Bills

Whyalla Steel Works (Charge on Property) Amendment Bill

Introduction and First Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (10:48): Obtained leave and introduced a bill for an act to amend the Whyalla Steel Works Act 1958. Read a first time.

The Hon. A. KOUTSANTONIS: I move:

That the allotted time for the remaining stages of the bill be five minutes.

Motion carried.

Second Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (10:48): I move:

That this bill be now read a second time.

I commend the bill to the house and seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

The Bill I am introducing today seeks to ensure the Crown has appropriate monitoring and enforcement rights and powers regarding the State strategic asset of the Whyalla steel works, and its associated facilities including the mining works and transport, storage or trans-shipping facilities, hereinafter referred to as the Whyalla steel works.

It amends the Whyalla Steel Works Act 1958, formerly the Broken Hill Proprietary Company's Steel Works Indenture Act 1958, which approves and ratifies an Indenture between the State of South Australia and OneSteel relating to the operation of its steel works in Whyalla.

The Act came into being after lengthy years-long negotiations with the Broken Hill Proprietary Company (BHP), where a bargain was struck, and the company was provided relevant prospecting, mineral and land rights and commitments to infrastructure, in return for which the company would build the Steelworks within 10 years and pay the relevant rates and royalties.

Summarising the deal, the then Premier explained 'this represents a bargain made between the two parties. In my opinion, it has given this State something that will be of inestimable value in the years to come'.

The preamble of the original Indenture, found in Schedule 1 of the Act, recognises the establishment of steel works in South Australia would greatly increase the economic strength of the State and provide opportunities for the employment and advancement of its citizens and be instrumental in influencing other industries which substantially depend on the products of the Company in their processes of manufacture to establish operations at Whyalla.

The steel works today is as important to Australia, the State and the Whyalla community as was contemplated by the introduction of the Act in 1958.

The steel works provide work for several thousand people and produces steel products of critical importance to the Australian Economy, such as long products including rail, structural beams and columns, steel angle and piles used for domestic and large scale industrial and infrastructure projects.

Whilst the steel works have not been without challenges since their establishment, such as the appointment of a voluntary administrator in early 2016, these challenges have always been overcome.

The sale of the steel works out of administration to Steel manufacturer Liberty House GFG occurred in September 2017 and the GFG Alliance continues to be the owner and operator of the steel works today.

The State has made significant efforts to supporting Whyalla's mining, smelting and manufacturing operations. A Steel Task Force was established in 2015 and a State commitment was made to provide $50 million to support co-investment in capital infrastructures to secure the sustainable future of the Whyalla steel works. Unfortunately, the owners of the steel works have not brought forward a compliant project proposal to access any of that funding.

The situation we find ourselves in today is one where the Crown is owed millions of dollars in mining royalties and water debts by OneSteel Manufacturing Pty Ltd the legal entity that owns and operates the steel works.

It is also being widely reported that there are also significant debts owed to a broad range of supplies to the Whyalla steelworks and multiple stop works by suppliers have been reported over the last few months as suppliers attempt to recover their debt. These stop works by unpaid suppliers include critical contractors across mining, port, rail and steelmaking operations.

The blast furnace, a critical component of the Whyalla steelworks, experienced two prolonged outages in 2024, impacting the production of steel products. As publicly stated by the GFG Alliance Chairman, efforts are still continuing to stabilise and accelerate production.

I am, with the rest of Government and the Whyalla community, concerned.

The State has sought to work with OneSteel on the repayment of their debts. As the continued operation of the Whyalla steel works is of utmost importance, every opportunity has been given to the company to manage this situation.

Attempts to rectify this situation have, however, been unsuccessful and the State has an obligation to the people of South Australia to act on these non-payments.

Whilst the mining royalty debtis secured by way of first ranking charge over all of the property of the Company save in respect of real property and the SA Water debt is secured by way of first ranking charge over all real property in relation to which water services have been provided, the enforcement rights are imperfect.

One debt is a charge over everything but land; the other is over only land and not anything else.

This is a situation that has not emerged through any intention of Parliament but instead has only become apparent when rights are considered as a whole.

Some of the enforcement mechanisms available to the State, such as suspension and cancellation of the mining tenement leases, are effective general enforcement mechanisms in relation to mining tenements, however, in this specific circumstance exercising these rights would significantly impact the continuity of the steel works and the Whyalla community.

In essence, our enforcement rights fall at extremes – either insufficient to enable effective redress or so strong as to potentially operate against the continued viability of the Company's operations.

The Bill therefore seeks a minor amendment to the Whyalla Steel Works Act 1958 to ensure the State has the appropriate rights and powers to act on these debts, in a manner that protects the continued operations of the Whyalla steel works. Specifically, it would avoid the risk that the State cannot use the powers under the Corporations Act of the Commonwealth so as to maximise the chances of the Company, or as much as possible of its business, continuing in existence.

The amendment creates a first ranking charge over all property of the Company for any amount owed by the Company to the Crown or an agency or instrumentality of the Crown, securing payment of the amount owed.

The charge is presently enforceable by the Minister for Energy and Mining, as the Minister to whom the Act is committed under the Bill.

Importantly, various enforcement mechanisms that enable the State to act on the debts owed in a manner that is consistent with the objective of protecting the continued operation of the Whyalla steel works are provided for in the Bill.

It is important to note that these changes do not apply to mining tenures more generally nor do they modify the general law in relation to how the State recovers debts.

These changes only apply to debts owed in respect of the entity operating under the Indenture.

This is appropriate–the indenture has granted special rights and privileges in exchange for investment and the payment of royalties. Given there has been neither investment, nor payment of royalties, the State should have available to it remedies commensurate with the rights and privileges granted.

We are not seeking these amendments for the purpose of placing repayment of our debt above other suppliers. We strongly believe that GFG should pay all its creditors, not just the State of South Australia.

A further challenge that has been highlighted by the current circumstances affecting the GFG Alliance and the Whyalla steel works is the lack of transparency provided to the State regarding this State strategic asset.

The Bill seeks to rectify this by requiring the Company to submit annual audited financial reports to the Minister and enabling the Minister to seek documents or information from the Company by written notice.

To contribute to assurances to the State that the Whyalla steel works are being appropriately operated and maintained, the Bill requires the Company to provide greater transparency of risks and actual disruptions to the steelworks operations. Furthermore, the Company must also facilitate access for persons designated by the Minister to Company works or facilities for inspection and reporting purposes.

At the end of the day, if the steelworks had been appropriately managed, the enforcement and information gathering powers contained in this Bill would not have been necessary to introduce.

I need to emphasise that the Act and Indenture does not contemplate the Whyalla steelworks ceasing operations, indeed there is an implicit assumption of their ongoing operation.

The State also does not see an end of steel making in Whyalla. The Company has access to significant magnetite ore reserves, suitable for the transformation of the Whyalla operations to a green iron and steel hub.

This Bill will provide the State with better visibility of this State strategic infrastructure into the future.

It also enables the State to act on debts owed in a manner consistent with securing the securing the immediate future of the Whyalla Steel Works and moving towards a sustainable long-term future.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

These clauses are formal.

Part 2—Amendment of Whyalla Steel Works Act 1958

3—Insertion of sections 3A, 3B and 3C

This clause inserts new sections as follows:

3A—Charge on property

The proposed section creates a charge over all property of the Company securing payment of amounts owed to the Crown or an agency or instrumentality of the Crown by the Company. The proposed section further sets out various matters in relation to the effect, terms and conditions of the charge.

3B—Charge declared to be a statutory interest

The proposed section provides that a charge of a kind created pursuant to section 3A is declared to be a statutory interest to which section 73(2) of the Personal Property Securities Act 2009 of the Commonwealth applies.

3C—Provision of reports and information etc

The proposed section:

requires the Company to provide certain reports, information and documents to the Minister in a manner and in circumstances set out in the provision;

requires the Company to notify the Minister in writing as soon as practicable after becoming aware of planned or unplanned significant disruptions, or a risk of significant disruption, of relevant Company works or facilities;

allows the Minister to issue guidelines to the Company specifying the kinds of events that will constitute planned or unplanned significant disruptions or a risk or significant disruption, to relevant Company works or facilities;

requires the Company to facilitate access to relevant Company works and facilities by persons designated by the Minister for the purposes of inspection and reporting to the Minister in accordance with the proposed section;

creates an offence with a maximum penalty of $1,000,000 if the Company refuses or fails to comply with a requirement under the proposed section;

creates an offence with a maximum penalty of $1,000,000 or 2 years imprisonment if a person makes a statement that is false or misleading in a material particular (whether by reason of the inclusion or omission of any particular) in any document, information or answer given under the proposed section;

provides that information provided under the proposed section is not liable to disclosure under the Freedom of Information Act 1991.

Bill read a second time.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (10:49): I move:

That this bill be now read a third time.

Bill read a third time and passed.