Wood, in the form of pine and porn, was the ACT's top export in the 1980s and 1990s. But while the pine forests were spectacularly destroyed in the 2003 bushfires, the territory's porn industry has suffered a slow demise. The pornographic film industry has, as it were, gone out not with a bang but a whimper.

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In 2000 renowned art critic Robert Hughes sat in his wheelchair in a lonely paddock in Mitchell, walking stick across his knees, watching a new feature film being created.

Beside Hughes were Robbie Swan and Fiona Patten from sex industry representative body the Eros Association. But this was no ordinary film. It was The Erotic Adventures of Ned Kelly.

A photograph from the time shows a muscular ''Ned'' - sans helmet - grappling with a nubile and pale-skinned young woman sprawled on crumpled white sheets. But despite his best efforts, and the obvious attractions of his co-star, the would-be erotic adventures of Kelly withered under Hughes' imposing gaze.

''Unfortunately, the Australian actor couldn't perform with Robert Hughes sitting there watching him,'' Swan chuckled.

Hughes was in the research phase of his BBC series Beyond the Fatal Shore and wanted to watch a pornographic film being made in Canberra, famous across the country for its porn industry. The only problem was that by 2000, the industry had all but dried up; even The Erotic Adventures of Ned Kelly was never finished due to lack of funds. Swan, who kept the Kelly helmet (it now sits in his garden), says the industry used to turn over $34 million a year in ACT wholesale retail sales. It now scrapes about $2 million.

Eros figures show about 15 million sexually explicit films are sold across the country every year, turning over nearly $300 million. Just 20 per cent of these sales now take place in the ACT. Compared with accessing or downloading pornography from the internet, the cost of buying pornographic films is relatively high. And much of this is due to the cost of producing and distributing them.

The annual licence fee to sell X-rated films in the ACT is $13,740. It costs another $13,740 a year to copy X-rated films, and it costs a little more than double that - $27,511 a year - to sell and copy X-rated films. According to the latest figures, which came out in June, there are now just nine active X-rated film licences in the ACT, which used to distribute $34 million a year in wholesale retail films alone.

John Lark, who made more than 20 adult films in the ''Down Under'' series, many filmed in Canberra, was turning over $6 million a year in the 1980s, and employing 140 staff. He believes the rise of the internet, coupled with changes to the classification laws in 1996, crippled the burgeoning local industry.

''The internet's had a big play in it, no doubt about that,'' Lark says. ''Canberra's only a small part of the industry, but we had a big name, and so our mail order grew enormously.

''So getting those names and addresses would be difficult [now] because anyone can get on the net and not have your name and address recorded.''

But Lark also blames changes to the classification laws introduced in 1996.

''Even language, can you believe that? They've even classified language.''

Swan concurs, saying the new laws made it an offence to use derogatory language in adult films, or to depict many ''fetishes'' such as spanking.

''You can say, 'f--- me', but you can't say, 'f--- you','' Swan says. ''It's considered 'assaultive material'.''

Under the federal scheme states and territories are responsible for enforcing classification decisions and, in 1995, the ACT introduced a regulated system.

A spokesman for Attorney-General Simon Corbell says the aim of the regulated system was to provide proper oversight of X-rated material.

''The ACT Government takes the view that, on balance, it is more prudent to regulate and control the release of such material,'' the spokesman says. ''The regulated structure, and the way that it is enforced in the ACT, acts as a disincentive to illegal market activities, and serves to balance the rights of an individual against the need to protect the wider community.''

Former deputy chief censor David Haines, who estimates he watched in excess of 15,000 films - ''we tended to look at the X-rated ones in fast-forward'' - says the revised classification laws, coupled with a relatively small Australian audience, had dampened the local industry.

''The mainstream industry in Canberra was only distributing legal material, and of course the internet has made a huge difference because you can access pretty much anything you want.''

But, says Lark, Canberra's sex industry is nothing if not resourceful.

''There's still an industry there, it's just toys and dress ups and oils and so on now. It's not going away.''

This reporter is on Twitter: @_biancah