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House of Assembly - Fifty-Second Parliament, First Session (52-1)
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ROXBY DOWNS (INDENTURE RATIFICATION) (AMENDMENT OF INDENTURE) AMENDMENT BILL

Committee Stage

In committee.

The Hon. L.R. BREUER: I ask some indulgence from members of the house because, as Speaker of the house, I have not been able to speak on the bill but, as the local member for the district of Roxby Downs and having been involved in what has been happening for many years, I would really like to be able to speak to this; and also to get some reassurances from the minister, following on from the questioning from the other side, in the same vein.

Members interjecting:

The Hon. L.R. BREUER: It is very interesting being this side and keeping my mouth shut. A number of times I had to restrain myself very carefully. There are some issues that I would like to clarify on behalf of the people of Giles and my part of the state concerning the impact that it will have on our local communities. First, I want to express my full support for the legislation and I appreciate the opportunity to make some comments as the local MP, because I think it is important for me to pass on comments from my particular electorate.

I am fully supportive of the indenture and what is happening there, and I want to congratulate all concerned who have been involved in this because it has been a long and very difficult process, I know, in getting to the stage that we have in the last two days.

My feeling is that it will certainly change the face of South Australia, but particularly in my part of the state. I remember when I was first elected 14 years ago what dire straits we were in in my part of the state, but certainly in the last 14 years things have picked up; and I think that the Olympic Dam expansion will be a real turning point in our future and all of us will benefit. It was interesting to hear the comments of the member for Goyder, the member for Stuart has commented about it also, as has the member for Flinders and, certainly, me. We will benefit, I think, more than anyone from the expansion of the dam; it is very important for us.

There will be an opportunity there for our young people, for our Indigenous community and for our numerous trades people, and so many other occupations will be involved in the service industries, etc. It is really important for us. It is going to be a wonderful opportunity for us for the future. I also have to express my appreciation to BHP for the consultation they have done with our communities. I presume that they have consulted with the other communities as they have consulted, certainly, with my community, Whyalla.

They have been in there for a number of years talking to us about various aspects of the proposal to expand the mine. They have talked to our communities. They have come in and kept constant contact with us, and that has been appreciated because we have been able to find out some of the answers that we needed to know. I have been on record many times talking about my concerns about the desalination plant. I suppose that will be considered later.

I do have concerns about the location of the desalination plant, as do many in my community of Whyalla, particularly in regard to the cuttlefish but certainly in regard to our other marine species that are based in that area. We have concerns about the tidal movement in that particular area. However, the EIS and the experts say that we will be okay, so all I can do is say that we have to trust the experts and hope that it is all okay.

We also have a number of years, I understand, before that will be completed or even commenced, so, maybe there is still time if we need to do more work for that. However, I am concerned and wanted to ask the minister about it. Maybe I have missed it, but not one person has actually mentioned the issue of Andamooka in their discussions and the impact of the mine on Andamooka.

Certainly, as the local member for Andamooka, I am very, very aware of the impact that that is going to have on the community of Andamooka. It is only a very small community but a very important community, and I feel beholden to ask the minister about some issues regarding Andamooka. Again, I ask an indulgence. Can I just read a few extracts from a letter that was sent by the Andamooka Progress and Opal Miners Association? Peter Allen, the chair of that association, sent a letter to minister Russell Wortley on 24 October.

Last week I was able to meet with Peter Allen. I asked him to come down to Iron Knob and meet with minister Wortley, me and the Outback Areas Authority. I am interested to see Mark Sutton here tonight who also met with us last week. The Grants Commission came over from Canberra and we had a discussion about the future of Andamooka. Peter wrote to the minister, saying:

I write on behalf of the Andamooka Progress and Opal Miners Association and the community of Andamooka to request your assistance to address a situation that has reached an untenable and unsustainable position.

The town of Andamooka is an opal mining community that had approximately 400 people in the seventies. With the discovery of the Olympic Dam ore body the town itself actually started to change. The letter continues:

...into the mid 1980s many opal miners were involved in the sinking of the first mine shaft, the Whenan shaft, and the community of Andamooka continued to play host to the Olympic Dam mining operation. Accommodation for a variety of workers was provided...

The population of Andamooka increased but since that time the population waned for a while. Now it has started again. With the expansion phase in the late 1990s, it started to expand again. Currently, around half of the working-aged residents commute to Olympic Dam for employment. The number of permanent residents has been increasing and stands at around 800 at this time. However, the management of the community is way beyond the ability of volunteers.

Andamooka is run by a progress association, by a volunteer group, two-thirds of which are pensioners, sick and unable really to participate fully. Some of them are business people. Really, it has been left basically to the chair, Peter Allen, to do the work that is involved in what is happening with the expansion in the mine with the help of the Outback Areas Authority. He is doing things.

He talked to me about the fact that he had 11 inquiries on one day—last Friday—from developers wanting to develop in Andamooka. None of this has come out in the discussions that we have been talking about today. Andamooka is devoid of most accepted infrastructure which is taken for granted in most of the western world. They get $50,000 a year from the Department of Transport for the maintenance and construction of unsealed roads. They have very little other income that comes into their township and they are trying to run the town.

With the expansion of the Olympic Dam mine, the town's population will rise alarmingly. It has already begun, with some 120-plus development approvals in place as at July of this year. One of the proposed developments is that of the Opal Inn, costed at up to $12 million and including the provision of accommodation units to cater for 120 people, as well as new hotel facilities and the inclusion of 20 poker machines. This development is not for the townspeople of Andamooka, but for the Olympic Dam expansion.

The method of volunteer government has been in place for many years. In the last three years it has been unable to cope with the demands placed upon it and it has to be replaced by a model that can be successful and sustainable. It is a matter of the utmost urgency. I know that Peter is very stressed. It is getting beyond his capabilities. It is getting beyond the town's capabilities. There seems to be very little recognition of this, and that is where one of my major concerns is: we must recognise the impact of the expansion of Olympic Dam.

BHP has indicated that because there is no expectation for its workers to live there that it has not been included in this indenture act. Peter has asked:

In conclusion, I ask for your assistance in whatever manner may be available to aid the Outback Communities Authority and the Andamooka Progress and Opal Mining Association in managing the community now and into the future.

I was somewhat heartened earlier today when I spoke to minister Wortley. After our meeting of last week he has come up with a number of proposals, which I will be talking about more with him. So, I think there will be a short-term solution; however, there needs to be a long-term solution for Andamooka as well, because it is absolutely involved in the process of the expansion of this dam. It will have a major impact on the community and I believe that the state government has an obligation to support that community.

Again, I want to know what assurances we can have for the community of Andamooka. What assurances can we have that they will receive significant support from the state government? Following on from previous comments from the opposition, we want to make sure that our communities benefit to the maximum: to use local engineering firms where possible, transport service industries, etc. I want support, as I said, for Andamooka.

I would be very happy, of course, if OneSteel steel could be used in the construction. That would be wonderful for us and Whyalla because the steel industry in Australia is struggling, very much so, and we know that very well. I also want assurances that the infrastructure and services will be there for the community. Are we going to be using local resources there, or will we be able to get them in from Adelaide, etc.?

There is a significant birth rate in Roxby, the highest in the country. There are backup services but we are going to need a lot more in the future. One of the real issues for Roxby Downs people, and I see this all the time, is that there are many young children living there, babies, etc., but there are hardly any grandparents, and you really notice that in a community, how important grandparents are, because they are not there to back up the community and the families. So, we need to provide other services.

It has always been a young community and it will probably continue to be a young community, and we have to provide those services. If the young parents in this place did not have grandparents around then I am sure that a lot of them would be in a lot of trouble. When you are 200, 400 or 500 kilometres away from the grandparents, then we have to make sure that the infrastructure and services are there in the community for those parents and families. Again, where we can use local services, I would ask that you are looking at them. This has been left out of the picture a bit because we have been talking about the expansion of the dam rather than the expansion of the community and what has been involved in that.

I do not want to take up any more time, I just wanted to get on the record. I congratulate all those involved once again, particularly the former premier and also former treasurer Foley for the work that he has put into it. The Olympic Dam Task Force has put in an incredible amount of work, and Paul Heithersay has been involved in it for many months (years), and previously it was Paul Case. I know they have been very concerned with the social aspects of what would happen to the town of Andamooka.

I hope that the Greens get over whatever their problems are because for our part of the state this is our future and if they hold this up then I hold them to ransom. All their good talk about how they feel about it and they want to do this and they want to do that and protect people, etc., is rubbish when it comes to the expansion of the Olympic Dam. We need this desperately in our part of the state.

The Hon. A. KOUTSANTONIS: I will say very briefly at the outset that when the member for Giles speaks, I listen.

Members interjecting:

The Hon. A. KOUTSANTONIS: No, I wasn't. I have done plenty for the member for Giles and she is someone I have a great deal of admiration and affection for.

BHP currently provides the bulk of water connections providing potable water to the township. There is also potential for the provision of ICT connectivity to Andamooka, and this would be dependent on the type of capacity of the infrastructure that BHP provides to Hiltaba. They subsidise the school quite heavily already. They supply the water. When there was damage during the flood, BHP repaired the pipework and returned that water supply. In terms of the subsidy to the school, they return approximately $70 per child to the area school. The company funded tens of thousands of dollars for the restoration of historic cottages at Andamooka and associated interpretive signage.

Obviously the state government will always be there for you and Andamooka, and we will meet regularly. The task force will be meeting with BHP monthly to discuss all these issues. Obviously, all local members, when their local communities are affected, are more than welcome to have input into that process. Ultimately, Andamooka will see the benefit of the expansion even if it is not directly articulated in the indenture.

Ms CHAPMAN: On the same clause, pages 44 and 45 of the indenture, I start by indicating that I have questions about the use of both 'services' and 'labour' in this clause. They are both covered. It is fair to say from the answers you have provided to date that two things are clear; one is that there is no binding obligation on BHP, a party to this indenture, to employ anyone. However, there is a reasonable expectation from the information you have that they will find it most convenient and commercially beneficial to them to explore and exploit—and I mean that in a positive sense—the available workforce in South Australia due to location, accessibility, and accompanying things, such as language and the like.

An honourable member interjecting:

Ms CHAPMAN: Well, I hope that the member for Morialta is listening because he will probably be the only one who will be alive by the time this contract comes to fruition. He is the one to whom we are bequeathing the obligation to ensure that there is some compliance with this indenture—so listen up, member for Morialta. I go back to the expectation that BHP will find it commercially viable to explore and harvest from South Australia, as best they can, opportunities by way of employment.

Last year, members of the opposition attended the mine, and it was of benefit for me to be able to go back to the mine after a number of years. On this occasion, I did not go underground, but I was briefed with my colleagues, and there was an expectation provided to us at that time that there would be a combination, about fifty-fifty, of fly-in and local employment. That was the reasonable expectation they had on the basis of the expanded employment that was available. We are talking the 6,000, the 4,000, the extra 15,000 and the like that were quoted in the explanatory material for the promotion of this indenture and agreement.

I note the minister's confirmation that it is his understanding that it is currently at about 65 per cent. I want to address a number of the clauses here because the second aspect from the minister is that his understanding, although there is no legal obligation in this regard, and the expectation, as I have indicated, are that he is in some way prohibited by either the Australian Constitution or some trade practices law from imposing any impediment to a completely open free-trade agreement. I think it is fair to say that in the general marketplace that is a reasonable assumption to make; that is, that there is considerable difficulty, including from consumer and competition laws, in actually restricting the terms of a contract for the purpose of employment.

However, it seems to have escaped the attention of the minister that what is happening here is that BHP is an existing important company in South Australia. They and their predecessors have, for the last 35 years, been exploiting this resource, and there is no indication whatsoever that they would not continue in that role, even if they didn't have the opportunity to go into this fourth phase of the development of this mine, the fourth time they have come to the parliament to seek some protection by way of indenture.

It also seems to have escaped the minister's attention that it is actually BHP that is seeking, not unreasonably, to have some security of access, some ownership ultimately by way of free title, some exclusive use—and I will not go into the merits of these things at the moment—and, obviously, a significant cap on the royalty rate that is imposed, all in exchange for obligations that the state government, on behalf of South Australia, could quite reasonably expect. In presenting to the South Australian public the benefit of this arrangement in providing all these privileged positions to a significant player for the economy of South Australia, they equally have an obligation. You, minister, with the government, have an obligation to explain to South Australians how you will ensure that the promises you make about expectation of employment and private local contracts is going to come to fruition; in particular, the presentation to them that there is an expectation that there will be a large slice of the 25,000 work force that is expected to develop as a result of this expansion.

The question has been raised about the qualifications on behalf of BHP—and I note subclause (4) also gives it another out, if we want to describe it as that—and that is that they are in no way required, as a company or any associated company, to act other than upon commercial considerations. My first question is: why is it that we are here now being asked to pass this indenture before BHP has indicated any commitment to provide the funding to proceed with this venture; that is, in advance?

The state government has come in to sign, for good or bad, terms of the agreement, and the BHP representative in Melbourne has come to the party to sign about the commitments they are going to make, but London's meeting of the board is yet to make a decision about the progressing of it. I understand that you have published, or the former premier has published, his requirement that there be a 12-month rule in the commencement of the implementation of this to ensure—I think, from what I have read between the lines of what he has said—that there is some reasonable expectation that they will progress that commitment, so that they do not just sit on the indenture.

Having done the signatures, can the minister explain to me why we are progressing this indenture before we have two things? The first is a commitment from BHP in London that they will actually progress this on the basis of the indenture occurring, not just think about it in the meeting in April next year; and, secondly, your government has not explained to the people of South Australia what financial commitment it is going to make and allocate in its budget to provide for the schools, clinics, etc., regarding your obligations on our behalf in the indenture.

The Hon. A. KOUTSANTONIS: I think there were about 15 questions there, and every question was premised with, 'My first question is'; but that is fine. I understand the member's passion for this, but I know that when I spend $25 billion I like to have a bit of certainty ahead of me. I think when you are asking the largest mining company in the world to embark upon the largest mining venture in human history—

The Hon. K.O. Foley: Any history—plant history.

The Hon. A. KOUTSANTONIS: —any history—they would want some certainty. I think what the opposition is putting to the government is that they would expect a massive commitment of investment by BHP in the order of between $25 billion to $30 billion in advance of an indenture passing. If you can do that, you could sell the Bakewell Bridge.

Ms CHAPMAN: Clause 3, minister—

Members interjecting:

The CHAIR: Member for Bragg, you can continue.

The Hon. A. Koutsantonis interjecting:

Ms CHAPMAN: I know, we are being nice to each other. We have had the edict from the Premier. I withdraw calling you a grasshopper on heat, and you are going to be nice to me, so we are just going to get through tonight. Clause 12(3) has been omitted. This is a removal from the indenture. Just for the record, I know you said you were going to offer this new indenture as some kind of precedent, but I remind you that this was an indenture drafted back in 1981 for approval of the parliament in 1982. It has been changed twice. This precedent is 30 years old.

We are not drafting a new contract: you are drafting an amended aspect to the indenture, and you have removed subclause (3). Subclause (3) anticipated that there would be a magnificent Technology Park developed and that it would be accessible for the purposes of research. That has happened, of course, and there is Technology Park. It might be full, it might not be available for research, I do not know, but perhaps you can explain to us why that subclause has been removed or at least not reworded to confirm the accessibility to Technology Park.

The Hon. A. KOUTSANTONIS: Rather than being prescriptive about a site where the innovation and research will occur, I am advised that we have on the following page subsection (5)(f) 'opportunities for research, development and innovation.' I think it gives a more broad appeal for BHP to be able to invest in different sites rather than just being committed to one site at The Levels.

Ms CHAPMAN: I will just clarify that, because all of those subclauses relate to the company's obligation as to what they are going to do in relation to the plan that they have to prepare for you to approve; it is not the other way around. Subclause (3) imposed an obligation on the then state government to make Technology Park available for the purposes of research. I think you are saying that you have taken it out because you think they can go anywhere that they might do that and you are not obliged to give them anything because they have not chosen to go there necessarily; they have not asked for it, or whatever.

The Hon. K.O. Foley interjecting:

Ms CHAPMAN: That's what I just said before. I note you are listening carefully, thank you, member for Port Adelaide. Subclause (5) is the obligation on the company for them to put a plan to you, minister. So I am not quite sure how that means that you are going to make available other spaces, because I do not think it is. Am I right in that assessment?

The Hon. A. KOUTSANTONIS: All subsection (3) provided was that we would give reasonable consideration to the use of this park as a site for research and development activities for the purpose of this indenture. It did not require them to go there. Given what the member for Waite was saying, when his party negotiated the indenture in 1982 they were using terms like 'reasonable consideration', 'experts in their field' and 'great negotiators', but when we do it we are hopeless, I think what we are trying to do is say that we do not want to restrict BHP to one site. We would like them to engage with all our universities—University of SA, University of Adelaide—

The Hon. K.O. Foley: Laureate.

The Hon. A. KOUTSANTONIS: —Laureate, Flinders University.

Mr Hamilton-Smith: We will come to that in a later clause.

The Hon. A. KOUTSANTONIS: Okay.

Ms CHAPMAN: I thank the minister for his answer. I think he has acknowledged that (5)(f) has nothing to do with 12(3) and in fact relates to the company's obligation with respect to the plan and not the reverse. In any event, I appreciate that answer. On the workforce itself, one thing that is evident is that, in the pecking order of BHP's investment in Australia, we are certainly not first. We would be struggling to be second and, arguably, we are even fourth.

The reason is this: obviously, we are not the first. BHP Billiton acquired Western Mining's assets, which existed extensively in Western Australia and in Queensland. Those who have read the indentures in those states, including the proposed significant coal expansion in Queensland, would understand that BHP's eyes are not exclusively on South Australia. There is no question that they have an investment at the Olympic Dam station and that they have developed the Roxby Downs site, but they have maintained their headquarters in Melbourne.

BHP is building a multistorey new building in Perth as we speak, which you may have been over there to see. I have put that on the transcript, minister, but it is the reality. They already have a magnificent building in Perth, not surprisingly; they have a massive investment in that state. If you have an opportunity to go to Perth, you will see a very significant new building. I am not sure whether, when it gets to finished height, it will be the tallest building in Perth, but it is a very substantial investment.

If you couple that with what we all had to see—that is, the Premier having to get on a plane to go to Melbourne even to sign the indenture, which I thought was humiliating—I suppose it at least brings us down to earth about the reality of BHP's perception of us. The reality is that we have to appreciate that we are not the only attraction in Australia for BHP. If you couple that with the quite significant advertising campaigns they already operate in all those states, including in Melbourne (to the best of my knowledge, they do not operate any mines in Victoria), as do Rio Tinto and Xstrata—this is not something exclusive to BHP, and I am not presenting them as something unique in this regard—the reality is that they are already out there presenting to the public of South Australia the opportunity to live in major cities and work in the outback in their mines.

When I arrived at the Melbourne airport on Monday, I saw a great big banner up in lights that said, 'Mining career, Melbourne living.' Then in the smaller print it outlined the opportunities to develop a career while having all the benefits of the cafe latte set in Melbourne but being able to fly in and fly out to Queensland, to Western Australia, offshore or to our mine here. It gives an appreciation of the level of sophistication that is already out there that will have a contra benefit to what we are being told, and that is the primacy of wanting to promote local employment.

The second thing that concerns me is that, having worked on this project for a number of years and having statements from time to time by your predecessors and the former premier of the importance of understanding the skills that would be required for the development of this mine, we hear that geology is very low on the pecking order.

We have a significant under-representation of that in our universities as a course and the question of it even remaining on the national curriculum, and we have the complete inept response when we have to ask current education ministers what they are doing about this. Whilst there has been some continued promotion of maths and science that was started under the previous government, really there has not been any significant preparation for what is necessary for the skills base of the workforce of this mine.

All of the things are stacked up against the culmination of there being this dream, this panacea, of work opportunity for our predominantly young South Australian population and that is very concerning because as you know we lose, depending on the year, some 3,000, 4,000 or 5,000 people net per year from South Australia into other states, predominantly to Queensland. It remains a concern to me what is being done to arrest that and to be able to prepare for that opportunity which otherwise has eclipsed us.

I ask you minister: what efforts has your government made in the last six years to prepare for that 25,000 workforce? If you can point to any establishment of a chair in the university such as Santos did when the development of their opportunities came and the development of their faculty within the University of Adelaide, as an example, I would be very pleased to hear it.

The Hon. A. KOUTSANTONIS: Let's just clear up a few points to start with. South Australia has the largest cohort of geology students in the nation.

Ms Chapman: Cohort—what does that mean?

The Hon. A. KOUTSANTONIS: Students, I am advised. The premise of the question was that we are the lowest in the nation. I suspect that if BHP turned up and said, 'We want to build a massive, big building in the middle of Adelaide,' the people who would be opposing it are the same ones who are complaining about them not building one.

If I had a choice between a mining company spending probably the largest amount of money on removing an overburden before they make a return or moving their headquarters here, I would choose the mine. The opposition may not. I am not sure that the days of the 1980s when we travelled the world saying, 'Open a mine in South Australia and move your headquarters here and move all your staff here—'

Ms Chapman: You did with the Santos indenture.

The Hon. A. KOUTSANTONIS: Exactly—an indenture with Santos. When was that? What year was that?

Ms Chapman: Two years ago.

The Hon. A. KOUTSANTONIS: What you are saying is you want BHP to move out of London, move out of Melbourne, move out of Perth and move to Adelaide. Quite frankly, what I would rather BHP do is invest in doing the work to make sure that this mine gets operational because this mine will change the face of mining in South Australia.

An honourable member interjecting:

The Hon. A. KOUTSANTONIS: Great contribution, yes.

Ms Chapman: I asked what you're doing.

Mr Whetstone: We're listening.

The Hon. A. KOUTSANTONIS: Yes, I'm sure you are. You asked what the government has done. The Centre for Exploration—

Ms Chapman: Any idea what it is?

The Hon. A. KOUTSANTONIS: The Centre for Mineral Exploration Under Cover and the government through PACE supports the professional chair a hundred per cent. The government also supports 50 per cent of the chair for mining geology so, yes we are. Again, you purport a premise to the parliament. You are not accountable for it. There will be nobody accusing you of misleading the parliament but you start with the premise that we are the lowest people involved in geology in South Australia and that is not true. You say that we have not invested anything in any sort of professorial chairs for mining and it is not true. BHP is investing nearly $30 billion on a mine that will not see a return for decades. That is not good enough for you.

Ms Chapman interjecting:

The Hon. A. KOUTSANTONIS: What am I doing? We are trying to pass an indenture that will create over 15,000 jobs and all we are getting from the opposition is that it is not good enough.

Ms Chapman interjecting:

The Hon. A. KOUTSANTONIS: Well, fine, then I say to the member for Bragg: vote against it; vote with your conscience. But, of course, the member for Bragg will not vote with her conscience; she will vote for it. She wants the best of both worlds: if I drown, I am innocent, if I float, I am a witch. That is exactly the point of view that is letting this state down. The Leader of the Opposition has shown more leadership in this debate than you have ever shown in parliament.

The CHAIR: Minister, would you like to move that—

Ms Chapman interjecting:

The CHAIR: Member for Bragg, take your seat please.

Mr Whetstone interjecting:

The CHAIR: Member for Chaffey, I am about to ask the minister to extend time—okay? I know you all seem to know more than I do.


[Sitting extended beyond 22:00 on motion of Hon. A. Koutsantonis]


Ms CHAPMAN: I regret to note that your answers give me no confidence in relation to the labour workforce, and I am very sorry about that, because this is a very significant aspect of this bill in relation to the expectations of South Australians, and it is very concerning that you cannot name one single thing that your government has done in preparation.

I ask now in relation to engineers, surveyors, architects and other professional consultants. The reason that I ask is that you will be aware that, under 457 visas, people have the opportunity in Australia to advertise for work outside their local workforce, to bring people into Australia if they cannot secure the expertise and skills in Australia, and South Australia is no exception to that. In fact, we have some extra provisions to make it a little easier to bring them in, in a number of circumstances where there is a skilled workforce shortage.

Incidentally, that is a classic example where there is a threshold where an obligation is to be met before an employer can go off and get workforce outside the area that is to be encouraged. But it is concerning for one other reason; that is, I am told that recently engineers have been removed from the list of skills that we need in Australia for immigration purposes and for the opportunity for people to come and study here.

A resident of South Australia from India who recently came to me had undertaken an engineering degree but had converted to accountancy when he was advised that engineering was no longer on the federal list for the purposes of skills shortages to come into Australia, to be able to get permanent residency. That is exactly the sort of thing that is of concern for members on this side to hear when we are trying to develop a skills base that is necessary, not only to support this mine, but also other manufacturing and development in South Australia.

My question is: what action have you taken, minister, or a representative from your department, to ensure that the areas of expertise that we need for the purpose of applying for permanent residency and, therefore, bringing people to South Australia—hopefully who will stay here or at least have a chance when they get here—to explore those professions which will give preference to them?

The Hon. A. KOUTSANTONIS: I am not sure if the member is aware that I used to be the state migration minister until the recent reshuffle. We were in regular contact with Chris Bollen's office.

Ms Chapman interjecting:

The Hon. A. KOUTSANTONIS: Yes, you never asked me a question once.

Ms Chapman interjecting:

The Hon. A. KOUTSANTONIS: Sure.

Ms Chapman interjecting:

The Hon. A. KOUTSANTONIS: Chris Bollen is very good. He is a very good minister. Obviously, the federal government and the state government are in constant contact about skill shortages. One of the problems we have—and I have to say that if you are going to have problems this is the one you want to have—is that we have a skill shortage; and we are doing all we can to try to bring the skills that we are short of into the state. Ultimately, it is a matter for the federal government.

We are constantly negotiating with the commonwealth government about skill shortages and constantly asking for a greater proportion of the share of skilled migration into South Australia. However, there are some fundamental problems with that; one is that there is no restriction of borders in Australia once you land. When the commonwealth government grants 457 visas or visas for entry to a particular state, the only way they can monitor them is through Medicare or through a family benefits application. Often, what is happening is that some people are trying to jump the queue by applying through a skill set in a state that has a regional status.

Perth has a regional status (recently), South Australia now has a regional status and Tasmania has a regional status. I understand, and I could be wrong, some parts of New South Wales have regional status. But what happens is that a lot of these migrants come in and they go straight to Western Sydney where minister Bollen's electorate is. As a nation we need to grapple with travel between borders and migration in terms of skill shortages. The best way to do that, and what the commonwealth is doing, is trying to link visas to jobs.

Under the old system we would say, 'We need more engineers,' so we would get an allocation of, say, 8,000 skilled migrants and we would say, 'At the top of that list is mine engineers.' So, a mine engineer who wants to migrate to Australia could jump the queue. They might want to move to New South Wales but they can see a South Australian point of entry and they jump the queue. Once they land here, there is nothing that we can do to keep them in this state.

The commonwealth is trying to grapple with that by getting the companies that are seeking the skilled migration to do the visa applications based on a location. Ultimately, the commonwealth is dealing with this. It is a very difficult set of circumstances. Obviously, the federal parliament is in gridlock. There have been many attempts by the federal government to amend migration laws, especially quite recently because of offshore processing. I do not think you are going to see many changes to our migration laws in this current parliament, simply given the nature of the parliament.

What happens is that we are back to the old days when state ministers turn up to national meetings with federal ministers and we are into this bargaining stage where we all want more. Quite frankly, as a state, I was very disappointed when Perth was given regional status because that is unacceptable. But that was a decision of DIAC at the time and I think it disadvantages us. I want to pay tribute to Amanda Vanstone and the former Howard government because they struck a very good deal with the then Rann government about skilled migration into South Australia which would positively discriminate for South Australia. Unfortunately, that has now lapsed.

I understand what the member is saying. It is a good problem to have. There is very little we can do about it.

Ms CHAPMAN: So that I can be clear about this minister, do I take it that what you are saying to me is, because it is too difficult to deal with, you have not actually asked in the time you have been minister? You have not asked for engineering, surveying, architecture and the professional consultants relating to mining to stay on the list for permanent residency opportunity? Is that what you are saying to me? You haven't because it is too hard, or—

The Hon. A. KOUTSANTONIS: No, with all due respect to the member for Bragg, that is not quite how it works. I have many times asked former minister Chris Evans and minister Bollen about the skill shortages relating to the mining industry in South Australia, the manufacturing industry in South Australia and, of course, the agriculture sector. As the minister for industry and business, many competing sectors are coming to me, saying, 'We need more skilled migration.' Still, manufacturers are coming to me regularly asking for more skilled migration in their sector because they are competing directly with the Chinese.

We have a high Australian dollar. It is very expensive to train skilled artisans so they are wanting to import them from overseas to get into the work very, very quickly. It is a cost-competitive problem. I do ask regularly and I do lobby as much as I possibly can, but ultimately the decision is up to the commonwealth minister. It is not that I have not tried, I have, but the decision is with him.

Ms CHAPMAN: Thank you. In relation to the local contractors, which has been the subject of questioning tonight, the most published example of the opportunity for BHP to demonstrate its commitment to local and regional contract opportunities was the housing for Hiltaba's development. We heard of the 3,000 it sourced from China. I think that you have explained to us that they have purchased 1,250 within, I assume, South Australia. However, reading the recent press from Mr Della Valle those figures are consistent. I think that, from what you have said tonight, there is a 35 per cent, or thereabouts, penalty that they have paid—that is what they have explained to you, notwithstanding that they have bought some locally and they are sourcing the rest from China.

This was probably the first opportunity for the company to show good faith to all of us but including to the government about their commitment to this principle, that is, look local where it is at least commercially competitive. What I would like to know, minister, is what inquiry has your department made about the terms of that arrangement of BHP? Have they simply just said to you, 'Look, it wasn't commercially an option. We got 3,000 from China. They were by far the cheapest'; or was it, 'We couldn't get 3,000 more', because my reading of the press from Mr Della Valle is that it was not a question of price competitiveness. That was not mentioned in the article. What was mentioned in the article was availability of access to that source.

I was reading that as there just was not another 3,000 house building capacity within the housing market here to provide that service. On the other hand, I am sure that I am like other members in this house in that the housing industry is saying to me, 'Look, because of change of federal rules and the like and first home owner grants we're actually in a huge downslide in the building of new homes.'

There are a number of companies in South Australia, and there are certainly some just over the border in Alice Springs and more in the Northern Territory, that are big builders of housing for remote areas, particularly mining companies. We know that in the west they are converting, for a cost of about $12,000 to $18,000 per unit, containers—and I had a look at one of those in Western Australia not long ago—into quite presentable accommodation, usually for a single person.

They are not huge, but when one compares that with the area that is proposed for the units for affordable housing at the Bowden development at Clipsal, they are positively palatial. I would just like to know what they have told you. Was it cost alone? What attempts did they make to search in South Australia to buy these properties? When did your government first know that it needed 4,500 houses ready to start next year for its development for presumably the commencement of the dig, and what action more particularly has your department taken to coordinate that with the housing industry for the provision of that contract, or did BHP not even come to you to ask your help to prepare for that inevitable first very big contract?

The Hon. A. KOUTSANTONIS: I think the question is: why have you failed so miserably in every aspect of this endeavour? I think that whatever answer I give will not be able to satisfy the member. She asked, 'Of the 3,000 units that BHP purchased from China, was it a case that they purchased only 3,000 because they could not get any more?' I am advised that they could have gotten more but they made a decision that—

An honourable member interjecting:

The Hon. A. KOUTSANTONIS: I do not know what it said in the paper, I am talking about the advice I have received, and if it is wrong then I will correct the record. The advice I have received is that, yes, they could have purchased more at a 35 per cent efficiency dividend, but they did not. They spent 35 per cent more and bought over 1,200 local ones. Why did they do that? I think BHP is a good corporate citizen and it wants a social licence to operate.

Is it a good commercial decision? Probably the eggheads in their departments would say no, but I think that sometimes they make decisions that are based not on good commercial decisions but on, one, probably maintaining a strategic presence locally. So, if something does happen in China and they cannot source, they have a supplier here. It is diversity of supply and that is why they split it. Two, social licence to operate. Three, maybe they want to test the capability of the local market, they want to see their ability to deliver. These are all good things that multinational companies do.

One thing that I know from my limited experience of business, is that you want diversity of supply because if you are relying on one person to supply you and something goes wrong, then you are in serious trouble. That is why the desal plant and the GAB, that is why they want to be able to import and source locally, that is why they want to have diversity of supply and sale. What is this government doing? This government, in the indenture, has negotiated a participation plan which BHP will submit to me and we will be making public to see what they are doing locally.

I know the member does not think it is good enough. Then again, I do not think that anything I do is good enough for her. On balance, I think it is a very good and very well negotiated indenture. I think it gives good rewards to local companies: the ICN is there, the IPP is there. I think you will find that ultimately we are really arguing about not very much because there will be so much demand that we will not be able to meet the demand, and that is a good problem to have.

The CHAIR: Any more questions or comments on this clause? Which clause would you like to go to next?

Ms CHAPMAN: 14A. Clause 14A refers to the workers' village, Hiltaba. The village is to be built between Andamooka and the current Roxby Downs township and is ultimately to be a single person's quarters of some thousands. It is primarily to accommodate single persons, as I have said, for the initial construction and then to provide, as I understand it, accommodation for what will be a substantial fly-in/fly-out service. For those who visit other mines, Beverley is a classic example on a much smaller scale of a facility where one worker flies in, uses the room and then flies out, and then the replacement for their shift takes over the room. I do not know what the actual details are.

This indenture makes a number of provisions for this village. It gives, firstly, the right to the company to establish a workers' village and to have all of the infrastructure which surrounds that. I do not want to go into a lot of detail in relation to the village itself. I note that there are a whole lot of issues relating to leasing and renting. There is even a provision that they have to have solar hot water services, which I am pleased to see, considering that we do not even have them in Housing Trust homes in Adelaide, and all the run-off water has to be used for dust suppression, etc.

What I want to get back to is this: during the course of the development of this indenture in 2010 I corresponded with Monsignor Cappo, formerly the head of the state Social Inclusion Unit. He corresponded with me because I wrote to him about what involvement he was going to have in some of the social aspects of this development—in particular, Hiltaba—because our understanding was that there had been a survey of the people in the existing Roxby Downs township and there was a general feeling that it would be undesirable to have a huge number of single persons (particularly men—I don't mean to put a reflection on that), but there was a concern that men coming into the town en masse would cause some social disruption.

All of that may be so; I am not criticising that assessment by the local town. The information we had from BHP was information they respected and from which they developed a proposal for this separate village which was to be some kilometres away from the main town which, in itself, would have all its telecommunications services and facilities to go with it.

Monsignor Cappo wrote to me after he had launched with the Premier a glossy new publication called Digging Deep: The Social Benefits of Mining in South Australia which cost nearly $20,000 to produce, espousing the virtues of mining, the potential for the social infrastructure of South Australia, and the benefits to us. He explained in his correspondence, in response to my inquiry about aspects of the proposed Roxby Downs expansion:

I will be following this issue up directly with BHP Billiton and other various stakeholders involved in the Olympic Dam expansion, to ensure the issues of housing, health and community services and employment opportunities are considered.

That correspondence was back on 21 December 2010, after I had made an inquiry about what he was going to be doing.

During the course of 2011 there have been a number of briefings and meetings. I have inquired a number of times with BHP whether Monsignor Cappo had either (a) sought a briefing with them about their proposed development, (b) attended the mine or the proposed site of the expansion, or (c) sought any information from them about the social data that had been collected and which is reported in the extensive EIS reports that we have tabled.

The answer to that question is no in all categories. That was concerning. I then wrote to the freedom of information officer at the office of the Premier (which, of course, was responsible for Monsignor Cappo's unit). I sought whether there was any correspondence—a letter, a note, an email, a report or anything—that had been sent to the Premier from Monsignor Cappo about any of these issues in respect of the Olympic Dam expansion. I was very saddened to receive a response which said not one single document was in existence.

I am very concerned to hear that, because we have had a lot of reassurances in publications and statements by the government to date (including the former premier) about the significant work that has been done to investigate these aspects and to validate, I suppose, the claims made in the EIS about the social aspects of the development of this mine. That includes the question of whether it is actually very sensible to put 8,000 blokes out in the desert by themselves, separated from other infrastructure, whether they should have gone into Andamooka (who wanted them), or whether they should have been in the township. These are all issues that were—

The Hon. K.O. Foley interjecting:

Ms CHAPMAN: The member for Port Adelaide seems to be collapsing into—

The Hon. K.O. Foley: That's a ridiculous statement.

Ms CHAPMAN: Can I say that these were all issues that were explored and referred to in the EIS about why they had made these decisions. In the process of the government doing its report on the EIS, and doing the modelling for the financial aspects, etc., this is one of the things we had a clear indication was being looked at by your government, by the representative who had been appointed to look at these type of things.

Given all that background, and given the very disappointing response I have, is there any single report the minister can provide to the parliament which demonstrates the government had taken any investigation, modelling or assessment of the decisions that had been made about the social provision of infrastructure, including the housing arrangements, that his government has done to support the proposed accommodation arrangements at this expansion?

The Hon. A. KOUTSANTONIS: I cannot speak for Monsignor Cappo or what correspondence he did or did not send to the Premier. I refer the honourable member to the Environmental Impact Statement Assessment Report, page 442—Whole of Project Social Management, which states:

The proponent [that is, BHP Billiton] must collaboratively prepare and implement a social management plan (SMP) within 12 months of the date of the approval in consultation with the state government and key stakeholders for approval by the indenture minister that includes, amongst other matters, measures to achieve the following:

Then it lists a whole series of things such as maintaining a minimum rental housing vacancy rate at Roxby Downs at 5 per cent; providing a minimum of 7 per cent of affordable rental and home purchase opportunities within all new developments; monitor rental rates, rental availability and housing stress at Whyalla, Port Augusta, Andamooka and Woomera; inclusion of community health, social wellbeing, indicators to manage social wellbeing within Roxby Downs and other affected communities. It goes on and on about this sort of thing. I refer her to that.

Ms CHAPMAN: I read that—I said that. What have you done is my question? Do I understand it, minister, that all your department has done is require in the indenture, on the questions of the machinery of occupancy, tenancy, lease arrangements, etc., that BHP provide you a plan? Is that all that you have done? Has there been any independent assessment by your department of any of the proposed housing accommodation arrangements, including the village out in the middle of the desert, that are proposed? If not, I am happy to hear it. If there is something, will you bring it to the parliament so we can have a look at it?

The Hon. A. KOUTSANTONIS: I am not sure whether the honourable member understands this: the role of the assessment report and the indenture is that we require BHP Billiton to undertake certain aspects, and they include social responsibilities, and then we will assess that. BHP Billiton and mining companies in general already manage large populations in remote areas that are prominently known, and they do it exceptionally well. They have already built-in procedures and management in place. They made a decision that it was not appropriate to have a construction site or camp in Andamooka or in the township. I think that is a very socially responsible outcome.

They will manage those issues. They will manage the distribution of alcohol on the site, I would imagine. They will manage the testing that is normally available to all mine sites; most mine sites have regular breath testing and other testing that goes on. These social management plans are the requirement of BHP, which we monitor: it is not the other way round. They are the ones conducting the work; we are the ones who monitor it. It is not the other way around.

The reason we do that is because we are not establishing a community in the middle of nowhere; BHP is, for the purpose of the extension of the mine. Therefore, we want BHP to come back to us with the management plan. In my view, that is how it would be best; that is how every government has done it, including your government in the past. You may disagree with that approach, you may think we should be mandating this, but I think that the way to do it is to allow a private company to establish its own protocols and put them in place to make sure that there is good social management.

I recently went to the Challenger gold mine, one of the most remote mines in South Australia. They have excellent social management plans in place to make sure that the diversified work force (1) behave themselves, and (2) operate effectively with alcohol. Being away for a long period of time creates a lot of social problems; they deal with that and they deal with it effectively. So will BHP. Mining companies are very good at this. We will monitor them. That is how it operates. If you are asking whether I am sitting in the ring with BHP telling them how to design the camp: no.

Ms CHAPMAN: I thank the minister for being honest about that, because clearly the correspondence I have had with Monsignor Cappo has, frankly, not been worth the paper it is written on. You and I, minister, expert as you may think you are, are not the experts in relation to the social aspects; you and I are not. One of the reasons we in here rely on the information we are given about the assessment of these things is that you—being in the position that you are—ensure that, when we are given assurances about the checking of proposals that come through before you signed up on this indenture, you actually do that.

So it is very disappointing that you would say that to us now. Notwithstanding the assurances given in the correspondence, whether Monsignor Cappo did it or anyone else—and he was indicating that he was going to do it—he or his unit did not do it, and you tell me that your department has not done any of that, because, as you say it, you are not here to tell the mining company about how they set up the social infrastructure.

You can't have it both ways, minister. You are giving them instructions about levels of affordable housing, about leasing arrangements, about rental arrangements, even about whether they have a solar hot water service. You are giving them the prescription in relation to just those accommodation arrangements, and they are very prescriptive. Yet you are saying that you have done that without any independent assessment by the department on the matter.

The reason it is concerning is that you have been quick, as a minister—and the former premier as well, and indeed the member for Port Adelaide—to give reassurance to the people of South Australia, which I think is important to do, to say that you have actually checked the EIS reports, that you have used the resources of your departments to do these assessments and that you have undertaken modelling, for example, on the economic impacts of a number of the EIS and proposals put to you. Yet you are telling us that you have done nothing in relation to this model regarding accommodation. That is extremely disappointing, minister, and begs the question of what else we can rely on, when we have had assurances of a thorough investigation of these matters.

I do not know whether it is going to be a social experiment that will be a disaster or whether it will be a new model for the future of mining, but I did read in the national press just this last week of 3,500 wives—it may have been spouses generally, but probably and accurately mostly female, as being wives—who were taking a petition to BHP with their complaint about the terms and conditions of, I think, not just accommodation but wages as well of their husbands in relation to the Queensland operation. So, there are social impacts on these things.

We get all these promises about what the Social Inclusion Unit or other parts of your government are doing to monitor these things and to make sure we get the best model possible, and in all the prescription you have given BHP on this, you cannot give me one piece of independent data or documentation; that is extremely disappointing, minister. I will save my next question in relation to affordable housing for when we get to clause 21(17).

The Hon. A. KOUTSANTONIS: The village is to meet a temporary need—albeit for a number of years—and will then be wound down to about 1,500 beds for the short-term annual maintenance needs. Also, the block living: they will be working 12-hour shifts; they work, they sleep, they work, whilst in the camp, and they are monitored. I am not quite sure what else I can say to the member, and I will leave it at that.

Mr HAMILTON-SMITH: I am raising the issue of third-party access. I note that this is dealt with in clauses 13, 16, 17, 18 and 48, but I might choose clause 16 to raise it. I refer particularly to page 68, (2B)(e), which provides:

(e) the tenant may exclude any third party from the premises the subject of the lease if required for the tenant to conduct its operations and necessary activities.

I am just using this as a trigger, because it is mentioned right throughout the indenture. My understanding is—and perhaps the minister could clarify this for me—that in this new indenture, we have given up something that was in the earlier indenture, which was the preservation of a right to, in certain circumstances, insist that third parties be given access to infrastructure. Could he just clarify that for me first? Was that provision in the original indenture, and have we removed it?

The Hon. A. KOUTSANTONIS: The state has removed its right under the state access regimes, but not the federal access regimes. There still maintains, in the indenture, the right of third-party access under a federal regime.

Mr HAMILTON-SMITH: But there was a third-party access criterion in the original indenture, as I understand it, that we have now surrendered; is that correct?

The Hon. A. KOUTSANTONIS: I think a telling point on this is that under the old indenture, there was no exclusion—I am advised—for third-party access, yet BHP did not construct any infrastructure that could have been accessed, I am advised by—

Ms Chapman interjecting:

The Hon. A. KOUTSANTONIS: Hang on. I think what we are seeing here now is a commitment by BHP to actually construct infrastructure that would be their property. They are making a commercial decision that they have put to the government, and the government has accepted it.

Mr HAMILTON-SMITH: The reason I raise this is that I think it is a very important issue. I think that point was proven with the Fortescue Federal Court case, where the Western Australian government found that another mining opportunity came along—Fortescue's iron ore deposits, a project that was probably not bankable without access to, I think it was BHP and Rio Tinto's railway lines. That was ultimately resolved. I understand BHP spent a lot of money defending the case—millions—and Fortescue had access to the railway and that made that further project a viable proposition for the Western Australian government. It created jobs, tax, royalties, all the benefits that go with it.

Curiously, the government has chosen to freehold the mine, the desal site and a lot of other precincts within the indenture. We are selling the mine; it is like selling the farm. We are selling the land, freehold; they will have the minerals and the land. Of course, that means the infrastructure they build on the land, as the minister quite rightly points out, is their property on their land. I know the minister's answer will be what I know BHP's answer will be, 'Well, we own the land, it is our infrastructure. We've paid to build it, so we are not going to let anyone else use it.'

I can understand BHP feeling that way, but if the land had been retained leasehold, or alternatively if they had freeholded it with certain caveats in regard to access to infrastructure—it could have been done either way—then if another opportunity came along, another significant mine that was bankable with access to that railway line or that airport or that infrastructure, but not bankable without that, then we would be able to say yes to that project.

Let me use this analogy: if I lease you my farm and you put new fences on the farm and then at the end of the lease you go, unless there is some separate deal the fences are mine, by and large. Similarly, if you build some piece of infrastructure on the lease I may have caveats in the lease that give access to myself or others to that infrastructure. I can build certain things into the lease agreement in regard to access. By freeholding, you have given that up to a degree and you have also given up any third-party access regime, as I understand it. I mentioned all the clauses that it applies to.

I understand BHP has made it clear this was a die-in-the-ditch issue for them. It was a deal breaker for them, apparently. They did not want to give up access. I understand all that, so there is no need to repeat it. BHP is acting in its self-interest and you cannot blame it for that, but when negotiating the deal the government's responsibility was to act in the interests of its shareholders, the people of South Australia. If another mine is found up there—it could be bigger than Roxby for all we know; I understand Rio has a tenement just north of this site—then that railway line, that airport might be very important to the future of this state.

I am not suggesting that the government should say to BHP, 'Look, you've got a railway line, you've got an airport; we want you to make it available to Rio because they've discovered a mine as big as Roxby. Why don't you just interrupt your commercial operation and not run the trains, and we will let Rio come in?' Clearly that is not a sensible proposition, but we could get a situation where we have an airport that is only being used three times a day that would have the capacity to be used 30 times a day to fly in and fly out a workforce to another mine.

We could get a situation where the railway line BHP has constructed is only used twice a day and there is capacity there to use it without interfering with BHP's principal operation. Why would we say no to this other mining venture simply because we have signed away on behalf of future generations any access to that infrastructure? So my question really is: why did you feel it was necessary to agree to that provision? I know BHP was prickly on it, but should we have fought harder on that, given the prospect that there might be another mine discovered up there?

The Hon. A. KOUTSANTONIS: I am not sure that the airport is excluded from third-party access. The advice that we are receiving is that because it is governed under the Trade Practices Act it probably is open to third-party access.

An honourable member interjecting:

The Hon. A. KOUTSANTONIS: Because it is commonwealth. In terms of the state regimes, I think the point that you are making is that if the line is available why not let a third-party take advantage of that for a commercial purpose. I suppose the answer to that is that BHP do that currently now with OZ Minerals.

Ms Chapman interjecting:

The Hon. A. KOUTSANTONIS: They do. They have an exclusive piece of infrastructure that they own and they share it with Oz Minerals. I will make this point to you: I do not believe that BHP would take the risk they are taking now, and I do believe this expansion is a risk—all endeavours are a risk for a company. There is a lot of risk here because the overburden is so large and they are subject to some of what I believe are the strictest environmental conditions in the world. You might not think so, but I think so. It is a lot stricter than for people who are currently operating under the Mining Act.

If we were to say to BHP, 'We want you to undertake this massive undertaking, but all the money you spend on infrastructure may be in the state's interest, taking third-party access, when is commercially viable for you, of course,' that adds another layer of risk to them. So, what you are really doing it pushing that bankable feasibility that they make and making it harder for the project to stack up.

Every layer of regulation we lay on top of BHP in terms of the way they do this project makes it harder and harder for their board to press a button on a project that I think it is obvious that most members of the current board will not see a profit on. They will not be on the board until a profit is returned. A majority of the board members who press the button on this development, who agree to begin work to expand Olympic Dam, when they make the decision sometime next year, will not be on the board when BHP returns a profit on this project. That is how far into the distance this is.

Our job is to do two things: protect the state's interests and give BHP as much of an opportunity as possible to get this project up and running. They really are one of the only companies in the world that can do this project. Every layer of regulation that we lay on top of them (and we have laid many, especially with the desal plant, the most regulated, highest environment standard desalination plant in the country by far—they have ticked the box) we start putting in jeopardy their rail movements. I know you are not suggesting that we define how that would be done. It just adds a level of complexity to BHP that gives another reason why this project probably should not proceed.

As mining minister, as shadow mining minister and as shadow industry minister, third-party access is very important to all of us, because infrastructure is very important to the state. I would love nothing more than BHP to say, 'We'll open it up to commercial considerations, open up third-party access for all of our infrastructure,' but they act in the interests of their shareholders and they act in the interests of their board. We act in the interests of the state.

I accept your point. If we had compelled BHP Billiton to allow third-party access on a commercial basis, I suspect we would not be here debating the indenture bill. I suspect they would have walked away. In dealing with mining companies, the one thing I have always noticed is the way they protect their infrastructure because capital is so scarce.

The world is changing. If you are going to invest this type of money into this type of venture and then have the risk of a commercial proposal, meaning that if you do not accept it you are in breach of the indenture, and then later on BHP find a larger ore body a bit further down, a bit to the left, a bit to the right, under their mine plan, and all of a sudden have to delay production because they have signed a commercial agreement with a rival mine a few kilometres to the north, a few kilometres to the south, whatever it might be, they would be letting down their shareholders and, quite frankly, probably the state. It is a tricky balance—a very, very tricky balance—and sometimes we suffer for it, but I think we have got the mix right.

The Hon. K.O. FOLEY: This is a difficult situation I find myself in as the person who negotiated this. The mining minister is doing an outstanding job in representing those negotiations, and, on every bit I think I could add some value to, I do not want to be on my feet; but on this one of third-party access I feel it is important—

Ms Chapman interjecting:

The Hon. K.O. FOLEY: No, I am making a contribution.

Ms Chapman: As an answer?

The Hon. K.O. FOLEY: No, I am entitled to speak on this.

Ms Chapman: He is not going to ask a question: he is going to tell us. We are happy to have it.

The Hon. K.O. FOLEY: I am giving you some more information. As I said from the outset on this negotiation, if you pull apart the 150 components of this indenture or whatever—the EIS, the many hundreds—yes, there are outcomes that you would like perhaps to be better outcomes from the state's point of view, but in any negotiation it is the total package and it has to be considered and understood in the totality of the package. You cannot go into a negotiation and expect to get 100 per cent of what you want. Despite comments that you would have done so much better and that I was rolled and my tummy tickled, I actually think that we negotiated a very, very good outcome.

The issue of third-party access was a real sticking point. BHP was very hot to trot on this one—very hot to trot. They have had experiences in the Pilbara and they are scarred by them. Now, as I am a free marketer, I think third-party access regimes are an appropriate piece of public policy. However, in this negotiation, we made it very clear that we would not make any representation to the commonwealth about commonwealth regulatory regimes.

They understood that and they were not, for that matter, necessarily asking for it. What we did was we got down to the couple of issues and it was mainly the rail because we are a state-based rail regulator. Their argument is that they are spending that money. It is their money. As the minister quite rightly said, they need to minimise the risks associated with this project. Whether we like it or whether we agree, they see, they saw and they feel that third-party access is a major priority issue for them. I took the view as the lead negotiator that this was not an unreasonable right to trade off. It did mean something quite significant to BHP and it was a negotiating option that we could give away that would be part of our position in terms of what we can give, so that we can take on a further item.

At the end of the day, the situation is this: BHP is building that rail line. It is for the purpose of serving Olympic Dam. BHP may well wish to enter into a commercial arrangement. No-one is saying there cannot be third-party access. What we are saying is there will not be mandated state regulatory third-party access. If BHP wishes to have a commercial arrangement with a Rio or an OZ Minerals or whoever—and I cannot think at this stage who it would be, given that there is no known activity that I think would want to use that rail at this stage; there maybe—if BHP can manage it commercially, it will do it.

As for the airport, the airport will be governed by national regulation and BHP, obviously, understands the importance of that airport for other users. I do not think that will ever be an issue.

The only other issue where we had some third-party discussions was around the desalination plant. Now, their argument is that they are building it. If they have surplus water, we get first right of refusal. My guess is that, if they have excess capacity of water, they may well enter into commercial arrangements with another mining company, should they so wish.

What we did do with the access corridors for electricity, gas and water is, with the easements and the approvals, we have corridors available for duplication of infrastructure, should that be needed. In a planning sense, we have corridors such that other easements can be granted for other pipelines, etc. You can mount a very strong case that we should not give them ground on this, and I would not be critical of you for doing that. All I am saying is that, in the totality of the negotiations, you had to take some hits.

My team and I both felt that in the quantum, quality and totality of what we were negotiating, and given it was so important to BHP—and I am not sure if it was a bit more philosophical than real for BHP. I do not know their motivation on it, except obviously, as the minister said, in terms of regulatory burden. All I knew was that it was an important issue for them and I do not think we gave anything of any material value away in agreeing to it.

I guess what I am saying is that there are no wrongs or rights in this. You have a good point and you may have negotiated differently. You may have given something else away and not given this one away, but those are the negotiations we were in. This took six months. There were hundreds of these things. I had to accept that there had to be some give and take, and this was one of them. There is no right or wrong answer.

Mr HAMILTON-SMITH: I thank the minister and the former minister for their answers and accept the general point. Although it is clear that in all likelihood this will not develop into a major problem, because I imagine BHP will want to enter into commercial arrangements if somebody wants to use their railway line, their airport or whatever the case may be, you could always get a situation where BHP might choose to unreasonably deny someone access.

I accept all the arguments about the risk, but surely they could reasonably deny access if they could prove that it would interfere with their operations and therefore not be required to give access. If it was a reasonable access request, I certainly would have liked to have seen that preserved. You see, it does not matter for this generation, but it may well matter in 20, 30 or 40 years' time.

I can see a huge compensation claim and other complexities if we find another mine up there, we have other miners wanting to use the infrastructure and BHP is being difficult—or whoever owns BHP at the time, or whoever owns the mine, because we have preserved rights for transfer of all the rights under this indenture to whoever might own it. There could be a problem there. Anyway, I do not want to dwell on it. I accept the answers, but I think it is a weakness in the contract that we have entered into.

Ms CHAPMAN: We are on a cluster of questions in relation to infrastructure on the question of third party access, so I will ask my questions here. The former minister touched on this in his contribution to assist in this matter, and that is the third party access by the state to the excess water, which is by way of first option or first right of refusal to that extra portion of the 100 gigalitres that they are going to be providing.

In fact, there have been some discussions certainly with the opposition about the fact that they were going to have a much higher capacity than what their anticipated needs were for this expansion and whether they would consider selling it to other commercial competitors, withholding it, providing it to the Whyalla township or giving it to the state. It seems as though that has been an excellent resolution, that at least the state has got first right of refusal of it, because we know what an important resource that is, especially for the Iron Triangle towns up there.

My question in relation to the freeholding generally—and bearing in mind that we have two separate things. The first is the freeholding of a much larger area of property, because of the expansion of the size of the mine and the infrastructure immediately surrounding it. There is a much bigger patch of territory that is going to be freehold. It is not new, because the freeholding capacity is in the original indenture.

I may not be right, but if you can clarify this: as I have read the contract, where the pipelines for water supply are going to go, the pipelines for gas supply linking up to Santos facilities are going to go, and the rail line are going to go—both to ports and I think there is a facility out to the west at Pimba or somewhere. I am summarising this now, but there is going to be some kind of compulsory acquisition by the government of the land necessary to facilitate the development of that infrastructure on behalf of this project, and that it will then be made available for this infrastructure to be built on.

Are these corridors that the former minister referred to going to be freehold as well, or are they going to have some kind of ownership by the government with a right of access over them? I have just heard from the former minister that within these corridors it seems that there is a facility for other infrastructure to be built. Can you explain to me the legal mechanism by which this is going to be held and by whom, and what opportunity there is for these other parties to come into it?

The Hon. A. KOUTSANTONIS: I will answer the most controversial part first—compulsory acquisition. That will always be a matter of last resort, and it will not be how we will do the majority of the easements. They will be an easement facility. If it is a slurry pipe or a rail line or a power line or a water or gas pipe—whatever it might be—it will be done on an easement basis, so it will not be freehold; it will be an easement. If we reach a block where BHP cannot acquire the land for whatever reason—there is some technicality—it will always be a matter of last resort for the government to use those powers. Generally, it will just be an easement option.

Ms CHAPMAN: I refer to clause 22, page 90, under the category of section 21, which is provision of infrastructure. At the bottom of page 90, subclause (10) deals with the state's obligation to equip buildings and structures for all of the educational, hospital, medical, dental, police, fire, local government, judicial, recreational, town maintenance depots and other civic and communal services, and the housing accommodation.

My question is: assuming that this relates to both Hiltaba and the necessary extra facilities that may be located in the Roxby Downs township, what budget, if any, has been prepared for the estimate of the cost of this to the state to comply with its obligations under this section? I am assuming at this point that it has not been put into any forward estimates because we are six to 10 years away, but I am not sure. Perhaps you can explain to me, if there has been any provision in the next four years in forward estimates, how much has been allocated to the provision of the development of those services.

The Hon. A. KOUTSANTONIS: I am advised that this is an existing clause; it is in the current indenture.

Ms CHAPMAN: I understand that but what—

The Hon. A. KOUTSANTONIS: Yes, I understand that, and I am answering the question the way I see fit. In terms of estimates, there has been a standing estimate from both governments of a certain value. That value varies. What the department and the OD task force are going to do now is to start a consultation with Treasury to get a more refined figure for this work. It has been sitting here since 1982, I am advised, so successive governments have put this in the forward estimates, and it has ranged between $80 million to $100 million to $200 million, but there will be a more refined rate done with Treasury to get an actual figure. Obviously, this work is really out into the distance.

Ms CHAPMAN: At page 92 is the insertion under subclause (17) of the affordability of housing obligation which is to be 15 per cent of all new vacant allotments in the town site. You will recall, minister, that you published in the gazette a number of conditions that were to be met prior to this bill coming into the parliament, including a 5 per cent obligation minimum for affordable housing. This now comes up to what I call the standard requirement under the Housing Affordability Act, which currently requires a 15 per cent obligation. I assume from this that it is going to apply only to a percentage of the new homes built in the existing Roxby Downs township and does not apply to the Hiltaba development.

The Hon. A. KOUTSANTONIS: I am advised that that is correct.

Ms CHAPMAN: Of the 15 per cent, is there any obligation, as is currently required at law, that 5 per cent of that 15 per cent that is under the act required to be available for the special needs obligations, that is, social housing? Is there any imposition or obligation in that legislation? In the list of all of the acts to which this indenture is to be paramount to, it does not mention the Housing Affordability Act, so my question is: is that 15 per cent going to be just all affordable housing, and will they have the same affordable housing definition as provided under the act? How is that to apply?

The Hon. A. KOUTSANTONIS: I am advised that that 15 per cent will be given to the state government, and the state government policies will apply. I am advised that roughly 5 per cent of that 15 per cent is the general rule—it can vary—but the requirement is on us, not BHP. So, BHP gives us the allotments; we are the ones who apply the policy.

Ms CHAPMAN: So, then it is only new vacant allotments; it is not housing as such? Is it just 15 per cent of the land that they might develop within those zones around Roxby Downs township?

The Hon. A. KOUTSANTONIS: I am advised that it is vacant allotments, and it includes new greenfield sites.

Mr HAMILTON-SMITH: I refer to clause 22, page 93. If I can ask the minister a question on subparagraph (l) on page 93: necessary sporting facilities and playing fields within the town site, together with appropriate change room facilities, will be paid for by the state, all costs.

I just want to use this clause to open an issue that I think is a very important one. The state is to provide all of these facilities at Roxby, including even sporting facilities. I can understand this just being part of the negotiation, but to me the broader issue is: the state is making its contribution towards this project, what contribution is BHP making back to the state and the people of this great city in regional South Australia? The minister might say, 'Well, they're paying royalties, and they're creating jobs and business opportunities,' although we have explored that under clause 12, in regard to their obligations.

I am curious that, when this government agreed to lift the share cap for Santos, we had a very feisty debate in here. One of the things that the government insisted upon was that Santos pay around $60 million over 10 years to a range of community investments.

I might just mention some of them. They range from being involved in the Tour Down Under as a sponsor and a sponsor of the Adelaide Symphony Orchestra through to being a major partner for OzAsia, a community partner for the Adelaide Festival, school scholarships, the Santos Stadium, Youth Opportunities, The Smith Family's Next Steps program, $25 million over 10 years into the School of Petroleum Engineering, $10 million over seven years to the University College London's Adelaide campus, $5 million into the RI Aus, $3 million over five years for the Common Ground project, $2 million into the Santos Conservation Centre, $2 million for the Botanic Gardens, money spent up at Moomba, money for the Asthma Foundation, three years' support for the Aboriginal Power Cup. It just goes on. Santos is a very good corporate citizen.

The government was quite keen, before approving a lift to that share cap, to get some investment out of Santos for the community. I do not see the same rigour in the way it has approached this issue of the indenture with BHP. I am aware that BHP has gone out there recently and promoted their investment in University College London's British operations, and that there is an arm of that here in South Australia and there is some money being spent in Adelaide, but it is minuscule compared with what Santos has been required to invest.

I simply say: where is the consistency and where is our government seeking to insist that BHP give something back, that BHP be seen to be a good corporate citizen? I will come to the issue of BHP in a minute and their attitude, but I am surprised that the government has not taken the leadership on this and insisted that they do more, and be seen to be doing more.

The Hon. K.O. FOLEY: I have seen the member put this out on a number of occasions. Can I just say, with all due respect to my good friend and a man I hold in high regard, the shadow minister for industry, it is a silly comparison. They are totally two different things. I was involved in the Santos share cap issue as treasurer and that was about, first, getting rid of an old redundant mechanism whereby the state could control the share cap on Santos. But what we were able to do, through Treasury and through independent advice, was get a feel or an understanding of what the balance sheet impact would be and what the windfall gain in shareholder value would be in lifting the 15 per cent cap.

By lifting the 15 per cent cap, the market capitalisation of Santos would increase by some significant magnitude. That was obvious. What the premier did, and very successfully, was extract some of that value back for the state. And why wouldn't he? That is, if Santos was going to get X hundreds of millions of extra shareholder value and they could use the ability of getting rid of that, the state should be able to pull some money back, and we did. Some might say it was extortion and some might say it was brutal politics. It was probably a mix of all of that. In the end, it was a totally different situation to what we face with BHP, the very point that the minister made so eloquently before.

In this deal, Marius Kloppers, Andrew McKenzie, Dean Dalla Valle—these people—have to be able to convince the board of BHP that they should invest $20 billion, $25 billion, $30 billion, whatever the final number is, 'But you won't get payback on that for 18 years,' or whatever. 'You won't start to see revenue for six or seven years.' Everything is brought back to a net present value cost of the project.

Every time you load in a substantial cost to it, it affects the viability of the project. You cannot be in a negotiation—and I would argue it would be improper, in terms of my ethical way of negotiating—to be trying to trade off various things to get a lump sum of money to spend on a football stadium, an arts precinct, or whatever. That simply would have added additional cost to BHP and would probably have meant that, as the state negotiator, I would have had to give something else away because it would have been a quid pro quo situation. It was neither feasible nor was it appropriate, in my view (and I am very firm on this), for me to have tried to extract $50 million or $100 million out of them for capital projects outside the scope of this project.

My view would be that Dean Della Valle would have had great difficulty in extracting an approval from his senior people—Andrew Mackenzie and Marius Kloppers—to do that very thing, because it is not part of the project. Now, bear in mind that BHP picks up half the operating deficits now of the township and will do so for many years to come. It already provides substantial amounts of recreational capital to the town, because it is a company town and it does pick up a degree of its responsibility there.

If, at the end of the day, BHP wants to be a good corporate citizen and make a sizeable donation to something, well, that is a decision that it may make in its normal course of business. It is not something for which you can extract, in my view, a lump of money from them, or even attempt to get that money out of them. We got down to fighting over half a million here, a couple of hundred thousand there and a million a year here because it was all brought back to the net cost to the project.

To think that I could have extracted a $60 million thing for the football stadium would have just been inconceivable. What BHP is doing is that it has a $12 million community investment fund over five years. Of course, Andrew Mackenzie, I think, and former premier Rann announced the $10 million it is putting into the universities in South Australia over the next five years. I have said that it carries 50 per cent of the Roxby Downs council deficit; it funds the Roxby Downs Area School and the Woomera and Andamooka schools; $1.2 million over three years to the Arid Recovery Research Project; more than $2 million a year in Indigenous funding (and that, I assume, is outside its separate ILUA negotiation that it has done with Indigenous communities); $1 million to Carclew Youth Arts; millions of dollars into major partnerships with the RFDS, the Burns Trust, the Polly Farmer Foundation and the Port Power Community Youth Program ($500,000 over three years); and it will also be the major guernsey sponsor for Port Power for the next five years at $1 million a year.

Ms Chapman interjecting:

The Hon. K.O. FOLEY: I got that one in. I did get that one in. No, that's a fib!

Ms Chapman interjecting:

The Hon. K.O. FOLEY: Yes, I just noticed the old Carclew. No, that was a joke about Port Power. Don't!

Ms Thompson interjecting:

The Hon. K.O. FOLEY: Anyway—

Ms Thompson interjecting:

The Hon. K.O. FOLEY: Yes, that is my answer, and it was with the greatest respect, member.

Mr HAMILTON-SMITH: I hear the former minister's answer, and I must say that I do empathise with the former minister. He has been negotiating with probably one of the most sophisticated negotiating parties in the world today.

The Hon. K.O. Foley interjecting:

Mr HAMILTON-SMITH: I am sure in verbiage, but I am not sure in negotiating skill. Look, you are talking about a negotiating party in BHP that is negotiating coal and iron contracts with the Chinese and the Japanese. They are skilled in this business of negotiation. I think that this whole negotiation has been handled artfully by BHP. I accept all the arguments that the former treasurer has raised, and I am sure that he did his very, very best. Who knows if anyone else could have done any better—probably not. It has been very difficult, I know that, very difficult indeed. But I do not accept his arguments that you should somehow give up on the people of South Australia in terms of some payback.

The minister has just given us some information—some of which I think might be new information—about what BHP is doing. We will have a look at that on this side, but I think BHP runs the risk—as does the state government—of being seen to have over-promised on this and possibly, maybe in the future, under-delivering, because we have had the former premier talk about us becoming the Dubai of the south. We have had this over-spruiked.

I say to the former minister that he and the former premier and the government generally have talked a lot about this project over the last six or seven years. It has been over-promised and talked up. In fact, the government and certainly the former premier and the former deputy premier had almost staked their reputations on getting a result here and, in so doing, gave up one of their strongest negotiating points, and that was time.

BHP knows that the government and the former premier and the former deputy premier, to a degree, had their backs to the wall. You wanted and you needed to get a result, and the minute the negotiating party knew that, they had you over a barrel. They knew that you needed this almost more than they did. The great trump card from BHP—'We'll walk away; we'll delay it another year. We'll just turn on the clock and time you out.' Of course, that is why we are all here wanting to expedite this and get it going, because all the cards are in BHP's hands. It can play the delay card on the government, on the opposition and on the parliament and it knows it will get whatever it wants.

I accept the minister's point that it was different—Santos, BHP—but the principle to a degree is the same. Both companies wanted the parliament to give them something. In the case of Santos, it was a lift of their share cap; in the case of BHP, it is $1 trillion worth of minerals that rightfully belong to the people of this state.

The former minister has talked about NPVs. He knows that the Olympic Dam Task Force briefed members of parliament that the NPV of the mineral resource was around $1 trillion. I know all the lines that we have been given, that, yes, there is time before there is a payback on this project. All of that is true. We were told that it was $5 billion to $6 billion to remove the topsoil, three to four years. We were told that there was $25 billion to $30 billion of infrastructure to be built—all of that is fine—less than one half of 1 per cent of the value of the resource, or 2 to 3 per cent of the resource, if you add all those costs up on NPV.

However, I do not accept the negotiating point from BHP. I accept that the former minister has probably seen economic modelling and I know that the government engaged its own consultants to try to verify it, to argue that this is a marginal project. I just do not believe that. If it was a marginal project, I do not think BHP would be continuing with it. I do not think it is a company that is silly enough to advance with a project that does not stack up. If this was a loss-making enterprise, I do not think we would be here. They are not dumb; they know when a project is viable or not.

I know the minister is going to get up and say, 'We had consultants look at it. We paid 300 or 400 grand and they told us it was a marginal project.' That is fine, but I think the fact that BHP is asking us to open this up is proof to the point. My message to BHP would be: the people of South Australia have been led to expect that BHP is going to give a lot of benefit to the community. Frankly, at the moment, they see more from Santos than they do from BHP, and they are a David and Goliath in terms of capital net worth. I think BHP could do—and could be seen to do—a lot more here in South Australia to help and invest in this community in a range of ways, from our universities to the zoo to wherever you want to go. I just think more could be done.

The minister and the former minister say that they did their best. I accept that, but it did not even need to be part of the indenture; it could have been a separate agreement. However, I am looking, and I am sure that South Australians are looking, for something more from BHP by way of an investment back.

The Hon. A. KOUTSANTONIS: I just point out to the member that subsection (l) was on the existing indenture:

necessary sporting facilities and playing fields within the townsite together with appropriate—

Mr Hamilton-Smith interjecting:

The Hon. A. KOUTSANTONIS: Sure, I understand. I am just letting you know that that is our responsibility and it always has been.

Mr Hamilton-Smith interjecting:

The Hon. A. KOUTSANTONIS: I understand.

The Hon. K.O. FOLEY: There are a couple of points here I cannot let go unanswered. I respect the member's own assessment. He is more than entitled to it. He certainly has an MBA—I don't—and that may well make him more qualified than I. But of the various business people that I take counsel from around Adelaide and certainly from around other parts of Australia, including some of the mining 'giants' in a sense in terms of personalities, all to a tee are of the view that this is a marginal project. Once they get to the crossover point, it is blue sky, but it is blue sky in about 20 years' time.

Very few boards would have the courage or the preparedness to sign off on a project that commits $20 billion—and, you know, you are not going to see any return of any size for a decade or more. On the timing issue, can I say this: it was never about Mike Rann and Kevin Foley because I gave a commitment to BHP when I started these negotiations that I would remain in the chair negotiating this for as long as it took, and I have been doing it for six years.

We met in early February from memory. As I said in my contribution, I had to put a spreadsheet out as to what the key critical time lines are for BHP. The moons are in alignment to get this away, and this is not something that Dean Dalla Valle or anyone from BHP said to me, but I am an avid reader of the financial papers. My view is that had BHP successfully acquired potash in Canada, which I think was about a $16 billion purchase price, I doubt that we would have started negotiations in February this year for this project because their capital was being committed to that purchase. That deal did not go ahead.

It was not long after that deal not going ahead that they re-engaged. Even for a company as humungous as BHP, there is only a limited amount of capital. The potash went off the radar. They had a lot of money. They have a lot of available capital now, but they have a lot of options around the globe, a lot of opportunities. They can make bigger iron ore mines, they can buy mines, they can do everything. But when potash went off the radar, my guess is—and this is just a guess because I have no inside knowledge to confirm this—they had a look and said, 'What is the next big investment (class A asset investment) that they can go for?'

You have to also look at the make-up of the company. Marius Kloppers, the CEO, has been there four years. He purchased Western Mining. He is taking a high risk as a CEO to recommend this to the board. My guess is that at some point Marius Kloppers will not be the CEO of BHP in a few years' time or whenever it may be because that is what happens in the world. This is not a decision or a recommendation that a brand new CEO would take to a board. We had a CEO who has been in that job long enough that he is confident enough that he can recommend and press the go button on this.

Then you have to look at the global situation. You only have to look at Europe today. You have Italy, you have Greece—

The Hon. A. Koutsantonis: Ireland.

The Hon. K.O. FOLEY: We had Ireland.

The Hon. A. Koutsantonis: You still have Ireland.

The Hon. K.O. FOLEY: This is not a—

An honourable member: Mauritius.

The Hon. K.O. FOLEY: Mauritius.

The Hon. A. Koutsantonis: Malta.

The Hon. K.O. FOLEY: Malta. Europe is frightening.

The Hon. I.F. Evans: Mauritius is not in Europe.

The Hon. K.O. FOLEY: I wouldn't know. I haven't been there on a parliamentary trip like you. There is the very obvious demand coming out of China but, if we thought we could wait another six months, what sort of environment are we going to be in? What other project might BHP get tantalised by to purchase or invest in? The buggers want to spend this money now. Why would we want to delay it? They are ready to go. They wanted this project approved before Christmas, not me, not Mike Rann. Do you really think I want to be here at midnight?

We are here because the company is ready to hit the go button. What I have been incredibly impressed by in the opposition—and this is of no criticism of your questioning tonight—is that, for the first time in my 23 years of roaming these corridors (seven as a staffer and 18 as an MP), this is without doubt the most cooperative and bipartisan atmosphere I have ever witnessed in this joint. I approached Isobel and Mitch (the leader and the deputy leader) privately some weeks before we concluded negotiations to bring them into the loop early and to give them the capacity to brief their party room early. I have to say that some of my colleagues were hostile at the idea that I should—

The CHAIR: Member for Port Adelaide, I think that we have covered some area, so could you wind up, please?

The Hon. K.O. FOLEY: I was enjoying this.

The CHAIR: You were. You will get another chance.

The Hon. K.O. FOLEY: I do not want to keep interrupting because I am not the minister, if you had not noticed.

The CHAIR: I will keep that in mind.

The Hon. K.O. FOLEY: So, I will shut up now, but whatever you asked, Marty, it was silly.

Mr HAMILTON-SMITH: That is a very curious remark. The reason why we are seeking this information, for the former minister's benefit, is to make sure that, before this finally advances through the entire parliament, we are all aware of the details. The former minister is aware of all the details because he has just told the house that he has been at it for six years, enmeshed in those details, but he is not the only member of parliament in this house. That is why we are working through the issues.

Similarly, he makes the point that the opposition has been full of bipartisan cooperation on this; we all are, but do not forget that the select committee only comprised six members and there are a lot more than six members in the house. So, a degree of it needs to be repeated and put on the record because there are some issues that we have raised tonight that may confound future generations when they look back on this matter and want to know how we arrived at the decision we arrived at.

That is why, as I say, I think one of the questions that they may ask, particularly if this project does not deliver on the promises that have been made, is: why did we not get more out of it? You have partly explained why and you have partly explained how difficult it has been, and I have no doubt that it has been a difficult negotiation. I do feel that it is a mystery that BHP is not out there demonstrating to taxpayers that it is prepared to make a bigger investment in them, because at the moment, to many people, it looks like a large multinational coming in to take away $1 trillion worth of minerals.

We are being told to expect enormous benefits back, but as we found out when we debated clause 12, we cannot hold the company to account for any of those jobs or any of those contracts because there is nothing in the indenture that does it. We heard earlier that royalties will be swallowed in horizontal fiscal equalisation. We may well be in a position where South Australians ask themselves, 'Well, you know what, we were promised a whole lot here and I don't see it.' That is why I think it is important that BHP invests something back. The former minister has just explained that that was not within the ambit of the negotiations and it could not be done. Well, it is unfortunate.

Ms CHAPMAN: While we are discussing the Santos indenture and we have the benefit of the history—

The Hon. A. Koutsantonis: We are not discussing the Santos indenture.

Ms CHAPMAN: Well, it has been raised at this point. I am happy to raise it now while we have the wisdom of the member for Port Adelaide to assist us. Can I ask the minister: what aspects of the Santos indenture that are currently at issue before the Supreme Court are in this indenture and what have you done, in the negotiations, to make sure that we are not exposed to the same litigation over this indenture that would be the subject of litigation?

The Hon. K.O. Foley interjecting:

Ms CHAPMAN: Well, you may not be.

The Hon. A. KOUTSANTONIS: The advice I have is that the dispute in the Supreme Court, which I do not want to comment on in any way, is about wharfage fees.

Ms CHAPMAN: I am not asking you the detail of the case, I can read the pleadings. What I want to know is can you give an assurance to the house that the issues in dispute there have been understood, anticipated and made sure that there is protection in this area, whether it is in relation to the port facilities here or anything else. I am not sure but I just want that assurance.

The Hon. A. KOUTSANTONIS: I cannot stop a future board, a future CEO or a future managing director of mines from suing the state government because they feel that the indenture is not being carried out. I, or a future indenture minister, may wish to act on some parts of the indenture where I think that BHP is in breach and we could well end up in the Supreme Court. Have we done our very best to minimise litigation? Yes. Can I foresee any problems? No; but you never know.

Ms CHAPMAN: Of course you cannot anticipate any litigation on anything, but when we were here a couple of years ago doing the Santos indenture we were given all sorts of assurances about how reliable that was going to be and, perhaps unforeseen at that time, an issue has now arisen and is being determined. It will take its normal course through the compulsory arbitration, etc. However, having had notice of that, can you give us some assurance that in the negotiating team you have directed some attention to remedying as best as practicable any repeat of the vulnerability of those clauses in this indenture?

The CHAIR: My understanding of that question is that you just revisited the same question, unless you have read it differently.

Ms Chapman interjecting:

The CHAIR: The question has already been answered once; that is the point.

Ms Chapman: He knows what the question is.

The CHAIR: Believe it or not, I do too. That is why I am about to rule it out of order.

The Hon. A. KOUTSANTONIS: Let's remember that there is an indenture currently under operation with BHP and the best advice that I have is that there has been no litigation in 30 years, and arbitration facilities are available under the indenture. While I suppose there are issues with the Santos indenture, we do not foresee any here and we haven't had any in the past, so I think (in terms of how this indenture has run) it has run exceptionally well.

The Hon. K.O. Foley: Trust me, if we could have kept lawyers out we would have!

Ms Chapman: I am sure you would have.


[Sitting extended beyond midnight on motion of Hon. A. Koutsantonis]


Ms CHAPMAN: I thank the minister for his indication. I hope it means, if I understand it correctly, that the current issues in the Supreme Court have been considered in making a determination on this indenture, and as best as practicable some attempt has been made to ensure that we minimise the risk of there being litigation in this matter. I turn now to page 100.

The CHAIR: If members do not wish to participate in this discussion and have a private conversation, can they please leave the chamber? It is very hard to hear what is being said. Member for Bragg, can you repeat your question, please?

Ms CHAPMAN: Page 100.

The CHAIR: 24B?

Ms CHAPMAN: Yes. This section has been added to the indenture obligations and that is, as I understand it, that once a certain threshold of population has been achieved and certain other threshold conditions, the township of Roxby will effectively be entitled to have its own local council, and that will both relieve some obligations of the company to provide certain services but also change the structure and entitlement to elections, etc. Who had asked for this process to be able to be effected and what was the basis upon which this was presented for consideration?

The Hon. A. KOUTSANTONIS: The government asked for these provisions. If there is a break-out of mass democratic feelings in Roxby Downs when they reach a certain size, we think it is appropriate that the normalisation of the town begin. It is only appropriate, as a town grows, should they choose to have it, that we would normalise the town. It is only proper with a large community.

Ms CHAPMAN: So, were any submissions put to you by the LGA or any other organisation?

The Hon. A. KOUTSANTONIS: No.

Ms CHAPMAN: So, apart from this being an idea that the government thought was appropriate to give them an opportunity for self government at the local government level, is there any obligation in any of other our indentures? For example, at Santos does it have some kind of provision for this? Obviously they are a smaller operation—I accept that.

The Hon. K.O. Foley: There's no council for Santos.

Ms CHAPMAN: Not entirely, but to the extent that—

The Hon. A. KOUTSANTONIS: My advice is no.

Ms CHAPMAN: So, there is no other precedent for this, is there?

The Hon. A. KOUTSANTONIS: Other than annexations in some European countries, no.

Ms CHAPMAN: In South Australia, minister.

The Hon. A. KOUTSANTONIS: In South Australia, as far as I know, other than giving up our Northern Territory to the commonwealth, I know of no other example of this.

Ms CHAPMAN: Can the minister explain where this idea then came from?

The Hon. A. KOUTSANTONIS: It is only appropriate that as a community grows to a certain size we normalise representative government in terms of a council. It is important that, as a community reaches a certain size, if a community chooses, we would normalise relations. It is just common sense, really.

Ms CHAPMAN: It might have been a thought bubble of yours—it may have been a very good one—or one of the former minister's, but did anyone or any group in Roxby Downs ask for it?

The Hon. A. KOUTSANTONIS: I understand South Australians thirst for democracy; they search for it everywhere, but no.

The Hon. M.J. Atkinson: Burnside.

The Hon. A. KOUTSANTONIS: In Burnside they search for democracy.

Ms Chapman: No, we search for a report, actually.

The CHAIR: Can we stick to this topic, please?

The Hon. A. KOUTSANTONIS: I do not think the government received any submissions from any residents about normalising the town. I think it is just prudent government forward planning.

Mr HAMILTON-SMITH: I just want to get on the record for future members of parliament and future generations more on the government's reasoning in regard to its outcome on royalties, because 20 years from now people will not know the reasons behind the decision unless they can read it. The government has made the point in its second reading addresses that it was just one of those things that had to be negotiated—a 45-year freeze on royalty rates. A lot of businesses in this state would like to have their tax rates locked in at today's figures for 45 years. It is very generous.

As I understand it, the government has also removed a provision in the indenture that was in the earlier indenture, where there was an element of profits-based royalty revenue possible should results exceed expectations. My question is: why did you remove that profits-based component of—

An honourable member interjecting:

Mr HAMILTON-SMITH: Yes, well, why did you not insist on it being continued in this indenture? You had the option. I note that this has been covered in The Australian, I think The Advertiser has also mentioned it. Why didn't you consider a more beneficial royalty regime either through a profits-based component or a shorter term than 45 years as a lock-in time frame?

The Hon. A. KOUTSANTONIS: I will ask the member for Port Adelaide to give a more detailed answer because I think the member for Waite deserves to have the person who was, I have to say, quite brave and courageous in the way he dealt with the royalties issue, explain it.

I have to say that I was very, very, very nervous during the negotiations, coming back to me. I had very different views from that. The government was always very worried about how far we could push this, but I would say this about profit-based schemes: given the size of the overburden on this mine, I am not sure it is for the benefit of the people of South Australia to have a profit-based scheme. You ask why we didn't continue the profit-based scheme that expired in 2005: it expired, and you have to have agreement from BHP to re-include it into the indenture.

I think the balance that the member for Port Adelaide and BHP reached is just right, and I think it is just right for a number of reasons. However, I also think it is important that the committee hear, from the person who negotiated it, the exact view on royalties, because I know that a lot of South Australians want to know the answer.

The Hon. K.O. FOLEY: This was a very, very sensitive issue. Right back at the very beginning of this project BHP made it clear that they wanted the new mining rate. The new mining rate is 2.2. Marius Kloppers, in maybe two or three meetings that I attended with the premier, made it very clear that they would be seeking the new mine rate and Dean Dalla Valle, on a number of occasions, made it clear that their inability to get a new mine rate may well jeopardise this project.

What I can say tonight—and I have not said this publicly, and I do not have BHP's approval for this—is that we reached an impasse on this issue: negotiations officially ceased for some two or three days because the government refused to accept BHP's position on the royalty rate. BHP was well entitled to put that position; the cost of those royalties to the viability of this project, from BHP's negotiating standpoint, was significant, bearing in mind that the existing royalty rate on Olympic Dam, prior to the new rates coming in that I brought in a couple of budgets ago, was 3½. So we have 3½ for processed copper, and for concentrate we have lifted it to 5 per cent. So we have already significantly lifted their royalty rate.

Under the old indenture they had a 30-year freeze. The reason we went for 45 is that they recommenced negotiations with us after two or three days—and it was a negotiation. They would accept a higher rate for a longer period of certainty. But what were we really giving away? What we were giving was certainty to BHP. The issue of royalties has to be seen in the context of horizontal fiscal equalisation. We only get to keep about 6.8 per cent, or whatever is our population share of the mining royalties. So, if we pull $350 million a year from them, we get to keep about 7 per cent of that ($22 million to $23 million).

We will be producing—I do not know—80 percent of the nation's copper. We will be producing 90 per cent of the nation's uranium. We will be the price-setter of royalties. Western Australia is not going to put a royalty rate higher than us; why would they be that stupid? They will not, and they are at our rates now. This will be the norm. If we were to increase the rate, and the average goes up, we get to keep 7 per cent of the increase. I did not believe that a long lock-in was going to cost us very much at all.

Under horizontal fiscal equalisation—and this is what the great complaint has been from the west for some time; that they share—about 90 per cent of the royalties they receive are distributed to other states; that is horizontal fiscal equalisation. It means that where we earn revenue that other states do not, it goes into a notional pool and then gets shared as a bounty to the nation. The only people we may have deprived from a significant windfall if we had the ability to lift royalty rates were the other states, alright?

On the issue of the profits-based tax, I say this: it would be my thought that your federal leader would not be very happy if you were out there saying we should have a profits-based tax, because he is giving Labor one hell of a shellacking over the mining resource rent tax. It is a resource rent. I have no doubt in my own mind, without prior understanding, that the nation will move to a resource rent at some point in the next decade or so. It is actually a more sensible way of taxing the industry. I think royalties are an old way of doing it, but we do not know what that regime is going to be.

The other point, which we have to make very strongly, is that if we had a profits-based tax, shadow minister for industry, these buggers ain't going to make a profit for 18 years—

Ms Chapman: Ten years.

The Hon. K.O. FOLEY: —or whatever the period is.

Ms Chapman: You said it was ten years.

The Hon. K.O. FOLEY: It depends how you measure a profit. I do not know how a state government will be able to measure the profitability of that.

Ms Chapman: But this is a statement you've made.

The Hon. K.O. FOLEY: Pardon?

Ms Chapman: By 2020, the income royalties start to flow, as long as you can start to make money.

The Hon. K.O. FOLEY: That doesn't mean a profit.

Ms Chapman: I'm not saying it is.

The Hon. K.O. FOLEY: Well, you were. You just did.

The Hon. A. Koutsantonis: She's never wrong; it's amazing. Permanently outraged and never wrong.

The Hon. K.O. FOLEY: She just contradicted herself. They will not make a profit that is—

Ms Chapman interjecting:

The Hon. K.O. FOLEY: Sorry?

The CHAIR: Can the member for Bragg please allow the member to respond without interjections.

The Hon. K.O. FOLEY: They can't—they will not make a profit for a bloody long time—we would lose hundreds of millions of dollars for the nation and probably half a billion for ourselves, so a profit-based tax makes no sense at all, levied by a state. I just make the political point again: if that is what the shadow minister wants to do, he had better get on the telephone to Tony Abbott, because I do not think Tony Abbott will be very happy about a state-based Liberal politician arguing for a Labor resource rent tax. It is in conflict with what your national leader wants.

I think that, over time, all resources will move to an agreed resource rent across all minerals, and agreed to by all states and by the mining industry. If you think about it, paying a tax on the level of your profitability is a hell of a lot smarter than having to pay a tax when you are not making any money. BHP will have to pay substantial royalties to the nation before they get a profit.

Ms Chapman: Two years.

The Hon. K.O. FOLEY: Sorry?

Ms Chapman: For two years.

The Hon. K.O. FOLEY: For two years?

Ms Chapman: Yes.

The Hon. K.O. FOLEY: How do you work that out?

Ms Chapman: Before they start making the profit in 2020.

The Hon. K.O. FOLEY: Where do you get 2020 from? Vickie—

Ms Chapman: Read your own documents.

The Hon. K.O. FOLEY: Vickie, they—

The CHAIR: Member for Bragg, and member for Port Adelaide, can you refer to the member for Bragg as that, and not as Vickie?

The Hon. K.O. FOLEY: The member for Bragg—they will spend whatever—6 or 7 billion, or whatever the number is, over the next six or seven years, digging the mine out.

Ms Chapman: I'm just explaining it to him; he obviously hasn't read it.

The Hon. K.O. FOLEY: Hasn't read what?

The Hon. A. Koutsantonis: Yes, he has.

Ms Chapman: He's had the briefing from the same people.

The Hon. K.O. FOLEY: Vickie, I know this project back to front, up and down, every place.

Ms Chapman: When do you say they start making a profit?

The Hon. K.O. FOLEY: Firstly, how do you measure a profit?

Ms Chapman: When do you say that they say—

The CHAIR: Member for Bragg, you have an opportunity to ask a further question if you want to clarify.

The Hon. K.O. FOLEY: I do not know how one would frame what a profit is in the context of a profits-based tax, because this company might make a trading profit in seven or eight years' time, but it will not have paid back its capital. Under the resource rent model in Canberra, they can write off their capital and not have to pay a profits-based tax; so God knows when you would work out when the venture is profitable. We would have to get access to ODX's internal profit and loss statements to calculate a profits-based tax.

I do not know of a situation where a state government in recent times has calculated a tax on a company profit. That information is the privy of the Australian Taxation Office, not for state-based tax authorities. It would be impractical and near impossible for a state government to try to construct a profits-based tax that was either fair or, indeed, deliverable. If the member for Bragg wants to put a press release out saying we should wack a profits-based tax on it, go for it, because Tony Abbott will be down on you like a ton of bricks.

The CHAIR: I think you have answered the question.

The Hon. K.O. FOLEY: I think that answers it. I do not know how else we could have extracted more revenue from the company directly other than—I don't know. HFE kicks in all the time. HFE kicks in on payroll tax. All the receipts we get from payroll tax from this project get equalised around the nation. The broad-based taxes, or the taxes that are part of the grouping of taxes that go into the GST pool, we share them all with the rest of the nation. You would almost have to find a one-off charge. Maybe you would put a $0.5 billion or a $1 billion stamp duty on them. I do not know how you could effectively tax this venture more than we have and not end up giving it all to the other states. That is how HFE works.

Mr HAMILTON-SMITH: I am really delighted to hear the former treasurer complaining about HFE. I really am, because what he is forgetting to tell the house is that South Australia is a net beneficiary from horizontal fiscal equalisation and that the royalties to which he refers go into the pool, along with the $3 billion worth of royalties, or something of that order, from Queensland and something pretty similar in WA, and we get far more than we kick in at the end. He has just given us a damning critique on HFE without reminding the house that actually it works in our favour. He is defeating his own argument.

The Hon. K.O. Foley: I'm just telling you how it works.

Mr HAMILTON-SMITH: We know how it works. The other point that I would make is—and I am not sure which minister I am talking to here, the current one or the former one, who seems to be answering all the questions: can he guarantee us that horizontal fiscal equalisation will be here in 10 years or 20 years?

The Hon. K.O. Foley: No!

Mr HAMILTON-SMITH: That's my point. That is my very point. My very point is that his argument is constructed around a fiscal arrangement between the commonwealth and the states that exists today that may not be there through the life of the project.

The Hon. K.O. Foley: Imagine something that might happen in a decade!

Mr HAMILTON-SMITH: Anyway, I will not dwell on the point, because I think we are just talking round in circles, but I would like to move on to the broader issue of tax benefits back to the state, because I think the government's answer to this question about why it set the royalty regime where it did is connected to two other provisions in schedule 1, and that is no special taxes in section 33 on page 118 and the stamp duty exemption provision in clause 43 on page 131. As I read it, the indenture exempts BHP for the period of the indenture from having to pay 'any stamp duty, gift or like duty' to the state government, particularly as it might relate to any insurance policy. So we have sort of surrendered, if you like, our revenue from stamp duty as part of the deal.

Similarly, in clause 33 we have indicated that we will impose no special tax. Now, at face value it seems quite a reasonable provision. Clearly, we could propose a special tax. I suppose we could get a pound of flesh out of BHP through another device; but when you look at these three measures together, the way you have structured the royalties regime, the fact that you have given up your right to any special taxes, and that there are stamp duty exemptions, seems to put a reasonable hole in our ability as a state government to generate revenue from the investment. Can the minister tell us how these three fit together and why the government constructed them in the way they did?

The Hon. A. KOUTSANTONIS: Before the Attorney makes a contribution, I think it is important to note a number of things. First of all, the provision of 'no special taxes' is in the original document. Again, it is there to make sure we are not discriminating against BHP. So we do not bring in a window tax on BHP for the windows they have, or whatever the levy may be, which is fine. It is now redundant, but it is part of the indenture.

In terms of the non-discrimination of the stamp duty, again, it is a legacy clause in the indenture. How do they fit into the current royalty regimes? Well, they don't really correspond at all. I am assuming—and I could be wrong, and I do not want to misrepresent you—you think these three issues combined somehow give BHP an advantage. I do not think that they do. If you have some evidence that they do please let us know.

Mr HAMILTON-SMITH: The point I am making is that you have forgone under clause 33 any stamp duties from any policy of insurance taken out and a range of other things, so the—

The Hon. A. Koutsantonis interjecting:

Mr HAMILTON-SMITH: Well, the stamp duty has gone, there will be no special taxes, and we have pegged the royalty regime for 45 years.

The Hon. A. KOUTSANTONIS: That is not a fair comparison because they are existing clauses in the indenture. You are trying to link them together and it is not reasonable to do so.

Mr HAMILTON-SMITH: Well, the royalty regime is new—

The Hon. A. KOUTSANTONIS: Yes.

Mr HAMILTON-SMITH: —and it relates to the other two. The point I am making is this: you might ask future generations, and future parliaments will ask what were the benefits constructed into this agreement by the parliament in 2011. Really, we have just heard the former treasurer tell us that there is not much in it for us in regard to royalties because it is all gifted away to a pool of money in Canberra under HFE.

We have given up the stamp duty provisions and the 'no special taxes' were there before—no revenues there. So where is the revenue coming from for this? The answer is probably payroll tax; there will be a benefit in payroll. I understand—and the minister may confirm this—that BHP will be paying payroll tax. I see nothing in the agreement, that I can spot, that gives them an exemption.

The real meat that the government is looking for is GST. It is looking for tax revenue from the wages that will be earned by workers, which hopefully they will spend in the shopping centres and in the theatres and restaurants, and they are looking for the GST that will be spent on the many transactions that will be linked to the arrangement.

However, as we heard when we debated clause 12, there is no enforceable way that one simple job or one single contract can be demanded of BHP here. That GST might go off to Melbourne, Sydney or Brisbane if that is where the workforce flies in or flies out from. I have heard the insurance is unenforceable, but more than likely they will hire locally, but there are no guarantees. Has the government modelled its expected tax revenues from all of this and how are you going to make your money from the proposition?

The CHAIR: Can I invite the minister to comment in response to that, then I invite the Attorney-General to comment as well.

The Hon. A. KOUTSANTONIS: The one aspect that the shadow minister failed to mention was the contribution to gross state product of about $7 billion per year. Now, you talk about GST, you talk about payroll tax, you talk about royalties; there is also economic activity. That economic activity comes from the extra employment. I do not accept the premise of your question, which I have heard from both members, that the majority of the jobs will apparently come predominantly from Melbourne, Sydney and other jurisdictions.

I have got to say this is a little bit disappointing, because BHP have been in South Australia for a long time and are already employing about 65 per cent of their workforce locally. But apparently, that is all going to change now. Apparently, all of a sudden, they are going to become a completely foreign company with a ring around them where everyone just flies in from somewhere else. The truth is, as mining minister, I know that mining companies want local workforces because they keep them longer.

The Hon. K.O. Foley: They are building a township up there.

The Hon. A. KOUTSANTONIS: They are building a township. Why are they building a township? It is not just to accommodate workers for the two-week shift: it is because they want to encourage the people who they invest in, and they invest millions into these people, to stay with their workforce. You can see it everywhere at every mine you go to.

So, the contribution to gross state product is about $7 billion per year. You sort of just skate by that and say, 'There is payroll, there is GST—you have done a really bad deal.' The contribution in terms of economic activity is massive, and I think that cannot be underestimated. What is BHP doing? BHP are delivering a project that will employ over 20,000 people. I think that is a pretty impressive project.

The Hon. J.R. RAU: I just wanted to say a couple of things about this. First of all, I just wanted to say that I think the member for Port Adelaide has actually done a fantastic job in negotiating this matter in the best interests of the state. Can I say secondly that the business about horizontal fiscal equalisation is a very barren argument because, presently, that is a fabric of the federal constitutional arrangements. That may ultimately change.

Ms Chapman: Absolutely. That's what we say.

The Hon. J.R. RAU: It may ultimately change, but it may change in one year, five years, 20 years, 30 years, 50 years.

Ms Chapman: Exactly.

The Hon. J.R. RAU: We do not know and you do not know, and the member for Port Adelaide, who has done the best he can possibly do on the information available to him, has decided that he will proceed on the basis of what is a known fact. I do not want to quote Donald Rumsfeld too much, but there are the known knowns, the known unknowns and the unknown unknowns, and what the opposition is canvassing is in the third category—unknown unknowns.

The Hon. A. Koutsantonis: Imagine the negotiation: 'Hey Marius, can you approve this taxing regime that may or may not exist?'

The Hon. J.R. RAU: Indeed. So, that is my remark about that. The third point I wanted to make is this: this conversation appears to be about, in many respects, the future, and that is obviously correct and important. However, if you are going to be talking about a project which, if we reduce it to the scale of some sort of thing that a domestic person can comprehend, is like buying a house, the comments that we have been hearing of recent times directed to the minister and to the member for Port Adelaide are not about whether the house is worth $500,000 or $600,000: it is about whether the doorknobs are yellow or green which, in the context of the total project, is, with the greatest of respect, insignificant.

The question was raised about whether or not we could identify how much payroll tax or how much of other things were going to flow to the state as a result of this decision. I do not know whether the honourable members opposite ever watched that great program on TV called Kung Fu, but, if they ever did—

The CHAIR: I did.

The Hon. J.R. RAU: I am glad you did. Not only did it raise the tantalising question of whether somebody could take the pebble from your hand but it also talked about the concept of the pebble being dropped in the pond. I hope this analogy—

Mr Hamilton-Smith interjecting:

The Hon. J.R. RAU: Yes, but when you reflect on it it will make sense. The point is, if you inject billions of dollars into the South Australian economy at some point, it is not a question of whether the minister or the member for Port Adelaide can tell you exactly where that ripple is going to come out from that injection point and what it is going to produce in a particular taxation regime.

Members interjecting:

The CHAIR: The Attorney-General has the floor.

The Hon. J.R. RAU: Thank you. The point I am trying to make—and I hope this is—

Mr Hamilton-Smith: What is the point you are trying to make?

The Hon. J.R. RAU: If you just listen for a minute.

The Hon. K.O. Foley: I don't get the Kung Fu bit.

The Hon. J.R. RAU: You drop a pebble—

Members interjecting:

The Hon. J.R. RAU: People back there know what I am talking about, don't you? You drop a pebble into the pond and the ripples come out. They are saying, 'At what time will the ripple come out, exactly where will it impact, who will be affected?' That is not to the point. Are they seriously doubting that dropping billions and billions of dollars—

Mr PENGILLY: Point of order: what on earth has this got to do with the question? I think it is a question of relevance, Mr Chairman.

The CHAIR: Yes, and there is no point of order. I do not uphold the point of order. The Attorney-General will be heard uninterrupted.

The Hon. J.R. RAU: Thank you, Mr Chairman. Can I say to the member for Finniss that there is a thing called metaphor. It is subtle, but I encourage the member to think about it. That is why I am talking about ripples in ponds, because I am not literally talking about a pond with a stone in it. That will help you with what I am about to say.

So, we have a pond—not literally a pond but a metaphorical pond—and in this metaphorical pond we introduce billions and billions and billions of dollars—or, to help the member for Finniss, pebbles. Those pebbles—or dollars, as those of us here on this side would understand them—produce an effect. Nothing I am saying is revolutionary, unorthodox or weird. I am not sort of conjuring Jedi things on the opposition. That is the second point I wanted to make. I hope I have made that point.

The Hon. K.O. Foley: What was the third?

The Hon. J.R. RAU: The last point I wanted to make—aside from saying the member for Port Adelaide and the minister have done a fantastic job and I commend both of them, and I am proud to be part of a government that both of these extraordinary men have been a part of and an integral part of—

The Hon. A. Koutsantonis: Am I leaving too?

The Hon. J.R. RAU: No. My final point—and I am going to get to it now—

Members interjecting:

The Hon. J.R. RAU: Hello.

Ms Chapman interjecting:

The CHAIR: Member for Bragg.

The Hon. J.R. RAU: The final point is this: are you actually supporting this or not? Are you on board or not? Is the member for Waite actually pretending to be part of the caravan, but he is waving at everybody who is not on the caravan and saying, 'I am actually with you. Hello, Mark, I am with you. Mark, are you there?' Are they having secret conversations using—what do they call that stuff now? Is it Facebook or Twitter? I cannot remember.

Mr HAMILTON-SMITH: Point of order. We are ready to start wrapping up, but I think this is debate and I fail to see how this is answering the question. It is just getting embarrassing.

The CHAIR: No, I was embarrassed much earlier, I can tell you.

The Hon. J.R. RAU: It is not embarrassing me but it is obviously embarrassing them. If members of the opposition are seriously interested in the future of South Australia it would be interesting and helpful if they actually said, 'We have committed to support this bill and we are not going to nitpick about whether the doorknob is yellow or green; we're actually going to be supporting the great work that the minister and the member for Port Adelaide have done over a considerable period of time.' Thank you for your indulgence.

Mr HAMILTON-SMITH: I am not sure if that was the Deputy Premier's finest hour in this place.

The CHAIR: Can you get to the next point, please, member for Waite.

Mr HAMILTON-SMITH: I have heard him do much better. The opposition—all of us—is fully supportive of this measure and we are about to conclude our questioning. However, as the Deputy Premier would well know, and as the minister would well know, this house has an obligation to thoroughly explore (including committee debate) the detail of the important matters before it—and this is one of the most important.

I am struggling to see why the Deputy Premier would find some discomfort in the fact that we are seeking to solicit information. It may be lost on him but 20 years from now people will not know a lot of the details that went into this matter unless they read Hansard and hear the explanations that have been given as to why we are where we are. As far as I am concerned, that ends our exploration of the matter in committee.

I note that it has been a very difficult negotiation—that is very clear—and no doubt the former treasurer is ready for a long holiday; I am sure it has been very difficult. I think it is a good outcome. I think we have heard tonight that it could have been a better outcome but, as the former treasurer has explained, a negotiation is a negotiation and we are where we are. However, there are some serious weaknesses in the bill. We have explored a number of them tonight but it is the bill we have before us and the bill which enjoys our full support, and the bill that will shortly pass.

Schedule passed.

Title passed.

Bill reported without amendment.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Manufacturing, Innovation and Trade, Minister for Mineral Resources and Energy, Minister for Small Business) (00:13): It is with great honour and pleasure that I move:

That this bill be now read a third time.

Ms CHAPMAN (Bragg) (00:13): First, Mr Deputy Speaker, I thank you for your chairmanship during the course of the committee and wish to acknowledge that, during the course of this debate, the opposition has been provided with briefings to its nominated team that had carriage of discussions on the matter, taking into account the sensitivity of confidential matters which have transpired.

I also wish to thank members of the department in the minister's office—they have changed from time to time and, indeed, the ministers have changed from time to time—who have provided briefings on this matter to all of us, but I am speaking only for myself in this regard.

I thank BHP, who have not only provided the opposition with briefings (and our nominated team), but have also provided me with briefings on a number of aspects of the bill where I have raised concerns with them, both here in parliament and also in their offices in Grenfell Street. I also thank BHP for coming out to Portrush Road to my constituency of Bragg to provide a briefing to a meeting so that my community might also be informed about this matter.

Whilst there have been repeated claims that what we are going to pass tonight will produce the biggest mine in the world, can I just say this for the record: currently, the mine is not the biggest in the world. Even when it is finished, it will not achieved the status of having been the biggest mine in the world, and the reason for that, we are informed by BHP, is that the biggest mine in the world, in South America, is an open-cut mine—

The Hon. K.O. Foley interjecting:

Ms CHAPMAN: It is certainly far bigger, but it is likely that the life of that mine will have expired before the commencement date of the operation of this mine. Therefore, by the time this mine actually starts, it will then have the status of being the biggest mine in the world. That assumes, of course, that the South American mine actually will have expired—they might find some more deposits under it, who knows—in which case you may never have that mantle. Nevertheless, I think that we can say that, if all of the development of this mine reaches the expectation that has been presented by the government of what it will do for South Australia—and, indeed, that has been presented by BHP that it will do for South Australia—will we certainly enjoy the profits of it.

I also remind the house that this is not a new mine, and there are two aspects I wish to record that, during the course of the committee stage, the opposition raised the fact that there are a number of vulnerabilities. For my part, the significance of these is in the expectation of local employment and opportunity for local contracting, and I would have to say that the answers in relation to that do not fill me with confidence. I am still left with some hope but, on balance, I would have to say that the minister's answers have not alleviated my concerns in that we remain vulnerable, I remain hopeful.

On the question of the social infrastructure, the minister's answer, I think, leaves the house completely in a vacuum. It seems as though there has currently been no independent work done to make an assessment of whether the proposed plan for social infrastructure is going to be in the interests of the community, both developed directly and overall for South Australia. I remain concerned about that, but there seems little else that we can do in that regard but, again, I put it in the hopeful category that, in fact, it will work out as a better outcome for the state.

The final area relates to royalty rates. During the debate on this bill, I have said to the house that I do not support a profit assessment for the purposes of receiving extra benefit. During this debate, there have certainly been some media commentators who have espoused that view, but it is not one that I support, nor am I suggesting that the size of the mine should attract a higher mining rate. I think that it is reasonable that the mining royalty rate should be as has been indicated. The question is: has it been reasonable for the government to accept an indenture at the current mining royalty rate and keep a cap on it for the next 45 years? We may never know whether a better outcome could have been achieved.

The answers that have been given tonight by the member for Port Adelaide, who has had the carriage of much of this negotiation, have been frank to the extent that he was obviously concerned that, early in the debate, when BHP, he said, threatened to pull up stumps and cease the negotiations when it was not given its 2 per cent royalty rate entitlement and that the negotiations appeared to be in a state of haemorrhaging. Obviously, he thought it was important to rescue that. We may be grateful for his having done that. Ultimately, whether a 20-year freeze, a 10-year freeze or a 45-year freeze is acceptable as the best negotiation, we may never know.

But what I will say is this, and it relates to the fact that this is not a new mine. If we were back in 1982 and the resource had not yet been opened up and there was no existing facility, I think it is reasonable to offer, during the period of development where there is a high level of risk, some security, some incentives, some protections and some privileges which indentures give.

What is a little concerning to me is that we have ended up with another 45 years of a protected privilege circumstance when there is already a 35-year old mine in existence with the same operator and, therefore, if this indenture did not pass at all, obviously the state would miss out on an enormous opportunity but it would not close the mine.

The mine would continue and we would continue to receive the royalties as they are. So it is not as though BHP will be saying, 'If you don't not sign the fourth part of the indenture'—this is the third time we have been back here to change it—'we are just going to sack everybody and disappear out of the state. Clearly, they are not going to. That is the key difference, I think, that history will show about whether we should be as generous in relation to the time frame.

What I will say is that we cannot make that assessment from here. We have to have some faith that those who have negotiated this matter have done the best on our behalf. I think the areas of vulnerability are there and they are stark, and we have raised the risks. I am sad to say that the minister has not allayed my concerns about them, but I do remain hopeful that, in fact, we will actually have the generational benefit which has been offered.

I wish to also thank the member for Port Adelaide for his years of participation in this. Whether he has achieved the best outcome or whether he has achieved a good outcome, others will judge as time goes on: but what I do accept is that he has maintained an interest and an energy in this negotiation over a sustained period of time, whilst, of course, he has had other duties not only in this parliament but obviously as a minister of the Crown.

I think that does need to be recorded. We do thank him for that. As we know, his retirement is imminent and I want to make sure that I say some kind things about him before he goes. I will say this: it has been a very long, sustained effort, and I congratulate the member for Port Adelaide and thank him for it.

During the course of the debate, I am not sure whether it was exactly on this bill or whether it was something else, I think I offered to assist him to apply for a job as secretary in my electorate office. It must have been a weak moment. I want to place on the record that I wholly withdraw that offer—not that he was about to consider it or that he was preparing his CV. I think I have also offered some opportunities in China, which I hope that he considers. He might want to take that up. I think it would be a very good position, actually. Nevertheless, whilst I think he would add a certain flavour to the electorate office of Bragg, he would probably find it difficult to take any instruction from me as his employer, so I will conclude by saying—

The DEPUTY SPEAKER: Can the member for Bragg get back to the topic, please?

Ms CHAPMAN: —that I do wish him well in his retirement post the parliament. During the last six years, in this aspect, that contribution has been well received, and I thank him for it.

Members interjecting:

The Hon. K.O. FOLEY: Can we have some quiet in the chamber, please?

The CHAIR: We would if the member for Port Adelaide did not speak. Member for Waite, speak now or hold your peace.

Mr HAMILTON-SMITH (Waite) (00:24): Mr Deputy Speaker, as this bill comes out of committee I commend it to the house. I think it is commendable that both sides of the house have passed this within two days. The opposition has certainly stood by its commitment to advance it expeditiously but, at the same time, has exercised its duty to examine it thoroughly, and I think that we have been through it.

I think that it is a good outcome. We are finally getting the expanded mine underway. There will clearly be great benefits to this state. Having said that, I think that we have identified during the debate a number of weaknesses in the agreement. We have talked about the way in which the royalty regime is struck. It has been explained to the house that, of the options available, this may well have been the only one we could get with a company that has proven to be an excellent negotiator. We have talked about third party access and we have talked about whether the benefits in terms of jobs and business contracts will be delivered at the level we expect during the course of this project.

I must say that I have concerns about many of those things, and I have characterised this agreement as a prenuptial. I think that two parties are about to enter into a very long and lasting relationship together—the people of South Australia and BHP. What I think this agreement constitutes is something like a prenuptial. I think that it is tilted towards BHP, which, I think, has done a very good job of getting what it wanted out of the negotiation and putting the former treasurer over here under enormous pressure.

I must say to BHP that I think that you have done extremely well. I think that the objectives that you set for yourself at the beginning of this negotiation have been met in spades, and I think that you have won on many of the key points. Having said that, I commend the government and the former treasurer in particular, because it could have been much worse. I think that he knows that better than anyone, and he has probably prevented it from being an absolute rout.

I think that now a lot depends, like any marriage, on goodwill, and I think it depends on BHP doing the right thing and delivering the jobs and economic activity that everyone expects. I would caution companies in South Australia that may have been led to believe that we will become the Dubai of the south just to hasten slowly in their expectations of the BHP expansion of Roxby Downs and not rush into overinvesting before the deals are signed, because I think that we have to see how this develops. I am optimistic that it will be a fantastic outcome for the state and for all involved, but we do need to give it time to work.

Could I add my congratulations to the former treasurer? I have seen the former treasurer at work in the house now for 14 years, or so, but I have got to say one thing about the former treasurer: I think that he is a doer, and I think that he is someone who sets out to get results and who generally does not give up. I would say that this negotiation has been gruelling. It has been a bit of a David and Goliath negotiation.

I am sure that, in many ways, all the bullets were in BHP's magazine but, as I said, it could have been a far worse outcome. I think that it has been a good outcome. It could always have been better. I have got to say to the former treasurer that, when you do leave, you can look back on this negotiation with some comfort. It has been a good result for South Australia, and I am sure that generations to come will reflect back on it as being something that we can be proud of.

The Hon. K.O. FOLEY (Port Adelaide) (00:29): I have to rewrite my third reading speech. I was going to get stuck into the member for Bragg and the shadow minister. Look, I really do respect and appreciate the comments given by the member for Bragg and the member for Waite. They do mean a lot. I can attempt to comfort the member for Waite and say that I had a fair few bullets in my magazine, and I reckon we did okay out of this; but, as you say, only time will tell. It has been a good process.

I have already said this publicly before, but we have shared many a long night with the team that we have here with us tonight, and they worked a hell of a lot harder. There were some nights when Paul Heithersay was there until four or five in the morning. Gaby Jaksa, of course, as our crown, was under a lot of pressure to do both the Adelaide Oval and the indenture.

A little secret out of school in terms of when we finally signed off on this deal in Melbourne with Marius Kloppers: Paul Heithersay did not sleep, because we still had literally last minute t's and i's to be crossed and dotted. I think Paul, Gaby and a few others—the whole team, I would think—would have finished at five in the morning, and then Paul Heithersay hopped on a plane and came to Melbourne. There were just the final bumps along the way that you have with these things. It has been a pleasure working with these people; they are a bloody good team.

The BHP people were really good to work with. We have Kym Winter-Dewhirst with us now, and Paul Flanagan, but, importantly, Dean Della Valle, in particular, and his team, were outstanding. Also, Bruce Carter, of course, and many others, and the former premier, Mike Rann, and the present Premier, Jay Weatherill.

I think the important point out of this process is that we have a terrific opportunity in this state with Olympic Dam. Could we have done better? Yes, no—there will never be a right answer. My view is that if we have not done as well as we can, it is at the margin. I do not think it is a substantial issue. This is not the last time I will speak in this house, but it is nearly the last time, and this is a pretty good one to go out on.

Mr WILLIAMS (MacKillop—Deputy Leader of the Opposition) (00:31): I will not hold the house for long. It is late; I note the hour. This has been probably the most important thing that will happen in my political career in this state and probably the most important piece of legislation that goes through this parliament. I have had the privilege of being right at the coalface of this on behalf of the opposition.

I want to take the opportunity to thank the government, particularly the member for Port Adelaide. We have tick-tacked on this over a fair period now and we have worked, I think, in a very mature way. He came to me and to some of my senior colleagues and said, 'I'm sticking my neck out here', and we said, 'Well, you are not alone there, Kevin, but I think we can work well because, at the end of the day, we have the same outcome at heart.' So, that has worked well.

I have worked with people within the Liberal Party and the opposition—my leader, Isobel Redmond, our shadow treasurer, Iain Evans, our leader in the upper house, David Ridgway, and our shadow minister for the environment, Michelle Lensink, who formed the subcommittee on behalf of the opposition.

This is the only experience I have ever had of the opposition forming a subcommittee to oversee the passage of a piece of legislation. It has worked fabulously well and it has worked fabulously well because I think there has been bipartisan support for that work and also because we were given access to departmental officers from a range of government departments: obviously, the Department of Mines—Paul Heithersay, with whom I have had a relationship for a long time and for whom I have a great deal of admiration; he has more recently led up the Olympic Dam Task Force—and the EPA. The bureaucracy also offered and brought in consultants from outside of government to brief us and give us insight behind the EIS. Also BHP—and we have had an ongoing relationship with BHP for a number of years, probably ever since it has been involved in the Olympic Dam operation here in South Australia. It has been a privilege to work through this project.

At the end of the day, this is one time when I think we have had true bipartisanship. It is one of those few occasions, which I lament to say, where there is true bipartisanship for the benefit of this state. I hope that all of our children, grandchildren, great-grandchildren and great-great-grandchildren will benefit because I think this project will be an important project in South Australia for well over 100 years. We have helped deliver that—all of us involved.

Can I say on behalf of my colleagues that I have always lived by a simple credo that when I put my head on the pillow of a night-time and close my eyes, I enjoy the fact that I can satisfy one conscience, and that is my own. I am very satisfied in my conscience when I put my head on the pillow tonight that as a parliament we have given due diligence to what has been presented to us. I agree. It may not be the best. None of us has a crystal ball to know what is going to happen in 10 or 20 years, let alone 100 years' time. I expect this project to be still in operation in well over 100 years' time.

I wish everybody who is associated with this project over that period of well over 100 years maybe beyond 200 years all the best. I think it is integral to the future of this state and I thank all of my colleagues for the support they have given to me and my senior colleagues who have worked with the government on this project. I have had the privilege of having access to senior people in government, in BHP and some other people to answer questions. My colleagues here tonight have taken the opportunity to put onto the record their concerns and to ask questions and I think that is part of the process that we all live by. I expect and hope that BHP Billiton embraces this project and the board gives it the tick of approval some time in the first half of next year and that we all reap the benefits of this over many generations to come.

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Manufacturing, Innovation and Trade, Minister for Mineral Resources and Energy, Minister for Small Business) (00:37): Today is 10 November. It is my daughter's first birthday.

Members interjecting:

The Hon. A. KOUTSANTONIS: Yes, a great milestone for me.

Members interjecting:

The Hon. A. KOUTSANTONIS: Thank you. I am going to go home to my little girl tonight and she is not going to know what her father and 46 other people did, along with a number of staff members and others. She will not understand. But I am not going to thank staff just yet because the final hurdle has not been passed. There is still another house that deserves respect, that deserves consideration. I hope that the intentions of members in the upper house are honourable. I know that at least 20 of them will have very honourable intentions. I am not sure about—

Mr Williams: Don't stir them up.

The Hon. A. KOUTSANTONIS: I do not think there is anything I can do to change their minds. There are two ways to view the expansion of Olympic Dam: that it is a good thing for the state or it is a bad thing for the state, and I am a black and white type of guy.

I think the honest response that the Greens can give this bill is that they do not support the expansion of Olympic Dam because they are opposed to uranium mining. Everything else they say about this bill is a tactic to delay. If you are honest about your opposition, and you are honest about your politics and you are honest about why you are here, you would get up and you would say so honestly and you would not make an apology for it.

This project is overwhelmingly popular. I have heard tonight, throughout the debate, MP after MP (Labor and Liberal) get up and say, 'This is our idea. This is our project.' The truth is this project belongs to all South Australians and they are looking to us to do the right thing by them for future generations. I think we have done that, but we have not passed the final hurdles.

Even when it passes the upper house, that is not the final hurdle. When it passes the upper house—if it passes the upper house—the clock ticks. In 12 months if BHP decides, for whatever reason, not to go ahead, the project may be lost forever. I do not think that is going to happen but I do believe passionately that the world is watching us.

If your are an investor in the UK, northern Europe, southern Europe, Africa, South Africa or South America in a mining company, and you are looking for a place to invest your money in mineral exploration, there are not many options where you think there is a safe place to do business—a place that does not have debts that are more than your GDP. In fact, our debt is in single figures, compared to our GDP. It is about 6 per cent of our GDP, compared to the average in Europe, which is nearly 90 to 125 per cent.

You are not seeing any sovereign risk issues where political parties are threatening to nationalise mines; you are not seeing partisan debates about employment opportunities for mining, about investment; there is no wholesale corruption in terms of procurement and bribery. What you have is a safe regulatory regime that is independently analysed as being the best in the world, thanks to the people who regulate us.

The world is watching. I say to the Greens in the upper house, now is the time to put your political affiliation aside, now is the time to stand up and be a South Australian and say that you support or do not support. Do not filibuster. Do not speak for hours on end. Make your point. I am not in anyway trying to guillotine this. This is not about us stifling debate. If the Greens want to express a view that they do not support the mining of uranium, that is a legitimate point of view. It is legitimate to say, 'We do not support this mine and we do not want to see it expanded.' That is an honest and legitimate point of view to have. What is not honest and legitimate is to try to make it so unfeasible that the proponents walk away. That is not an honest tactic.

I wish the bill a speedy passage through the upper house. I think we can all go home tonight very proud. It brings new meaning to 'without amendment, without delay'. When it comes back to this house we will make the appropriate thanks to the staff who have worked so hard, but their job is just beginning because, quite frankly, this was easy.

We are going to see the state change forever. I have said this many times: I think future generations will look back to this moment, not because of BHP Billiton and not because of Olympic Dam, but because of a series of events: Woomera opening up; our exports year to date, month after month, leading the nation, or second to leading the nation; bipartisan support; safe regulatory regime; more investment; Rio Tinto are back in town; Fortescue Metals are back in town. I think we are on the precipice of something amazing.

I may not be minister to see it. Maybe in six years time there will be a new minister.

Members interjecting:

The Hon. A. KOUTSANTONIS: Maybe in 10 years time there will be a new minister. I think we have well and truly shaken the tag and we are well on the way to no longer being a mendicant state in terms of the way other states view us. We are now the epicentre. You may well laugh. BEACH Energy—

Mr Williams interjecting:

The Hon. A. KOUTSANTONIS: I do not talk down my state. BEACH Energy is proposing—

Members interjecting:

The Hon. A. KOUTSANTONIS: I am not exaggerating. If you looked at what BEACH Energy is proposing in Moomba you would not be saying that. Mitch and I know what is going on. This state is changing forever and changing for the better and I commend the bill to the house.

Bill read a third time and passed.

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