Bills

Whyalla Steel Works (Environmental Authorisation) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 13 October 2015.)

The Hon. D.W. RIDGWAY (Leader of the Opposition) (15:24): I rise to be one of a number of speakers, I think, by looking at the Notice Paper, to speak on this bill. On behalf of the opposition, I indicate that we will be supporting the bill, but I know two of my colleagues have some other contributions to make. Essentially, this bill is about maintaining Arrium's confidence in the state's regulatory regime as it faces many challenges to its Whyalla operations in the coming years.

Arrium (or OneSteel, as it was known) is essential for the future of Whyalla, and it is undertaking a root-and-branch review to maintain and enhance their operations in Whyalla. We are all aware that the current economic climate internationally and nationally, especially in South Australia, is particularly tough for businesses, and Arrium is going through a fairly significant review of its operations.

The company's decision to half its mining operations in South Australia will have a significant impact on our economy and jobs. With extremely low commodity prices, coupled with our ailing manufacturing sector, it is imperative that we give existing operators confidence through any means that are practicable and reasonable.

The key component of this bill is that it seeks to extend for another 10 years the requirement for Arrium to be accountable to the Department of State Development for all environmental regulations at the steelworks, rather than to the EPA. I remember that we had a bill go through this parliament nearly 10 years ago. I think this one expires on 4 November, so it is a little short of the 10 years. I think that the long-term plan, even back then, would have been for the EPA to be the regulatory authority.

While the bill is sensible and necessary, the government has been typical in its rushed timing, taking it for granted that parliament can rush a bill through at any time before the 10-year expiry. I think that is symptomatic in that often we see in this place this panic that suddenly there is an issue and we have to resolve it and that it has to be passed today, which we are happy to do, but we could easily have had much more time. We have known for 10 years that it was going to expire on 4 November, yet there is a rush.

The department did not facilitate the opportunity for this bill to be thoroughly considered by the opposition as it had not been provided with the bill when it was first listed for debate in the other place. We are told that Arrium approached the government seeking the extension of the environmental authorisation.

Understandably, the government being sensitive about our economic position and the financial difficulty being experienced by Arrium, they were prepared to make a negotiation. I might add that they are also in a difficult political position because they have failed to cultivate the business environment where the current economic threats can be mitigated. Arguably, many businesses which have folded would have survived if the government had been more nurturing, more sympathetic and more understanding of how tough it is to do business in this great state. So, the government is under even more pressure to save our existing industries in any way possible.

As I said earlier, it was in 2005 that the South Australian Parliament enacted amendments to the Whyalla Steel Works Act 1958, including the addition of section 15, where Arrium was granted environmental authorisation under the Environment Protection Act 1993. It gave the company the regulatory certainty it needed to enable it to diversify into the resources sector, through Project Magnet, which would convert the Whyalla steelworks to magnetite iron ore feed, creating a new revenue stream for the company by making available hematite iron ore for export sales.

The successful implementation of Project Magnet essentially provided a new lease of life for the Whyalla steelworks and significant environmental improvement with respect to the red dust problem. As we would all recall, there has been a constant stream of questions in this place and the other place about the red dust issues in Whyalla. Arrium's confidence in the regime also resulted in further investment in the port and mining operations.

With the environmental authorisation about to expire, the section is to be varied such that the expiry will occur on the 20^th anniversary, rather than the 10^th anniversary, of the section being enacted, taking it to 4 November 2025.

Arrium is currently undertaking a broad strategic review of its business as a result of the low global iron ore prices now prevailing. It has already curtailed significant mining in South Australia, writing down some $1.3 billion in costs. Obviously, this has led to reduced exports for the financial year 2014-15. It was predicted in January that exports would fall from about 12.5 million tonnes of 60 per cent iron to about nine million tonnes of about 69 per cent iron.

The government is working with the company to assist it to minimise its costs and maintain financial viability. They had aimed to cut total production costs by about 20 per cent to around $57 a tonne by 2016. In these circumstances, the proposed extension of the environmental authorisation provides continued regulatory certainty for Arrium and directly contributes to the prospects for its business sustainability in Whyalla and Upper Spencer Gulf. Arrium has agreed in writing to work with the EPA over the 10 years to transition to a 'normal' EPA-issued long-term licence.

Apparently, the department has seen a letter from OneSteel's general manager at the Whyalla Steelworks to the EPA outlining that commitment. I think that is the key to this. We have a situation in place. They need a 10-year extension. Times are particularly tough. If we were to have a new regime it would provide some uncertainty but also, I suspect, quite a lot of cost on this particular company. We have been happy, as a state, to have it operate in that fashion for the last decade. It will go on for another decade but I think that any of us who are still here in another 10 years time will need to make sure, at that point in time, that they do transition to a normal EPA-issued long-term licence.

The second part of the bill is the insertion of a section which has provisions for schedule 3 of the act (environmental authorisations under the EPA) to be updated to reflect the variations in the environmental authorisation at the request of the minister. We are pleased to see that the EPA maintains a good relationship with Arrium, which is so important in terms of Arrium's willingness to continue business in South Australia. Again, I reiterate that the opposition supports the bill and sincerely hopes the government will endeavour, when making amendments which could have such serious implications for the state's economy, to facilitate a more thorough consideration by providing information to us, as the opposition, in a timely manner.

I should also add, to be on the ball and alert when this sort of legislation is about to expire, that we have some lengthy period of time to examine it. I know it was examined briefly by a select committee in the House of Assembly. There was some criticism of that relatively small time frame and it was not particularly widely advertised. If the government had been on the ball and realised this was happening some six months ago we could have done it quite thoroughly. We would probably have had the same outcome but could certainly have answered some of the questions that may not have been answered. Given the tough economic times the opposition is happy to support the bill.

The Hon. T.J. STEPHENS (15:31): I rise to support the bill, as I did 10 years ago. Given that I have what can only be described as a reasonably consistent and solid background, having been born and bred in Whyalla and spent 40 years there, I think I am reasonably well placed to give a bit of a commentary and talk about the feelings of most of the community that I came into contact with. I have managed to find an email which was a submission to the select committee on the Whyalla Steel Works (Environmental Authorisation) Amendment Bill. This email was from one Ted Kittel.

The Hon. M.C. Parnell interjecting:

The Hon. T.J. STEPHENS: The Hon. Mr Parnell interjects and says, 'My old mate.' No, he is not. Can I just put this on the record; I will read it to you:

Dear Sean,

I refer to recent articles and responses in the Whyalla News and The Advertiser, and on Southern Cross TV regarding the renewal of the 10 year Indenture.

My position is as follows

It is true that the 2005 Indenture caused the WRDAG Inc. litigation to be null and void because the Indenture changed the law.

However, on behalf of WRDAG I continue to negotiate with OneSteel with the express desire to find a middle ground.

The negotiations over a period of time resulted in a win/win position for both Parties and launched the beginning of a new partnership between WRDAG and OneSteel/Arrium.

This partnership has flourished and is now strong and progressive.

I have observed throughout the 2005-2015 Indenture period that OneSteel/Arrium has conducted its operations in Whyalla in a most environmentally responsible way.

OneSteel/Arrium has shown good faith by engaging with community representatives (myself included) on all issues which relate to environmental impacts, and I have no doubt this will continue for the duration of the 2015-2025 Indenture.

I will continue to further expand the good relationship I have with the Company by recognising and promoting the good environmental outcomes already enjoyed by the affected community as a result of the goodwill, and the good work we have done together.

I therefore distance myself from any negative media statements about this issue because I am confident that the Company will continue its responsible environmental practices during the life of the new Indenture.

Please forward this email to the relevant CEO/Managers.

Yours sincerely

Ted Kittel

Former Chair WRDAG Inc.

The reason I am quite keen to put those remarks on the record is that I want to indulge the council and inform it of probably the most offensive email I have had in my time as a member of parliament. Sir, as you may be aware, I was a strong supporter of the last indenture—quite proudly so—knowing that the vast majority of the community in Whyalla wanted certainty and they wanted that industry to continue to flourish and provide employment and opportunities for the people of Whyalla.

Mr Kittel, and I did not keep the email, basically went along these lines: you've sold out your city, you should be ashamed of yourself and that my father, who had recently passed, would turn in his grave with regard to my behaviour. I do not think I ever responded to that email because I could never trust myself to provide a response that was remotely calm or reasonable. But here we are and I am about to make my speech, but I just wanted to put that on the record that one Ted Kittel, who thought I was the worst thing since sliced bread, dared to say that my father, who was never a fan of Ted Kittel, would be ashamed of me and now is talking about how everything has actually worked out pretty well. You would be surprised, Mr President, that I have not had an email from one Ted Kittel apologising at any particular point, nor do I want one at any stage.

I speak in strong support of this bill. This bill is an extension to the special exemptions from certain environmental standards which, when applied to the steelworks, were unreasonable and had the potential to affect efficiency and productivity at the works. Of course, as many in this place would remember, these exemptions were first applied 10 years ago, and I made a contribution on the amendment bill back then.

Similarly to my view in 2005, I believe these exemptions should remain in place. The steelworks are the economic lifeblood of the Whyalla community and everything within the government's power should be done to ensure that it remains viable. Contrary to the argument of the Hon. Mark Parnell, OneSteel and Arrium have proven to be decent corporate citizens by working with the community to ensure that the red dust problem has been well and truly alleviated, and I am very proud of that outcome.

As mentioned during the 2005 debate, Project Magnet was proposed by OneSteel as a way to significantly reduce, if not resolve, the problem of red dust by shifting to magnetite ore, crushing it at the mine site and transporting it to the process plant in a slurry form via pipeline. Fast forward to 2015, we can confidently say that Project Magnet has been a success. This was despite the protests of those on the WRDAG group and others who were against the exemptions and were distrustful of the intentions of OneSteel/Arrium.

Given the time of the day, I am not going to continue at great length with this but I am extremely keen to support this particular bill. I put on the record a little bit of my distasteful history with regard to a certain person but I feel that I have been vindicated and, at a time when Whyalla desperately needs certainty, the people of Whyalla want OneSteel/Arrium to continue. I think that this parliament and this government, along with strong opposition support, wish them every possible success.

The Hon. J.M.A. LENSINK (15:38): I will make a few brief remarks in relation to this bill which is an extension of the 10-year conditions which were granted in 2005 to provide the company operating the Whyalla steelworks with some regulatory certainty. Many comments have already been made, particularly in the House of Assembly by our lead speaker, the member for Stuart Mr Dan van Holst Pellekaan. I would like to endorse those remarks and the remarks of my Liberal colleagues here in the Legislative Council.

This is not dissimilar to the issue that we faced with BHP Billiton in that there are occasions when companies need to manage risk, and I do see that these conditions relate to risk minimisation which is very much a function of the commodity markets and investment circumstances of companies, rather than necessarily a reflection on environmental standards. My understanding of these operations is that they have been good corporate citizens and have implemented effective environmental programs.

The advice of our Liberal colleagues in the House of Assembly in relation to the select committee is that the Environment Protection Authority's preference is not to have an indenture, but it does not oppose the extension of the indenture; it considers Arrium/OneSteel to be environmentally responsible; it does not believe that the indenture compromises the EPA's ability; and that it may effectively adjust its licence conditions as necessary. I think that should give comfort to anybody who has particular concerns about environmental matters in relation to this indenture.

It might be just a philosophical point, but I think it is possibly not ideal that we do require these indentures, whether it is a reflection on the way the EPA operates or the way that capital markets and the flow of funds respond to those agencies that require separate conditions for certain circumstances, but I do not believe that that is a reflection on these operations. I endorse the bill to the council.

The Hon. G.E. GAGO (Minister for Employment, Higher Education and Skills, Minister for Science and Information Economy, Minister for the Status of Women, Minister for Business Services and Consumers) (15:41): I thank honourable members for their second reading contributions. As honourable members have identified, the amendment bill simply extends for a further 10 years the environmental authorisation provided to Arrium for operating its Whyalla steelworks by simply changing the expiry date in the existing act. The reasons for the need to do this have been outlined. I thank honourable members for their second reading contributions, most of which were supportive of this bill, and look forward to dealing with this bill expeditiously through the committee stage.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. M.C. PARNELL: In my quite lengthy second reading contribution I made some observations about parliamentary process. In particular, I referred to the fact that this bill had, in another place, been deemed a hybrid bill and therefore had to follow the standing orders of the House of Assembly, which are similar to the standing orders of the Legislative Council. That meant that just after the second reading it had to go to a select committee.

I make the point in my contribution that that having occurred in the House of Assembly and a select committee having been formed, there was no requirement on the House of Assembly to notify the Legislative Council that the committee had been formed and that public submissions were being called for.

In my second reading contribution, to a somewhat mirthful response, I referred to the advertisement in the Adelaide Advertiser on page 81 and its companion advertisements for various lonely hearts, a kennel club and a lost cockatiel. But really, the point I was making was that our parliamentary processes, in my view, are quite defective in that there is no mechanism whatsoever for this chamber—which was going to have to consider this bill—to be told that a select committee has been established in the other place and, as a courtesy, to let us know that this is happening and perhaps invite us to contribute to that select committee.

So, my first question of the minister is: is she prepared to consider a review or change of parliamentary processes that might enable communications between the two houses to be more effective and more adequate so that we are not tempted in this chamber to try to set up our own select committee, which we could try to do, because we were not told that they had set up theirs?

The Hon. G.E. GAGO: I thank the honourable member for his question. I can understand the sense of frustration. I was not aware of that issue in relation to the process, and I be would happy to take that up with possibly the President and the Speaker of the House of Assembly and also the Leader of the Government in that house as well, and see whether we cannot come up with a better process to inform and enable a greater level of participation and communication between the houses.

The Hon. M.C. PARNELL: I thank the minister for that response because I really agree with her that it is not satisfactory and we could improve it. I know that the minister was not part of that select committee process, and I am not sure whether she is able to take advice on how that process went, but another aspect I raised in my second reading contribution was that only one submission was made to the select committee, yet as I have read through the transcript of the select committee I can find no reason why, given that it had only one submission, it did not want to hear from the person who made that submission. Does the minister have any intelligence as to why the sole submitter was not heard by the select committee?

The Hon. G.E. GAGO: I am unaware of the process, and I am unaware of the submission as well, so I will have to take that question on notice.

The Hon. M.C. PARNELL: I accept the minister's answer. As I said in my second reading contribution, it was a Mr Warren Godson, who I think lives down on the South Coast somewhere, from memory; he is affectionately regarded as a 'frequent flier' in that he is a regular correspondent to a number of members of parliament on matters related to pollution issues, and it is a shame what the public record will show about an advertisement in the back of the newspaper—I should acknowledge as well that it was in the Whyalla newspaper (I do not know what page)—but certainly it was on page 81 of The Advertiser.

It strikes me that the record will show that a committee was established very quickly, gave less than a week for submissions to be made, and that the only person who made a submission was not heard. I will accept the minister's undertaking previously that these are discussions we need to have perhaps between the chambers to try to resolve a better process.

I am not intending to delay the committee for a long time today, but I want to ask what I think is the most fundamental question in relation to this bill, and that is what we would call the evil to be overcome, the need for this legislation and the purpose of the legislation. I have read the various statements made by minister, I have read the various statements made by the company, and the only thing that they can really point to is the fact that this bill gives them certainty; it removes any possibility of something coming out of left field in the next 10 years. Mind you, the only certainty it delivers is that the company will not be bound to complying with different environmental standards.

The key question, which goes to the heart for the need for this bill, is: what possible change to environmental standards is anticipated that might affect the company and thereby justify the need for 10 further years of exemption? Is there any particular environmental standard that the company is not currently complying with or that is on the horizon and there is a fear the company will not be able to comply with? What environmental justification is there for giving this special exemption for another 10 years?

The Hon. G.E. GAGO: I am advised that the reason for providing the 10-year extension is that the environmental authorisation in the Whyalla Steel Works Act has allowed over $1 billion investment in South Australia. Arrium continues to undertake a strategic view of all aspects of its business. They have indicated that decisions are to be made within the next six to 24 months, and the Arrium board requires continued stability and regulatory certainty at this particular point in time. I read from an excerpt from their submission where they say:

What is going to be really important in the next 24 months is being fluid enough and flexible enough to deal with what's happening in the world. And investment criteria is the crucial thing. We want at least the board to have the confidence in knowing that this is what we operated under the last 10 years and that this is what we have at least got going for a period of time subject to our further discussions with the EPA.

So, it is basically providing the board with the assurance of a known in terms of the environment that they were required to perform in and the conditions of that and that it was simply extending the same, so it provides a certain level of reassurance.

The Hon. M.C. PARNELL: I thank the minister for her answer, and that exactly is my understanding. The words that the minister read out included confidence, certainty, assurance, and a known investment environment—I accept all that. But the special deal that has been done here is protection from change to environmental standards. My question is: what environmental standard was about to change—or did the company fear might change—that would somehow create an uncertain investment environment?

The Hon. G.E. GAGO: None, is the short answer. For businesses, and particularly in this environment—the industry environment they are in is very challenging—the question is the potential for change; to extend the same provisions for a further 10 years is simply providing the assurance that there is no change, and so it is about risk management. It is less risky then that they have to manage in terms of their business plan because the conditions remain identical to the previous 10 years.

The Hon. M.C. PARNELL: I again thank the minister for her answer, and I am not going to pursue this because I think it is the best answer that she can give. There is not really anything on the horizon, environmentally, that is known. It is more like an unknown unknown—to coin a former American secretary of state—that something might happen, we do not know what it is, but it might happen in the future and it might affect future investment.

In the first part of her answer, the minister talked about how this indenture allowed the $1 billion of investment, and for the record I point out that that investment was going to happen anyway. The company might have said that having a special environmental protection was an essential precondition, but the reality was they were always going to move from a hematite production process to a magnetite production process and, as I have said before, I think it was a happy result that the red dust problem was largely resolved as a result of that shift.

The minister also referred to the horizon that the company is looking at over the next six to 24 months in terms of making decisions, so my next question is: has the company given any commitment, or have they provided any analysis, that this indenture will create any new jobs or, in fact, that it will save any jobs that are currently there in Whyalla?

The Hon. G.E. GAGO: I have been advised no, none at all, that it is about their ability to manage risk.

Clause passed.

Remaining clauses (2 to 4) and title passed.

Bill reported without amendment.

Third Reading

The Hon. G.E. GAGO (Minister for Employment, Higher Education and Skills, Minister for Science and Information Economy, Minister for the Status of Women, Minister for Business Services and Consumers) (15:55): I move:

That this bill be now read a third time.

Bill read a third time and passed.