The $276 million agreement that Prime Minister Julia Gillard and Tasmanian Premier Lara Giddings flaunted only a month ago as the ultimate peace deal to end the 40-year war in Tasmania’s forests is dead in the water.

It comes as no surprise to those who have sought to interpret the poorly drafted provisions of  the intergovernmental agreement (IGA) signed by Gillard and Giddings and those of the agreement that preceded it, the so-called Statement of Principles.

The Statement of Principles was the product of those purporting to represent the Tasmanian forest industry and the conservation movement to achieve a peace, most recently under the guidance of former ACTU secretary Bill Kelty.

Both documents appear to have been the work of plant operators rather than draftspeople.

Grammar and proofing blunders aside, the giant flaw in both agreements has been the right of conservation groups to identify and nominate another half a million hectares of Crown land in Tasmania to be annexed into reserves, perhaps to the status of national parks or World Heritage, in order to neuter, by law, the timber industry in Tasmania and to pay alms to its victims.

Private foresters, who manage 26% of the total forest cover, were excluded from the negotiations on the pretext that the talks did not involve forests on private land, yet clause 31 of the IGA specifically drags 885,000 hectares of private forests into the equation.

Such a deal, whether concluded at NGO or government level, was never going to pass Tasmania’s Upper House, the Legislative Council. If it did come to pass, it would seal the fate of the Labor-Green governments in Canberra and Hobart as far as Tasmanian voters were concerned.

The premise for the Statement of Principles and the IGA was that the major industrial player, Gunns, was getting out of native forest logging in favour of plantations in order to swing public and banker support behind its $2.5 billion pulp mill proposal at Long Reach on the Tamar River.

In effect, Gunns was about to place all its eggs in one basket, a world-scale pulp mill using only plantation timber.

Both agreements hinged on Gunns getting government compensation for its departure from public native forests, yet the mood in Tasmania has clearly been that Gunns should get nothing; its exit from native forests was being made on purely commercial grounds; it was immaterial that it had residual rights to use the public native forests.

If the Giddings government had been responsible for giving Gunns one red cent from the overall $276 million compensation package for the IGA, it would have faced political and electoral oblivion.

We don’t know what Gunns was offered in the end. It is thought to have been $23 million, but on the proviso that it pay its debts to Forestry Tasmania, a disputed $25 million.

Yesterday the Tasmanian government confirmed Gunns had rejected the offer, though Gunns, which has been in a trading halt on the stock exchange since August 8, said nothing.

Assuming that is right, it has the option to place those forest rights on the market. Since the IGA depends on those forests being protected, the keystone to the agreement is gone.

Added to Gunns’ problems is its lack of progress on a start of work on the pulp mill on the Tamar River. If director of the Environmental Protection Authority Alex Schaap determines that Gunns had not in fact started work substantially by August 31, despite a last-minute influx of earth-movers, then the permits for the mill will lapse and Gunns’ only recourse will be to the courts.

In the meantime, the queue grows of people waiting for Gunns to pay them what they say is owed, some small forest lease payments going back to June.