APP mill can produce far more than expected, stoking worries

Green groups fear firm will break promise not to cut down natural forests to supply new mill.

APP mill can produce far more than expected, stoking worries
OKI mill, APP.

Asia Pulp and Paper (APP), one of the Indonesian firms blamed for the record-breaking haze in 2015, is facing fresh allegations over its lack of transparency, this time over its newly operational mill in Indonesia’s South Sumatra province. A document obtained this month by The Straits Times showed that the mill in South Sumatra’s Ogan Komering Ilir (OKI) district has the option to produce far more than APP had given the impression that it can – causing environmental groups to worry that the company would have to cut down natural forests to feed the mill’s appetite.

The government licence, issued by Indonesia’s Capital Investment Coordination Agency (BKPM), showed that the mill had approval to produce up to 3.25 million tonnes of pulp a year. BKPM media relations officer Iwan Ungsi confirmed that the document was an approval licence which allowed pulp production capacity at APP’s OKI mill to go up from 2 million tonnes to 2.5 million tonnes. Existing legislation in Indonesia also allows companies to produce up to 30 per cent more than the amount stated in their licences without the need for further approvals, which means that the APP mill can produce up to 3.25 million tonnes of pulp annually.

APP had applied for and been given the licence in December 2015. But as recently as in February this year, during a media visit to the mill, APP told The Straits Times that “the initial production licence for the OKI mill… and an approval from the Environment Impact Analysis licence granted production of 2 million tonnes of pulp annually”.

On why APP’s recent communications did not reflect the updated figure, an APP spokesman said: “The initial production licence for the OKI mill which was issued by BKPM in June 2012 and accompanied by an approved Environmental Impact Analysis licence was granted… for the production of 2 million tonnes of pulp annually, with the option of seeking further permits for increasing production in the future. This was why the 2 million figure was used as that was the initial production licence that the government granted. With an output of 2 million tonnes of pulp a year, enough wood could be sourced from its plantations to feed the mill, APP said. But Mr Aidil Fitri from Indonesian environmental group Hutan Kita Institute said: “I think APP has not been transparent about the mill’s capacities.”

It is not the first time that APP has faced accusations over its lack of transparency. In March this year, Singapore’s National Environment Agency, which is investigating firms believed to be responsible for the haze under the Republic’s Transboundary Haze Pollution Act, said APP had not provided investigators with enough information. The Singapore Environment Council had also, in the wake of the 2015 crisis, revoked APP’s use of its eco-label, which resulted in its products being pulled from supermarket shelves here.

Environmental groups worry that APP will renege on its no deforestation policy, now that it has emerged its mill can legally produce much more than it has given the impression that it can.

This is especially as APP had applied for the licence in December 2015 – after the catastrophic fires earlier that year that razed many of its plantations, and caused the intense haze. The Indonesian government had forbidden firms from replanting on burnt peats after the crisis, reducing the amount of land for planting pulpwood.

An analysis by a group of Indonesian environmental organisations showed that the 2015 fires had burnt an estimated 86,000ha of planted acacia within the OKI mill’s supply areas in South Sumatra – accounting for 26 per cent of APP’s total planted area in the province.

Mr Bas Tinhout, technical officer for climate-smart land use at environmental group Wetlands International, said: “The demand for raw material will present a very high plantation fibre shortage… What APP will do is speculation but will APP default on its zero-deforestation commitment?”

APP said the 2015 fires were unfortunate, and that its concessions in South Sumatra were affected. “But we have suppliers elsewhere who also supply to OKI mill,” said APP’s spokesman. In all, the mill will acquire raw materials from two regions in South Sumatra, with a total concession area of 808,000ha. The mill also has support from other sources or suppliers in Riau, Jambi, West Kalimantan, East Kalimantan and South Sumatra, with a total of 42 suppliers, said the spokesman.

APP said the OKI mill’s maximum output capacity currently is 2.8 million tonnes of pulp a year. But environmental groups pointed out that the machinery may be upgradeable to produce more.

Hutan Kita Institute’s Mr Fitri said: “In 2013, it was indicated in an environmental impact assessment report that the mill will have capacity of about 2 million tonnes of pulp a year. Later, the director of OKI Mill said they will produce 2.8 million tonnes of pulp a year. But trade reports have also said that the OKI mill machinery is upgradeable to 3.2 million tonnes of pulp a year.”

Mr Aditya Bayunanda, director of policy sustainability and transformation at WWF-Indonesia, said: “The licence that allows such a huge capacity without ensuring that they have enough fibre supply makes us very concerned,” he said. Pressed on whether APP plans to upgrade its machinery beyond the 2.8 million tonnes capacity, its spokesman said: “The mill currently has no intention of expanding output beyond what the licence allows for.”

He added that production levels have been at a low level since operations started last year, and this year, the mill is expected to produce 1.7 million tonnes of pulp. “Output (will) increase at a gradual pace subject to demand and availability of raw materials from APP’s suppliers, who are bound by our Forest Conservation Policy commitments. Put simply, we are not seeking to achieve maximum output in the shortest period of time,” he said.

Mr Bayunanda said there was a “dire need” for independent checks, now that it has been revealed the OKI mill can legally produce much more than what was communicated. “There is widespread scepticism by civil society about the limits of their plantation supply. This has heightened our deep concern that APP may go back to sourcing natural forest timber to make up for the timber shortage to feed their mill. “Reliable and truly independent verification of wood supply is the only way we can ensure that this will not happen, but the company has not implemented any such measures to date.”

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