SANTOS LIMITED (DEED OF UNDERTAKING) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 24 October 2007. Page 1340.)

Mr HAMILTON-SMITH (Waite—Leader of the Opposition) (16:34): I indicate that, although I am speaking first on this matter, I am not the lead speaker, and I will make a brief contribution. The lead speaker will be the member for Morphett.

This is a very important bill, and I urge all members of the house to give it their most careful attention. It is a bill to give parliamentary sanction to a deed of undertaking made by Santos Limited in favour of the Premier for and on behalf of the Crown in the right of South Australia; to repeal the Santos Limited (Regulation of Shareholdings) Act 1989; and for other purposes. The bill will overturn a 1979 action of the Corcoran Labor government, which introduced an act to place a 15 per cent shareholding restriction on Santos to prevent a hostile takeover.

At that time, the threat was from Mr Allan Bond. The concern was that he would strip the asset and cash out, leaving a reduced investment here in this state, which might then flounder to our disadvantage. The act protected South Australians from such a hostile takeover, and the effect has been a positive one. Since that time (1979), Santos has spent billions of dollars on further investment in the Cooper Basin and has substantially improved the infrastructure bases for mining, energy, transport and in a range of other ways, particularly in the Mid North and the Far North, but also right down through the state to Adelaide and beyond.

At the time, the Tonkin Liberal opposition did not support the bill. I am not going to go over the full history of the bill—I will leave that to the member for Morphett, who will be our lead speaker on this bill—but I want to make some remarks to the bill as Leader of the Opposition because I think it is such an important bill that it warrants my contribution from the outset. This bill will essentially mean that Santos as we have known it for all of its life will be at risk, and it will be at risk once the cap is lifted from a potential hostile takeover.

Of course, there is an alternative future for Santos, and that is the one which I know the company prefers and which I understand, from the second reading explanation—and I will listen to the government's contributions—that the government also prefers. That is, that Santos, once the cap is lifted, will be free to grow, possibly to acquire, certainly to revalue itself in the share market and it will be, as an entity, more flexible, more mobile and more able to grow as a publicly listed company based here in Adelaide. There are those two alternative futures for Santos, as we know it, once this bill becomes an act. The bill will become an act because, as an opposition, I am indicating to the house today that we intend to support it.

For those reasons I think it is very important that members give this their careful attention, because if Santos grows and prospers here we will all be better off for it, and if the lifting of this cap enables the company to be even more prosperous and creates more jobs and opportunities for South Australians and for South Australia than we have seen already, then good. But if this bill sets the foundation for a savaging of Santos that would ultimately see a predator strip the company, perhaps leaving only the Cooper Basin asset here and those people linked to the Cooper Basin asset investment only here, then Santos, as we know it, would no longer be the headquarters of a large publicly listed company with investments all around Australia and all around the world.

In fact, what would quite likely be the case is that all those functions not linked to the Cooper Basin might be taken away to another corporate headquarters by an acquiring party to become part of its entity in Melbourne, Sydney or overseas. There could be, down the track, significant losses to South Australia in terms of job numbers, future investment and head office status for what is probably our principal publicly listed entity here in this state. So, the risks linked to this bill are quite prominent and profound.

As a Liberal, let me say that I am not encouraged towards the sort of interventions that occurred in 1979 where a cap was imposed. I think at that time, and in that context, it was the right thing to do, but at heart, as a Liberal, my view is that Santos should be free of this constraint. It should not be subject to an imposition to which no other public company here in this state or, to my knowledge, anywhere else in the country is subject. At heart, I think the spirit of the bill to lift the cap should be embraced and supported.

Having said that, I am very aware that in this house, as members of parliament, our stakeholders, our shareholders, the people we represent, are not as one with Santos. Santos must, and is bound to, represent the interests of its shareholders. We are bound to represent the interests of ours, and ours are the people of South Australia. If one were to take a completely self-interested view of this one might argue that this cap is here and it keeps Santos as a publicly listed company here in Adelaide. We might argue, as our predecessors in this place have argued, that the cap should remain in place and that Santos should be kept here, against its will.

I am hoping, therefore, that the debate will convince not only the house but the people of South Australia that the benefits for them are there in the bill. That is to say, that the government ought to be able to convince us during this debate that Santos will grow and prosper here, that at least it is convinced that the company is right to adopt the view that it will grow and prosper here, that the lifting of this cap will free it up, that the benefits will flow to South Australians, and that it will not be savaged and taken over.

I note that Santos today is a very different company than it was in 1979. Back then, sales revenue was around $25 million: it is now $2.769 billion. The net profit after tax back in 1979 was about $6.2 million: it is now $643 million. Total assets back in 1979 were $109 million; it is now $6.9 billion. The number of shareholders back then was just short of 8,000: it is now 80,000. The enterprise value back then was $391 million: it is now $10.3 billion. Interestingly though, back in 1989 it was a top 10 company on the ASX and now it is a top 50 company, which gives you an indication that, although Santos has grown, so too has Australia and the marketplace. I acknowledge and accept that Santos is a different animal today than it was back in 1979 and that, therefore, we must review this cap.

Santos argues that the cap is a brake on the company's full growth potential, and it argues that it is an impediment to Santos's objective of becoming a leading international oil and gas company based in Adelaide. Santos argues that removal will enable the company to use its shares to fund acquisitions and to raise capital for major development projects in a manner that is currently not possible and that use of shares in this way is an essential growth tool available to our competitors but not to Santos. In a fiercely competitive and costly international industry, the company argues that removal of the cap puts Santos on a level playing field with its peers.

I seek an assurance from the government that it concurs with those arguments from the company. I agree with them, but I am not the proponent of the bill. The proponent of the bill is the Premier and he must take responsibility for any outcomes that flow from it. It is Mike Rann's bill to lift the cap on Santos and, if it proves to be a benefit to the people of South Australia, I am sure he will seek the credit. The point I am making is that if the company is savaged he should and will receive the odium for having brought this matter to the house, having opened the door for the demise of Santos as we know it as a publicly listed South Australian-based company with multinational operations.

I move to the question of the deed. Of course, it is the deed that this bill seeks to enforce and uphold. I am intrigued that it is a deed between Santos and the Premier, not a deed between Santos and the government. In fact, clause 4.1(a) of the deed provides:

The company undertakes that, unless otherwise approved by the Premier, the company's South Australian Cooper Basin assets head office and operational headquarters will remain in South Australia for the term, including without limitation, direct management and key supporting functions for the SABC assets identified in clause 4.1(b) for as long as those functions are carried out.

The key words are 'unless otherwise approved by the Premier'. In effect, this deed is meaningless should the Premier decide for whatever reason to otherwise approve a change. The Premier, with the stroke of a pen, without reference to the cabinet, the parliament or anyone—it could be done over a cappuccino or a five-star dinner and a glass of Grange—could simply walk away from the deed, or most of it. I find that a curious situation and I think it is unacceptable.

I think it would be better if at least the cabinet on behalf of the people of South Australia and its government was required by the deed to approve any change to the deed. Essentially, it is a request by the Premier individually on behalf of the Premier of the day—it may not be this particular premier. He is asking the parliament to give him carte blanche to decide without reference to anyone else whatever he feels appropriate in respect of this deed in the future. I find that of concern.

For example, if one looks at the details of clauses 4.3(3) and 4.4 of the deed, one finds that the provisions that the Premier describes as 'compensation requirements' should Santos wind back its assets here drop away in the 10 years that follow the passage of this bill. Santos is supposedly required to pay a certain amount one year out, should it leave and take with it all its assets, but as each year unfolds the amount it has to pay in what the Premier describes as compensation reduces. It is curious. It seems to suggest that the government at its heart feels that Santos, including a lot of the Cooper Basin jobs linked to it, will go; it is just a matter of time. So we will have these provisions up front, and in a few years they all can go because the compensation provisions are wound away.

Of course, the carte blanche approval being sought by the Premier through the government by the device of this act gives the Premier the right to waive those compensation provisions should he see fit. It is a considerable power that the Premier is seeking by virtue of this bill and one that, in effect, renders the deed meaningless. It is a public relations exercise. The Premier does not want to wear responsibility if Santos is savaged almost immediately upon passage of this bill, notwithstanding the 12 months provision which the bill provides in the way of protection for an immediate acquisition. He does not want to wear the responsibility should it all go pear-shaped, should it all go wrong. I assure the Premier that he will wear the responsibility if it all goes wrong. This is Mike Rann's bill to lift the shareholding cap. If, shortly after its passage, certainly at the end of 12 months, there is a feeding frenzy as sharks pull Santos apart limb by limb and deconstruct it, then it will have been at the behest of the Premier himself.

Having said all that, I draw to the attention of the house that the former Liberal government did raise this proposition in 2000. The reason that it was not proceeded with was that the then government—we Liberals—was convinced that the Premier (the member for Ramsey), the Treasurer (the member for Port Adelaide) and the member for Elder would run a scare campaign. They would go out there, beat the drums, fly the flags and flash the lights; 'This is outrageous. You are selling off the farm. Santos will be taken over.' They would run a huge scare campaign as they have on so many occasions to whip up public hysteria—the word the Minister for Transport likes to use—and I hope he has checked the Hansard after his threat yesterday to introduce privileges matters; he might find frequent reference to the word 'hysteria'.

The Hon. P.F. Conlon: You told a lie.

Mr HAMILTON-SMITH: I have a point of order, Mr Speaker. I ask that that be withdrawn.

The SPEAKER: The Minister for Transport must withdraw.

The Hon. P.F. CONLON: I will withdraw for being told a lie.

Mr HAMILTON-SMITH: I have a point of order, Mr Speaker—without qualification. There is no need for debate.

The SPEAKER: Order! Both members will take their seat and be quiet. The Minister for Transport has withdrawn.

Mr HAMILTON-SMITH: We will not do as an opposition what the Labor Party did when they were in opposition, which was be irresponsible.

The Hon. P.F. Conlon interjecting:

The SPEAKER: Order!

Mr HAMILTON-SMITH: They were regularly and frequently irresponsible, and they would have been irresponsible with this matter had we proposed it. Now they are in government they see things differently. Well, that's fine, but I just want to expose the ruse. We will do the right thing. I actually believe this cap should be lifted, and we on this side of the house are of the view that it should be lifted. We think it is the right thing for the company. We recognise the risks. However, on balance, we are of the view that the bill should pass. We could have taken the view that we would run a scare campaign. We could have got together with Independents in the upper house and we could have blocked this measure.

We could have stopped the matter from proceeding, and that would have been the end of it, and Santos would labour under the cap for some years to come. But we have decided not to do that. We are going to support it because it is the right thing to do. I accept the company's argument in good faith that they are focussed on growing and prospering here and doing what they can to resist breakup and takeover, but, rather, that they will go on and acquire, go on and grow, and go on and build their investments here.

A careful reading of the deed shows that the provisions of it only apply to the Cooper Basin assets, in any event, and that a good part of it could go, but that notwithstanding it is a bill that we think is worth supporting. But I just say to the Premier, it is his bill, it is his initiative, it is his measure—accept the credit, but also be prepared to accept the responsibility if it goes pear shaped and does not unfold as we all might hope. With those remarks, I commend the bill to the house.

Members interjecting:

The SPEAKER: Order! I call the member for Morphett.

Members interjecting:

The SPEAKER: Order! If members want to bicker, take it out of the chamber. I will not have it happening across the chamber while another member is trying to address the house. The member for Morphett has the call.

Dr McFETRIDGE (Morphett) (16:57): Thank you, Mr Speaker. I indicate that I am the lead speaker on this bill and the Liberal opposition will be supporting the bill, as we did in 1979. We would love Santos to be unfettered. However, I understand that the circumstances have changed considerably since 1979 when the Corcoran Labor government introduced the legislation to place the 15 per cent shareholding restriction on Santos. It makes very interesting reading to read the address by Hugh Hudson back in May 1979, and also to read the reply by the then leader of the opposition, the late Hon. David Tonkin. His comments are still quite relevant today.

The opposition is supporting this. I have had a look at the presentations that have been put to the government by various groups, including the South Australian Chamber of Mines and Energy, Business SA, and the Australian Shareholders Association, who are all supporting the lifting of the cap. I did note that there is one particular shareholder who expressed strong concern. He was concerned about the loss of another head office. I do not believe that is going to happen. I sincerely hope not. He believes the reasons for stopping bonds are still valid for other predators. There certainly is that risk, but with a 12-month transition period that should bring some order to the market, and Santos, from our discussions with them, certainly are looking to expand, and for them to be the ones that are taking over other companies, not becoming a takeover target.

This chap also says he cannot see any benefits to the shareholders of the state from the removal of the cap. Well, I think the shareholders will be more than happy to see their share prices go up. I think that is what will happen, because this company will be able to expand and fulfil its full potential. The state certainly will benefit from an expanded company.

The thing that I tried to do today was to phone the Hon. Don Laidlaw, but I was unable to contact him. Back in 1979 it was a fairly traumatic time for Don Laidlaw. He actually supported the then government in getting this bill through the upper house, and it was with the Hon. Don Laidlaw MLC, the Hon. Jessie Cooper MLC and the Hon. Dick Geddes MLC. They crossed the floor, they voted with Labor and they enabled the passage of the bill. Jessie Cooper and Dick Geddes are deceased, unfortunately. Don is still alive. I do know that he wrote to the then minister for minerals and energy, the Hon. Wayne Matthew, and expressed some concerns about the lifting of the cap. This was in the year 2000, but my reading of a copy of the letter is that Don was mainly concerned about the loss to the state of the philanthropy that was clearly being shown by Santos, and is still going to be shown by Santos.

In fact, under the deed of undertaking Santos's willingness to increase its assistance to South Australia is going to increase quite significantly. But Don did give credit, even in 2000, to the fact that $25 million was given by Santos to create a chair in petroleum engineering at Adelaide University, and certainly in the deed of undertaking there are a number of other areas that will benefit from the social bottom line that Santos has availed itself to.

In 1989 the original act was repealed and replaced by a new act, as the early act was considered potentially ineffective. The new act sought to make effective the objects of the old act. It was more a technical change, as I understand. At the time, the state government assumed responsibility for negotiating major gas sales contracts, and owned significant gas industry assets itself. South Australia was the only jurisdiction exporting gas interstate.

In 2000, the gas market in south-east Australia was undergoing a period of rapid change, and the new competition policy induced changes in the structure of the electricity and gas markets, which resulted in a far more competitive, expanding and more volatile energy market. Major gas contracts with the Cooper Basin joint venture were approaching completion, and the Cooper Basin gas fields were declining and increasing in maturity, leading to increasing costs to achieve future gas deliverability.

New sources of gas supply were required within a five-year time frame, and South Australia was looking forward to the provision of a supply from south-east Australia as well as the north-west shelf, the Timor Sea and Papua New Guinea. The 15 per cent shareholding cap was reviewed by the Liberal government and the then energy minister, Wayne Matthew, in 2007, as I have said, and the November 2000 review was undertaken by Mr Ian Kowalick. The Kowalick report made a number of important recommendations to cabinet, if cabinet were to consider removing the cap.

Mr Kowalick recommended to cabinet that an orderly market entry of Santos should be ensured, and that will be achieved through the transition period that is contained in this bill. There should also be an act of parliament to ensure that the wants and desires of the people of South Australia are achieved. The need to not restrain Santos was at all times paramount because, as Liberals, we do not want to see companies restrained by regulation, particularly if it is an individual company.

At the time, the Liberal cabinet decided not to adopt the recommendations and maintain the cap, as the public benefits of the 15 per cent restriction on shareholdings were believed to outweigh the costs of the restriction. At the same time, the SEA Gas pipeline was in operation. So, we were not purely reliant on the supplies from the Cooper Basin.

On 1 May, Premier Mike Rann announced that the state government would be reviewing the 15 per cent shareholder cap and that that review was to be undertaken by the Economic Development Board, and the Minister for Energy introduced a bill into this place on 24 October. I have had discussions with Santos about the deed of undertaking. It is more than comfortable with that deed of undertaking, and I will not repeat the comments that have been made by the leader. He made some salient points and, certainly, there is no way that this Liberal opposition will get in the way of Santos being able to achieve what it may have been able to do in the past had we looked at this under different circumstances years ago.

The thing that we need to do today is to make sure that we get this bill through the house in a timely fashion. The opposition supports the initiatives in the deed of undertaking, and I will quickly read the nine categories. There will be $60 million over a 10-year period (it is interesting that they are already putting in about $30 million during that time). The following are the areas of particular endeavour: scientific endeavour and research; indigenous employment and training; vocational and industry development; environment, sustainability and climate change; health and safety; education and training; youth affairs; arts and culture; and other community benefits.

There will also be $10 million to support indigenous employment, training and education initiatives; $10 million towards education initiatives, which support Adelaide as a university city; and $35 million for organisations or projects that have mutual benefits for both Santos and the state. That is obviously not in addition to the $60 million; it is part of that.

The deed has some reporting requirements. At the moment, there is absolutely nothing that would restrain a company from coming in, if it was to take over Santos (or just Santos in its own regard), and moving the head office interstate. At least we will have a head office here in South Australia with Santos. It has just put $100 million into a new office, so I would be surprised if it moved, However, that could happen if it was taken over, and that is a possibility; that is business today.

I know the Deputy Premier has said that it is not about who owns it: it is about the merit and the equity and the return to the state. I think Santos will be here for a long time and, from what I have been told at various briefings from Santos executives and their staff, it will be aiming to expand and improve and return not only a financial dividend to its shareholders but also, certainly, a financial dividend to the people of South Australia—and, more importantly, that social dividend that we see in the deed of undertaking.

I do not know whether you can drive a truck through that deed, as some people have said. I am not a lawyer: I am open to opinion on that. However, certainly, I am convinced by the goodwill of Santos and the fact that it has been here for a long time and that it expects to be here for a long time. Also, like most businesses in South Australia now, it has arms overseas and international investments. Santos has some very exciting international investments, which will make it an even more powerful company that will, hopefully, become a takeover opportunist, not a takeover victim. I wish the bill a fast passage through both houses.

Mr PEDERICK (Hammond) (17:05): I rise today to speak briefly about the bill. In 1979, legislation was passed in this house capping the number of voting shares that a person could own in Santos. This helped to ensure the security and development of the Cooper Basin and Santos' obvious interests in South Australia, Queensland and around the world. With this bill, we are assured that the South Australian head office will stay in Adelaide. Key functions will include: executive general management, geosciences expertise and development, engineering, oil and gas exploration, maintenance, operations planning and Moomba carbon storage, which will be interesting as it develops in the future and as we all work on minimising the effects of climate change.

There will also be other functions, including finance, accounting, legal procurement, IT, human resources and, of course, gas marketing. I congratulate Santos on the main commitments offered by the company as part of this deed of undertaking. The benefits of the deed—

The Hon. P.F. Conlon interjecting:

Mr PEDERICK: I am sure you will speak for yourself, minister. South Australia stands to benefit from the guarantee that 90 per cent of the roles currently based in this state will stay here. That involves approximately 1,700 people in this state and includes all roles at its major sites. Santos's provision of a legally enforceable compensation structure amounting to $100 million is aimed at covering contingencies should there be a significant reduction in its corporate presence.

The company's sense of social responsibility is clearly demonstrated by its establishing a Community Benefits Fund of about $60 million over 10 years, providing a number of sponsorships and including support for various indigenous programs and educational scholarships. Nine categories are covered in this plan. They include scientific endeavour and research, indigenous employment and training, vocational and industry development, environment sustainability and climate change, health and safety, education and training, youth affairs, arts and culture, and other community benefits.

These funds will directly benefit the Australian School of Petroleum at the University of Adelaide, the Royal Institution of Australia and the Santos Stadium at Thebarton, as well as assisting education initiatives in the state's energy sector and the development of Adelaide as a university city. My experiences in the Cooper Basin commenced in March 1982. I secured a job up there working with Peter and Yvonne Bennett Earth Moving. I worked on this job for 12 months, and it was very interesting. I will never forget as a 19 year old flying over the Cooper Basin and into Moomba for the first time. I looked out the window and wondered what the hell I had landed myself into.

Looking out the window it looked like a scene from Mad Max, just to see the gas plant working away and nothing much between that and Adelaide—about 1,000 kilometres with only the stations, Lyndhurst, etc. There is not a lot between there and Port Augusta, let me put it that way. It was a bit of a culture shock. Back then I was working for a contractor, and dozens of contractor companies work under Santos. A lot of the operation work in the field is done by Santos itself, but a lot of the other work done directly on the drilling rigs and service companies is done by contractors.

Companies were very well looked after, even when we had to go out to far-flung fields and swag it on occasion because we were the first ones there after the guys had been through checking out where the oil and gas reserves were. It was quite an interesting time. I can remember a problem in the plant. We were in the old contractors' camp right next to the plant at Moomba. A lot of gas had to be flared off, and the whole place was vibrating.

I met a lot of good people up there. One person I can remember on the earth-moving job was Bob Bain. He was one of the bird dogs (we called them) who made sure we were doing our job building sites for the oil rigs, roads and airstrips. I remember Peter Bennett. You would be sitting on a D6 bulldozer and he would fly over in his light plane, drop your mail to you and he would just about land it on you in the cab. Following that 12 months using the dozers and scrapers, I worked for a company called Gearhart Australia doing wire-line work, testing flow production of wells and shooting wells through the casing once they had been run with what were called armour-piercing guns.

I was very fortunate. They said that it was pretty distressing if one went off on the surface but, thankfully, they all worked underground. It was very interesting work. You cannot see too much going on because it is all happening 10,000 feet down. Another experience in that job (and I am not sure, I am guessing a bit from memory) involved Big Lake 27, I think it was. It was a wild well. Various companies could not contain it. In the end, after all the work had been done on opening up this well (perforation and that sort of thing), we got sent in to fill it up with cement and block it up. We did that successfully, but I was up in the basket on the end of a crane with an engineer. We were on the way down. We were still about 20 feet above the well head and the crane operator let the clutch out, or something, and dropped us. You can imagine what we thought as we bounced off a well head in the Cooper Basin. Thankfully, we both survived.

The Hon. R.B. Such interjecting:

Mr PEDERICK: Yes, exactly. We bounced a bit. I can remember the engineer. His name was Louis Buffone. He was a Canadian/Italian who was in a rigid position at the back of the cage instead of bending his knees. I think he felt it for a while. There have been lots of experiences up there. Santos has had a pretty good safety record. Obviously there has been work right throughout the basin, not just on the South Australian side but through to the Queensland side. Delhi Petroleum was one of the main operators on the Jackson field when that opened up and crude oil was being trucked through to Brisbane.

I had not been back to the basin until a couple of years ago. I took my family through to Birdsville and came back that way. It was interesting to see the facilities Santos has put in for the staff at Tirrawarra field. I certainly could not have played tennis in the days I was up there like they do now. It is a place where you need to look after your workers to keep them interested in the game, and it is good to see that Santos is doing that. With those few words, I wish Santos every success in the future. I support the bill.

Ms CHAPMAN (Bragg—Deputy Leader of the Opposition) (17:14): I indicate that I will be supporting the passage of the bill. As previous speakers have traversed a number of the important historical reasons as to why this previous limitation of 15 per cent shareholding was imposed and the change of circumstances, I will not go through the principal reasons for support. I wish to place on the record my appreciation as a South Australian of Santos's valuable work both in industry and as a benevolent contributor to South Australia during its history. I consider that to have been significant and look forward to our state having a continued association with the company and its employees. However, the two matters I wish to traverse relate to the two initiatives announced by the both the Premier and the Minister for Transport in his second reading contribution on 24 October.

I remind the house of the two features to be imposed pursuant to a deed of undertaking enforced by this legislation (which have a $1 million legally enforceable compensatable mechanism): firstly, there will be 'guarantees that effectively 90 per cent of the current South Australian-based roles'—that is in respect of employment—'stay here'—referring to South Australia—which includes all the roles at our major South Australian operational sites; and, secondly, a social responsibility and community benefit fund of some $60 million over the next 10 years. This addresses the concerns of the Hon. Don Laidlaw as expressed in his commentary over time on occasions when there has been an attempt to remove the cap and as one of the original surviving parties who voted to support the act (as it currently stands) and when the bill was canvassed in the 1970s.

Having viewed the deed of undertaking, I wish to place on the record that I do not see that there is any guarantee that the current workforce will be in South Australia. What is clear in the deed of undertaking is that the company is giving guarantees that the current position of the company in respect of its employees is: firstly, 90 per cent of its workforce is currently South Australian based; and, secondly, effectively 100 per cent of its role is directly associated with the South Australian activities.

When you combine those two features there are some 1,700 jobs in South Australia. That does not guarantee that 90 per cent of those roles will stay here. What it says, though, is that, if there is a breach of 4.1 or 4.2 of the deed, which is that it will keep its headquarters, its direct management and its key supporting functions (which are subsequently defined in 4.2 and which are bound under this undertaking) in South Australia, this situation will continue. It does not guarantee 90 per cent of its workforce staying in South Australia. I make that point.

If the company continues to operate the sanctioned areas of enterprise under this undertaking and does not reduce its workforce to carry that out, then the effect is that it will maintain a workforce of some 1,700. However, members should not be under any illusion that this is a guarantee that 90 per cent of the workforce that it currently has here will stay here and that it will have a corresponding penalty as a result. It is clear that the enterprises which it carries out as defined are extensive and that they are valuable contributors to the Santos enterprise and profit line, and therefore one could only hope that that will continue.

The second aspect relates to the donations. I am a little concerned that we have some trade-off really to the purchasing of legislation. I think that is a poor precedent. I think that the company has demonstrated its willingness to make magnificent contributions to charities and organisations which have benefited from its donation. Its history speaks for itself and is to be commended.

It may be that, in the scheme of things, a $60 million commitment over 10 years is a drop in the ocean when it comes to the anticipated contribution that it would have made, anyway, but I do not like to see this type of impost being employed as part of a mechanism to ensure the passage of legislation as a sort of term and condition. I point out that, pursuant to the deed of agreement, the $35 million contribution has to be 'organisations or projects in South Australia which the company can reasonably demonstrate have mutual benefits for both Santos and the state'.

Quite frankly, that could be any organisation. As long as Santos can say that this benefits us and the state, then there is no limitation on to whom or what it can contribute. That may be intended. Again I point out that, although there is a qualification by the definition of 'social responsibility' and 'community benefit'—and it lists a whole lot of very important categories of organisations that it can sponsor or donate to and they are all very admirable—the last one under 4.3(b)(9) is for 'other community benefits'.

Again that is a very broad definition and I do not think that will add much constraint to Santos signing up to this deed of undertaking, nor frankly is the amount of money relative to the turnover of this enterprise. It is hardly surprising to me that Santos has agreed to the terms which have been imposed by the government and about which the Premier has been so grandiose in his description to South Australia. It is not those reasons—that is, the compensatable clause or the obligation to contribute to funds for charity or community benefit—that persuade me to support this bill. I highlight that the Premier's description of this is far from what the reality will be.

I also indicate that I had the opportunity to be thoroughly briefed by Santos representatives, as I am sure did other members of the house. In recent times, I took the opportunity to travel to Moomba to look at its current operations. I viewed the determination of some weeks work on Well 179 at the time, which I am subsequently informed has been a successful drill and is an important aspect of the work that continues to be undertaken in relation to gas production, which is a major part of its South Australian operation in the Cooper Basin. So, I think there are important reasons and that the circumstances have changed sufficiently to change the law, but I have not been persuaded by virtue of the rather grandiose description of the Premier as to what safeguards he claims he is providing for South Australia.

The Hon. P.F. CONLON (Elder—Minister for Transport, Minister for Infrastructure, Minister for Energy) (17:23): I thank the opposition for supporting the bill, but I cannot help but observe two startling things: one, how the opposition has cast about anywhere to find something wrong or some criticism, particularly of the Premier; and, two, the division that it has in its approach. The Leader of the Opposition says that he is concerned that the Premier, on a nod and a wink, is just going to let the obligations slide; I think that is a fair paraphrasing of his complaint.

The Deputy Leader of the Opposition says that we should not be asking them for these gifts at all. When we, the government, present to the opposition something that is a win for both Santos and the people of South Australia, they just have to cast around for something. They can never accept that their biases run so deep. They never accept that we have just done something good; they just cannot bring themselves to say that.

The criticism of the Leader of the Opposition that there is a clause that will allow the Premier to absolve the company from the obligations of the deed is there for a very simple reason and that is: should the company come to the Premier with an offer superior to that contained in the obligations—and do not forget the obligations in the deed are imported into the act and they have the force of law by virtue of a provision of the act—it is open to the premier of the day to accept that. The comments of the Leader of the Opposition indicate that the opposition has real doubts about there ever being a Liberal premier at any time in the next 10 years, because obviously he has been talking about what Mike Rann will do.

I say to the Leader of the Opposition in his desperate attempt to find something wrong: why would a Premier go out and negotiate such a good outcome for South Australia only to let it slide? Santos was not of the view that it had a nod and a wink agreement. These were quite robust discussions and, as I understand it, the Premier does not apologise for that. The Premier has done a good thing for Santos, and it is quite appropriate that he should also get a good deal for South Australia as well.

The other thing that I could not help noticing was that the Leader of the Opposition said that they would have done this when they were in government but they were frightened of a scare campaign by me and the members for Port Adelaide and Ramsay. Wasn’t that a good government! They would not do the right thing because they were scared of us. That says a lot about why they were not much of a government at all. They had a heart like a split pea, obviously.

Mr Koutsantonis: Unfair on split peas.

The Hon. P.F. CONLON: A bit unfair on split peas, as my colleague says. The bill is a good outcome for Santos. It is a company that, as everyone recognises, is not in the position that it was in when we protected it from corporate bandits like Alan Bond. There is a very significant redundancy, mostly created during the lifetime of this government, in our gas supplies into South Australia now, and this bill constitutes a good way forward for Santos. It has been supported with far less qualification by Senator Nick Minchin and, from memory, the Hon. Alexander Downer, so we appreciate the support of those individuals in what we seek to do. It is a good outcome for the company and it is a good outcome for South Australia.

Bill read a second time and taken through its remaining stages.