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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2011-07-27 Daily Xml
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OLYMPIC DAM EXPANSION

The Hon. M. PARNELL (17:46): I move:

1. That this council notes—

(a) that the environmental impact statement and supplementary environmental impact statement for the proposed Olympic Dam expansion comparing the proponent's preferred option of exporting the uranium-infused copper concentrate to China for processing with the option for domestic processing is 'not discussed in sufficient detail to enable an understanding of the reasons for preferring certain options and rejecting others', as required in the guidelines for the preparation of the environmental impact statement;

(b) that this absence of detail does not 'provide an adequate framework in which decision-makers may consider the environmental, economic and social aspects of the proposal'; and

(c) that the state government has publicly expressed that it will 'strongly oppose any moves by the company to do most of the processing of minerals from the expanded Olympic Dam mine overseas'.

2. That this council calls on the state government to urgently require BHP Billiton to publicly release further detail, including economic modelling, justifying the export of South Australia's mineral wealth to China for processing over the option of processing here in South Australia.

There is no doubt that the proposed Olympic Dam expansion will have an enormous social, economic and environmental impact on our state, and as such it was declared to be a major project under the Development Act. That declaration triggered the formal assessment of the social, economic and environmental impacts of the project through the EIS process.

A key part of any EIS process is a detailed discussion about the alternatives. These will include the alternative of not undertaking the development at all, or undertaking it in a different location or in a different way. This is an important part of the process because it helps the decision-maker, in this case the Governor (which effectively means the Executive Council), to assess not just the proponent's preferred option but the other potential options that may have been rejected as part of the proponent's assessment.

In relation to the Olympic Dam expansion, the formal guidelines for an EIS on the proposed development, published in November 2008, state the following:

The EIS is required to:

Provide information of the existing operations, the proposed expanded operations and the alternatives considered in establishing the expanded project…From this information interested individuals and groups may gain an understanding of the proposed expansion, the need for the expansion, the alternatives…

The EIS must also include, according to the guidelines, 'A description of the alternatives investigated'. This description was required:

Alternatives are to be discussed in sufficient detail to enable an understanding of the reasons for preferring certain options and rejecting others…

I can think of no more important aspect to this project than resolving whether the resource should be predominantly processed on site here in South Australia or in China. The implication of each path flows through to all aspects of the project. It has a huge impact on water, energy and other inputs. It also has a huge impact on waste and rehabilitation, but, most importantly, it has an enormous social and economic impact, especially on jobs.

Certainly the government is acutely aware of the importance of domestic processing. I remind this chamber of the Premier's media statement from 2007, entitled 'BHP Billiton's "China option" is not South Australia's option.' I will quote from some of that media statement. It states:

Premier Mike Rann has told BHP Billiton that the South Australian Government will strongly oppose any moves by the company to do most of the processing of minerals from the expanded Olympic Dam Mine overseas.

The giant mining company has today publicly revealed that it is exploring a 'second option' to ship uranium-bearing copper ore from Olympic Dam directly to China, with correspondingly lower levels of processing in South Australia.

The Premier is quoted as then saying:

South Australians own the resource. South Australians own the minerals. And the South Australian taxpayer is being asked to invest massively in infrastructure to support this project. We have a right to expect a decent return on that investment in the form of jobs and economic development for the long term.

We have a good relationship with BHP Billiton and will continue to work to add value to the resource. We do not want this world-class resource to be unfairly viewed as some kind of giant quarry from which both jobs and minerals are exported. I am aware that offshore processing is not the only option BHP Billiton is now considering.

I met with BHP Billiton executives earlier this week, and I have made my views perfectly clear that the South Australian government, through our indenture agreement negotiations will maximise the benefit of this mine for all South Australians. I will insist that jobs and value adding are the foundation of any indenture legislation.

BHP Billiton is expecting the South Australian government to invest hundreds of millions of dollars into this mine through the provision of infrastructure and services. It will require more roads, schools, health services, policing and so on. We want and expect a decent return on our investment.

The Greens could have written a large part of that because that is what we have been saying for many, many months.

It is clear that, when the EIS guidelines were finalised in 2008, domestic processing of the ore was a very real option. The guidelines for the EIS state at page 21, 'The existing and proposed processing plant site is to be illustrated...' It also says, 'The criteria for selecting the proposed plant site for the expanded operation is to be described...' and 'Integration of the existing and newly proposed plants is to be discussed...'

Clearly, it was in the guidelines that domestic processing was one of the aspects that needed to be thoroughly assessed. Therefore, it is very surprising how remarkably little discussion on alternative processing options is included in the original environmental impact statement. Essentially, in the 4,600 pages of the original EIS, less than half a page is devoted to discussing why BHP Billiton, despite the government's overwhelming interest in an alternative to the China option, has not selected domestic processing.

The two main reasons given by BHP Billiton are, firstly, that the capital cost of the additional smelter would not provide the optimal return on investment and, secondly, that there is an operating constraint in trying to match the design capacity of an on-site smelter with the volume of ore mined. There is no economic modelling whatsoever or any details provided to justify those claims.

If we then go to the supplementary EIS, in the approximately 15,000 or so pages of that document, the domestic processing option is dismissed in just four short dot points, with the explanation that this option was assessed but rejected for the same reason as detailed in the original EIS: that the additional cost of building a new processing unit on site would 'not provide the optimal return on investment'. The question for us is: is that explanation good enough? Is it okay for BHP Billiton to essentially refuse to provide appropriate justification for their preferred option—the China option—in defiance of the EIS guidelines? Certainly the Greens do not think that this is acceptable.

I recently approached the South Australian Centre for Economic Studies to see if it would be able to do an analysis of the potential economic and employment benefits to South Australia of processing our resources at Olympic Dam. For those members who are not aware, the South Australian Centre for Economic Studies is a self-funding joint research unit of the University of Adelaide and the Flinders University of South Australia. The centre provides applied research, analysis and commentary on contemporary economic, social and public policy issues.

It offers an extremely valuable service providing a snapshot of recent economic and social trends in our state through a selection of key indicators and the dissemination of regular briefing reports that are well respected among government and the business community. In response to my request, the centre's Executive Director, Associate Professor Michael O'Neil wrote:

There is no real physical infrastructure or labour constraints which are preventing BHP Billiton from processing locally but it appears as if there are significant costs associated with processing ore at the expanded operation. BHP Billiton has not quantified any of these costs in their EIS. More information on the various processing scenarios is needed from BHP Billiton to weigh up the costs and benefits of each option.

Professor O'Neil goes on:

To assess BHP Billiton's conclusion that processing ore locally would not provide the optimal return on investment, further information is required from the company which quantifies the costs and benefits of each alternative. It should be noted that an optimal return on investment to shareholders does not equate to optimal return on the mineral deposit which is ultimately owned by all South Australians. The calculation of an optimal private investment return would need also to factor in the contribution of taxpayers to infrastructure and other services that enable the operation of the mine and it may be that an optimal return on public investment may warrant higher employment levels (or higher taxes, higher user charges).

He goes on:

Given the EIS does not provide any costing information on alternative processing scenarios which BHP Billiton considered, the South Australian Centre for Economic Studies is unable to make an economic and financial assessment regarding the feasibility of processing ore in South Australia.

Professor O'Neil finishes by saying:

It is advised that Mr Parnell further asks government to contact BHP Billiton and request more information on the processing options they considered, to obtain an indication of the total costs and benefits associated with processing the ore locally and the relative rankings of each option.

That is precisely what I am doing in this motion today. Voting in favour of this motion does not mean that any member necessarily supports domestic processing over exporting the ore to China. All the motion does is ask for more information from the company. I come back to the Premier's words from 2007. What he eloquently stated was:

South Australians own the resource. South Australians own the minerals. And the South Australian taxpayer is being asked to invest massively in infrastructure to support this project. We have a right to expect a decent return on that investment in the form of jobs and economic development for the long term.

I think it is entirely reasonable that, if BHP Billiton wants to pursue an option that reduces the potential South Australian economic benefit of the Olympic Dam expansion, it should provide some justification and explanation to the South Australian public, who are the owners of that resource. At the moment, we have less than one single A4 page explaining the company position. There is no data and there is scant detail. That is simply not good enough for a project that will have such an enormous impact on our state's economy. I commend the motion to the house.

Debate adjourned on motion of Hon. J.M. Gazzola.

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