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House of Assembly - Fifty-Second Parliament, First Session (52-1)
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MINING (ROYALTIES) AMENDMENT BILL

Second Reading

Adjourned debate on second reading (resumed on motion).

Ms CHAPMAN (Bragg) (15:42): I rise to speak on the Mining (Royalties) Amendment Bill 2011, which amends the Mining Act 1971. In essence, this bill was introduced to fulfil a budget proposal from 2010 of this government to increase the royalty rate for mining operators and to maintain a differential rate, according to the nature or age of the mining project. As the member for MacKillop and deputy leader has indicated, this bill will not be opposed by the opposition, and we recognise that it is a budget bill.

There are a number of matters, though, that I wish to bring to the attention of the minister. May I first say on this matter that it is the first bill that I have dealt with him as the minister for mining and, although I have not had to personally deal with him or his advisers on this issue, I do place on the record my congratulations to him for taking on this responsibility; it is an important one for the state and it is an important one for this parliament. I trust that the government, under his advice—the cabinet in particular—will recognise three things that are beneficial in maintaining a healthy mining industry in this state.

We are in the 175th year of the state, and mining, along with fishing, were embryonic and pioneering industries in this state and have been very significant for the last 175 years. It is a very important portfolio. The beneficiaries of mining are: South Australians, of course, who enjoy the employment opportunities; the support industries surrounding it; the mining and exploration companies themselves and their shareholders; and the government which enjoys the ultimate luxury of being able to administer funds that it harvests from royalty or taxation income.

However, there are three matters that I wish to bring to the attention of the minister. The first thing I say is that money that is used to promote mines or mining projects in this state should be money that either comes from the mining industry itself, SACOME (its representative, which may have promotions for the industry on its behalf or from the members themselves) or the government from its royalty income promotion. I do not have any objection to that. In fact, I think that is the proper course.

What I object to, and I hope the minister will take this on board, is tens of thousands of dollars not being spent as social inclusion money; that is, money for the welfare of the hurt, hungry, homeless and vulnerable in this state who are represented by Monsignor Cappo as the Commissioner for Social Inclusion. To have a circumstance where $18,600 has been spent to provide a bright shiny portfolio presentation called Digging Deep to promote, on the face of it, the social benefits of the mining industry but which is just one big, glossy magazine advertising for specific mining companies and the Premier, I think is a shameful abuse of precious funding for the social services and welfare of people in need in this state.

I think it is disgraceful, and if in future the minister is going to apply money from royalty income—and we are supporting an increase in that today—he should make sure that, if this industry is to have some social promotion, then it ought to come from his budget or that of the industry and not from the Commissioner for Social Inclusion. Shame on this government to even ask or refer this as a matter for the Commissioner for Social Inclusion.

On finding that the commissioner intends to go on a tour around South Australia to inspect mines, I was a bit surprised to note that he actually presented this nearly $18,600 glossy document, which is distributed across South Australia, before he has inspected them. Obviously, we have the costs of him and other members of the Social Inclusion Unit going around the state, out of the social inclusion and/or the Premier's budget, to promote an industry when we have people who are in desperate circumstances. I think it is a disgrace. I think that if money is to be applied for these big promotions, to give some platform for the Premier, then he should be paying for it and not the people who rely on that money.

The social impact statements are done by industry themselves, and, for example, BHP has done a major impact statement for presentation dealing with social, economic and environmental impacts, etc. I am dealing here with the social impact of mining proposals, and because that one is on the table I used it as an example. Of course it is relevant that, when governments come to give approval and we as a parliament look at the indenture in due course for the BHP proposal, issues arise in respect of workforce, housing and accommodation, and services for people who might reside in the town or who may be settled in the Hiltaba development.

That is a township, if I can describe it as that, of single persons' quarters, effectively, which is to be built near Andamooka but well out of Roxby Downs. There are some social decisions that had to be made in relation to which the local people in Roxby Downs have been surveyed. They do not want to have thousands of single men, in particular, living in a town of families, so it seems, from the material prepared by BHP, that it is proposing this Hiltaba project, and it will have some social consequences and there will be issues about it. I understand that Andamooka is not too happy that it was not given an opportunity to bid for the opportunity to house these people, but nevertheless these are social impacts that are important and governments will have to consider them.

What I say is that, like all other impact statements, they are prepared either by or at the cost of the proponent, and these are costs that should be looked at and covered—including if Monsignor Cappo wants to go around and have a look at them to see what he considers social impacts—by industry or within the jurisdiction of the minister's portfolio and not under social inclusion, which takes away precious funds for those in need.

Finally, I want to address the issue of the resources rent tax which has been promoted as something that was under consideration, appeared to be withdrawn for a while and is now back on the table and is being considered by the Gillard government, and there are some negotiations pending. I think it is important that if there has been any agreement between the minister and the federal minister, or members of the department—as indicated by the member for MacKillop, who during his briefings was advised that there had been some apparent agreement reached between the state and federal arenas that there will be the capacity for a rebate of the monies paid for royalty set off against the resources rent tax. We do not know what the final form of this is going to be. It appears to be on the coal and iron ore exporter's but, in any event, when it comes we want that assurance.

I think we should see if there is an agreement reached between the departments. Two things should happen: one, we should see that document; and, second, I think we need the minister's endorsement that that is the position and that he has a commitment in writing from the federal government that that is the position and it is in place. I think that he needs to call for it, not just because I am asking for it, or anyone else in the parliament, but because he as a responsible minister needs to ensure that he protects South Australians against what has become the Gillard guillotine on our tax base. It is an important issue and if it is missed it will be a very difficult position, given that mining has and will continue to be, obviously, a major income earner for this state.

Then there is the carbon tax. Goodness knows what is going to happen with this. We were told that by the end of June we will know what the carbon tax is going to be. This is the one that was not actually going to exist six days before the last federal election but it now appears we are going to have one. Who is it going to apply to, and how will that affect all of the support industries around the mining industries that are taking up their position now?

If it is not put on petroleum, if it is not put on certain companies, that may be so, but what we are hearing is that it will be on companies that are based overseas. So this will be a tax on Tim Tams, let there be no illusion—products that are produced by companies with an overseas base. If that transpires then we will have a carbon tax filter down, not just to energy products, not just to petrol and oil and so on, but we will see a tax trickle down onto a whole lot of these products.

So we await with bated breath to see what that is going to be. But what I think the minister must assure us in due course is how this is going to affect the mining industry when, today, the minister is asking us to pass legislation to effect a promise from last year, when we were in a policy vacuum in respect of what the government was going to do.

So, it could be dangerous times, not just for the mining industry, when the two biggest federal initiatives—that is the highest you could put this—are still floating, are still undecided, and are still undefined, and of which their applicability is unknown. That is potentially a very dangerous situation not just for South Australians but obviously for one of the biggest single sectors of revenue in the state, which I think needs to be protected against rape and pillage by the Gillard government.

Mr VAN HOLST PELLEKAAN (Stuart) (15:53): I will just make a few comments. I know this subject has been covered very well by the people who have spoken before me, so I will not keep the house for too long. I have a few things I would like to say with regard to the Mining (Royalties) Amendment Bill. The first is the obvious—it is part of the budget so, naturally, the opposition will be supporting it along those grounds. While we all have some concerns about mining, whether it is social, whether it is environmental, whatever it might be, and we all agree that issues must be dealt with, and the member for Bragg delved into some social issues which are very important.

I think it is fair to say that on this side of the house we are all extremely supportive of the mining industry in general, and we are all hoping that the state will benefit enormously from it. Despite the Premier's assurances that he has single-handedly superman-ed the mining industry over the last eight or nine years, the reality is that less people are employed in mining than they were many years ago, and on both sides of the house we consider employment and jobs to be one of the most important things that we can try and contribute to.

Nonetheless, I am very supportive of the mining industry. I used to work for BP Australia back when BP Australia owned 49 per cent of Olympic Dam. I took a very strong interest in mining from that point onwards. I lived at Pimba through the second Olympic Dam expansion and learnt a lot about it then.

I was fortunate enough to arrive at the drilling camp—where the current Challenger gold mine is—when Dominion started that mine, the day the drillers received news on the satellite phone that it was going to get the go-ahead. It was quite an unusual situation to turn up there on a hot, March day, early to midafternoon, to find everybody sucking on tinnies and having a great old time and really enjoying themselves. Having been to many of the other camps in that district, I certainly understood when they explained to me that they just had word at lunchtime that all their hard work was going to be rewarded, that there was going to be a mine there. I visited Challenger many times through its expansion phase. I am very supportive of mining.

With regard to royalties and what we are talking about here—an increase in state royalties in mining (I will not going to the details because the shadow minister covered that in great detail)—I think it is important to point out that this probably will not result in a great deal of extra money for our state. I think that between the federal government's horizontal fiscal equalisation calculations and the impending resource rent tax, the federal government will probably make whatever adjustments it wants with regard to the funding support that it gives our state. So, if we gain a bit more here it will not necessarily add to the pie overall, but we will just have to wait and see how that turns out.

The one thing that is very different, though, is that the Liberal opposition went to the last election with a policy of putting 25 per cent of all state mining royalties into the Regional Development Infrastructure Fund. On last year's calculations, that would have taken the total amount of money available in that fund from something like $2.5 million to something like $42.5 million, so straightaway $40 million more directly transferred into regional infrastructure spending. I support that wholeheartedly.

While the current government probably cannot control the total amount of money that it is going to get because the federal government will probably just make adjustments offsetting these royalty increases, a potential Liberal government could certainly make some very significant decisions that would control how this money is spent.

That was a commitment at the last election and policy has not been determined for the 2014 election, but I make absolutely no bones that I will certainly be fighting very strongly for the Liberal opposition to include that again in its commitments heading towards the next election, so that we would guarantee to spend 25 per cent of mining royalties and by an increase, without going into all the details, broadly speaking, of 3.5 per cent, 5 per cent, 25 per cent of the 5 per cent, which would mean even more money for regional development infrastructure projects. I will go to my grave fighting very hard for that sort of program for regional, country, outback, remote South Australia.

Roads, as everybody knows, is an area that I am very passionate about. I believe it is completely underfunded currently throughout the outback of South Australia and the country areas. However, I point to some other significant infrastructure spending requirements which are coming up and which are going to have to be met one way or another. We could haggle about the urgency. I might think they are urgent now and the transport minister might think that they are not so urgent just yet, but the reality is we are going to have to find money for these things regardless of who is in government.

Yorkeys Crossing and a second two-lane bridge over the gulf in Port Augusta are going to be necessary. They are absolutely unavoidable. I think that this money, this increase in mining royalties, should be spent on projects exactly like that. I challenge the government to quarantine some money from the increase in mining royalties and to put it towards those things and to do it before the next election.

There is no need to wait for us to make a commitment heading to the next election and then potentially match it or not match it. Why not just get on with the job government is meant to do, which is look after all of South Australia, and quarantine some money? We are going to increase mining royalties. Why not just say straightaway that that gives some money that comes from remote South Australia, that comes from outback South Australia, and that we will spend it directly in the country and outback areas of South Australia?

The Port Augusta power station is another big issue. It is an issue that I have spoken about extensively here and in the media. It is going to be expensive. Regardless of who is in government, we are going to need a lot of money. We are going to need millions and millions of dollars to do something with regard to the Port Augusta power station. Whether it is upgraded maintenance because, over time, the quality of the coal declines, whether it is the fact that the cost of accessing the coal is going to increase over time—as we have to go deeper and further away to get it, it becomes more expensive to receive it—or whether it means that we need to do something to entirely re-jig the Port Augusta power station for environmental reasons and for carbon tax reasons, something is going to have to be done.

Again, I challenge the government and say, you have an extra 1½ per cent in mining royalties here, how about just allocating that? How about committing that money to go to some of these very, very important regional projects?

Another example—and I will not hold the house up too long with my very, very long list—would be airstrips at small towns, so that, all over country South Australia, people can fly to the mines. Most towns have an airstrip, as members would know, but most towns do not have airstrips that will take the large planes that are required by an airline to take people on economical flights to work at the mines.

I think it would be a tremendous regional infrastructure development program to say, 'We will take some of this new mining royalty income and we will spend it on airstrips, spread evenly throughout country and remote South Australia, so that people from towns can actually get on planes and fly to the mines, so that they can actually get some of those direct employment benefits.' The minister is shaking his head.

The Hon. A. Koutsantonis interjecting:

Mr VAN HOLST PELLEKAAN: The minister is shaking his head but did not have anything useful to say about the bill. So, this would be a tremendous way to spend this new money that the minister is asking the house to get for us. As I said, that would be the last one that I would mention with regard to projects that I consider to be important.

One question that I put to the minister quite sincerely is, I understand that, from the reading that I have done in preparation for speaking today, there are different ways of treating uranium and different ways of treating BHP. I am not saying anything negative about that whatsoever, but I do understand that ore taken from Prominent Hill to Olympic Dam for processing includes a small amount of uranium.

Olympic Dam extracts a small amount of uranium out of the ore that comes from Prominent Hill. So, it is important to point out that, in essence, Prominent Hill is actually, in a very, very small way, a uranium mine as well because it extracts uranium out of the ground and sends it off to Olympic Dam for processing. When the opportunity arises, I would like the minister to just clarify exactly how that uranium would be treated with regard to this change in state mining royalty rates.

Mr PENGILLY (Finniss) (16:03): I also rise to indicate support for this bill. The opposition has, through the shadow minister, quite clearly indicated its support and I listened with interest to what the member for Stuart had to say.

This whole mining debate is most interesting, and I do not know how it is all going to pan out. I am acutely conscious that, in the last few days, there has been some quite wide media coverage of the great China miracle and what might happen if China suddenly stops and if China suddenly fails. That is causing concern in the wider community.

Interestingly enough, as the matter of royalties relates to iron ore, a friend of mine—a constituent, actually—who has just done a Nuffield Scholarship, which included China, was absolutely flabbergasted to find that Australian iron ore that is not being used in China is being tipped overboard in the harbours for use at a future time. As was told to me by him, and he was told by Chinese people themselves (I am not sure whether in government or industry there), the Chinese government is attempting to procure iron ore supplies that will last 20 years so they can stop buying, and they will have 20 years' supply of iron ore resting on the bottom of the sea and they will just pick it and use it. As I say, he was absolutely flabbergasted to find this out. Similarly with wheat. I know wheat is not part of the bill but he said they are trying to procure 20 years' supply of wheat.

In South Australia we are putting a huge amount of trust in the mining industry to take us forward. It is already the vehicle which drives Western Australia and Queensland, and I am most supportive of the fact that the mining industry in South Australia will inject vast royalties into state government funds, of whatever persuasion, and enable us to put in place a better way of life for our South Australian community. However, I am not quite sure how this is going to gel throughout the bureaucracy because a situation has been brought to my attention in the last few days—and there will be royalties paid on this metal, I might add.

About 12 months ago there was a severe storm at Penneshaw which damaged the breakwater which SeaLink uses. This was brought to the attention of the government through the Department for Transport, Energy and Infrastructure, and I understand that the ferry company asked for it to be repaired posthaste. Where this is leading to is there was a failure to communicate between two departments, DTEI and the mines section that operates under PIRSA. The minister may care to have a look at this.

When they built the original breakwater they had a quarry at the town of Penneshaw about a kilometre away from which they brought the rock down to the breakwater. This time the tenders have gone out—and just remember that royalties will be paid on this rock to the government—and they are requiring that the breakwater be repaired. However, because the departments could not get their heads together about this million dollar repair to the Penneshaw breakwater, $500,000 of that cost will be used to bring 8,000 tonne of rock from Sellicks Hill quarry, down the Fleurieu Peninsula and on the ferry to Penneshaw, when there is rock a kilometre away. I have never heard anything so damn stupid in all my born days.

I am reliably informed that this is simply because two departments could not agree and grant another quarry licence or permit in time to allow this rock to be carted from a few hundred metres down the track to the breakwater at Penneshaw. Talk about an absolute waste of taxpayers' money, when you are dragging 8,000 tonne of rock down the Fleurieu Peninsula to be used on a breakwater at Penneshaw when it could be sourced from just out the back!

The point that I make is that this money being paid on royalty for the rock at Sellicks Beach will no doubt come to the government—it will not be a significant amount—but, in the meantime, they are spending, it is alleged to me, $500,000 to repair that breakwater. That is just purely the cost of the rock, transporting it down to the Fleurieu and on semitrailers, probably 25 or 30 tonne at a time, over to Penneshaw. As I said, I have never heard anything so damn stupid in all my born days. So, if you wonder why we get concerned about government expenditure and the waste of taxpayers' resources, I put that on the table clearly.

As the member for MacKillop in his shadow role has indicated, we do support this bill. It is part of the budget measure and we support that, and I earnestly look forward to future generations benefiting from the increased royalties that will be paid to government through mining over this generation, the next generation and, I hope, in 100 years, if not longer. But I plead with the minister to find out what is going on here and get his department to sort it out. What has taken place is just a ludicrous exercise. I support the bill.

Mr TRELOAR (Flinders) (16:10): I rise to support this bill and I do so because I believe we are entering an exciting time for both the state of South Australia and the electorate of Flinders. Much exploration has occurred over the last few years and I do feel confident that at least some of these prospective mines will progress to become fully operational and exporting mines in the near future.

The challenge as I see it will be to overcome the significant environmental and social issues that confront any such new venture. Those demands become even more pressing for companies operating within the settled areas of the state rather than in the pastoral zone. I make particular mention of this and highlight this because, up until this point in time, most of the mining ventures that have occurred in this state have been outside the settled areas, away from people, away from more intensive farming, more intensive agricultural activities and, of course, in less populous areas.

As the proposed mining ventures come closer to those settled areas and agricultural zones, obviously the concerns of the landholders and those people living in nearby towns and urban areas are greater. So this needs consideration; a balance needs to be found. These demands, however, are not insurmountable. As a local member, I have attended a number of meetings, with landowners and also with mining companies, and I sense that there is very much a sense of goodwill towards each other to get the best result and the best result for the community.

I have recently read a history of South Australia. I borrowed it from the parliamentary library, in fact. What was evident from this text was the very crucial role that mining has played from very early days in this colony.

An honourable member: It saved us from bankruptcy.

Mr TRELOAR: Indeed, it saved us from bankruptcy in those early days. Copper was first discovered at Kapunda, then at Burra, and then, of course, at the Wallaroo mine. These copper mines injected significant funds into the South Australian coffers, and indeed it could be said managed to pull South Australia out of a very precarious financial situation. In fact, the member for Goyder in his grieve today alluded to that heritage of copper mining and referred to the Kernewek Lowender which was held quite recently and celebrated that Cornish heritage, many of whom came to the mines here in South Australia.

It is not too long a bow to draw to suggest that we may well see history repeat itself. After a relatively quiet period over many years, it would now seem that mining in this state could possibly reinvigorate our economy once again. The proposed Olympic Dam expansion is the obvious example of this and much in the way of royalties will be forthcoming from this project. Even in my own electorate of Flinders, after many years of seeing widespread exploration, I have the sense that a number of mining ventures are on the verge of beginning their operations and it will be a significant injection into our local economy.

There is talk of development of a new deep sea port, there will be significant jobs, and the member for Finniss mentioned the markets in China. I too have had the pleasure of visiting China on a couple of occasions over the last little while and cannot help but be impressed by the expansion and growth that is going on there, the drive of the middle class to achieve an improved income, and certainly my sense is that that market will be there for some time yet.

Most mining companies will be exporting a bulk product out of this state, but I do note that in the bill there is some incentive at least, through a lower royalty rate, for companies to process, to value-add or to refine onshore before it goes further afield. To pay just 3½ per cent rather than 5 per cent for those exporting a raw product is some encouragement at least for companies to investigate that option.

I do understand that this bill is a budget measure and that we as an opposition will support this bill, but I would reiterate the words of many of my colleagues and sincerely hope that this current government manages this income stream effectively.

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Mineral Resources Development, Minister for Industry and Trade, Minister for Small Business, Minister for Correctional Services) (16:15): First of all, I would like to thank the opposition—and long may it remain the opposition—for its steadfast support of this tax measure. It is always good to see Liberal Party members getting behind tax increases. It warms my heart and my soul to see them speaking so vigorously in favour of a tax increase; it is excellent.

The government undertook targeted consultation with key mining operations on the specifics of the new royalty amendments and the transition arrangements for the new royalty rates. I understand that high-level informal consultation with key industry players has been undertaken by the Deputy Chief Executive of Mineral Resources Industries and, of course, the South Australian Chamber of Mines. I was a bit surprised to hear what the deputy leader said in his remarks. I assume what he meant is that they were consulted about the formulation of the bill, not on its introduction, or both.

Mr Williams: They were consulted before the budget announcement, but they were not aware that the bill was before the house.

The Hon. A. KOUTSANTONIS: I will undertake to find out what happened there.

The Hon. I.F. Evans: Shame!

The Hon. A. KOUTSANTONIS: Yes, we cannot reach the dizzy heights of the member for Davenport, but I will keep on trying. I am young and I am learning! Very few operations will be immediately affected by the introduction of these amendments which come into effect in January next year (so at the end of the July-December return period), meaning payment is not due until the end of January 2012. The expected dollar value of the impact of the increased rate on each operation at the time has been estimated by PIRSA. However, I do not think it is appropriate to discuss that here.

As minister I will retain powers to vary royalties in case of external unforeseen threats to individual mines. It is essential to remember that South Australia's unique, new mine reduced royalty rate, for the first five years, offers industry a significant advantage at the commencement of mining, countering, to a great extent, the later increases in royalty payments.

Without wanting to be argumentative, I disagree with the Deputy Leader of the Opposition that we are behind the eight ball compared to Western Australia and Queensland. In my brief time as minister I have noticed an overwhelming sense—from all the conferences I have gone to, all the mining interests I have spoken to—of how well this jurisdiction works. That is a credit to the opposition, as well.

It is very rare to hear those sorts of remarks, and I will give you an anecdote from my time in Canada with Norman Moore, the minister from Western Australia. While he was berating the federal Labor government for its carbon tax and its resources tax, he and I were involved in a public forum to discuss mining. Mining company after mining company talked about what a great regulatory process we have here in South Australia as compared to Western Australia and Queensland, and they held us up as an example of best practice.

I think we are ahead of the game and we are collectively doing a very good job for the people of South Australia. The important thing about that is that there is quite effective bipartisan support for the department and for the industry, and I look forward to further support from the shadow minister in the government's push to expand mining in South Australia.

A lot of members have raised a number of issues which I will talk about, and I will take some of those questions in committee. The big concern of a lot of members is what will be the impact on BHP Billiton and Olympic Dam. We have carefully modelled the impact on Olympic Dam and we do not believe that a relatively small increase in royalty payments on uranium oxide would have any significant impact on BHP Billiton's decision to go ahead with the expansion or adversely affect any current operations. Future royalties for an expanded Olympic Dam will be negotiated as part of the indenture revision for the process underway between the government and BHP Billiton.

I suppose the question is: why raise the rates now? The new three-tier mineral royalty regime will ensure that mining companies pay an appropriate dividend for revenue generated from extracting minerals owned by the people of this state. The increase in royalty rates will bring South Australia into closer alignment with prevailing rates in other Australian states and territories, and I think that is entirely appropriate.

Again, I do not want to be argumentative, but I think what the member for MacKillop was saying is that we are a smaller jurisdiction than the other larger mining states and we should be encouraging more development and exploration at a lower rate to encourage exploration. I think we do that and we do that well, and we do that with our regulatory framework and, of course, our new mine policy.

That does not mean, though, when those new mines are up and running and we have given them that competitive advantage and that pre-competitive data in advance—so, after they are up and running and doing well and they are employing hundreds of people in South Australia, and that value-add—that we should allow them to take our minerals that we own as our heritage in this stage at a cheaper rate than they get in Queensland or Western Australia. I think we should be competitive and we should encourage that investment, and we are doing our bit early on, but that does not mean we should be doing it for 40 or 50 years, for the life of the mine. So, I think it is prudent.

I think future generations will look back on us and expect of the state government—when South Australia is leading the nation in mineral exploration, when South Australia is the new Western Australia, and when we are the next mining titan, as has been said by some foreign jurisdictions and by people who research this—that we did take the appropriate steps to ensure the future of this state and its royalties. I imagine that people who aspire to the position of treasurer and deputy premier would be very keen to make sure that South Australia's tax base is increased.

In terms of what other states charge, Western Australia's mineral royalty rate for minimally processed or 'lump' iron ore is 7.5 per cent, and is 5 per cent for most metallic ores and concentrates, including uranium. Queensland's rate is 4.5 per cent, and in New South Wales the rate is currently 4 per cent, but I understand it is likely to increase in the near term. The NT has a different system altogether; it is a profit-based royalties system. Tasmania has a hybrid system with an effective maximum of about 5 per cent. I do not think it will affect South Australia's competitiveness at all.

This government does a fair bit to support the mining industry and we are very proud of our credentials. I know there was a little backwards and forwards in question time about which political party does more for the mining industry, but ultimately South Australia as a jurisdiction can hold its head up very high. The pre-competitive data that we provide through PACE is a fantastic program and it is something that I think we can be very proud of. Of course, all members are well aware of what that is.

Some people also raised whether companies were consulted about the rates increase. There has been extensive and targeted consultation with the South Australian Chamber of Mines and Energy (SACOME) and certain mining companies, including BHP, OZ Minerals, OneSteel, Iluka, which has occurred in recent weeks. Furthermore, an open industry briefing was given to members of SACOME. So, we are doing our bit. There is general support within the industry for this. The rates increase is due to apply to minerals produced after 1 July 2011.

I commend the bill to the house and I look forward to its speedy passage through both houses of parliament. I thank PIRSA for all the work it has done in preparing this bill and this legislation and for making me look exceptionally talented.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 3 passed.

Clause 4.

Mr WILLIAMS: It was not my intention to go into committee, but I felt obliged to after question time today because the Premier, in answer to a question today, said that he and the government were negotiating with BHP over the indenture agreement and said that, 'We are in negotiations to establish the royalty rates for the next 100 years,' from the proposed expanded Olympic Dam operation. My question goes directly to that point. Is it the case that the government intends to have a royalty rate established and set in the indenture that is different from what we have been debating today in this particular bill, or is it the intention of the government that, certainly for the foreseeable future, BHP under an expanded Olympic Dam operation will be facing the royalty rate as we have been debating in this bill?

The Hon. A. KOUTSANTONIS: Without wanting to pre-empt the indenture negotiations which are very sensitive and critical to the state's future prosperity, I will say this: the undertaking at Olympic Dam, in my opinion, is the equivalent of the Apollo project. It is a huge undertaking. It is the largest open mine in the world. It will dwarf Escondida. The mine size itself will be from Gepps Cross to Flagstaff Hill. That is how large we are talking about. The Bureau of Meteorology has told us that the pit will actually alter weather patterns, so the idea—

The Hon. I.F. Evans: Climate change.

The Hon. A. KOUTSANTONIS: I know you are a denier. It's okay; we can get a scientist to talk to you.

The Hon. I.F. Evans interjecting:

The Hon. A. KOUTSANTONIS: I am just talking about Brand Liberal; it denies climate change. If you want to break away from that, congratulations. I fully endorse you breaking away, being your own man, Iain, being your own man.

The CHAIR: Order!

The Hon. A. KOUTSANTONIS: Back to the point, Madam Chair.

The CHAIR: Order!

The Hon. I.F. Evans interjecting:

The CHAIR: Order! Member for Davenport, I think you will find that the minister for mines and whatnot was talking about weather, whereas you were talking about climate. Weather is short term: climate is long term. Problem solved. Carry on, minister.

The Hon. A. KOUTSANTONIS: Here endeth the lesson, ma'am.

The CHAIR: Yes, indeed.

The Hon. I.F. EVANS: Madam Chair, thank you for that lesson.

The CHAIR: I thought you'd be pleased.

The Hon. I.F. EVANS: I will hand up my homework later today and you can mark it, but thank you for that. Am I right to assume that—

The CHAIR: I hope you are not in any way being—

The Hon. I.F. EVANS: —if you add all the weathers together, you get climate?

The CHAIR: I haven't finished talking. Excuse me, member for Davenport. While I am sure you are deeply amusing, I hope you are not in any way being disrespectful towards this chair because that would be highly regrettable.

The Hon. I.F. EVANS: If it was disrespectful, Madam Chair, it wasn't meant to be. I was just inquiring—

The CHAIR: Good.

The Hon. I.F. EVANS: —since you were informing us of your view.

The CHAIR: There is no need to be flippant or facetious.

The Hon. I.F. EVANS: I was just inquiring.

The CHAIR: No; I think you were being flippant and facetious and that is completely pointless. Thank you, minister.

Mr Williams: Lost your place, Tom?

The Hon. A. KOUTSANTONIS: No, I know where I am at. The undertaking that BHP is making—and the member knows this—is a considerable amount of effort, energy, capital and wealth that will be going into this mine before it gets a bit of ore. In fact, it could even be up to seven years before it reaches the ore body so that consideration has to be put in place.

There is probably only one company in the world that can develop this mine to the size that has been talked about and if we do not have special consideration for BHP Billiton then we are negligent in our duties, because the member knows, and I know and most members in this house know that there are not many companies in the world that could undertake a project like this and go profitless as long as it can on this project before it returns an investment without any special consideration.

Mr Williams interjecting:

The Hon. A. KOUTSANTONIS: I know, but I do not want it to get out of hand that people are saying that BHP is going to get a special deal. What I am saying is that we are taking into account the circumstances and the indenture is something that will be debated in the parliament, so the opposition will have more than ample opportunity to have its say on the indenture and I think we should be awaiting that debate.

Mr WILLIAMS: I am still no more informed than I was five minutes ago. My question was simply: is it the government's intention that the medium-term royalty rate, specifically to Olympic Dam but to everybody else, will be what we are debating today? My assumption up until question time today was that the government had sat down and done its due diligence on what the royalty rate should be, where the royalty rate should be set and has brought this matter to the parliament but, in question time today, the Premier hinted that there might be some other process happening behind the scenes which might mean that the whole debate that we have had on this bill is totally irrelevant. All I am asking of the minister is, is this what the government wants or is this just a smokescreen, and we will end up with something completely different presented to us sometime in the future?

The minister has made some really nice comments about the bipartisan support for the mining industry in this state, and the things that both governments—the previous Liberal government and the current government—have been doing to try and encourage mining development, both exploration and mine development. There is a huge lead time in this industry, particularly the exploration industry, where you spend vast resources and quite often get small returns. There is a lot of hit and miss in mining exploration. When you do find something then there is a vast lead time to develop it into a working and profitable mine.

One of the keys to encouraging investment in this industry is actually knowing the risk profile of the future. A large part of that, as I mentioned in my second reading speech, is that, now the royalty rate is getting to 5 per cent of the mine gate value, that is a significant factor in decision-making. I am just trying to get the minister on the public record: is it the government's intent that this is where the royalty rate will be in the foreseeable future, or is this just a smokescreen for some other process that is happening behind the scenes?

The Hon. A. KOUTSANTONIS: Madam Chair, the smokescreen is the indenture. That is what he is trying to say, that somehow us negotiating an indenture with BHP is a smokescreen. The indenture will be brought before the parliament, so there is no smokescreen. Nothing will be hidden. I am not going to negotiate the indenture with BHP here on the floor of parliament with you now. Obviously, we will get an agreement with the company first and we will come to the parliament. We cannot do that process any other way. Can the deputy leader imagine having private negotiations about the indenture and then the minister coming into the parliament before the indenture is agreed and debating it on the floor of the house? I cannot do that.

However, what I can say to the member for MacKillop and the opposition is that the royalty rates in the bill are the government's view on what the value of these minerals should be. It is before the house and I cannot start giving you the commercial and confidential details of an indenture negotiation on the floor of the house; I just cannot do that. You know that.

The Hon. I.F. EVANS: Madam Chair, clause 4 is one of my favourites. I just want to ask the minister this very simple question because I have not partaken in this debate up to this point. Is it the intention of the government that the royalty rates set out in this bill apply to all mines in South Australia?

The Hon. A. KOUTSANTONIS: I would have thought that that was self-evident.

The Hon. I.F. EVANS: Minister, it is clearly not self-evident as I need to ask the question. Is it the intention of the government that the royalty regime set out in this bill applies to all mines in South Australia, which, by implication, includes Roxby Downs and its expansion? If the government is going to offer some discount to BHP through the indenture, I am not asking that question to be negotiated here. I ask a very simple question: is this royalty rate going to be applied to all mines in the state? If it is not, fine, at least we know; we will wait until the indenture comes in.

We are not seeking to know what the royalty rate is, if there is a different royalty rate for some mines. We were under the impression—according to the shadow minister and, if I understand the shadow minister's argument—right up until question time today that the royalty rates in this bill were going to apply to every mine including Roxby. The Premier told the house that he was negotiating with BHP about the royalty rates for the next 100 years. That seems to imply that the royalty rates in this bill are not going to apply to BHP for the next 100 years.

I do not want to know what the royalty rate that you are going to charge BHP is; bring it in with the indenture bill. All we want to know is that there might be some negotiations with BHP on the royalties. That is all we need to know.

The Hon. A. KOUTSANTONIS: Since the very early 1980s—the member for Davenport has been around this place a lot longer than me—

The Hon. I.F. Evans interjecting:

The Hon. A. KOUTSANTONIS: Sorry, early nineties. I remember in high school reading about you getting preselection.

The Hon. I.F. Evans: What was it, your social studies class, or something?

The Hon. A. KOUTSANTONIS: Yes, it was, actually; social studies. Margaret Fenwick was my social studies teacher. I am advised that there are three mines—Olympic Dam, OneSteel and Leigh Creek—that are covered by indentures. All mines not covered by an indenture will be covered by this act; but that has been the case always. The question that the member for MacKillop was asking was: will the indentures in place, and the indentures being negotiated, have this act apply? That is the question he is asking. I am saying to the committee that I cannot give you that information now, because we have not finished negotiating the indenture with BHP Billiton. And, if you want me to give you the information on the floor of the house we are jeopardising those negotiations. That is what I am saying you.

Mr WILLIAMS: Instead of having my curiosity satisfied, I am having it pricked. What is the royalty rate paid by the miners at Leigh Creek and what is the royalty rate paid by OneSteel in the Middleback Ranges? Do the indentures to those two operations override the Mining Act, and this particular clause 17 (the royalty clauses in the Mining Act)? If that is the case, is there any intention for the government to enter into negotiations with those other two companies about the royalty rate paid on those mine sites?

The Hon. A. KOUTSANTONIS: I will explain this very slowly for the deputy leader. Parliament is the master of its own destiny. If the parliament has the Mining Act and a mining royalties act, and you want an indenture for a specific work, it is obvious that the parliament can delineate between the two. I do not know how more simply I can explain this to the deputy leader. If the parliament's will is to charge in the indenture a certain rate, so be it. If it is the parliament's will to refer the indenture agreement to this bill, it is its will. So, just so the deputy leader understands, indentures are not just those; they are indentures decided by this parliament. It is almost like a whole little mining act just for one mine.

Mr Williams: I'm aware of that.

The Hon. A. KOUTSANTONIS: Well, good. So, if you are aware of that, why are we having this line of questioning? It seems to me that the deputy leader wants me to say that the rate Olympic Dam that we will be paying for the next five years in the indenture will be X. I am saying to the member for MacKillop—

Mr Williams: No, I'm asking about Leigh Creek.

The Hon. A. KOUTSANTONIS: Leigh Creek? I will get that information and I will get it to you. I understand that they do vary, but I will get that information for you. I do not have it here at hand, but if I do, as the debate goes on I will give it to you. On Leigh Creek, coal from Leigh Creek is used solely to feed the power stations at Port Augusta and pays a royalty amount that is calculated under a formal agreement with the state, rather than a percentage rate. Therefore, at this stage, Leigh Creek coal production will not be affected by the increase in the royalty rate. In future, should new conventional coalmines come into production, they will be subject to the new rates of 2 per cent for a declared new mine for the first five years, increasing to 5 per cent thereafter.

Mr WILLIAMS: The minister has answered the question with regard to Leigh Creek; he has not with regard to OneSteel.

The Hon. A. Koutsantonis: Give me the Whyalla Steel Works Act and we will show you.

Mr WILLIAMS: I am aware that there is a special consideration where there is a 'less than arms-length' (I think that is the terminology used) deal between the mine site and where the product is being used, which is the case with Leigh Creek. The one company operates the mine and also uses the product from the mine which is burnt in the Port Augusta power stations.

With regard to OneSteel, it is somewhat different because it now has two mining operations. One produces magnetite, which is then used—not dissimilarly to what I have just described with regard to Leigh Creek coal and the Port Augusta power station—at its steel works in Whyalla. So, there is, I guess, a not at arms-length relationship between the mine and the use of the mineral produced from that mine. That is with regard to its magnetite business.

They also still run, I understand, a hematite mining business. It used to be used in its steel works but it has converted that to a magnetite operation through Project Magnet, but the hematite is still mined and, I understand, exported. So, we have a dual operation by OneSteel. It has this not at arms-length operation where the product of the mine is used in its own steelworks. Then it has this other operation where what it mines is exported.

Can the minister inform the house whether those two different operations are covered under the indenture act? I think we did change the indenture act some years ago—it is more than a couple now. Is it the case that material exported will now be paying the 5 per cent? I guess my original question was: is there an intention to go back and relook at that indenture act or is that not the case? Are we just going to allow OneSteel (formerly BHP) to continue under the conditions of its existing indenture and is there a differentiation between those two operations?

The Hon. A. KOUTSANTONIS: I am glad that the opposition is having a whale of a time.

Mr Williams: No, I am just happy on the surface and seriously trying to get some information.

The Hon. A. KOUTSANTONIS: The Whyalla Steel Works Act 1958 is being negotiated now and will be brought before the house as soon as that negotiation is completed. I am advised that the royalty is still calculated in pence.

Mr Williams: That is why we were having a joke.

The Hon. A. KOUTSANTONIS: You are probably two people who would remember dealing in that currency.

Mr Williams: Absolutely.

The Hon. A. KOUTSANTONIS: I have no memory of it myself.

Members interjecting:

The Hon. A. KOUTSANTONIS: There you go and Charlie Cameron Kingston spoke at their school. So, when that is negotiated, I will bring back the bill to the house and, of course, offer full briefings to both members who are fascinated by royalties calculated in pence.

The CHAIR: So, are you happy? I mean, that is a ridiculous question. I am sorry. I don't know what I was thinking; that was a silly use of language. Do you have any further questions?

Mr WILLIAMS: Let me suggest that I have no further questions.

The CHAIR: Excellent.

Mr WILLIAMS: That does not imply that I am either happy or satisfied.

The CHAIR: Well, perhaps that is not our problem.

Clause passed.

Remaining clauses (5 to 7), schedule and title passed.

Bill reported without amendment.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Mineral Resources Development, Minister for Industry and Trade, Minister for Small Business, Minister for Correctional Services) (16:45): I move:

That this bill be now read a third time.

Bill read a third time and passed.

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