2016-10-20
Hon Robin Chapple MLC
Brendon Grylls is a political player, and with the coalition looking weaker by the day, he needs another 'big idea to set his party aside from the crumbling Liberal National government. But his return to leadership has been so fraught with hypocrisy and misinformation, hell have a problem actually delivering anything after the election. Over the past weeks since his new revenue raising announcement, it has become abundantly clear that Brendon Grylls has no idea how to actually implement this policy. Lets break it down. Rentals of 25c per tonne, which admittedly are antiquated, are not simply lower tax measures contained in State Agreement Acts (SAs) with the big two producers, they exist in the mining regulations (28A.Additional rent for mining lease producing iron ore) introduced in1996 for every iron ore producer, debunking the first of Mr Grylls claims that it only applies to 'the big two. On top of that rental, there is already a royalty rate of 7.5% paid by all iron ore miners, which equates to almost $4 per tonne at the current price.
Regulation 28A was added to the mine regulations by the Department of Minerals and Energy, who had for many years tried to introduce a consistent royalty treatment between SAs and Mining Act producers. There was no provision in the Mining Act for these additional iron ore lease rentals to be paid and it was therefore necessary to amend the Mining Act Regulations to include these rentals, payable after 15 years of production.
Due to regulation 28A, we need to note that this 25 cents therefore applies to all Iron Ore miners not covered by State Agreement Acts (Atlas Iron; BC Iron; CITIC Pacific Sino Iron; Cliffs; Moly Metals; Mount Gibson; Pluton; Polans; and Top Iron). To apply such a discriminatory increase to only two iron ore producers is very dangerous territory, given that all iron ore producers are in the same boat, including Fortescue Metals Group and Roy Hill. Furthermore, SAs are a contract in law and can only be amended through negotiation by both parties. It is impossible for the state, therefore, to take unilateral action in the manner suggested; those SAs specifically exclude variations in royalty or rental rates as a condition of approval.
Regardless of how many times its sugar-coated, the discriminatory methodology that Mr Grylls is proposing absolutely represents a sovereign risk to the state of Western Australia.
Pragmatics aside, the National party has supported every single SA, whilst The Greens have consistently opposed them because they provide an unfair playing field in the mining sector and are deemed to be anticompetitive in many cases.
Currently there are 66 State Agreements, of which at least 18 (originally 22) deal directly with the iron ore industry. Brendon Grylls seems to forget that in his past life as a Minister for Regional Development, from September 2008 through to December 2013, he presided over four such SAs personally.
He was also a Minister when Cabinet dealt with the State Agreements Legislation Repeal Bill 2013 to repeal and amend various iron ore state agreement acts. This Repeal Bill, which removed Koolyanobbing and Cockatoo Island iron ore mines from SAs and placed them back under normal leases, clearly identified that doing so would result in the same 25 cents per ton lease arrangement as those contained in BHP and Rios SAs. This point would absolutely have been raised, and as a Minister, Mr Grylls would have been present in that discussion. Not only is this wildly hypocritical of the National Party, but it demonstrates that Mr Grylls is acutely aware that his policy is a total farce.
Since 1952, SAs have been regularly used by successive Western Australian Governments to foster resource development such as mineral, petroleum, or wood extraction, and related downstream processing projects, together with essential related infrastructure investments.
When the Honourable Crawford Nalder established the first SA with Conzinc Riotinto over iron ore, he did so under a number of principles. The Iron Ore (HamersleyRange) Agreement Act 1963 was the first of many to come but provided for the companies to build towns, not be subject to local government rates and many other laws of the state. This was the first agreement that referred to the additional rental in respect of the mineral lease equal to 25 cents per ton on all iron ore and a royalty of 7.5% freight on board price.
It is important to note that all other minerals pay royalties at a much lower level than the 7.5% and pay land rentals based on area and not tonnage production.
Lets delve a bit further into the hypocrisy of Brendon Grylls. On the ABCs landline program in 2010, as Leader of the National Party, he had this to say about the Mining Super Profits Tax:
“The reason we're concerned [about the mining tax] is that most of these major projects rely on international finance to get off the ground. There's not enough money in Australia to fund the multibillion-dollar projects which are underpinning the West Australian and national economy. If the new mining tax, which we oppose, goes ahead, were worried that well scare that international capital market away from Western Australia, and the projects simply don't go ahead.”
These comments were made right at the beginning of the boom, when the iron ore price was sitting comfortably over $120 per tonne and the big producers were in fact making obscene profits. It was sensible to introduce a super profits tax at that time, and indeed The Greens were very supportive of that policy because it could be effectively and safely implemented at a federal level. To turn around now when the price has slumped to a third of those historically high prices and suggest we should introduce similar legislation is to mock the intelligence of West Australians.
Interestingly, CITIC Pacific Sino Iron were given a 50% royalty reduction rate by this Liberal/National Government due to the state of the industry after the boom. There is no consistency in the policy approach of Brendon Grylls whatsoever, and if anything, he has reacted to the state of the industry in the most illogical way possible at every possible turn.
Unfortunately, people are worried about the state of our economy and our states share of the GST. But what weve got to remember is that just a few short years ago, before the mining boom really took off, WA was the net beneficiary of GST revenue. Warren Truss, a former National Party leader himself has been on record stating that WA is now paying back its 'GST debt. Regardless of what our state leaders 'negotiate now with their federal counterparts, in a few years our share of GST will be fairer based on the state economy of today.
Ultimately, for Brendon this is simply about showcasing another 'big idea to his electorate right before an election. But unlike Royalties for Regions, this discriminatory policy will not create opportunities or foster sustainable growth for the Kimberley, the Pilbara or the Goldfields and I urge those people – my electorate – to see through this cheap ploy and recognise there is nothing in this 'policy for people in regional Western Australia.
List of current and past Iron Ore SAs in WA:
Iron Ore - Direct Reduced Iron (BHP) Agreement Act 1996
Iron Ore (Channar Joint Venture) Agreement Act 1987
Iron Ore (Dampier Mining Company Limited) Agreement Act 1969
Iron Ore (FMG Chichester Pty Ltd) Agreement Act 2006
Iron Ore (Goldsworthy-Nimingarra) Agreement Act 1972
Iron Ore (HamersleyRange) Agreement Act 1963
Iron Ore (Hope Downs) Agreement Act 1992
Iron Ore (Marillana Creek) Agreement Act 1991
Iron Ore (McCamey's Monster) Agreement Authorisation Act 1972
Iron Ore (MountBruce) Agreement Act 1972
Iron Ore (MountGoldsworthy) Agreement Act 1964
Iron Ore (MountNewman) Agreement Act 1964
Iron Ore (Murchison) Agreement Authorisation Act 1973
Iron Ore (Rhodes Ridge) Agreement Authorisation Act 1972
Iron Ore (RobeRiver) Agreement Act 1964
Iron Ore (The Broken Hill Proprietary Company Limited) Agreement Act 1964
Iron Ore (Wittenoom) Agreement Act 1972
Iron Ore (Yandicoogina) Agreement Act 1996
Iron Ore Agreements Legislation (Amendment, Termination and Repeals) Act 2011
Iron Ore Beneficiation (BHP) Agreement Act 1996
Iron Ore Processing (BHP Minerals) Agreement Act 1994
Iron Ore Processing (Mineralogy Pty. Ltd.) Agreement Act 2002
Photo: Rio Tinto iron ore mine in the Pilbara http://www.miningmagazine.com/