ROXBY DOWNS (INDENTURE RATIFICATION) (AMENDMENT OF INDENTURE) AMENDMENT BILL

Introduction and First Reading

The Hon. K.O. FOLEY (Port Adelaide—Minister for Defence Industries, Minister for Police, Minister for Emergency Services, Minister for Motor Sport, Minister Assisting the Premier with the Olympic Dam Expansion Project) (12:45): Obtained leave and introduced a bill for an act to amend the Roxby Downs (Indenture Ratification) Act 1982. Read a first time.

Second Reading

The Hon. K.O. FOLEY (Port Adelaide—Minister for Defence Industries, Minister for Police, Minister for Emergency Services, Minister for Motor Sport, Minister Assisting the Premier with the Olympic Dam Expansion Project) (12:46): I move:

That this bill be now read a second time.

Today is a momentous occasion for the state of South Australia. Just as mining projects at Broken Hill, Mount Isa and Kalgoorlie at the turn of the last century helped transform the economic future of their respective states, so will the Olympic Dam expansion. It will transform South Australia by bringing unprecedented wealth and economic opportunity to the state well into the next century.

Olympic Dam is certainly no ordinary project. It is a highly significant project for the state, being the world's fourth largest copper resource, the fourth largest gold resource and by far the largest known uranium source anywhere in the world, some would say in excess of 35 per cent of the world's known deposits of uranium.

In March 1982, the state and project proponents of the time entered into an indenture to provide for the establishment and development of the initial Olympic Dam project. The indenture was first ratified by parliament through the Roxby Downs (Indenture Ratification) Act 1982. The ratification act, incorporating the indenture, regulates the operations of the mine, associated treatment plant and transport facilities, related infrastructure and the municipality of Roxby Downs.

In response to the proposed expansion of Olympic Dam by BHP, the state agreed to amend the indenture on the basis of the benefits which are expected to accrue to the South Australian economy and community, including royalty payments, increased workforce participation and development, local supplier participation, Aboriginal economic development and, importantly, regional development.

As a result, the Roxby Downs (Indenture Ratification) (Amendment of Indenture) Amendment Bill 2011 (the bill) proposes enhancements to the Roxby Downs (Indenture Ratification) Act 1982 to provide for expanded project components that were not envisaged under the original agreement. The revisions also change the way in which certain other acts of the parliament of the state of South Australia apply to the revised indenture to ensure its currency with relevant legislation.

The project expansion proposed by BHP Billiton will develop an open pit mine, processing facilities and supporting infrastructure that will operate simultaneously to the existing underground mining operations at Olympic Dam.

This is certainly no ordinary project. Its size and scale for a singular mining project is unprecedented in Australian history, some would say in world history. Over a 40-year development period, the open pit is anticipated to extend more than four kilometres long, three kilometres wide and at least one kilometre deep, far in excess of the world's largest open cut mine at Escondida in Chile in the Andes. It will have annual production volumes expected to be more than three times current capacity once at full production.

Without doubt the project will deliver considerable economic wealth to the state's economy, with BHP Billiton estimating, in its EIS (environmental impact statement), that the project will contribute an incredible $45.7 billion in net present value terms to the South Australian gross state product (GSP) to our economy over a 30-year time frame from the start of the expansion. It is important that that be repeated: $45.7 billion in net present value terms to our state's economy over the next 30 years.

Furthermore, the expansion will generate considerable employment opportunities for the state. In its EIS, BHP Billiton estimates that the Olympic Dam expansion will generate up to 6,000 new jobs during construction, a further 4,000 full-time positions at the expanded open pit mine, and an estimated 15,000 indirect jobs.

The broadscale benefits achieved through the expansion of Olympic Dam will also substantially contribute to our latest government strategic plan priorities, including Our Community, Our Prosperity and Our Environment, particularly through targets on total exports, minerals production, processing, regional population levels and local jobs, to name just a few.

Such an expansion does not happen overnight, and it is not without inherent complexity and considerable investment risk. In progressing with this project, BHP Billiton is subject to enormous upfront costs and a long-term return on investment. It must be noted that the payback period for BHP on its substantial capital outlay is many, many years; I cannot provide the house with an exact figure, but some suggest somewhere between 18 and 25 years. Very few companies—if any—globally would have either the balance sheet or the courage to undertake this project.

The state recognises that certainty is of key importance to BHP Billiton in light of the high risk of investment. In this context the state's objective has been to maximise the benefits to South Australia, and for Australia, through this bill, whilst applying effective and efficient regulation of the project and, importantly, providing certainty to BHP Billiton, wherever possible, to secure the long-term investment viability of the project.

Regional development is a key outcome of expansion. The project touches many regional areas in the state from Roxby Downs, Andamooka and Woomera to the Upper Spencer Gulf and the Eyre Peninsula, and will therefore generate considerable development opportunities in these regional areas, particularly through wealth generation, increased employment opportunities and the use of local services and companies.

The expansion includes a doubling of Olympic Dam's current smelting capacity, and the bill provides for BHP Billiton to process ore from other mine sites. This will not only generate value-adding opportunities to existing and future mines in the region but also increase the total volume of minerals processed in this state.

Without doubt increased employment opportunities are a win for the South Australian people, and particularly for our regional communities. To facilitate these opportunities BHP Billiton will develop an industry and workforce participation plan that outlines initiatives to maximise opportunities for local industry, for the workforce and for the use of local service providers. Particular emphasis will be placed on opportunities for employment and workforce development of Indigenous people, and support for Aboriginal and regional economic development, which is of key importance to the state.

The bill delivers several key outcomes that maximise economic benefits for the state while ensuring that the project is subject to our best practice regulations and environmental compliance regulations and regimes. Whilst BHP Billiton may apply to the indentured minister of the day for all other approvals, BHP Billiton will now be subject to the Environment Protection Act for environmental authorisations for the project. That was not the case previously, as the earlier indenture preceded the introduction of the EPA act, although it should be acknowledged that BHP operated as if it were under the EPA act and in accordance with its requirements. In this way the bill recognises the full independence of the Environment Protection Authority for environmental approvals, licensing and necessary compliance action for Olympic Dam.

Another important revision to the bill is the enhancement of compliance and enforcement provisions to ensure that the project achieves approved environmental outcomes and brings the existing act into line with current legislation in the Mining Act and the Environment Protection Act. As part of this, BHP Billiton will develop a program for the protection, management and rehabilitation of the environment and will be subject to a strong compliance and enforcement regime. BHP Billiton will also incorporate a greenhouse gas and energy management plan into this program as a commitment to reducing its greenhouse gas emissions.

Furthermore, BHP will provide the state with rehabilitation security in the form of a performance bond to secure the performance of its rehabilitation obligations. This is a cornerstone agreement for the state, providing the state with guaranteed financial security against rehabilitation requirements at any time with the Olympic Dam project.

Water continues to be a key concern for the state. In recognition of the value of this scarce resource, BHP Billiton will pay the Arid Lands Natural Resources Management Board for water extracted from the Great Artesian Basin and the saline well fields for the purposes of its operations. This is a new agreement that we have reached; previously no such charge was levied on BHP. Charges are based on the current levy rate but are capped at a maximum amount for 30 years to provide certainty of the charging regime in the medium term to the BHP Billiton company. My understanding is that the rate at present is about 3.18¢ (give or take a point or two) and we have provided a cap of 10¢ fixed for 30 years.

The project will also transition the township of Roxby Downs to a major regional centre, with BHP Billiton anticipating in its environmental impact statement a doubling of the residential population to approximately 10,000 people. This brings increased commercial opportunities for local and regional businesses both directly and indirectly related to the project. In addition to BHP's commitment to the provision of certain infrastructure and support, the state will continue to provide infrastructure support to Roxby Downs up to a township population of 9,000 to facilitate development of the long-term sustainability of the township.

The state will provide BHP Billiton with an expanded special mining lease of approximately 60,000 hectares. This will provide certainty in the face of the long lead times and the high investment risk. The SML will be secured with an initial term of 70 years, with the ability to renew for a further 50 years. To facilitate further investment in the Olympic Dam area, the state has provided BHP Billiton with the opportunity to develop another project under the indenture. The state will also facilitate the provision of infrastructure and infrastructure corridors required for BHP Billiton's operations, including granting freehold title for certain project elements.

As I said, BHP Billiton will have the opportunity to apply the indenture to a further deposit that is within 30 kilometres of the mine site—effectively, a satellite deposit of world-class resource—and that is a further indication of the extraordinary wealth that we have within our borders in South Australia. That development will not occur for quite some time but it will be for the long-term benefit of the state.

[Sitting extended beyond 13:00 on motion of Hon. P.F. Conlon]

The Hon. K.O. FOLEY: The royalty rates of the Mining Act will be applied to this project. BHP Billiton will not receive a concession on royalty rates payable and will pay the same rates as other existing mining operations. The house should be reminded that of course the government has increased royalties in recent budgets: 3.5 per cent for processed copper and 5 per cent now for concentrate that is exported from the state. That is consistent with the charge in Western Australia.

For a very quick moment, can I remind the house that, whilst this mine when in full production could be producing in excess of $350 million worth of royalties, under horizontal fiscal equalisation (HFE)—the Grants Commission distribution of royalties—the state keeps our population share—let's say, for argument's sake, about $20 million—and the balance is redistributed to the other states. That is the way that HFE works. Colin Barnett in Western Australia shares 90 per cent of their royalties and keeps 10 per cent. If we, as a member opposite has mentioned, charge a higher rate, that would be illogical, given that it would be hard to explain how one should be charged a higher royalty rate than for any other similar mining operation. That would be somewhat of a deal killer in negotiations, of that I can assure you.

However, in recognition of the long lead times for the development and the need for certainty, the indenture provides that the current rates will be held for a term of 45 years. South Australia will be the price setter on royalties, given the sheer volume that we have, and we believe that that is an appropriate trade-off for a company that was initially seeking the new mine royalty rate of 2 per cent. Had we agreed to that, the state would have received significant leakage of revenue from our GST grants.

The Olympic Dam expansion is one of the most significant development projects not just in South Australia but within Australia and, arguably, the most significant multimineral open-cut mine the world has ever seen. The provisions of this bill strengthen the state's commitment to effective and efficient regulation of mining projects, whilst seeking to facilitate long-term investment viability of the project for BHP Billiton and its shareholders and maximising the benefits that this project can bring to the state over the next century.

In conclusion, can I say that this has been a difficult and long road. We established the Olympic Dam task force under Paul Case and its chair, Bruce Carter, about six to 6½ years ago. The Premier and I had our initial meeting with Marius Kloppers about five years or so ago. We saw great progress early and then in 2008, as the global financial crisis descended on the globe and on Australia, we realised that mining and resources companies can turn the tap off very quickly with these projects as they re-evaluate the uncertainty. That is why, in the view of the company and of the government, the necessity for this legislation to pass both houses of parliament by the end of this sitting is crucial.

The risk that we as a parliament would be putting on this project should it be not be approved and roll into the first quarter of next year I think is a risk too great. I welcome the cooperation and the cooperative spirit of members opposite and the Leader of the Opposition. However, the view of the government and BHP itself is that the time frames that we are working to are critical for the project, and the board has indicated its preparedness to spend $1.2 billion up-front. We think a further approval for the project will follow within a reasonably short space of time, and I think it would be both negligent and an unacceptable risk for a state parliament not to agree to these time lines.

The negotiations have been drawn out, and I can remember at the very beginning of the EIS when BHP had in excess of 270 people working on it. It has been a torturous path, a long path, an incredibly detailed analysis. Clearly, not all will be happy. There will be those who believe that they should have had a decision in certain areas, but no-one can argue that they have not been consulted significantly and over a very long extended period of time. The government, BHP and the commonwealth have relied on the best advice available from government officers, independent statutory officers, commonwealth officers and, of course, independent consultants.

Dean Dalla Valle, the President of BHP Uranium Division, Bruce Carter and I met at the beginning of this year, I think in February, when we mapped out with Kym Winter-Dewhurst a time frame for when we needed to conclude these negotiations; we are about two weeks past when we hoped to have concluded them. We always knew that we needed to give the house as much time as possible, and there were a few hiccups with the EIS in terms of the time that it took, particularly at the commonwealth level to get that resolved—and that is no criticism, just a fact—and that has seen us slip a couple of weeks, but we are still within acceptable time frames.

It was an extraordinary negotiation process, and it took hundreds and hundreds of hours. Dean Dalla Valle, Bruce Carter and I conducted the negotiations—Dean for BHP and myself for the government—but the real tireless workers were Paul Heithersay and all of his team, all of the government officers involved in the EIS process from a myriad of government departments and, particularly, an outstanding servant of the state, Bruce Carter, who ensured that we had strong commercial acumen for the government all the way through. That was of vital importance to us. At one stage during the negotiations (I am not quite sure where they are now, they may be No. 3), the BHP share and market capitalisation made them the largest company on the planet, in excess of Exxon, but I think they may have come back one or two notches. So, it was important that we had the commercial acumen and I thank Bruce Carter very much for that.

I thank my parliamentary colleagues, particularly the Premier, who gave me unwavering support right through this process, and assisted me when needed and ensured that we had the full backing of the cabinet. I thank the incoming premier, Jay Weatherill, who has been briefed and was a part of negotiations and a part of the cabinet sub-committee that was authorising my negotiating position. I also thank all of my colleagues, my staff, and of course Dean Dalla Valle, whom I have grown to respect enormously. We had a lot of tense moments. Surprisingly enough, many times I was the cool head in the room—true story—I might share a couple of those later. Dean and I were the cool heads—

An honourable member interjecting:

The Hon. K.O. FOLEY: There were plenty of witnesses. Isn't that correct, Paul? Even Paul is saying that I was the cool head. It was an enjoyable experience, I guess. I thank Marius Kloppers, an outstanding corporate leader, and somebody who has shown enormous support. I conclude by saying that no other company in the world would have had the balance sheet, the available cash and the appetite for risk that BHP Billiton has. I doubt that any other mining company would have that. I also say equal to that is a chief executive officer who is at the point in his career where he can bank and make a decision of such enormity. These are not decisions that new CEOs make. These are not decisions that conservative, cautious leaders make. This is a leader, Marius Kloppers, who has taken an enormous challenge and risen to it, as has the board. It is our duty now as a parliament and as a state to back the board of BHP in.

We will be having a select committee. We have made available any officers who are needed by the opposition at any time, and we have been doing that now for nearly two weeks. To all members of parliament: if you have any questions, or if you are seeking any advice, please come to us. It must be noted, though, that the environmental impact statement is approved by the state, BHP and the government, and cannot and will not be altered.

As the indenture itself is a negotiated and contractual agreement between a sovereign government and the company, it is not up for renegotiation at all, and that is the position of the government and the position of BHP. However, it is only appropriate that the government make the parliament and all its members aware of all of the reasoning and rationale that went into our decisions.

I will conclude by saying that there is no question that, as you look through all the individual items—of which there are probably in excess of 300—there are some items to which a casual or interested observer would ask, 'Why did they agree to that? Why didn't they try and get something better?' Well, Madam Speaker, it was a negotiation, and in any negotiation there has to be give and take. I believe that our team negotiated an outstanding deal for the state, and Dean Dalla Valle believes he has negotiated an outstanding deal for BHP Billiton.

But there is no question that, in a perfect world, there are always things you might like to have done a little differently, but the spirit of negotiation is that you have to compromise, you have to give, and you have to support the other negotiating partner with a flexibility that is required. The indenture needs to be looked at in its total, as a complete package, and not as an individual assessment on each item, because it was a collective agreement that took hundreds and hundreds of hours, and I think the state is well served.

I commend this bill to members, and I seek leave to have the explanation of clauses inserted in Hansard without my reading it.

Leave granted.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

These clauses are formal.

3—Interpretation

This clause sets out definitions for the purposes of the amendment Bill.

4—Amendment provisions

This clause is formal.

Part 2—Amendment of Roxby Downs (Indenture Ratification) Act 1982

5—Amendment of section 4—Interpretation

This clause proposes the insertion of certain definitions into the Act.

6—Amendment of section 7—Modification of State law

The proposed amendment to section 7(2)(a) revises the names of the Acts listed in subsection (2). Other amendments are made to section 7 related to the modification of State law for the purposes of the Indenture.

7—Amendment of section 8—Licences etc required in respect of the mining and milling of radioactive ores

The proposed amendments to section 8 substitute references to 'Joint Venturers' with 'Company'.

8—Amendment of section 9—Application of Aboriginal Heritage Act to the Stuart Shelf Area and the Olympic Dam Area

Some amendments in this clause delete obsolete provisions. Other amendments are consequential or related, or update the scheme to conform with current provisions of the Development Act 1993.

9—Substitution of section 12

This clause inserts proposed section 12:

12—Special provisions in relation to local government

This section contains special provisions concerning local government related to the administration of the municipality.

10—Insertion of Parts 4, 5 and 6

This clause inserts proposed Parts 4, 5 and 6:

Part 4—Special provisions relating to Projects

13—Unlawful abstraction, removal or diversion of water

This section provides for an offence of unlawfully abstracting, removing or diverting water.

14—Protection of infrastructure and equipment

This section provides for offences relating to the protection of Desal Infrastructure and equipment.

15—Access to desalination plant land

This section provides for an offence for a person to access desalination plant land without authorisation from the Company.

16—Access to SML1 land

This section provides that the holder of a licence under the Petroleum and Geothermal Energy Act 2000 will not be entitled to access any part of the area of a Special Mining Lease (or to be granted any such access) unless a statement of environmental objectives is in place in accordance with clause 19(13) of the Indenture.

17—Application of Land Acquisition Act 1969

The Minister may acquire land in accordance with the Land Acquisition Act 1969.

18—Approvals and declarations

Subsection (1) of this section relates to the validity of certain Project Approvals. Subsection (2) extends subsection (1) to project approvals given before the Ratification Date. Subsection (3) is a provision concerning the declaration made under section 46 of the Development Act 1993 in relation to the Indenture on 21 August 2008.

Part 5—Authorised investigations

19—Appointment of authorised officers

The Minister may appoint persons to be authorised officers.

20—Authorised investigation

This section sets out the scope of an authorised investigation.

21—Powers of entry and inspection

An authorised officer may, for the purposes of an authorised investigation, enter and inspect land.

Part 6—Other matters

22—Water requirements

This section provides that any charges for the distribution of potable water or the provision of sewerage services within the town must comply with the requirements of clause 13(22) of the Indenture.

23—Supply of electricity

This section provides that any tariffs imposed by a power distribution authority must not, in respect of electricity supplied to consumers within the town, exceed the rates that apply under clause 18(16) of the Indenture.

Part 3—Variation of Indenture and SML1

11—Variation of Indenture

This clause provides that the amendments to the Indenture are ratified and approved.

12—Variation of SML1

This clause provides that the amendments to SML1 are ratified and approved.

13—Variation Date

This clause makes provision for the Variation Date, and prescribes procedures related to the extension of the Variation Date.

Schedule 1—Variation Deed

The Schedule contains the Variation Deed.

Standing Orders Suspension

The Hon. K.O. FOLEY (Port Adelaide—Minister for Defence Industries, Minister for Police, Minister for Emergency Services, Minister for Motor Sport, Minister Assisting the Premier with the Olympic Dam Expansion Project) (13:13): I move:

That standing and sessional orders be and remain so far suspended as to enable the Roxby Downs (Indenture Ratification) (Amendment of Indenture) Amendment Bill to be taken through to the completion of the second reading forthwith.

The SPEAKER: I have counted the house, and as there is an absolute majority I accept the motion. Is that seconded?

An honourable member: Yes, ma'am.

Motion carried.

Second Reading

The Hon. K.O. FOLEY (Port Adelaide—Minister for Defence Industries, Minister for Police, Minister for Emergency Services, Minister for Motor Sport, Minister Assisting the Premier with the Olympic Dam Expansion Project) (13:14): The government acknowledges and appreciates the cooperation of members opposite to enable both the Premier and I to read our contributions to the parliament as, come Friday morning, we will no longer be members of the executive. The opposition has allowed us to do that, and for that I thank the deputy leader and the leader.

Also, we will be establishing a select committee that will enable members opposite to be fully briefed in further extent to what they have to date, and what is also planned for the members of their caucus.

We will give an absolute commitment that all members of this house will be given the opportunity to make a 20-minute contribution, should they wish to do so, in response to the select committee report prior to the bill going to the third reading. Then, the bill will be moved to the upper house, where the upper house will do what the upper house does. Whatever it is they do, I hope they do it in a speedy time frame.

I will be a member of the select committee, which we will move to shortly. I will be an adviser to the government in the upper house on this, and an adviser—should it come back or when it comes back—to the lower house, to be received by the new Premier, Jay Weatherill.

Bill read a second time.

The SPEAKER: I indicate that this is a hybrid bill within the meaning of the joint standing order (private bills) No. 2.

Referred to Select Committee

The Hon. K.O. FOLEY (Port Adelaide—Minister for Defence Industries, Minister for Police, Minister for Emergency Services, Minister for Motor Sport, Minister Assisting the Premier with the Olympic Dam Expansion Project) (13:14): I move:

That the bill be referred to a select committee pursuant to joint standing order (private bills) No. 2.

Motion carried.

The Hon. K.O. FOLEY: I move:

That a committee be appointed consisting of the member for Heysen, the member for MacKillop, the member for Davenport, the Minister for Mineral Resources Development, the Treasurer, the Minister for Transport and the mover.

I am 'the mover'—I just could not see my name. You would reckon after 18 years and seven years as a key adviser I would get that!

Motion carried.

The Hon. K.O. FOLEY: I move:

That the committee have power to send for persons, papers and records and to adjourn from place to place and to report on 1 November 2011.

Motion carried.

The Hon. K.O. FOLEY: I move:

That standing order 339 be and remain so far suspended as to enable the select committee to authorise the disclosure or publication, as it sees fit, of any evidence presented to the committee prior to such evidence being reported to the house.

The SPEAKER: There being an absolute majority I accept the motion.

Motion carried.

The Hon. K.O. FOLEY: I move:

That standing and sessional orders be so far suspended as to enable the report of the Select Committee on the Roxby Downs (Indenture Ratification) (Amendment of Indenture) Amendment Bill on being adopted by the committee may be presented to the Speaker prior to the next sitting day along with minutes of proceedings and evidence and the Speaker be authorised to publish the report within one business day; further, should the report be published pursuant to this order, that it be deemed to be taken into consideration pursuant to standing order 346 as an order of the day for 8 November 2011.

Motion carried.

[Sitting suspended from13:19 to 14:00]