill campaigner for Australia's pro-environment Wilderness Society, said Garrett should not approve the mill under any circumstances as it would be an environmental catastrophe.

"Gunns is proposing to dump 64,000 tonnes of toxic pollution into the Bass Strait every single day, endangering marine life and Tasmania's precious fishing industry," Oosting said, referring to the sea between Tasmania and Australia's mainland.

Gunns said the high-tech mill was climate-friendly and would not cause environmental damage.

Garrett set new conditions on the mill plan allowing for penalties of up to A$1.1 million on Gunns if the plant on Tasmania's northern coast breached environment laws. ($1 = 1.408 Australian dollar) (Editing by Jonathan Standing and Sugita Katyal)