Middle earth may no longer be set in New Zealand as Warner Bros., financiers of "The Hobbit," plans to relocate it on other parts of the globe, particularly in England, for the filming of the two-movie prequel of the highly acclaimed film adaptation of J.R.R. Tolkien's "Lord of the Rings" trilogy.

Unmoved by the New Zealand Council of Trade Unions' claim that the labor issue with the New Zealand union, Actors Equity, is on its way to being resolved, as evidenced by Sunday's lifting of the work bans on the project by the union and its foreign counterparts, Wingnut Films senior producers said it may be too late to save the production in New Zealand as Warner Bros. representatives are ready to pack things up in New Zealand next week "to make arrangements to move the production offshore" because "they are now, quite rightly, very concerned about the security of their investment."

New Zealander Peter Jackson, who directed "The Lord of the Rings" and who is also the producer, co-writer, and director of "The Hobbit," declares in his statement, "Unfortunately lifting the blacklist does nothing to help the situation," adding that the dispute had already done enough to undermine Warner Bros.' confidence in the New Zealand industry.

Jackson's partner and co-producer Fran Walsh also asks why would Warner Bros. "go to a place where they're almost guaranteed industrial action during the shoot?" During Thursday's interview by New Zealand's National Radio, Walsh said, "They are saying they need stability and certainty and that's no longer here - they can protect their investment better elsewhere."

The labor dispute started in late September when Jackson refused to meet with the Actors Equity for a union-negotiated collective agreement which demands that equal wages and work conditions be given to local actors and their international counterparts. The union called for the international boycott of the movies and the US Screen Actors Guild and British actors, including Sir Ian McKellen who is slated to reprise the role of the wizard Galdalf from the Lord of the Rings movies, heeded the call.

Jackson insists that the actors would be hired as independent contractors and would be compensated according to the local industry standards. Jackson's company, Wingnut, and partners Warner Bros., MGM and New Line Cinema, all agreed that the collective agreement would expose them to unfair liabilities and sanctions under New Zealand law.

Even before this industrial problem, the making of "The Hobbit" had experienced a series of snags, some of which were closely linked with the production of "The Lord of the Rings." These include the delays caused by the announcement in January 2007 that Jackson will never again direct a New Line movie after the former filed, in March 2005, a lawsuit against the company claiming lost of associated revenue from The Fellowship of the Ring. New Line co-founder Rober Shaye, tried to make amends and in December 18, 2007 Jackson was named the executive producer of "The Hobbit" with New Line and MGM as co-financiers. MGM, through the 20th Century Fox, will distribute the films outside North America.

In February 2008, New Line Cinema merged with Warner Bros., the same month that the Tolkien Estate filed a lawsuit against New Line for breach of contract and fraud claiming 7.5% of all profits from the Tolkien films and seeking to block the filming of "The Hobbit." The lawsuit was settled in September 2009 when New Line paid the Estate an undisclosed amount of money.

Another problem occurred when Guillermo del Toro, who was initially hired to direct the film and who had already done two years of pre-production work with Jackson, left in May 2010 due to project delays. It was only in July that Jackson was signed on to direct both films. Filming was supposed to begin in New Zealand in February.

All these dragged the production prompting Alan Horn of Warner Bros. to announce in January 2010, that the first film would be released only after the fourth quarter of 2012, a year behind schedule.

New Zealand's unique terrain and wonderful landscape undeniably enhanced the fantastic cinematic effects of the "Lord of the Rings" trilogy film and would have easily offered the perfect setting for what Del Toro imagined "The Hobbit" world would be, that is, "slightly more golden at the beginning, a very innocent environment," where the key character Bilbo Baggins will be introduced in the fantastic world of Tolkien's Middle Earth.