Premier Lara Giddings said today she was unable to comment on the amount of taxpayers money that may be used to buy out Gunns contracts.

"There's a period of negotiation that has to occur, but as I've said around the issue of Gunns and any form of compensation: they are quite complex issues and we're having to seek a lot of legal advice as to how we step through these issues."

She said the government met with environment groups yesterday, and industry stakeholders on Tuesday as the final countdown begins before an intergovernmental agreement on forestry is signed on Sunday.

THE state government may have to find more than $100 million of its own money to pay Gunns forestry compensation.

The government would not comment on a possible payout yesterday but Premier Lara Giddings and other ministers have been in talks to work out the size of the compensation and how it will be funded.

It is understood that possible state funding of a Gunns package is necessary because the federal government has refused to be directly linked to compensation to the former timber giant.

The payout would compensate Gunns for its timber allocations after it decided to pull out of the native forest industry before roundtable peace talks started last year.

It is understood that the state government is considering whether Gunns may get some of the $43 million earmarked for community consultation and compensation for sawmillers wishing to exit the native forest industry.

Premier Lara Giddings said yesterday that the matter of compensation for Gunns was complex and was still being considered.

Gunns managing director Greg L'Estrange has indicated he expects significant compensation as part of the forest statement of principles agreement.

A condition on the sale of the Triabunna woodchip mill to Jan Cameron and Graeme Wood is that Gunns can delay the reopening of the mill for up to 12 months if it does not get the compensation it wants.

It is understood that the original Gunns demand was for $250 million but that has since dropped to $106 million.

Gunns needs the money to help retire debt and to try to raise the finance to start building its proposed $2.3 billion Bell Bay pulp mill.

Yesterday its share price closed at an all-time low of 22¢.

The company has not commented on claims its Bell Bay sawmill operation had been affected by a lack of wood supply.

It is understood that Timberlands has twice cut supply in the past month in an effort to recoup money it is owed for logs.

The forest-management company is one of many suppliers and contractors whose payments from Gunns have been delayed as the company tries to raise pulp mill capital.

Gunns has managed to keep the former Forest Enterprises Australia mill operating for a few days using stockpiled timber but it is believed that production had stopped yesterday.

There is still no news of successful tenderers for the earthworks and construction work at the pulp mill site, which is due to start before state government permits expire at the end of the month.

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