Pastoral Land Management and Conservation (Renewable Energy) Amendment Bill

Committee Stage

In committee.

Clause 1.

The Hon. G.E. GAGO: In terms of a clause 1 contribution, I would like to take this opportunity, on behalf of minister Hunter, to insert on record answers to questions that were raised and, just so that everyone is clear, I then intend to adjourn so that members have time to consider those responses.

In relation to questions from the Hon. Michelle Lensink: how does the minister manage a potential conflict of interest? The bill requires the minister to consult with and take into account the views of prescribed interested parties in deciding to grant a licence. This includes native title parties but also pastoral lessees and others. It is no different from other decisions taken by ministers that require them to consider and balance the interests of various parties. The minister is not acting on behalf of any of the prescribed interested parties.

Question 2: could the minister outline how they arrived at the 5 per cent? Ninety-five per cent of the wind farm payment will be passed through to the prescribed interested parties. Five per cent of the wind farm payment will be retained by the government for administration. The precedent for this apportionment lies with provisions under the Mining Act 1971 in relation to freehold land. In the case of a mining production tenement on freehold land, landowners are entitled to rent, which is administered through the government. Ninety-five per cent of this rent goes to landowners and 5 per cent is kept by the government for administration.

Question 3: in relation to wind farm payments, how does the minister envisage resolving disputes, etc.? I am advised that, in the case of native title holders, Indigenous land use agreements may reference payments but this will be a matter for the parties to decide. The resultant agreement must be registered with the Native Title Tribunal before a wind farm licence can be issued. In the case of a pastoral lessee, the minister must consult with and have regard to the views of the pastoral lessee before a wind farm licence can be issued, and there are no appeal rights for a pastoral lessee beyond the negotiation with the minister. In practice, a wind farm developer will also engage with the pastoral lessee to ensure on-ground issues are understood.

Question 4: what is the situation when there is more than one pastoral lease involved in a single development, etc.? In the case of a wind farm where turbines are situated across pastoral lease boundaries, pastoral lessees will be given payment according to how many turbines are situated on each leasehold. There may be a case where infrastructure such as a substation, sheds or powerlines are required to be built on a leasehold that is not associated with the turbine revenue. In this case, prescribed interested parties will be made a payment on a per square metre area basis for things like sheds, substations and powerlines, and payments will be made on a per linear metre basis.

Question 5: if the renewable energy company goes broke, what happens to the clean-up and removal of infrastructure? I am advised that, before any construction occurs, the project would need to be financed and this is typically done through non-recourse bank financing. This means that, if a developer cannot meet payments, the bank has recourse to the assets. The most likely scenario in this case is that the bank will want to continue to recoup its funds and will also continue the operation of the wind farm. The bank may also choose to sell the development to another owner, who will continue the operation.

The technology is not experimental and has been in operation for many years so the risk of infrastructure being left on land without company presence is low. In the unlikely event that this is not the case, clean-up will be the responsibility of the Crown, which is no different from the case on freehold land.

Question 6: can the minister provide any details about previous pastoral lease resumption, etc.? As far as I am advised, there has been only one resumption in the last 20 years and that is one that currently occurred at Cultana. In this case the federal government required land for defence operations and land was resumed from a number of pastoral leases. This land will be issued under miscellaneous lease under the Crown Land Management Act 2009. When the resumption is gazetted it will describe the purpose of the resumption.

Question 7: are the prescribed interested parties entitled to be represented by legal counsel in relation to these negotiations? Prescribed interested parties listed in the bill are those parties which are entitled to be consulted under section 49B(2). They are parties to which information on the development must be provided under section 49B(3) and they are parties to which funds will be paid under section 49K(1).

This last entitlement, however, does not apply to resource tenement holders as such a negotiation is not part of the rights of prescribed interested parties per se. There is nothing preventing a leaseholder, however, from obtaining personal legal counsel or any other advice to assist in the preparation of a submission to the minister. The minister will need to have regard to any views expressed in the submission.

Question 8: could you confirm the definition of native title holders and if the definition is correct as described in new section 49A, etc.? The question was in relation to whether there is a requirement to include paragraph (d) in the definition of prescribed interested parties to avoid a breach of the Native Title Act. There could be an inconsistency with commonwealth legislation if rights were conferred on holders of non-native title interests but not native title holders. It is possible that native title could exist but not yet be recognised over some areas of pastoral land. Paragraph (c) of the definition of prescribed interested parties deals with the situation where a court has made a determination of native title. Paragraph (d) I understand is intended to deal with those interests that may not have been recognised.

Question 9: in the new section 49E of the bill the wind farm licence may grant rights, etc. It goes to the area of exclusion. The areas, I am advised, excluded from other parties are minimal in comparison to the whole area of a wind farm. An example is in the case of the substation where, under the Electricity Act 1996 there is a requirement for fencing to be installed. Other possible exclusion areas could include a locked shed and an area where spare parts are stored.

Question 10 goes to the new section 49K. I am advised that pastoral lease holders are compensated for access to pastoral land by wind farm developers through the payment of licence fees. This section ensures that this form of compensation is not duplicated through other mechanisms for compensation under the act. Pastoral lease holders will not miss out as wind farm payments will be in excess of any possible compensation for land access. This section does not, however, prevent access to compensation through common law rights or rights under other acts.

In the case of a wind farm and any damage that may occur in constructional operation, the developer will have insurance and they will make good the damage. In the case of native title, their rights extend to their ability to exercise and enjoy their native title rights and interests which can include things like accessing land and using resources from the land.

Question 11: can the minister explain the new section 49F(6), etc.? The wind farm payment should not be regarded as compensation for loss of entitlement by a pastoral lease holder; rather the wind farm payment is commensurate with what would be paid on freehold land. This is an amount that will be in excess of any compensation.

Question 12 goes to the period of 2½ years. I am advised that these time frames are based on experiences with wind farm developments on freehold land. The milestone after 2½ years was included to ensure that land is not locked up without development occurring. Things that are achieved during this period include wind monitoring which needs to occur for at least two years, flora and fauna studies which are often seasonal, technical studies, heritage studies, as well as applying for development assessment and all the inputs required for that process.

Question 13 goes to the new section 49K(1)(a). I am advised that during the feasibility stage of a wind farm development the developer will pay a yearly amount. Question 14 goes to compensation to mining tenement holders. I am advised that the land access agreement between a resource tenement holder under either the Mining Act 1971 or the Petroleum and Geothermal Energy Act 2000 will cover potential commercial issues between the parties, and it is for those parties to decide what is included. Question 15: why is a wind farm licence exempt from stamp duty? I am advised that a wind farm licence is akin to a licence under the Crown Land Management Act 2009. Under section 53 of the Crown Land Management Act the grant or renewal of a licence is exempt from stamp duty.

In relation to questions by the Hon. Mark Parnell, in question 1 he asks: are there particular areas targeted by companies for development? I am advised that a detailed feasibility study for wind development potential on Eyre Peninsula established an outstanding area for wind resource situated on crown land subject to pastoral lease. There is also an emerging trend of wind developers becoming more attracted to inland sites in South Australia and the department is aware of a number of proponents seeking to access crown pastoral leaseholder land to develop projects. These projects are commercial-in-confidence and so more information cannot currently be given on their location.

The areas where pastoral holdings are located correlate with high quality wind and solar resources. In general, developers are drawn to sites where resources are available and that are in proximity to network infrastructure to enable connection. For solar development interests it is mainly focused on the northern areas of the state where resources are highest. Question 2 goes to mining companies having the right to veto, etc. I am advised, in recognition, that resource exploration can coexist with wind farm development.

A wind farm developer will need to negotiate a land access agreement with an existing tenement holder before a wind farm licence can be granted. If agreement cannot be reached the issue is referred to the ERD Court. In resolving a dispute the ERD Court would have consideration to the objects of the act and if this bill is passed the objects will also provide for wind farm development on pastoral land to coexist with the activity of pastoralism. It is also noted that this only applies if there is an existing resource interest in advance of the wind farm licence application. If the wind farm developer has a licence first and a resource exploration company wanted a licence over the area with a wind farm licence they would need to seek consent from the wind farm licence holder.

In question No. 3 he asks about conditions for decommissioning and rehabilitation. I am advised that it is the expectation within the wind farm industry that wind farm developers would undertake any decommissioning requirements and it is standard in the contracts with landowners to have decommissioning and rehabilitation specified. At the end of the life of a wind farm licence it will be up to the developer as to whether they would like to apply for a new wind farm licence or to decommission the plant. Regarding rehabilitation, this will extend to all above-ground infrastructure, including powerlines. The surface will be restored to preconstruction condition.

In relation to questions from the Hon. David Ridgway, in his first question he states that the government is targeting 20 per cent renewable energy by 2014 and he is asking how these ambitions add to the cost of electricity, etc. I am advised that the main market mechanism supporting large-scale renewable development is the national Renewable Energy Target scheme, in particular the component relating to the Large-scale Renewable Energy Target (LRET). This is a market mechanism that states and territories contribute to, no matter how much renewable energy is installed in each state. The contribution is determined by the amount of electricity consumed in each state or territory. So even though South Australia has 38 per cent of the nation's installed wind capacity, South Australians are paying an amount for the Renewable Energy Target which would be the same whether we had 3 per cent of the nation's wind power or 38 per cent.

For 2014, approximately 17 million large generation certificates must be created and surrendered Australia-wide for the Renewable Energy Target. South Australia's liability in relation to the certificates is determined by the federal Clean Energy Regulator, based on forecast electricity consumption in the state. The cost of these certificates is set by the market, and the liability would exist whether or not large-scale renewable energy generators were located in South Australia.

The price impact on the LRET is relatively minor compared to retail electricity prices. The Australian Energy Market Commission 2013 Residential Electricity Price Trends report found that in 2013 the LRET contributed 0.56¢ per kilowatt hour to the 31.27¢ per kilowatt hour electricity tariff in South Australia, and in 2013-14 it contributed 0.57 cents per kilowatt-hour to the 31.03¢ per kilowatt hour electricity tariff. In both cases the price impact on householders is less than 2 per cent. The state has, however, been a significant beneficiary from renewable energy investment, as outlined in the second reading speech, and the operation of wind farms in South Australia has put downward pressure on wholesale electricity prices.

Question 2 goes to breaking down the figure of $5.5 billion investment in renewable energy. I have been advised that there is no discrepancy between the two cited numbers in this question as not all wind farm capital investment is realised in regional areas. The $5.5 billion in capital investment in renewable energy in South Australia is based on an assessment by SKM (Sinclair Knight Merz) in September 2013 for the South Australian government. Of this $5.5 billion, SKM assessed that there was $3.3 billion in large-scale renewable energy, $1.9 billion in rooftop solar photovoltaic systems, and the remaining investment was in solar hot water heaters and small embedded generation.

The Clean Energy Council's figure of about $3 billion relates to capital investment in wind farms. In South Australia not all wind farm capital investment is realised in regional areas, as I said. For example, if work is subcontracted to an engineering firm based in Adelaide, this investment will not be recognised as capital investment realised in regional areas.

Question 3 relates to there not being any new wind farm developments in this state over the last two years, etc. I have been advised that there has been development in wind farms over the last years. There are nine wind farm projects with development approval in South Australia, with a combined capacity of over 2,000 megawatts. Another two wind farms in the state are being actively developed. Snowtown stage 2, in the Mid North of the state, is currently under construction, and commissioning is planned for late 2014.

A number of projects need to secure power purchase agreements to underwrite project financing so that projects can proceed to construction. A significant factor influencing the demand for power purchase is the national Renewable Energy Target, which is currently being reviewed by the federal government. Once that review is complete there will be greater certainty for proponents seeking to negotiate power purchase agreements.

Question 4 relates to why a fee is charged for wind farm licences, etc. I have been advised, and I have stated, that any wind farm payment will be commensurate with that paid by wind farm developers to owners of freehold land. These payments are large and have definitely helped to drought-proof the income of those farmers who choose to host wind turbines. Development does cost more in remote areas and, to ensure any remote development is economic it must be stated that while wind farm payments are commensurate with those on freehold land, they will take account of the cost of remote development. This does not mean, however, that there will be no wind farm payment or that there will be only a token amount.

Question 5: why does the wind farm developer not negotiate directly with native title holders, etc.? I am advised that as the Crown owns and leases the land the interested parties are negotiated through the Crown. The minister will consult with and have regard to the views of pastoral lessees and other prescribed interested parties. In the case of native title holders the Crown needs to negotiate an Indigenous land use agreement with native title holders before a wind farm licence can be granted.

Question 6: who decides on the distribution of licence fees, etc.? I am advised that the bill requires that payment be made to prescribed interested parties on an equitable basis. As every case is different, this will be determined on a case-by-case basis by the responsible minister. Before a wind farm licence can be issued over pastoral land with co-existing native title interest, an Indigenous land use agreement will need to be negotiated between the state and any native title parties. Where land is not subject to native title, then 95 per cent of the payment will go directly to the pastoral lessee.

Question 7: what is the level of rehabilitation required, etc.? I am advised that rehabilitation will be to the preconstruction surface condition, and all surface material will be removed. The obligation for rehabilitation forms part of the licence condition so that if the wind farm changes ownership the obligation will be transferred to the new licence holder.

Question 8: has any consideration been made in regard to setbacks? I am advised a wind farm licence is a property right over the crown land that is subject to pastoral lease. A wind farm development will also need to be assessed in regard to the change in land use under the Development Act 1993. Items such as setbacks are best addressed through the development assessment process.

Question 9: does this legislation take account of migratory bird impact? I am advised that, as with the above answer, it should be acknowledged that this bill relates to a property right over crown land that is subject to pastoral lease. A wind farm development will also need to be assessed with regard to a change in land use under the Development Act 1993. The developer will need to undertake flora and fauna studies and impact assessments, which will assess migratory bird impact to satisfy the requirements under the development assessment process.

Question 10: what happens in the case of a solar facility being granted a lease, etc.? I am advised the mechanism for excision of land from an existing pastoral lease already exists in the Pastoral Land Management and Conservation Act 1989. The only change proposed in this legislation is the time frame for resumption. Once land is excised from a pastoral lease holder it needs to be reissued under another act—the Crown Lands Management Act 2009. Any requirements to introduce provisions for a land access agreement to be agreed between a resource tenement holder and a solar development would need to be implemented through the act.

Question 11: will the land that is excised for the solar use take into consideration existing land uses? I am advised that in the case of solar, a solar developer will initially negotiate commercial terms with the pastoral lease holder to surrender a portion of the pastoral lease holder's lease. It is only if no agreement can be reached that the land would be resumed. For resumption to take place, the minister needs to agree, and he or she will take account of existing land uses.

Progress reported; committee to sit again.