Premier Lara Giddings today backed away from an earlier statement that the commercial settlement would be capped at $23 million under terms of the $276 million intergovernmental agreement.

She said there was $43 million available even though the agreement specifies that $15 million of that is for sawmillers exiting native forestry and $5 million to inform and consult with affected communities.

``We are now going to be entering into new discussions with Gunns with the aim of finalising those negotiations,so that we can in fact do what the intergovernmental agreement requires, which is the extinguishment of contracts in native forestry which Gunns has,'' Ms Giddings said.

``There is the $43 million in which there is an envelope for us to be able to work through a number of issues that relate to all of this and that's what we intend to do.

She said the agreement with the Commonwealth was in no danger, and neither was compensation for forestry workers affected by Gunns exit, but that reaching a deal was essential.

``All parties understand the importance of settling these contracts, as without the contracts there are no reserves that can come out of this process.''

Forestry Tasmania is claiming that Gunns owes it $25 million, which the company has disputed and that issue is part of the negotiations.