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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2011-06-07 Daily Xml
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MINING (ROYALTIES) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 18 May 2011.)

The Hon. D.W. RIDGWAY (Leader of the Opposition) (15:40): I rise on behalf of the opposition to speak to the Mining (Royalties) Amendment Bill 2011. As members would be aware, this bill is a result of the government's announcement in the 2010-11 budget that it would reform South Australia's mining royalty regime. As members would be aware, the opposition supported the budget through this place last year and, of course, we indicate that we will support this bill.

Currently, the royalty rate is at 3.5 per cent of ex mine gate value of all minerals, other than extractive minerals, which are based on a volumetric rate, and a rate of 1.5 per cent is applied to new mines for the first five years. Members would all know that Olympic Dam has been and will continue to be a major source of royalty revenue for South Australia. We also have a large stream of revenue from the petroleum sector within the Cooper Basin, and I know a number of other prospective areas in relation to gas and oil are under exploration at present.

I will give a brief history in relation to Roxby Downs. The indenture bill of 1982 set out royalties from that operation at 2.5 per cent of the ex mine gate lease value—the value of the mineral once mined, brought to the surface and removed from the site—for the first five years of operation. After the fifth anniversary of the commencement, it went up to 3.5 per cent. This increase recognised the government's contribution of infrastructure required to support that operation.

As the cut-off for that legislation neared in 2005, the government moved to protect that 3.5 per cent royalty revenue stream and also increased the blanket rate across all operations in the state to 3.5 per cent. That legislative change also included a grace period for new operations, where they paid only 1.5 per cent for the first five years, rather than the new 3.5 per cent. This bill, however, creates a new classification for royalty purposes—a mineral which is mined and processed to a concentrate form on site but then exported for refining, rather than being refined on site. For those operations exporting unrefined minerals, the royalty will be 5 per cent and the rate for that grace period I referred to earlier will jump to 2 per cent.

In summary, the new royalties outlined in the bill are: 5 per cent on exported bulk commodities such as iron ore, coal and copper concentrates; 3.5 per cent retained for metallic products, including copper, gold and silver; and 3.5 per cent will also be retained for certain industrial and construction minerals, such as salt, limestone, dolomite and gypsum. Mines producing refined metal will be subject to a 3.5 per cent rate. The concession rate for new mines will be increased by 2 per cent for any mines approved after 16 September 2010. Olympic Dam will only face increased royalties for its uranium oxide production.

The basic principle behind the main change in this bill is to encourage the retention of on-site value-adding processes and, in particular, operations like Olympic Dam. It is already difficult and expensive to mine in South Australia, as in other states, such as Western Australia. It is important that we protect future investment in our industry. We must be careful—as pointed out by Mitch Williams (the member for MacKillop, the deputy leader in another place and shadow minister for mineral resources)—as, by simply setting our royalty to that of the other states, we are already in heavy competition with Western Australia. The decision to invest in our state is a carefully weighed decision for many company directors.

I was disappointed to hear that the South Australian Chamber of Mines and Energy did not receive a detailed briefing on this bill, although it was aware of the budgetary announcements. I think that typifies the way this government has operated: it really has not consulted and taken the industry along with it. I think that the Hon. Paul Holloway, the former minister for mineral resources development, is, in fact, a Mining Legend—an award he received while he was minister. I know that I sometimes see him wearing his little gold picks on his lapel.

It Is a shame that the South Australian Chamber of Mines and Energy was not consulted and given a detailed briefing on this bill. The former minister and the current minister, the Hon Tom Koutsantonis, championed the mining sector yet did not really have the decency to provide a detailed briefing. I think it really is a sign of Labor's risky approach to a lot of decisions which can largely influence the future direction of our state's economy.

The opposition has always been appreciative of the mineral wealth of this state, and some of the benefits must flow through to the state. It is the responsibility of our state government to reinvest that money in worthwhile projects whereby the benefits can be advantageous to future generations.

Royalties are an important source of revenue for our state. We are lucky to be rich in mineral wealth, and we must nurture the industry which exploits that wealth so that our revenue can continue to grow along with the multitude of benefits that flow on to our economy. I indicate that the opposition is happy to support these changes to the royalty structure in South Australia, although I think we also need to understand that we do have significantly less royalty revenue in this state than some of the other bigger states, such as Queensland and Western Australia.

Interestingly, I recently had a discussion with some industry players in the finance sector here in Adelaide who talked about how our royalty stream was so large because of the great expansion in mining. I pointed out that in Victoria—most people think it does not really have many mines at all—the royalties paid by the Victorian coal industry to the government are far greater than the royalties that we receive here in South Australia.

So, the opposition certainly does support these measures, but we also need to be mindful of the fact that we have a long way to go to catch all the other states in relation to the income received for mining royalties. It should not just be about increasing royalties all the time but developing industries and supporting those industries to expand in the state. With those words, I indicate that we support the bill.

The Hon. A. BRESSINGTON (15:47): I rise to indicate my support for the Mining (Royalties) Amendment Bill. Announced as part of the 2010-11 budget, the bill in effect raises the royalties payable on bulk export commodities such as coal, iron ore and copper concentrate to 5 per cent of the ex-mine gate value and it also increases the discounted new mine rate to 2 per cent, up from 1.5 per cent.

Sensibly, the proposed new regime rewards those who refine bulk ore and concentrates in South Australia by retaining the royalty on such products at 3.5 per cent. Additionally, those materials associated with construction, such as limestone, dolomite and gypsum, will also remain at 3.5 per cent.

I am pleased that the increase in the new mine rate is not retrospective, and those mines currently paying 1.5 per cent will continue to do so until their concessional five years expire. Only operations given new mine status after 16 September 2010 will be liable to the 2 per cent rate. It is my understanding, though, that no new mine has so far applied for such status in this time.

While there are many points one could make in relation to mining in South Australia—or, more accurately, the lack thereof—or how revenue generated through royalties should be spent, the only point I seek to make in relation to this bill concerns the federal national Resources Rent Tax which, in effect, will largely override this parliament's ability to henceforth raise mining royalties.

While this state's intention is to raise royalties were announced prior to the national Resources Rent Tax and, as such, has seemingly been accepted by the federal government, in the case of Western Australia, which has more recently announced its intention to raise its royalties on some products, we have seen the reaction that this parliament can expect if we propose to again raise our royalties in the future. The Western Australian Premier, Colin Barnett MP, has come under fire from the Labor government threats that the federal government will penalise Western Australia via a reduction in infrastructure spending as a consequence.

This is because the national Resources Rent Tax indemnifies mining companies against state royalties and, hence, if South Australia increases its share, it comes at the expense of federal revenue. Western Australia's increase has supposedly cost the federal government $2 billion over four years, hence the reaction that Premier Barnett has seen.

While I believe there is, ultimately, little this parliament can do to change this, I do believe it is necessary to recognise that in effect this parliament has been forced to concede its right to fluctuate mining royalties as it sees fit without threat of consequence from the federal government. To me, this is simply another example of this parliament losing its relevance to its federal counterpart, even if it is indirectly.

Debate adjourned on motion of Hon. Carmel Zollo.

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