Forest landowners havea choice to make

01-09-2010 | LandVision

Pre-1990 forest landowners now have an important choice to make between an allocation of New Zealand units (NZUs) and, if eligible, an exemption from deforestation obligations under the ETS.

Under the New Zealand Emissions Trading Scheme (ETS), pre-1990 forest land is defined as land covered by forest species (either exotic or indigenous, including manuka and kanuka) on December 31, 1989, that remained in forest species, and was predominately exotic forest species, on December 31, 2007.

Land that was in indigenous forest on December 31, 1989, and remained so on December 31, 2007, is not pre-1990 forest land, and is not captured by the Emissions Trading Scheme. It is not eligible land.

When landowners deforest more than two hectares of pre-1990 forest land in each five-year period from January 1, 2008, they are mandatory participants in the ETS and incur liabilities for the carbon emissions from those forests. These liabilities reflect the liabilities the country incurs under the Kyoto Protocol.

Landowners are permitted to deforest two hectares or less in each five-year period from January 1, 2008, without incurring liabilities.

Harvesting pre-1990 forest, followed by replanting or natural regeneration, is not considered deforestation and does not incur liabilities.

Landowners need to apply to MAF to receive either an allocation or an exemption. They can also choose not to apply for either an allocation or an exemption, but may be worse off as both have value. If deforesting more than two hectares in each five-year period, ETS deforestation liabilities will apply regardless of whether the landowner received an allocation or not.

Also allocated NZUs will have some value in the future.

The deadlines for allocation and exemption applications are:

• Tree weeds exemption for the period 2008 to 2012, October 31, 2010.

• Less than 50 hectares exemption, September 30, 2011.

• Allocation of NZUs, November 30, 2011

The Government is providing landowners of eligible pre-1990 forest land with a one-off allocation of NZUs. The allocation is in recognition of the impact the ETS deforestation rules may have had on land values.

You are eligible for an allocation regardless of what you do in the future (whether that be deforesting, or continuing to harvest and replant). If you deforest in future, the allocation can help you to meet your ETS deforestation liabilities.

In general, if land was bought or transferred to the new owner before November 1, 2002, it is eligible for the highest allocation of NZUs. That date was when the Government announced its intention to introduce restrictions on deforestation, and those owners would have been hit the most by the ETS deforestation rules.

Those who bought their land after the announcement could be expected to factor the deforestation rules into land purchase negotiations, and therefore receive a lower allocation of NZUs.

NZUs are allocated on the basis of each mapped hectare of eligible pre-1990 forest land. How many NZUs are allocated a hectare to the eligible person depends primarily on when the land was acquired. Other factors include how it was acquired, and how the land is owned, for example, company, trust, joint tenancy, Maori incorporation etc.

The allocations are:

• Sixty NZUs a hectare for eligible pre-1990 forest land that has not changed ownership arrangements since October 31, 2002;

• Thirty-nine NZUs a hectare for eligible pre-1990 forest land transferred to the landowner on or after November 1, 2002; or

• Eighteen NZUs a hectare for eligible pre-1990 forest land that was Crown forest licence land on January 1, 2008, that was or will be transferred to an iwi under a Treaty of Waitangi settlement after that date.

The allocation will be transferred in two parts:

If the law changes, some or all of the second part of the allocation may be cancelled.

There are several transfers that are exceptions to the rule for the 39 NZUs a hectare allocation (called excluded transfers). Generally, this is land that was transferred on or after November 1, 2002, where there has not been the opportunity for a commercial consideration of land value, or where there has been no change in beneficial ownership. Typically, excluded transfers do not involve a sale or purchase of the forest land.

Examples of excluded transfers of land that receive 60 NZUs include:

• Transmissions and vesting under an Act, such as on bankruptcy (except for transfers in accordance with a Treaty of Waitangi settlement which receive 18 NZUs per hectare);

• Distribution of property under a will;

• Establishing trusts and trustee changes;

• Gifting;

• Giving effect to Property (Relationships) Act 1976 matters;

• Transfers between joint owners, partners and certain other ownership structures where the beneficial interests in the eligible land have not exceeded certain thresholds;

• Partitioning land between joint owners.

Only one excluded transfer needs to have occurred for the land to be eligible for 60 NZUs a hectare.

You are free to hold your NZUs, in which case they could be used to help meet future emissions liabilities for either pre-1990 forest land or post-1989 forest land. Alternatively NZUs can be sold for cash, or held and sold later.

Carbon trading and brokering firms can connect people selling NZUs with buyers - just like a sharebroker does. The range of services offered and fees vary from company to company. Alternatively, you can sell them yourself.

Like all tradable commodities, the price of NZUs is determined by what buyers are prepared to pay and what sellers are prepared to sell for. Information on carbon prices can be obtained from carbon brokers and carbon market websites.

The "less than 50 hectares" exemption is a one-off opportunity available to landowners to exempt pre-1990 forest land from the ETS. The area of forest land must be less than 50 hectares, and must have been owned on September 1, 2007, by a person who owned less than 50 hectares of pre-1990 forest land in total.

If the landowner on September 1, 2007, included a body corporate (for example, a company, limited partnership, incorporated society or Maori incorporation) then the interest of any "associated person" must also be counted and be less than 50 hectares.

Some of these deadline dates are over 12 months away but applying is not just a five-minute job. The planning for this needs to start soon. Want to know more, check out: www.maf.govt.nz/sustainable-forestry.

In next month's issue we will discuss the pro-s and con-s of applying for NZUs and how to apply for them.

• Check out www.maf.govt.nz/ sustainable-forestry

  Printable View