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

Committee Stage

In committee.

(Continued from 24 November 2011.)

Schedule 1.

The Hon. M. PARNELL: I have some questions on clause 13 of the schedule but before I do, does the minister have anything remaining from previous clauses that she wants to put on the record? No? Clause 13 is entitled 'The company's water requirements'. I think it is the longest clause in the indenture and it raises a number of matters that have been of some controversy in the community. They include the desalination plant and the extract of water from the Great Artesian Basin.

In relation to the desalination plant, members would be aware that the Environment, Resources and Development Committee, a standing committee of this parliament, inquired into the location of the desalination plant and their number one recommendation was: find a better spot. In relation to the desalination plant, firstly, can she confirm that the indenture itself is not location specific; that the indenture itself refers to any desal plant, not necessarily a desalination plant at Point Lowly?

The Hon. G.E. GAGO: I am advised that is correct.

The Hon. M. PARNELL: When the environmental impact statement was being prepared and out for public consultation, a number of people raised the issue of alternative locations. What level of investigation did the government require of BHP Billiton in relation to alternative sites other than Upper Spencer Gulf?

The Hon. G.E. GAGO: The government required that they consider a number of sites, and I am advised that they did consider 20 different sites.

The Hon. M. PARNELL: I thank the minister for her answer, but my question is: what level of investigation was the company required to undertake? I understand they have nominated sites that they said they investigated, but none of them was investigated to the extent that their preferred location was looked at, that is, Upper Spencer Gulf. Why did not the government require the same level of investigation in relation to ocean currents and dispersion modelling at these other locations, or any of these other locations, and why did the government instead allow BHP to effectively only put one alternative forward?

The Hon. G.E. GAGO: The assumptions the honourable member makes are not true. A number of factors were looked at in relation to some of these alternative sites, such as environmental issues, economic issues, greenhouse gas emissions, costs, etc. I am advised it was the Point Lowly alternative that addressed most of these issues and delivered the best overall outcomes.

The Hon. M. PARNELL: Will the minister agree that the overwhelming advantage of Point Lowly is that it is cheaper than every other location identified?

The Hon. G.E. GAGO: I am advised no, that there were a number of factors that were considered.

The Hon. M. PARNELL: I will not pursue that line of questioning. I think we all know this is the closest bit of sea water to the Olympic Dam mine. We know that—

The Hon. G.E. Gago: Port Augusta actually is.

The Hon. M. PARNELL: Port Augusta might be, but we are talking about a very small distance—but certainly the West Coast, over at Elliston (which is a far preferable environment) would have cost more but it would have delivered better environmental outcomes. I want to ask about the capacity of the plant. Under this indenture the company is limited to producing 750,000 tonnes of copper, yet the approval for the desalination plant is for a plant far in excess of the water that will be needed for that volume of mining. Has the government committed to taking any excess water and, if the government has not yet committed, is the government in negotiations with BHP Billiton to take the excess water?

The Hon. G.E. GAGO: I am advised that it has not committed to buying any, but there is agreement that the government has first option to buy.

The Hon. M. PARNELL: Would the minister enlighten the committee as to how that first right of refusal, if you like, or the first right to buy, might be exercised, any time frames that have been put in place and any thoughts the government has as to when that water might be required?

The Hon. G.E. GAGO: I have been advised that there are no time frames, but it is an option for the future.

The Hon. M. PARNELL: Mining minister Koutsantonis said on ABC radio last week, when he was being asked about the desalination plant:

We've added real time monitoring. We've also empowered the EPA to shut down the desal plant if at any stage they believe salinity levels are reaching a level that may risk the marine ecology.

I note that development approval condition No. 66 does require a live telemetry observing system to be established to 'allow appropriate management responses to any unexpected salinity events'. Can the minister explain how it is intended that the live telemetry observing system will work and what the consequences will be if there is an observed unexpected increase in salinity levels?

The Hon. G.E. GAGO: I have been advised that that will be up to the EPA licensing arrangements, which have not yet been established.

The Hon. M. PARNELL: I thank the minister for her answer. I understand that the licence has not been finalised. In fact, the company has 12 years to commence construction of the desalination plant, but the reason I want to pursue this a little further is that the government has made quite some point over the last month or two about how the EPA will have the ability to shut down the desalination plant. We are told that the company will have a storage capacity for water and it will have that storage capacity, as I understand it, both at the desalination plant and at the mine site. Can the minister point out where that obligation is to have storage of water in the event that the desalination plant is shut down?

The Hon. G.E. GAGO: I have been advised that there is no obligation for storage of water; it is part of the EPA's risk management strategy.

The Hon. M. PARNELL: I think the minister meant it is part of BHP's risk management strategy.

The Hon. G.E. GAGO: Sorry.

The Hon. M. PARNELL: Is the minister's answer that it will be up to the company to basically punt on the EPA never turning off their desal plant; otherwise they would run out of water if they have not built storage facilities at either end?

The Hon. G.E. GAGO: That is a potential risk; however, they do still have water from the GAB.

The Hon. M. PARNELL: Yes, I understand the minister's answer that this is not the only source of water. We will get onto the Great Artesian Basin shortly. In relation to the powers of the EPA, whilst the licence might not have been written, can the minister confirm that under this indenture the EPA will have the power to order the immediate shutdown of the desalination plant and that they will not be required to go through the mediation process or the arbitration process? Can the minister confirm that power exists and that it is immediate?

The Hon. G.E. GAGO: I have been advised that yes, they can, through the licensing arrangements.

The Hon. M. PARNELL: Just to confirm, the EPA will license the desalination plant. The minister said they will have the power to order the immediate shutdown of that plant. Can the minister confirm that there is nothing in the indenture that would prevent that power from being exercised?

The Hon. G.E. GAGO: I have been advised no, that there is nothing in the indenture.

The Hon. M. PARNELL: The only other desalination plant of even a comparable size is the desalination plant at Port Stanvac. That provides a useful example of how desalination plants are regulated. The question I would like to ask the minister relates to the conditions that might be included in the EPA licence—notwithstanding that it has not been written and that the company still has 12 years to build it—that the conditions of licence may well be expressed in different terms to those that are in the EIS for example, or in this indenture.

I refer to the fact that this indenture and the assessment report refer to the dilution ratio of 1:70, measured at 100 metres from the diffuser point. At the Port Stanvac plant they had a 1:50, similarly measured, but when the EPA licence finally came out the actual unit of currency, if you like, was different. Regarding the unit of currency in relation to Port Stanvac, for example, it says that if the average salinity at any point 100 metres from the diffuser structure exceeds 1.3 parts per 1,000 above ambient salinity for a six-hour period, then the licensee has to notify the EPA within six hours and it has to take appropriate corrective action to manage salinity in the receiving environment.

Whilst the minister is not able to answer now what will be in the EPA licence, can she explain the discrepancy between setting conditions of approval that relate to a mixing ratio or a dilution ratio 1:70 with what ultimately turns up in the EPA licence, which, if it is anything like Port Stanvac, will be expressed in parts per thousand? The reason that that is important is that when you translate those two figures into a common currency you find—and Dr Kaempf of Flinders University found—that the dilution values at Port Stanvac were significantly lower by a factor of 1.7 or even up to 3.8 times that which was originally assured by the proponents and the state government. In a nutshell, using these different currencies—different units of measure, if you like—the water to be discharged could be twice as salty as that which we are led to believe in the EIS and this indenture.

What assurance can the minister give that the one to 70 first of all will be achieved (given that it is based on modelling), and secondly, that it will not be diluted, as it were, through a change of unit of measurement in the EPA licence?

The Hon. G.E. GAGO: I have been advised that, obviously, the conditions for Point Lowly are going to be some of the highest in Australia, but in relation to the dilution rates rather than salinity concentration to set conditions, I have been advised that we have done that because it is more practical and more reliable. I have also been advised that it does not compromise, or produce a lesser standard than, what is expressed in the dilution ratio.

The Hon. D.W. RIDGWAY: I read some of the information arrangements of the EIS and the approvals for the desal plant so long ago that I cannot recall whether there any restriction on the volume of water. We are talking about the licence agreements here now in relation to dilution and salinity but, as part of the approval, does that restrict BHP to a maximum amount of water?

The Hon. G.E. GAGO: I have been advised that the critical aspect to this is the dilution, not the actual volume. This is determined by a dilution of one in 85 at the nearest cuttlefish breeding ground.

The Hon. D.W. RIDGWAY: My understanding, from the briefings the opposition has had, is that BHP themselves are probably unlikely to build the desal plant. A third party might build and construct it for them. Is it possible then that, given there is no cap on the volume, a third party—which would naturally have some contractual obligations to supply BHP Billiton with the amount of water and the time frames and adhere to that—could construct a larger plant and provide some other operator, under another contract out of that same plant, with water for either community use or, in this case, another mine operator?

The Hon. G.E. GAGO: The answer is: potentially, yes; however, the government gets the first dibs on any excess water.

The Hon. D.W. RIDGWAY: I understand it gets first dibs on the excess water but, if another significant mining operation or resource is discovered and needs water, what you are saying is that we could see a 20, 30 or 40 per cent increase in the size of the plant. Because the approval to put in a plant is in place, that operator then would not need to go through the whole approval process, other than to meet the ongoing monitoring requirements in relation to salinity dilution.

The Hon. G.E. GAGO: I am advised that they are required to abide by the conditions of the indenture, and that is capped at 280. So, anything above that, the South Australian government has first dibs on.

Sorry, the maximum that the plant can go to is 280. I have been advised that there is nothing in the indenture to stop the desal from providing water to a third party or selling water to a third party; however, they have to abide by the conditions in their indenture, which means that is capped at 280.

The Hon. D.W. RIDGWAY: So will any capacity beyond 280 require a whole new approval process or just an amendment to the existing provisions?

The Hon. G.E. GAGO: It would require an approval process.

The Hon. M. PARNELL: Still on this issue of the desalination plant, is it the government's expectation that, during the dodge tides, which I understand occur about twice a month, a period during which there is very little water movement, the plant would be expected to shut down?

The Hon. G.E. GAGO: I have been advised that, yes, it is possible if those salinity levels are triggered.

The Hon. M. PARNELL: I would just like to tie some of these answers together, and the minister can respond if she wants. We have a couple of things that do not sit consistently together. First of all, the salinity levels have to be triggered. If the EPA licence is anything like the one at Port Stanvac, you have to have an anomaly for six hours, the company then has a further six hours to report the anomaly, then the EPA has to decide what to do. So, we are already up to 12 hours before we even get into EPA decision-making time. I would have thought that the tide has well and truly shifted by then. That is the first observation.

The second observation is—and the minister has answered before—that the question about whether or not to store water on site is a matter for the company. She has pointed out that it could use Great Artesian Basin water if it is not using desalinated water. Mining minister Tom Koutsantonis has said publicly that one to 14 days—maybe 28 days—worth of water use will be stored on site at Olympic Dam. Can the minister respond to how there can be urgent responses to salinity events given the time frames I have outlined?

The Hon. G.E. GAGO: The timing matters are technical matters for the EPA. It will set down and establish whatever guidelines it believes are a safe and timely response to the level of risk at hand.

The Hon. M. PARNELL: When we think of the discharge from the desalination plant, people mostly think about the hyper-saline brine solution, but there can also be other pollutants, in particular, chemicals that are used, for example, to de-scale the membranes used in the desalination plant. My question of the minister is: will the company be obliged to remove any biocides or anti-scaling agents or any other poisons that are used to clean or clear their water filters before releasing the brine discharge into the gulf? The context for this question is that giant Australian cuttlefish are known to have sensitive skins and that these chemicals could adversely affect these animals.

The Hon. G.E. GAGO: I have been advised that the chemicals that the honourable member refers to are removed and that toxicity testing has taken all those matters into account.

The Hon. M. PARNELL: I thank the minister for her answer; her assurance that all those chemicals will be removed before the discharge goes into the gulf. I was going to ask about the eco-toxicity testing, but there are a number of conditions in the development approval that relate to that, so I do not need to revisit that ground. However, my question is in relation to this additional eco-toxicity testing that BHP is required to undertake. If the results of those tests show that the dilution factors need to be changed, will the EPA have the ability to change them?

The Hon. G.E. GAGO: I have been advised yes.

The Hon. M. PARNELL: Just to clarify, if the figures we are talking about—70:1 at 100 metres and 85:1 at the cuttlefish breeding grounds—turn out to be not strict enough, the EPA will have the ability under this indenture to require a tougher dilution standard?

The Hon. G.E. GAGO: I have been advised yes.

The Hon. R.I. Lucas: Hear, hear! A very good answer.

The Hon. M. PARNELL: The Hon. Rob Lucas agrees—a good answer. I now move on to the Great Artesian Basin, which is the other major water issue. My first question of the minister is: given that they have permission to build a desalination plant that would provide more than enough water for their needs, why did the government not take the opportunity to wean BHP Billiton off the Great Artesian Basin?

The Hon. G.E. GAGO: There are a number of reasons not to choose that pathway. First of all, having more than one water supply provides greater security and better risk management for the future operation of the Olympic Dam expansion facilities. Given the level of capital investment, this is important to BHPB. It is also important to note that BHPB has invested around $100 million in infrastructure associated with the GAB wellfield and is not about to give up that investment.

Secondly, BHP already has been awarded a legal entitlement to extract water from the GAB. The approval and licence awarded by the water minister was provided under a previous project. The extraction of water from the GAB from this wellfield has now been capped at 42 megalitres per day. Thirdly, the water allocation plan for the Far North Prescribed Wells Area issued by the SA Arid Lands NRM Board in February 2009 says that at least 350 megalitres per day of water can be sustainably extracted from the SA section of the GAB. The BHPB allocation is well within that range.

The key is to ensure that the mound springs are protected. This means that not all of the 350 can be extracted from the same region. This would cause a high level of drawdown and potentially impact unfavourably on the mound springs. Therefore the extraction needs to be spread out throughout the GAB in order to ensure that the BHPB wellfield does not draw down unfavourably. The Department for Water has developed a sustainability test. Monitoring and annual reporting by BHP must meet this test, and after 25 years of operation, the GAB wellfield reporting has shown no decline in mound springs fauna and in particular no impact on endemic fauna.

The Hon. M. PARNELL: I thank the minister for her answer, and we will tease a few of those issues out as we go through, but the first thing that the minister said is consistent with what the company has always said: the reason they want to keep taking water out of the Great Artesian Basin is that they have invested significant capital in the plant and equipment required to extract that water.

The minister mentioned the figure of $100 million. Could the minister elaborate on that figure? My understanding is that most of the infrastructure was in fact paid for by Western Mining Corporation many years ago and that there has in fact been very little new additional investment in Great Artesian Basin infrastructure; that effectively it is a legacy issue from the previous operators that BHP Billiton have taken over. Can the minister explain how that additional $100 million has been spent, and over what period?

The Hon. G.E. GAGO: My understanding is that it is maintenance capital. We are not too sure over what period.