Deputy Prime Minister Barnaby Joyce is proposing to open up new zones for logging in Victoria's central highlands and review the endangered status of the Leadbeater's possum in a bid to keep Gippsland's Heyfield timber mill open.

Mr Joyce has written to Premier Daniel Andrews, urging him to take steps to keep the mill open to save the jobs of about 260 workers after Australian Sustainable Hardwood (ASH) said it had no alternative but to close the mill.

The Government-owned logger VicForests had offered ASH a three-year deal which involved reducing supply to the mill to 80,000 cubic metres of timber in year one, followed by 60,000 cubic metres in the subsequent two years.

The owners of the mill said that was not enough to make the mill sustainable, and earlier this month announced the mill would close within the next 18 months, dealing a severe blow to the small Gippsland town of 2,000.

"I can see no way in which this decision is in the interest of Victorians and urge you to reconsider," Mr Joyce said in the letter to Mr Andrews.

Heyfield timber mill shift supervisor Anthony Wilkes delivered messages from the community to MPs' offices. ( Supplied )

Possum protections questioned

Mr Joyce proposed two solutions to resolve the impasse which would give the mill enough timber to allow it to continue to operate.

He said the Victorian Government should bring forward timber production from future years' allocations to meet the immediate demand.

"I believe the Victorian Government should implement the following two options in order to provide the necessary timber security to the Heyfield Mill, as well as other VicForests' customers such as Australian Paper," he said.

"As you would be aware, Australian Paper employs around 1,300 Victorians"

That would allow time for a "reconsideration" of areas that were closed to logging because of the endangered Leadbeater's possum.

He also promised to "immediately approve" opening up access to special protection zones in the central highlands for harvesting, as an offset to the 10,000 hectares excluded by the possum protections.

Environment Minister Josh Frydenberg would also be asked to review the threatened status of the Leadbeater's possum.

"While I understand the conservation of the Leadbeater's possum is important, forestry is not a principle threat to the population," Mr Joyce wrote.

"I consider the livelihoods of 21,000 Victorian forest industry employees and their families deserving of greater consideration and thought by your government."

The Australian National University's Professor David Lindenmayer criticised Mr Joyce's call, saying there were fewer Leadbeater's possums left than giant pandas, and downgrading the classification of the species would be "absolute insanity".

"The scientific evidence is that the Leadbeater's possum is critically endangered. That's what the data shows and it's insane to down-list the species," he said.

"It's probably only got 20 years before it goes extinct."

Large tracts of forest are closed to logging because of the Leadbeater's possum. ( Facebook )

Professor Lindenmayer said opening up that part of the forest was a short-term solution for the mill.

"The reality is that extra forest will only keep the mill going another one or two years and at the same time drive the state's emblem to extinction," he said.

"It makes no sense for the public to continue to subsidise an industry that is a major loss making entity and to defile a water supply for 5 million Melbournians.

"It doesn't make sense, it's a silly decision, it's a handout to a mill that really doesn't have long to live."

'Reckless' proposal

Victoria's Energy and Environment Minister Lily D'Ambrosio accused Mr Joyce of not understanding the basics of the forestry industry, such as how timber volumes are measured.

She accused him of offering the mill "false hope."

"Mr Joyce's suggestions are reckless. In fact what they will do is risk the many hundreds of jobs at Australian Paper," she said.

The mill is the main employer in the small town of Heyfield. ( ABC News: Stephanie Anderson )

"VicForests, who manage our timber resources in Victoria, have made it absolutely clear. Offering timber volumes beyond that which they have said is available right now is reckless and would lead to job losses."

Ms D'Ambrosio said the status of the Leadbeater's possum was under review and the Government was expecting a report on the matter in the next few weeks.

Meanwhile some workers from the mill staged a small protest outside the electorate offices of Mr Andrews and Special Minister of State Gavin Jennings.

Shift supervisor Anthony Wilkes delivered messages from the Heyfield community, written on wood blocks, urging Mr Andrews to increase the mill's allocation of timber.

Possums now 'a lot more abundant'

National Party MP Tim Bull, who represents the Heyfield area, said the implications of losing the mill "would be devastating for the area".

"Any proposition that is laid on the table that offers a resolution to this should be closely considered," he said.

"If we can find a way that affords the appropriate protections for the Leadbeater's possum, that opens up areas that will increase the timber supply to Heyfield, absolutely we should be looking at it."

Mr Bull said suggestions it was a fight between the possum and timber jobs were "not right, we can certainly have both".

"Huge areas of forest had been put into reserve when the possum was first protected, when there were only 80 colonies. We're now up to 569 colonies," Mr Bull said.

"They are a lot more abundant than was, I guess, first imagined and we're still continuing to find colonies on a fairly regular basis.

"I think it's a good time to review that and we also need to save these jobs."

But Professor Lindmayer said the estimated population of the Leadbeater's possum was currently at 2,000 and "fast declining".

"The critical issue is that this animal needs very large old trees and the number of big trees has declined by more than 90 per cent in last 30 years," he said.