Chapman announced late yesterday that she had vetoed the project due to the potential for long-term environmental damage, impact on local businesses and the island’s character.

She said her decision came after a State Planning Commission’s Assessment Report found the application to be “finely balanced”.

“This was a difficult decision and one I have not made lightly,” Chapman said.

“The assessment report was line-ball, however, I have come to the conclusion that the possible long-term and irreparable damage the wharf could cause to the Island is a risk I am not willing to take.”

The publicly-listed timber company’s port proposal at Smith Bay was first declared a development of major environmental, social and economic importance in February 2017.

Kangaroo Island Plantation Timber was placed in a trading halt ahead of the Chapman’s announcement, after its share price lost almost 10 per cent in 40 minutes.

The company said it would not make a statement until its market announcement, which it says is not expected until Wednesday.

Chapman said she was aware her decision would have an impact on the local timber industry.

“However, I am not satisfied that the impacts identified can be monitored, managed or mitigated to a degree that would warrant development approval,” she said.

But the DPTI’s 238-page assessment report concluded that “on balance… the proposal can be supported subject to additional requirements (including reserved matters for further assessment) and conditions”.

“Consistent with other Major Developments, it is recommended that the approval provide for a substantial commencement timeframe of 2 years and a maximum 5-year period for material completion of the development,” it said.

“The assessment recognises that the proposal will have some impact on the coastal environment and visual impact, however the area is already subject to a commercial operation, is not a known area of significant or high value biodiversity, is not a location of significant landscape or amenity value or an area frequented by tourists.”

The report concluded that the social, environmental and economic impacts had been considered and could be managed via plans and strategies in consulation with state and federal agencies along with an EPA licence, with a governance group including the federal department of Agriculture, Water and Environment and Kangaroo Island Council to monitor the project.

Chapman said she would continue to search for a sustainable solution for the industry on Kangaroo Island and to also find a way to get timber burnt in the major bushfires in early 2020 off the island.

She said the government was exploring all possible options to boost timber supply and meet the current house-building demand.

KIPT has about 14,200 hectares of plantations, about 80 per cent hardwood (blue gum) and 20 per cent softwood pine, which is used to produce structural timber. This represents close to 10 per cent of the state’s plantations.

But about 95 per cent of it was damaged in the Kangaroo Island fires that began on December 20, 2019 and burnt 210,000ha – almost half of the island – across a 612 km perimeter before being declared contained on January 21, 2020.

The company has received more than $60 million in insurance payout following the fires and has since been in a race against time to salvage the timber and ship it off the island before it rots.

In total, KIPT estimates it has 4.5 million tonnes of bushfire-affected timber that could still be salvaged and sold.

It has been touted as a possible solution to the state’s timber shortage that threatens to delay the building boom.

The proposed Smith Bay port was to be built alongside Yumbah Aquaculture’s abalone farm and was expected to move about 12 shipments of plantation timber off the island each year.

It was also to be made available to other industries and generate about $42 million in annual economic activity.

In October 2019 the company varied the proposal following public consultation, and in December 2020, following a request for further detail, submitted more information in relation to its environmental impact statement.

While in the federal budget this year, the Commonwealth announced $32 million of road funding for Kangaroo Island which the company described as “the final piece of the puzzle” to clear the way for approval of the port facility.

In a statement today, Yumbah said the decision to refuse the port was “right for Kangaroo Island” and it and other businesses which relied on the environment were thankful.

“This is a victory for what makes Kangaroo Island special – a unique, biosecure island whose environment is internationally acclaimed,” it said.

“For more than five years, Yumbah’s growth and investment plans on Kangaroo Island have been put on hold because of the threat of a Smith Bay Seaport,” and its rejection meant “the door to aquatourism and aquaculture … is now reopened”.