Parliamentary Committees

Joint Committee on Findings of the Nuclear Fuel Cycle Royal Commission

Adjourned debate on motion of Hon. D.G.E. Hood:

That the report of the committee be noted.

(Continued from 18 October 2017).

The Hon. R.I. LUCAS (17:17): I rise with pleasure on behalf of Liberal members, not only in this chamber but also in the House of Assembly as well, to speak to the report of the Joint Committee on Findings of the Nuclear Fuel Cycle Royal Commission and the motion that the report be noted. In doing so, I speak on behalf of my colleague, in particular, in another place, the member for Stewart, Mr Dan van Holst Pellekaan, who together with myself were the two representatives from the Liberal Party on a joint select committee investigating the nuclear fuel cycle. I honestly cannot remember now how long the committee went for, but it was a long time. I am sure the committee secretary—

An honourable member interjecting:

The Hon. R.I. LUCAS: I am told it was around 18 months. As the report would indicate—and I am not going to go through that sort of detail—it took considerable evidence. It travelled widely—the most widely travelled committee that I have ever sat on in my long period in the Legislative Council and probably the most widely travelled committee of any committee in my time in the parliament.

The committee was supported by Premier Weatherill and the government because they clearly had a clear policy agenda in relation to the issue. Significant additional resources were provided to the committee in terms of the operation of the committee to enable evidence to be taken firsthand from overseas locations where toxic waste dumps were either being built or being contemplated in terms of their operations.

I thank the Hon. Dennis Hood, the Chair of the committee, in terms of its operation, and the government members and the Hon. Mark Parnell, who represented the Green fringe of the Legislative Council, on the operations of the committee.

As the committee report indicates, there was an overwhelming majority view of five of the six members on one particular recommendation, and then the committee fractured, splintered, shattered, or whatever word you wish, in all directions in terms of individual—I will not call them dissenting statements—minority statements by members of the committee.

So, five of the six members concluded that there should be no continuation of an exploration of a toxic nuclear waste dump in South Australia. The dissenting view in that case was the Chair of the committee, the Hon. Dennis Hood. But then there were four or five separate minority statements, one from the two government members, one from the two Liberal Party members, one from the Hon. Dennis Hood, and one from the Hon. Mark Parnell—so, four separate minority statements, that are attached to the back of the committee's report.

The position of the Liberal Party as it entered the 18-month process of looking at this was that many of us—and I put myself in this category—were sympathetic to the notion of exploring the possibility of a toxic nuclear waste dump in South Australia because of the claims of the very significant economic and financial benefits that would emanate from such a proposal in South Australia.

I certainly commenced the process with an open mind in relation to it; however, as my minority statement with the member for Stuart indicates, by almost the conclusion of that particular process, certainly at the conclusion of taking evidence, I had moved very strongly against the proposition and I did so on the basis that I just did not accept the claims of this economic and financial nirvana that Premier Jay Weatherill had been promoting as the silver bullet solution to the economic problems confronting the state of South Australia.

I hasten to add, without going on at any length in relation to it, that one of the many problems that I and some on our side see in the Weatherill Labor government, the Premier himself, the Treasurer and senior ministers, like the leader of the government in this chamber, is this delusional quality they have about themselves: that there is some silver bullet solution which they are always striving for, spinning and trying to sell to the people of South Australia. Whether it is the value from a toxic nuclear waste dump in South Australia, whether it is a massive expansion which then treasurer Snelling proclaimed proudly about the expansion of Olympic Dam, which was the centrepiece of one of the more recent budgets, or whether it is the Elon Musks of this world in relation to the world's biggest battery, there is always the silver bullet solution to the stark economic problems that confront the state.

I do not intend to prosecute the alternative, as I outlined the differing views of government and the alternative government in the Appropriation Bill debate, but there is a starkly alternative view to that silver bullet solution, and that alternative is to recognise very simply that the only way we are going to see economic and job growth in South Australia is if our small and medium-sized businesses can compete nationally and internationally in terms of the sale of their products—clearly not just in South Australia but interstate and, more particularly, overseas—and if they are going to be nationally and internationally competitive then the costs of doing business in South Australia have to be nationally and internationally competitive.

That involves state taxes and charges, it involves utility costs, it involves labour costs, it involves red tape costs and it involves workers compensation costs. It involves all of the costs of doing business in South Australia for small and medium-sized businesses. We suffer the tyranny of distance. In the age now of online selling that is less of an issue. It still does not disappear completely, but it means we have to recognise the fact that there is no silver bullet solution such as a nuclear waste dump for South Australia. There is a lot of hard work in terms of ensuring our small and medium-sized businesses are nationally and internationally competitive.

In relation to the analysis we did of the financial and economic benefit claims that were made by the Premier and the government and the royal commission in relation to this, we applied considerable rigour through the select committee to some of those claims.

There was very strong support for a position that Liberal members pushed that there be a separate high-level independent review of the claims being made by the royal commission and Premier Weatherill in relation to the financial and economic benefits of the state.

The committee resolved without dissent to do that. So Labor members and all the members of the committee accepted the sense of having a high-level independent analysis. A group called the Nuclear Economics Consulting Group, based in Washington DC, was appointed—someone untouched and untainted, in the main, by working and operating in the South Australian nuclear industry—to review the economics of the nuclear industry in South Australia and Australia, because it is not much of a nuclear industry obviously. That group was as independent as we are likely to get in this particular field.

That group and the value of the report that it produced together with the work of the committee research officers, one of whom had a background as a senior level Treasury officer from South Australia, was invaluable in terms of peer reviewing the claims being made about economic and financial benefits from the toxic nuclear waste dump.

In relation to some of the issues in terms of the NECG report, one of the big issues in terms of the revenue projections obviously was the issue of the price that has been assumed you could charge for accepting toxic nuclear waste from other countries. NECG pointed out that there are several reasons for significant differences between what they believed to the case and assumptions made by the royal commission. In part they were as follows:

Amounts already spent on existing national solutions (e.g. interim storage in dry casks) would reduce the value provided by the Project;

National laws usually preclude the use of such funds for anything other than a stated purpose (e.g. a national repository) and changes to laws may be required to allow use of the funds to pay for the Project, as a foreign activity;

Each customer country has its own financial considerations, anticipated national repository program timelines and interest rate/foreign exchange rate expectations;

Actual 'avoided cost' for each potential customer country depends on what activities a customer country has already undertaken with respect to a national repository and how much has been spent on those activities;

The extent that customer country funds accrued for national disposition of nuclear waste can be used to pay for the Facility and whether such funds are accessible (i.e., are in a segregated account, as opposed to approximated by asset values);

Each customer country's expectations about the services that they expect or require from the Facility;

The extent that a customer country compares the value of the Facility's value proposition to competitive offerings from other countries which may offer lower costs and simpler approaches or options to develop new advanced nuclear reactors that can dispose of spent fuel as fuel;

The risk discount assessed by a customer country to reflect the risk that the Facility may fail for some reason prior to waste delivery or prior to waste being placed into the geological disposal facility, with residual liability for the customer country;

A customer country's views on the cost, risk, and other issues associated with moving radioactive waste from current approved locations (e.g. at a nuclear power plant site) to South Australia;

The customer country's assessment that transferring, or signing contracts to transfer waste to South Australia would mean that real options for waste disposition (i.e. as better future information becomes available on approaches and costs) are lost; and

Assessment of economic impact of the investment and jobs lost by the customer country in accepting the Project approach.

In relation to the assumptions that have been made about market share estimates and potential volumes, NECG identified three issues with the methodology used by the royal commission:

Some 'accessible countries/volumes' are included for customer countries that are unlikely to participate in a commercial arrangement;

The simple market share (percent of total market) approach combines various independent factors (e.g., probability of future nuclear generating capacity and the spent fuel expected to be produced, and timing of availability of wastes, competition by other repositories or repository alternatives, alternative uses of waste); and

The complexity of addressing the large range of political, operational, contractual, regulatory and technical issues arising from such a broad market approach (e.g., different fuel vendor shapes, burn-up rates, storage requirements and storage containers) does not seem to be adequately recognised.

The NECG report also highlighted other concerns in relation to the market share assumptions, but I will not detail all of those. In relation to some concerns NECG raised about the cost estimates, they certainly indicated that the contingency for increases in costs that were incorporated in the royal commission's work they believe were not likely to be consistent with what the reality would be, that is, the cost blowouts in terms of a project like this over a long period of time were likely to be significantly higher than the 25 per cent contingency, which had been included in the report.

These witnesses noted the experience of overseas nuclear waste repositories with respect to large cost overruns and questioned why such cost increases would not apply in South Australia, where the scale of a proposed operation is so much larger. I think we have to bear in mind that this proposal in South Australia was significantly bigger than any other project that existed around the world that the committee looked at. We were talking about being the international repository for nuclear waste for around the world, and the size and scope of the proposal in South Australia was significantly larger than many of the other proposals, which, in essence, only managed the nuclear waste from their own country.

In relation to one of the most significant issues that I found, which was this issue of how much money (it is listed in the report on page 10—preinvestment expenditure), it essentially puts in simple terms how much money we, the taxpayers, would have to spend before we actually made a final decision to go ahead with having a nuclear waste dump or not.

It was impossible, according to the royal commission, to not spend any money and make the decision, and that was the drop-dead date for either you go ahead or you do not go ahead. They were saying that you actually have to spend some money in looking at this, and then at some stage later you make a decision as to whether you think it is sensible to proceed. Of course, all the money you have spent up until that stage, if you choose not to proceed, is a sunk cost, is money you have lost, and the taxpayers get no return from that.

The royal commission itself said that the estimates of what they call prefeasibility expenditure were in the order of $571 million in nominal cash flow to the end of year six in the financial model. These prefeasibility expenses included:

Budget planning and appropriations;

Establishment and incorporation of commercial bodies with charters consistent with SA legislation;

Develop and formalise regulatory standards for all facilities and their activities;

Scoping desk studies on interim storage facility;

Siting of interim storage facility;

Interim storage facility design development;

Interim storage facility Environmental Impact Assessment;

Licencing of interim storage facility system and site;

Scoping desk studies for geological disposal facility and intermediate depth repository;

Scoping desk studies on low-level base facility;

Siting of low-level waste facility; and

Design development of a low-level waste facility.

The committee took evidence from around the world, which in some cases argued that that $600 million was an underestimate and that it could be as high as $1 billion that taxpayers in South Australia would spend before you would make a decision, potentially, not go ahead. If I can reinforce that: the proposition that Premier Weatherill was putting to us was that we would spend $600 million to $1 billion on looking at a nuclear waste dump for South Australia and possibly decide at that stage not to proceed, and the taxpayers would have lost $600 million or $1 billion without any return at all, because the project would not proceed.

To be fair, the NECG consultancy did come back, because they heard the concerns that I and other members were expressing about this, and they did suggest that there was the potential for testing the market in a different way earlier and not having to spend $600 million to $1 billion before reaching the drop-dead date in terms of where we would head. There was nothing more than there was an alternative and a lot of work would need to be done and a lot of money would be spent, I guess, in terms of having a look at what that alternative approach might be.

For me, I was concerned, having read the NECG report, that there was a significant potential for massive cost overruns, as has occurred overseas, that some of the benefits that were being claimed on price and market share were, in my view, hugely optimistic in terms of the economic model. With my shadow treasurer's hat on, I swung, and swung significantly, from the viewpoint of this being something worth considering to it being something about which I went to our party room and our leader and argued strongly that we should say, 'This doesn't make economic sense. There is no silver bullet, and this isn't the appropriate silver bullet.'

The findings of the member for Stuart and myself, in our minority statement in terms of the economic and financial section, are as follows:

Evidence given to the Committee raised significant doubt about the revenue and cost estimates upon which the Royal Commission relied. This evidence included the possibility that more than $600 million might have to be spent before a final decision would be taken as to whether or not to proceed with the project.

Major projects in the nuclear industry worldwide have a history of major cost over runs and long delays in completion.

Federal laws and regulations would require extensive review and agreement and there is not bipartisan agreement to do so.

Recommendations

In view of the significant financial risks to the State and the lack of bipartisan Federal support for a legal and regulatory regime for the construction and operation of an international waste storage facility for spent nuclear fuel in South Australia, the South Australian Government should not commit any further public funds to pursuing the proposal.

We had findings under the broad headings of Social Consent and Safety and Technical Aspects. I do not intend to go over those. They are there in the report for members to see. I wanted to highlight for myself and for my party that the major issue for us was that the economic and financial aspects did not stack up, even though we might have wished them otherwise to have stacked up.

In concluding, what I want to say is, as I have said on a previous occasion—I think in the Appropriation Bill debate—that I think there is a stark choice at the next state election between a Weatherill Labor Party and a Marshall Liberal Party as alternative governments. The report from the member for Newland and the member for Elder and the position of the Premier is that the reason he is not proceeding with the nuclear waste dump in South Australia is that, he argues, the South Australian Liberal Party does not support it and has not provided the bipartisan support.

The clear inference of that is that Premier Weatherill, if a Labor government is re-elected, is committed to a nuclear waste dump for South Australia, if they can convince an opposition in the future to provide bipartisan support for a nuclear waste dump. That is the position of Premier Weatherill and the Labor government.

The Liberal Party's position is starkly opposed to that. We do not support and will not support a nuclear waste dump, even if there were bipartisan support offered by a Labor opposition to the proposal for a nuclear waste dump in South Australia. We have looked at the economic and financial aspects of the legislation and the proposal. We do not believe that they stack up, and as I said, I know as the paired member in seats like Colton, there is a very strong view from people I have spoken to in Colton that they are fearful of Premier Weatherill and the Labor government's position to continue to persist with a toxic nuclear fuel waste dump for South Australia. That is the position of the Weatherill Labor government. If they can get the support of an opposition party, then they will head down that path again as they sought to do during this parliamentary session.

The only way one can guarantee that there will not be a toxic nuclear waste dump in South Australia is not to support a Weatherill Labor government because it is not just the Premier. Senior ministers like minister Malinauskas in this house, minister Maher and minister Hunter have all publicly supported the Premier in relation to this policy position. They have nailed their colours to the mast. They are strong advocates of South Australia being a nuclear waste dump. Let's put it on the record: they can argue that case, we will argue the case that we should not be, and we do not think the economics and the finances stack up. It is for those reasons and those reasons principally that we could not support the project and we will continue to oppose such a project for South Australia in the future.

Debate adjourned on motion of Hon. T.J. Stephens.