Leasing land for carbon forestry

PF Olsen has been approached by Matthew Walsh and Andy Martin of NZ Carbon Farming Limited asking if we can assist them locating land eligible as post-1989 forest land, that they could lease for carbon forestry.

Our company relationship with NZ Carbon Farming last year focussed on leasing existing post-1989 forests and three of our company clients joined that program. NZ Carbon Farming now has more than 7,000 ha of existing post-1989 forest land under lease and is able to claim the carbon credits for those forests for the change in carbon stocks since 1 January 2008. They have sold the credits they claimed as at the end of March 2011 and have now engaged in the second stage of their program: the acquisition of land eligible as post-1989 forest land. They wish to acquire this land to plant a radiata pine tree crop for both carbon credits and log revenue.

The NZ Carbon Farming Land Leasing Program

NZ Carbon Farming offers owners of land that is eligible as post-1989 forest land an annual lease income without the associated carbon credit liability at harvest time. The proposed lease addresses the issue of the liability for the credits claimed transferring to the land owner.

In the event of non-performance or default (including receivership), the proposed lease gives the land owner the right to remove the forest land from the ETS before terminating the lease. Once the forest land has been removed and a final emissions return filed, the liability for surrendering credits remains with the lessee (and its directors!). They have shown us a legal opinion from Simpson Grierson to support this, but any party willing to enter into such a lease would need to have this opinion checked. We checked with MAF and they responded as follows:

If the lease expires or is terminated, the landowner becomes the ETS participant as shown in section 192 (1) Part C of the Climate Change Response Act. The landower will then become responsible for its own obligations and liabilities as participants. The landowner's risk of prosecution under the Act is in relation only to the landowner's liabilities since becoming a participant. The Crown would pursue the landowner only in respect of any breach of the Act by the landowner as a participant.

Furthermore, in respect of this land leasing program, in the event of a default by NZ Carbon Farming, the land owner gets to keep the trees. At current log and carbon prices, the timber value of the tree crop would exceed the value of the carbon liability at any stage during the tree crop rotation for most sites with reasonable harvest access and distance to markets. At the end of the lease, the land will be 'handed back' in a replanted condition, the land owner gets a newly planted forest.

The offer

As to the lease rental, they have indicated a range of $50 to $150 per ha per annum (CPI indexed). Rental rate offered depends on:

  1. Size – prefer large, minimum 100 ha plantable and eligible as post-1989 forest land
  2. Site – prefer high carbon yield, annual rainfall more than 700 mm, altitude below 600m
  3. Fencing – needs to be fenced

Our conclusion is that this scheme is suitable for owners of more than 100 ha of farm land that is eligible as post-1989 forest land and that is contributing little to the overall farm net income.

The alternative to leasing your land is to do it yourself!

Owners of marginal farm land suitable for carbon forestry could plant and manage this land for carbon forestry, claim the carbon credits while the forest is growing and use the harvest revenue to off-set the carbon liability at harvest time.

Which option do you prefer?

If you wish to consider this land leasing option or a do-it-yourself approach click here and provide your details. We can prepare a carbon forest establishment program and budget for your consideration or ask NZ Carbon Farming to prepare a draft leasing proposal specific to the land you want to make available. Please advise if there are any specific issues you want them to address in the lease.

The information we require from you to refer your expression of interest:

  1. Area available for lease;
  2. Land owner(s) name(s);
  3. Property location/address; and
  4. Property legal description.

Following are links to two websites for the two companies operated by Matt Walsh and Andy Martin:

NZ Carbon Farming
NZ Land Leasing