Melbourne's drinking water is being put at risk by "widespread" illegal logging near water catchment areas, Australian National University scientists say.

Key points: The report by ANU scientists alleges loggers from a Government-owned company are moving into banned steep-slope areas, because Victoria is running out of wood

The report by ANU scientists alleges loggers from a Government-owned company are moving into banned steep-slope areas, because Victoria is running out of wood About a third of coupes in the Thomson catchment — Melbourne's main water source — included slopes steeper than 30 degrees

About a third of coupes in the Thomson catchment — Melbourne's main water source — included slopes steeper than 30 degrees The Government paid VicForests millions of dollars last time the company breached logging laws

In Victoria, regulations prohibit logging on steep slopes — usually more than 30 degrees — to protect the integrity of critical water catchments used for drinking and agriculture.

But the ANU's Chris Taylor and David Lindenmayer have found 231 hectares of steep slopes in Victoria's Central Highlands have been clear-felled — an area larger than Melbourne's Docklands.

"Ten years ago you could drive through here and you wouldn't see a [logging] coupe anywhere in this rugged terrain. Now we're seeing them everywhere," Dr Taylor said.

The degree of damage done to waterways depends on what's in the soil in each particular location.

"Logging at steep slopes can cause soil erosion which can be deposited in waterways," ANU soil erosion scientist Elle Bowd said.

"Implications in water catchments could include increasing turbidity, salinity, nutrients — which can result in algal blooms," she said.

Chris Taylor noticed an increase in loggers operating in hard-to-reach areas. ( ABC News: Loretta Florance )

Dr Taylor used slope information from GeoScience Australia, and compared it against European Space Agency satellite imagery, which he said showed the areas had been logged.

He said the mapping suggested logging on steep slopes was systemic.

"We're seeing widespread occurrence of this across many catchments," he said.

The scientists allege there have been breaches in 252 logging areas since 2004 — the year VicForests began operating.

A logging coupe on Mount Matlock, in Victoria, November 15, 2019. ( Supplied: Chris Taylor )

The Office of the Conservation Regulator (OCR) is now investigating the scientists' claims.

"The OCR is empowered to investigate allegations of this nature and can take appropriate action if required," Victorian Environment Minister Lily D'Ambrosio said.

In a statement, VicForests said it had complied with the Code of Practice for Timber Production, which outlines environmental standards for the industry.

"VicForests uses high-resolution LiDAR [Light Detection and Ranging] data to determine the gradient of coupe slopes," the company said.

'They're running out of wood'

Michael McKinnell, who was a logging contractor working for VicForests for 27 years before he quit in 2017, said the over-logging of a finite resource was driving the alleged illegal logging.

"The contractors are being asked to go into more and more marginal country," he said.

Mr McKinnell said the breaches meant the Government needed to lower the amount of timber earmarked for harvest each year.

"If they can't work within their own guidelines, then the sustainable yield numbers can't be correct," he said.

Former Healesville logger Micheal McKinnell left the Victorian timber industry in 2017. ( ABC News: Bridget Rollason )

This month, the Victorian Government announced it would phase out native timber logging by 2030.

The Government has a legislated contract with Australian Paper to supply native timber from the state's Central Highlands under a deal passed by the Victorian Parliament in the 1990s.

"VicForests have had to breach their rules to meet the legislated supply volume that it's bound to deliver," Dr Taylor said.

"It's literally pushing them over a cliff and onto these steep slopes.

"They're running out of wood, so they're going into economically marginal country, which in turn compromises the integrity of these special water supply catchments."

Logging audit not released

The scientists' findings have been submitted to Forest Stewardship Council (FSC) auditors, who are assessing VicForests' latest attempt to have their products labelled as responsibly sourced.

The report found slope limit breaches across seven catchments — the Upper Goulburn, Thomson River, Tanjil River, Tyers River, Loch River, Tarago River and Bunyip River catchments.

In the Thomson catchment, which supplies almost 60 per cent of Melbourne's drinking water, the scientists found more than a third of the areas logged by VicForests — 50 coupes in total — contained logging of slopes that exceeded 30 degrees.

Some areas were small, but one location in the Thomson catchment had 5.6 hectares logged beyond the limit, while another had 2.5 hectares logged beyond the limit.

A logging coupe in the upper Goulburn catchment. ( Supplied: Chris Taylor )

In the Tarago River Catchment, 71 per cent of logging areas had alleged breaches and in the Bunyip River Catchment 69 per cent of areas had alleged breaches.

The report comes a year after the ABC revealed VicForests had been conducting widespread illegal logging of timber in state forests they did not own — an activity a legal expert said was "tantamount to stealing".

That revelation led to a "special audit", conducted by Victoria's Department of Land Water and Planning.

Despite that audit being completed months ago, it has not yet been released as intended.

An FOI application lodged by the ABC has been rejected on the basis that the report has not yet been approved for release.

A logging coupe on Mount Matlock, where researchers say operators are moving into increasingly steep slopes. ( Supplied: Chris Taylor )

Following those illegal logging revelations, the Government changed the law by closing what they say was a loophole, which it said made it hard to prosecute VicForests for criminal behaviour.

Instead of any prosecution, VicForests was paid more than $4.8 million "reimbursement for income lost and expenses incurred" due to delays caused by the changes to the law.

That money was more than double the profit made by VicForests in the 2018-2019 financial year, which was $2 million.