Mill deal puts government and Greens at loggerheads

The Department of Development advised the timber haulage operator Ron O'Connor that its board had approved the loan for about a third of the undisclosed purchase price, a spokesman for Mr O'Connor said.

Green opposition to the purchase strengthened with the revelation the state timber agency, Forestry Tasmania, had reached a supply and profit-sharing arrangement with Mr O'Connor to ensure the mill's future.

Forestry Tasmania was potentially taking on some of the risk of the deal, the Greens' economic development spokesman, Tim Morris, said.

The Tasmania Premier, Lara Giddings, claims the mill is critical to the state's sawmilling industry, which is facing a radical restructure.

Triabunna would give the millers a revenue source from pulpwood logs and sawmill residues.

Mr O'Connor's Fibre Plus Tasmania plans to export more than 500,000 tonnes of chips a year.

With many details of the deal unknown, the Greens and the federal independent Andrew Wilkie attacked the state's minority Labor government. Mr Wilkie told Federal Parliament the state government was poised to lend an undisclosed amount of taxpayer's money to the "foundering" mill, aiding Gunns.

"This is outrageous, because the handout would be just another thinly-veiled payout to the company struggling to manage its daily cash flow, let alone build its stinking Tamar Valley pulp mill," he said.

The Senate opposition leader, Eric Abetz, said the Greens were trying to further the interests of the party's biggest donor, Wotif's Graeme Wood. Mr Wood, who gave the Greens $1.6 million at the last election, is reported to have wanted to use the Triabunna facility for tourism.