Money treeValuer TOM McDONALD looks at proposed new measures, legislation, insurance, valuations, and outlook in Irish forestry.

Irish forestry is increasingly important in the social, environmental and economic aspects of rural Ireland.  Forests now account for approximately 11% of the land area of Ireland, of which approximately 46% is privately-owned. The remaining 54% is publicly-owned, primarily by Coillte Teoranta. Up until the 1980s, almost all afforestation was undertaken by the State.

Subsequently, with the introduction of the State/EU-funded forestry grant and premium schemes, private landowners, primarily farmers, began to plant significant amounts of forest.

Non-native species now represent approximately 76% of the forest area, while native species represent approximately 24%. We have significant advantage in relation to the growth rates of certain tree species, primarily sitka spruce. We also have a strong comparative advantage in the growing of wood fibre in relation to other EU countries.

While these advantages have been well documented, our annual afforestation has decreased from 20,981 hectares in 1996, to 6,652 hectares in 2012.

There are many reasons for this, which would include: inter alia changes in grant and premium support measures; increased taxation; more onerous legislation; increasing land prices; threats to forest health from biotic and abiotic factors; and, competition with various CAP-funded farming measures.

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Figure 1: Annual Afforestation 1991 – 2012.

Proposed new forestry measures
Unlike many rural development programmes, Irish Forestry is funded 100% by the exchequer. This presently approximates to €111 million per annum. Premium payments currently account for some 70% of the total forestry budget, while grants for afforestation (first and second instalment) account for more than 25%, leaving a relatively small balance to fund other support measures.

A new forestry programme for the period 2014-2020 has been proposed and is currently undergoing an ex-ante evaluation, strategic environmental assessment and appropriate assessment. It is built on the 2007-2013 forestry programme, which established 48,000 hectares of new forest and approximately 945 kilometres of new forest roads.

There are various proposed measures under the new programme ranging from: afforestation and creation of woodlands; investment in infrastructure; prevention and restoration of damage to forests; investments improving the resilience and environmental value of forestry; knowledge transfer and information actions; setting up of producer groups; investment in forestry technology; forest environment and climatic services; and, forest management plans.

A number of the proposed measures as outlined have generated significant discussion in relation to their impacts on the programme. These include:

  • premiums may be payable for a maximum period of five years for agro-forestry plots;
  • premiums may be payable for a maximum period of 10 years for forestry fibre plots; and,
  • premiums may be payable for a maximum period of 12 years for other grant and premium categories.

The introduction of agro-forestry is a new proposed policy measure. It will be primarily targeted at silvopastoral agro-forestry systems, which combine forestry and pasture. A stocking rate of 400-1,000 trees per hectare is proposed and the eligible plot size will be 0.50 hectares. Acceptable broadleaf species will include oak, sycamore, and cherry, while other species, including conifers, will be considered on a site-by-site basis. Agro-forestry plots must be fenced with appropriate stock proof fencing and plants must be protected by tree shelters for the first six to eight years. Grazing by sheep or young domestic stock will be permitted during spring and summer for the first six to eight years and thereafter by larger animals when the tree shelters are replaced with plastic mesh.

Some landowners and farmers have criticised the measure as the agro-forestry lands will be classified as forest land and the provisions of forest legislation will apply. In Northern Ireland, a more pragmatic and flexible approach has been proposed to allow agriculture as the dominant land use. This may be a more viable land use option allowing trees on to stock farms. However, agro-forestry is generally poorly defined in EU policy and it will be interesting to see how it will be incorporated into the new measures.

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Forestry legislation
In relation to forestry legislation, surveyors should be aware that forestry in Ireland operates within a legal and regulatory framework, which involves significant primary legislation, secondary legislation, EU legislation and international agreements, which Ireland is party to.

Presently, a new Forestry Bill 2013 has been proposed to replace the Forestry Act 1946 (and any amendments thereof), which primarily governed tree felling. It has received criticism from various groups due to: potential loss to growers – as, for example, where the Minister refuses a felling licence there is no legislation for appropriate compensation for the growers financial loss, due to lack of timber sales; limited period of felling licence; costs including costs of management plans. It should be noted the proposed bill retains the legislative framework for the replanting of trees. This restrictive clause has been debated over the years and has been seen by some as a significant disincentive to planting agriculture land. Clearly a farmer planting quality arable land significantly devalues the underlying land. On the other hand, the State’s role in incentivising afforestation and in supporting and creating critical mass for downstream industry can not be easily dismissed. The cost per hectare over a 20-year period to the State (grants and premiums) can be as much as €16,000 for broadleaves.

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Source: http://www.teagasc.ie/forestry/docs/grants/forestrygrantrates_2011.pdf

Forest insurance
Forest insurance has become an increasingly important issue for forest owners. Many farmers and landowners are unaware that beneficiaries of afforestation grants and premiums are obliged to maintain and protect their forest for a period of up to 20 years from the date the grant was paid. This means that there is an obligation on the beneficiary to replant where the forest is damaged by fire. Failure to adequately protect and maintain a grant-aided forest can result in cessation of premium payment and may, ultimately, result in recoupment of all grant and premium monies received, unless remedial work is satisfactorily carried out. The Forest Service invariably advise that forest owners ensure they have adequate insurance in the event of a fire, including the cost of reconstitution.

Recently, Irish forests have suffered significantly from Storm Darwin. It is estimated that up to 7,000 hectares have been damaged, particularly in the south and south west of the country. The Minister of State for Forestry Tom Hayes TD, has set up a Windblow Taskforce to co-ordinate a response to the damage. It will endeavour to estimate the area, timber volume and extent of the damage; make recommendations to address issues arising; and make recommendations for the orderly removal of the windblown timber.

Surveyors and forestry
Forestry insurance and compensation is now seen as a significant issue in Irish woodlands. Surveyors working in this area will be required to have a comprehensive knowledge base in relation to windblow, fire and snap, the impact of recreational activities and infrastructural works on woodlands. They will have to be familiar with inter alia planting and premium grants, accompanying measures, species mix, forest mensuration techniques, timber prices, costs, revenues and discounted cash flow analysis. In undertaking professional work, qualifications, skill set, knowledge and practical experience in a particular market sector is well recognised. Surveyors will be subject to red book regulations and standards. It will be interesting to see how surveyors perform in this area, particularly with responsibility for valuations, compliance, liability, and professional indemnity insurance cover.

However, forest owners will be pleased to note under the new Forestry Programme for the period 2014-2020, it is proposed to introduce a measure to restore forests that have been significantly damaged by natural causes.

Forestry outlook      
Unlike some farming enterprises, the price for standing timber and forest produce has generally continued to grow exponentially over the last number of years. This has been due to the demand from the wood-processing sector, which is now largely export driven.

Irish forestry is now considered to be a significant driver in the Irish rural economy through rural-based employment and diversification of farm income. The future for Irish forestry looks encouraging, with the demand for its produce increasing.

Will Irish forestry achieve its full potential? A lot will depend on the implementation and the sale of the new measures to be introduced over the next year. It will require forward-thinking tax incentives, innovative and generous planting, premium and support measures, and a substantial budget to convince Irish landowners to plant their land to achieve the government’s policy of 18% forest cover in Ireland by 2046. However, the funding for Irish forestry as presently outlined is seen by some as overtly exposed to the vagaries, challenges and changes of Ireland’s present and future economic situation.

Tom McDonaldTom McDonald
MSCSI MRICS MSIF MCIArb
Tom is an RICS Registered Valuer.