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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
2012-11-28 Daily Xml
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ROXBY DOWNS INDENTURE

The Hon. M. PARNELL (15:51): I move:

That the instrument for the purposes of clause 5.2 of the variation deed in relation to the Roxby Downs (Indenture Ratification) (Amendment of Indenture) Amendment Act 2011, made on 12 November 2012 and laid on the table on 13 November 2012, be disallowed.

This motion is the only way that this parliament can further debate the desirability or otherwise of the government's decision to give BHP Billiton a four-year extension on making a final decision about whether or not to go ahead with the Olympic Dam expansion project.

The Olympic Dam expansion is clearly a critical project at so many levels. It is a project that has enormous social, environmental and economic consequences for this state, which is why the approach the Greens took all through 2011 leading up to the indenture bill debate has been to make sure that we gave the project the most thorough scrutiny and that we asked questions on the public record so that the public would know what was going on and, ultimately, we debated the contract that was signed between the company and the government.

In relation to this latest development—the extension that was granted—I would like to thank Paul Heithersay, the CEO of the department, and his team who came in and gave me a comprehensive briefing. What we know is that this variation deed increases the time period that BHP Billiton has to decide whether or not to go ahead with the expansion from the original 12 months to 58 months, and that is an increase of 46 months, or just shy of four years.

It is also worth noting that the indenture legislation now lines up with the development approval that was put in the Government Gazette following the environmental impact assessment process. The effect of this notice is that the bill that was passed by the parliament last year does not come into effect until BHP triggers the project or until it decides that it is not going to ahead at all, in which case, the previous legislation applies.

I asked the government representatives why a four-year extension was granted, and two main reasons were offered: the first was that BHP Billiton was exploring bringing in electric conveyor belts in the pit rather than trucks to carry the ore out and, secondly, that they were exploring the use of heap leaching. In relation to the conveyor belts, as members would appreciate, the rough back-of-envelope calculations were that the use of trucks in the pit was going to involve the movement of one million tonnes of rock per day using one million litres of diesel fuel per day at a taxpayer subsidy, given the diesel fuel rebate of $117 million per year. That subsidy was to apply for five or six years before a single cent in royalties was returned to the people of South Australia. So, conveyer belts, we are told, are now on the agenda.

In relation to heap leaching, it must be clear to all members that this is an entirely different way of processing ore to that which was explored in the EIS and in the indenture. In heap leaching, the ore will be laid out over hundreds of hectares in piles around 9 metres high. Sulphuric acid will then be poured over the top, and minerals leached out in the acidic soup that emerges at the bottom of the piles.

That is the plan, anyway. But, as the company readily admits, it is an unproven technique; they do not know whether it will work on the type of mixed ore body that exists at Olympic Dam. I understand trials are currently underway, and that those trials will take at least a year. I think we all saw pictures in the newspaper of large tubes of ore at Wingfield, I believe, with the test acid leaching being undertaken there.

I will come back to acid leaching, but another important question that I did ask in the briefing is whether this extension was a one-off extension, or whether BHP Billiton can come back again and again and ask for a further extension of time. The legal advisers for the government at the briefing said that they 'reckon' that, because of the way the indenture was drafted, this is a once-only extension and that it would preclude a second bite at the cherry. However, they also admitted that BHP Billiton was of a different view.

I am not sure what notes the Hon. Mr Maher has to respond to this motion, but I would hope that in his response he actually addresses that question: is this the only bite at the cherry? Is it possible, under the legislation passed by this parliament, for BHP Billiton to come back and ask for another extension—maybe another four years, maybe longer? Is it possible for them to do it under this legislation, and is it possible for the government to grant that request?

We need to ask ourselves about this, apart from those two practical reasons why the company said it was seeking an extension. Let us look at the history of this matter, and some of the comments of the various key players. In May this year, when speculation first began to mount that BHP Billiton was pulling back from the project, minister Koutsantonis said, 'I will not be granting an extension. I don't bluff.' In August, Premier Weatherill said, 'We don't believe there is a basis for an extension of the indenture agreement.' And Treasurer Snelling said, 'I think the state would be very, very reluctant to give them an extension.' These are the comments from the key players in government this year.

We also had some fascinating insights into the negotiations between the government and BHP Billiton from former treasurer, Kevin Foley, in his column in the Sunday Mail. I did not, in my wildest dreams, imagine that I would be channelling Kevin Foley so soon after his departure from the parliament, but I find myself in furious agreement with the former minister. Kevin Foley, in the Sunday Mail of 5 August—and I will just read a couple of sentences from his article—said:

BHP Billiton must not be allowed to break its deal with South Australia...I want to share with you some of the behind-closed-door moments during our negotiations that help explain why I don't believe an extension should be granted to the one-year deadline for BHP to commit to the project.

Mr Foley then goes on to talk about the meetings, and says:

One of the rare occasions that Mike—

meaning former premier, Mike Rann—

asserted his authority over negotiations was when he insisted a specific clause be put in the agreement. He wanted a clause inserted that if BHP Billiton did not commit to the project within 12 months of the indenture law, then all bets were off and the indenture would lapse. To say BHP Billiton was taken aback, myself included, would be an understatement.

It is interesting the way he has worded that—as if he is part of BHP Billiton. Anyway, I will not correct his grammar. The article goes on:

BHP Billiton came back with a five-year deadline. There was no way I was going back to Mike with anything other than the one year.

He was absolutely correct to insist on this new clause. Both he and I had been working on this project for six years and had been through a few false starts.

If the state was to deliver a law enshrining a huge amount of rights for BHP Billiton, in many cases for the 100-year-plus life of the project, then it was only fair that they start the expansion soon.

He concludes with the following:

A deal is a deal, you break it at your own peril. Jay Weatherill and Isobel Redmond, it's time to stand firm against the enormous pressure BHP may bring to bear against our Parliament. As one who has been in the ring with them, you don't throw in the towel, you keep slugging away.

So, we have former minister Kevin Foley slugging away. The current Treasurer is apparently a bit of a slugger as well—we have seen pictures of him in the boxing ring. But when it comes to the slightest pressure from BHP Billiton, they have all gone entirely to water. BHP Billiton now has pretty much everything it wanted. They offered a five-year deadline—that is what they wanted—and now that is what they have. I should say that is a slight exaggeration on my part: they have 58 months, not 60 months, so they are two months shy of the five years they wanted. Whilst it is rare that Mr Foley and I agree, I think that he is dead right about this.

The state has enshrined an enormous number of special rights for BHP Billiton, many lasting over 100 years into the future, and that kind of agreement should not be open ended. Just to remind members, under the indenture—the old one and the new one—BHP Billiton is immune. It is protected from the entire statute book of South Australia to the extent of any inconsistency with the agreement that it has struck with the executive government. Another interesting commentary on this is from Kevin Naughton, a journalist with the InDaily online newsletter. He wrote the following on 26 October:

Hopes of a possible re-start to BHP's Olympic Dam expansion plans in the near future were dashed overnight when the company's boss pushed out the timeframe beyond the best-case scenarios.

BHP [Billiton] pulled out of its estimated $30 billion expansion project in August this year, saying it would prefer to examine 'less capital intensive' options for the project.

While that has been promoted locally as a 'deferral', the more sober view taken in the industry is that the 'big bang' economic transformation expected by the state is off the table.

Paul Heithersay, CEO of the State Government's Olympic Dam Taskforce, has told several industry forums the project is 'deferred' and could very quickly come back onto the table. On that basis, the government has given an extension of time on the Indenture Agreement which had required works be started by mid-December this year. BHP CEO Marius Kloppers, however, has a long-term timeframe in mind.

Then a quote from Mr Kloppers follows:

'We've been very clear that on Olympic Dam we're not in a position to take any decisions for years,' Kloppers told reporters today in London. 'Time is needed to allow for the results of new leaching technologies that facilitate extraction of minerals from ore.' Financial analysts interpreted the briefing as an indication the Olympic Dam expansion was out of favour.

A number of economic analysts started using the word 'cancelled' rather than 'deferred', and a great deal of the business literature is using that word. As Kevin Naughton says in his article, the word 'cancelled' is very much different from the message that is being conveyed here in South Australia. So, that is what the commentators have said about this.

In more recent times, when the government had caved in to BHP Billiton and did table in this place the extension granting the extra time for BHP not to start but to agree to start, minister Koutsantonis has had a few things to say in the media, and I need to put those on the record because many of them are quite outrageous. In particular, I will mention an interview that Mr Koutsantonis gave to ABC radio with Matt and Dave. The first claim that he made was that this idea of heap leaching was covered in the EIS, and I will just give members some of the exchange. Bevan states:

But if we're looking at a new technology, a new way of doing this, won't you need a new environmental impact statement?

The response from minister Koutsantonis:

Well, no, because BHP has foreseen that in the next, you know, five to six to seven years they may have been switching to this new technique.

Abraham chimes in:

Was that covered by the environmental impact statement?

The response:

It was, yes.

That is the claim. What is the reality? The reality is that, in over 7,000 pages (if members remember, this was the biggest document ever produced in the history of South Australia) of the original EIS, the supplementary EIS and the government's response to the EIS, the only mention in all of those pages of heap leaching is the following:

The feasibility of heap leaching in the lower grade ore at Olympic Dam is under investigation. At this early stage, recoveries of copper and uranium from heap leaching appear too low, but this option continues to be investigated.

Now, that is it. That is what it says, and it is in a section of the EIS which is entitled 'Optimisation Initiatives', and it says in that section, and this is important:

No approval is sought to implement these initiatives at this stage.

There you have it. Tom Koutsantonis, the minister, is saying that heap leaching—this novel, unproven technique—is covered by the EIS, yet when you read the EIS clearly it is not. I do not know how the minister can make that claim. In fact, it is a ridiculous assertion, and I think that in making it he misled the people of South Australia.

What is also worrying about it is that, within that revelation, according to the minister it was always the intention of BHP Billiton to rapidly shift to a radically different process during the first decade of the expansion, yet the EIS was expressed to be a document that would last for 40 years. If that is the case, the company and the government have conspired to keep an essential element of this project hidden from the South Australian people.

Now, he cannot have it both ways: either they were not planning to use heap leaching, in which case he needs a new EIS if they do go down that path; or, if they were always planning to use it, then the EIS becomes a very, very long work of fiction. Of course, the EIS will need to be significantly amended in light of this new technology. In fact, the minister very soon was taken off the airwaves, the Premier came on and effectively admitted that point later in the day; and the need for a new EIS for that part of the project was reiterated at my briefing with Paul Heithersay's team.

The other thing, of course, is that this project is governed by both federal and state laws and so new approvals under the Environment Protection and Biodiversity Conservation Act would be required as well. Minister Tom Koutsantonis made a second claim—and in some ways this is my favourite—and, again, we will go back to the interview. Abraham asked:

Do you think that's a good thing, Tom Koutsantonis?

He is talking about acid leaching—

Has anybody looked at that? Is anyone worried about it?

And then the minister's response:

Matthew, everyone driving to work and listening on this radio station has acid in their cars and their batteries. A lot of people have been using acid for a long time.

It is just remarkable to suggest that, because car batteries may contain acid, therefore pouring millions of litres of the stuff over piles of ore in the outback is somehow a comparable activity. It just beggars belief. The truth is that we do not know how safe it is. No-one has used it commercially for this type of ore, and we do not know what the impacts would be on the scale that would be required, and that is why you do an environment impact statement.

In fact, the only example of which I was aware of in situ copper leaching in South Australia was an old copper mine up near Copley. After they got four inches of rain, of course, it leaked like a sieve, and I have got the photos sent by a geologist. You have this green liquid running down Copley Creek. It went for about half a kilometre before it ended up in the local swimming hole. You have this copper acid solution in the local swimming hole—just remarkable. That is the only case I am aware of where acid leaching has been used in the heap method.

The third claim the minister made was that there had not been any safety incidents at Olympic Dam. Again, the minister said, 'BHP's been mining uranium in this state for 25 years.' Abraham interrupts, 'Right.' The minister continues:

There have been no incidents. I don't think the state government and the EPA—

Bevan then interrupts, 'No incidents?' Abraham interrupts, 'That's not correct. The tailings dam was breached, was it not, or,' and then the minister says, 'Excuse me?' Abraham asks:

You're saying there's been no environmental incidents involving BHP?

The minister replies:

There's been no incidents that have caused any harm to anyone's safety.

Clearly, that is just wrong. All of us here are aware of the many incidents that have occurred at the Olympic Dam mine over the years. In fact, even those of us who do not follow these things closely can just do a quick Google search and find many reports of the accidents that have happened at the Olympic Dam mine.

For example, on 7 July 2011 an underground fire involved six people being affected by smoke. We also had another incident where there was a fire, I think, in a drilling machine and six workers were affected. If my memory serves me, I think there has been at least one death during that time.

We have also of course had the major shutdown caused by the skip that was filled with oil and fell down the primary Clark shaft. That caused another skip on a linked cable to fly up, which damaged the head frame, and that put the shaft out of action for some time. BHP Billiton put the accident down to a failure of its computer braking system, and it was an absolute miracle that no-one was killed in that accident.

We also need to remember that there are still ongoing concerns about workers being exposed to airborne polonium 210. For those of us who follow international affairs, I think they have just dug up Yasser Arafat to have a look at whether polonium might have been the cause of his premature death. There have been, we know, many safety radiation breaches at the Olympic Dam mine, and I can provide members with references.

Despite the spin from the government, we know that this project is years away. The Greens strongly believe that we should not be committing into law a contract—because that is what the indenture is; it is a contract—that may not be actioned for many years into the future, if ever. A proper way to proceed would be to renegotiate if and when the company comes back with a plan to do something, either the same or different from what they proposed.

You have to remember that even if they came back with exactly the same proposal as before the passage of time means that our knowledge changes, the science changes and environmental standards change. We cannot lock in this contract for such a long period and have it unable to be amended during that time.

There is no risk to this project by not giving them an extension for the four years they ask because they are proposing to come back with something different anyway and most of it will have to be renegotiated, especially through the EIS. With the decision being decades away, we now know that they are proposing something different. We believe that we should have a fresh look at the Olympic Dam expansion, the Roxby indenture, rather than meekly extending it for another four years.

The government has said that there is a range of sweeteners, if you like, benefits that BHP Billiton has promised in exchange for the extension, and no doubt we will hear of those in the government's response. I would like to know how many of them are locked in law, the same way that the state's commitments to the company are locked in law effectively for ever. With those remarks, the Greens move that this instrument be disallowed.

The Hon. K.J. MAHER (16:14): I rise to speak against the Hon. Mark Parnell's disallowance motion. I do not propose to read into Hansard every single radio interview or newspaper article there has ever been on this issue, but I thank the Hon. Mr Parnell for his extraordinary display of verbosity. It is one of the great appreciations of my life that I was not in this place when the indenture bill was before parliament, because I do not think I would have ever got back that time.

The Hon. Mark Parnell asked one question in particular of the government in relation to whether a further extension can be granted. I am advised that the government does not consider that the legislation gives the company any opportunity to apply for a further extension. I thank him for that question, and I am glad to be able to bring back that advice to him. As a member of the Labor Party I am very proud to be part of a government that has created an atmosphere that has allowed a massive expansion of our mining sector, while at the same time ensuring that environmental concerns are at the forefront.

This government, while making sure South Australia gets the best possible deal, has done all the government can, as acknowledged by BHP Billiton, to create conditions that might allow an expansion of Olympic Dam to go ahead. Although the government and many South Australians are disappointed that the expansion has been deferred, when the government announced an extension to the indenture agreement BHP Billiton committed to spending more than $650 million over the next four years on initiatives within South Australia. I will not outline all of them, and I know the Hon. Mark Parnell has asked for examples of what they might be.

For example, there are four main areas of this $650 million investment: Olympic Dam project activities, EIS-related activities, capacity building in South Australia and community development. Some of the initiatives include NatureLinks biodiversity programs, a north-south biodiversity corridor, developing Indigenous land managers, a lot on Indigenous training and employment, and research and education.

This government has been aware of the power of industries like the mining sector to help transform regional communities. Since Labor came to office in South Australia the number of mines operating have increased from four to 20, the number of people employed in mining has increased from 4,000 in 2002 to about 14,000 this year, and mineral exports have quadrupled since 2004. This has not happened by accident. The careful planning and stewardship of the Labor government and Labor ministers have allowed this to occur. The South Australian government's PACE initiative is recognised worldwide as one of the programs that have contributed real growth in the exploration sector.

The Hon. D.W. Ridgway: You said you weren't going to reply with mindless rubbish.

The ACTING PRESIDENT (Hon. J.S.L. Dawkins): Order!

The Hon. K.J. MAHER: So, it is the hard-working dedication of people like the former minister in this place, the Hon. Paul Holloway—

The Hon. D.W. Ridgway: A legend of mining he was—he was awarded that.

The Hon. K.J. MAHER: He was, and the current minister, the Hon. Tom Koutsantonis, whose passionate determination to see the state succeed is probably without question. We have been exceptionally fortunate to have two giants in the area as our ministers. Under the watch of minister Koutsantonis, according to ABS figures private new capital expenditure for South Australian mining for the June 2012 quarter was $199 million. Private new capital expenditure for the 12 months to June 2002 totalled $1,058 million. This is not an accident: four mines to 20 mines—

The Hon. D.W. Ridgway interjecting:

The ACTING PRESIDENT (Hon. J.S.L. Dawkins): Order! The honourable leader of the opposition will get his turn in a moment.

The Hon. K.J. MAHER: —since Labor has come to government. It is no accident that this all happened under a Labor government. Protecting our natural environment has been at the forefront of the government's concerns in the expanding mining sector. For example, this government made the right decision in protecting Arkaroola and banning mining there. Arkaroola is unique, with sensitive environmental, cultural and heritage values, and that is why the state government introduced special purpose legislation to protect this area.

Further, the government will nominate this region for inclusion on the National Heritage List and seek to have it nominated for World Heritage listing. Mining is and will be increasingly important to regional communities in South Australia and South Australia in general, but it needs to be balanced with proper environmental protections. I am pleased that the vast majority of members in this parliament recognised the importance of the Olympic Dam expansion when the indenture bill was passed.

However, there were a few of us in this parliament who wanted to stand in the way of the benefits this could bring for South Australia, and I find myself in the very unusual position of wholeheartedly agreeing with the Leader of the South Australian Liberal Party, the member for Heysen, when she said that to object to the expansion really is a nonsensical policy. She was, of course, referring to the member for Waite when she said that, he having apparently led the charge within the Liberal Party not to go ahead with the Olympic Dam expansion.

In this respect, future generations of South Australians may well be thankful for that one single vote in the Liberal Party room that allowed the member for Heysen to remain leader, so that the member for Waite did not become leader and do everything he could to derail the project, as the member for Heysen pointed out in a newspaper article.

I urge honourable members to consider the immediate benefits of the $650 million investment from BHP Billiton and the potential benefits should the whole project go ahead.

The Hon. D.W. RIDGWAY (Leader of the Opposition) (16:20): I was a bit amazed that the representative of the government said he was not going to go on a whole range of historical stuff and read lots of Hansard. However, he read a lot of stuff that was irrelevant to what we are facing today, which is a discussion about BHP's extension of its approval.

I think, just quickly, given that the others have indulged in some historic rhetoric, I will talk about the fact that if it were not for the Liberal Party we would not have a mine there at all. It was the Liberal Party in David Tonkin's time that had the foresight to actually push ahead with this mine happening, and the young, energetic Government Whip should look at the 125 years of the Department of Mines and Energy which shows that there has been bipartisan support for the best part of a century, from both major parties, to see the mineral sector thrive.

We have always recognised that it is important, and I think he should actually study history in a little more detail to learn that it is not just the Labor Party, because you guys have only come in at the last five minutes of the timeline. In terms of one of David Attenborough's great long timelines, it was about two minutes to midnight when you guys started to get involved.

The ACTING PRESIDENT (Hon. J.S.L. Dawkins): Order! The honourable member should refer his comments through the chair.

The Hon. D.W. RIDGWAY: I apologise for that, but having said that, Mr Acting President, I think we are all aware of the economic benefits that a robust mining sector provides to our state, and certainly the economic benefits that this mine has already provided. I think in this whole debate we forget that there is already a very large and very important mine operating there, a very large copper mine, with obviously some by-products of uranium, silver and gold.

I think one of the issues with a lot of the hype around this extension comes from the way that former premier Rann and his team over-spruiked the whole mining expansion and the community expectation that was driven almost to a fever pitch in relation to when the expansion was going to go ahead. They built a level of expectation, which, sadly, when it did not go ahead, is one of the reasons our South Australian economy is in the doldrums today, with an absolute lack of confidence, because the Labor Party oversold something.

I think if you actually talk to the people from BHP, there was never any guarantee that it was going to go ahead, that they would do everything in their power to try and get it to go ahead. They needed all the government approvals in place to make that happen, but it was the government that said it was a definite reality, and it is, of course, the government that now faces tremendous budget shortfalls because of the reckless way they expected revenues to come flowing into the government coffers from a project that only they said would go ahead.

I will just quickly touch on the matter of heap leaching. I think there has been some misunderstanding from the Hon. Mark Parnell, and a little bit of spin, I suspect. Initially his comments sounded like they were going to be heap leaching the mine straightaway. All that BHP want to do is conduct a feasibility study of heap leaching, and I think they have some consultants working to do it. I think they have 100 people at Amdel to build up a testing site there and about 600 consultants involved in the project.

The heap leaching testing will be done at Amdel, so they will keep their 50 people in the team there. If the testing were to be done elsewhere it would be fewer people. However, people have to understand that, until such time as the heap leaching method is proved up, there is no need for a change to the approvals that are in place. However, that will just be a small part of it. We have got a desal plant that has been approved, we have got access, we have got expansion to the mine, and we have the airport.

There is a whole range of issues that will not change whether we have heap leaching or not, so that is why the opposition sees that this is an important extension. It is for 46 months. It is interesting that 12 months of that has elapsed, yet the Hon. Mark Parnell initially talked about a 58-month timeline. In actual fact it is 12 months that has now elapsed, with a 46-month extension to line it up with the other federal approval, which I think everybody would agree, if you are going to extend it, to line them up when they all lapse makes sense.

I think what people have to understand is that this is a company that would desperately like to invest here. Their first priority, of course, is always to their shareholders and the corporate governance of any company, whether a small company or one as large as BHP, must make sure that it protects its shareholders and protects its interests. Clearly, the amount of money that they have invested means that they are serious about expanding this mine.

In closing and in indicating that we will be voting against the Hon. Mark Parnell's disallowance motion, it is disappointing that the culture has changed. I never thought I would say this but when we had premier Rann and treasurer Foley (BHP expansion fix-it man), we had a culture of openness. The opposition was invited to minister Foley's office to view the indenture. It may have been before it finally went to cabinet, definitely before it went to caucus, and we had BHP throw their doors open to help us. The department threw their doors open. They wanted us to have all the information.

The disappointing thing from the opposition's perspective in this case is that this did not happen. Under Weatherill and Koutsantonis, it is silence and we are almost shut out of it. It is disappointing because I think there has been bipartisan support, even though we had to get a Labor member to cross the floor to kick it off. This has been a project that both parties initially saw as important and really did not want to play politics with too much, other than the bit of over-spruiking by the premier.

Now we have seen a change in culture where we have the Weatherill government wanting to try to exclude the opposition. We were disappointed and I felt that BHP were not as open and frank as they had been with us in other briefings we had with them prior to events taking place. I have conveyed that to BHP that I felt they needed to be mindful of the respect that we built up and the openness and trust that we had in negotiating the initial indenture and that I felt a little disappointed that that has been somewhat diminished and diluted. I hope that is not an ongoing approach to dealing with the opposition. With those few words, I indicate that we will be voting against the Hon. Mark Parnell's disallowance.

Motion negatived.

There being a disturbance in the President's gallery:

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