As the resources sector grapples with challenging market conditions, the policies of the prevailing government have an increasingly critical impact on the industry.
All eyes are on Queensland as the state’s new minority Labor government gets on with the business of governing and focusing their efforts on restoring Queensland as the “country’s engine room” and as Australia’s “leading State”.
Prior to the election, Labor made several commitments relevant to the energy and resources sector including:
- no asset sales
- reduction of government debt using two thirds of revenue from State-owned assets
- consolidation of five State-owned electricity businesses
- no increase in mining royalties
- life extension of Mount Isa copper smelter
- review of New Acland Mine expansion approval
- protection of the Great Barrier Reef, including an additional $100 million in funding to improve water quality
- banning off-shore dumping of dredge spoil
- withdrawal of financial support for Adani’s rail link from the Carmichael Mine to the Port of Abbot Point
- no approval for new projects which involve 100% FIFO employment
- renewable energy initiatives
- reinstating ban on uranium mining
STATE ASSETS AND DEBT
Labor campaigned on a “no privatisation” agenda, rejecting the previous government’s $37 billion program to lease State-owned assets (including the electricity network, power stations, ports, rail lines and water pipelines) to pay down State debt.
The new government will instead establish a debt reduction trust, using two thirds of the revenue generated by State-owned assets to repay $12 billion of government debt over ten years.
It is unlikely the new government will return to the issue of asset privatisation in the foreseeable future.
GREAT BARRIER REEF
Greater protection of the Great Barrier Reef was another key policy plank for the Labor government. Measures include introducing targets to reduce pollution run-off into the Reef and prohibiting trans-shipping operations within the Great Barrier Reef Marine Park.
The government has also pledged to ban off-shore dumping of capital dredge spoil within the Great Barrier Reef World Heritage Area and does not support the proposal to dump dredge spoil from Abbot Point on-shore onto the Caley Valley Wetlands. Instead, in early March, the government announced an agreement with major mining proponents, Adani and GVK, which would see dredge material dumped on vacant industrial land adjacent to the existing Abbot Point Coal Terminal.
Capital dredging outside the Ports of Gladstone, Abbot Point, Hay Point and Townsville will be prohibited altogether, and beneficial reuse of dredge spoil will be mandated, such as for land reclamation in port development areas, or disposal on land where expansion is necessary within these four ports.
While these restrictions on port development may be viewed as not supporting the resources sector which relies on this infrastructure for export, the measures may assist in keeping the Great Barrier Reef off the World Heritage Committee’s “In Danger” list, which is imperative for the resources sector.
MINING AND MAJOR PROJECTS
The government has promised not to increase royalties for coal, minerals, petroleum or gas. It also plans to legislate to extend the life of the Mount Isa copper smelter.
However, it is likely that the decision to approve the $900 million Stage 3 expansion of the New Acland Mine will be reviewed. The Minister for Natural Resources and Mines, Dr Anthony Lynham, has said he doesn’t support the Stage 3 expansion and the Premier has confirmed that the approval processes for Stage 3 will be scrutinised.
The Federal Minister for Environment, Greg Hunt, has extended the deadline for making his decision about whether or not to approve the New Acland Mine expansion in light of uncertainty at the State level.
Galilee Basin and other major projects
Labor does not support the previous government’s plan to provide funding for private commercial projects such as the construction of major rail infrastructure to transport coal from Adani’s $16.5 billion Carmichael Project in the Galilee Basin to the Port of Abbot Point for export. The new Premier says mining projects must show they are viable without government support.
Adani has nevertheless confirmed its commitment to proceed with its Galilee Basin mine, rail and port projects, with a spokesperson from the Indian company reportedly saying that the result of the election “does not influence the company’s financial decision making”.
The new government is expected to back Queensland’s multi-billion dollar LNG industry with the Queensland Resources Council noting that the LNG industry in this State commenced under a Labor government.
There is uncertainty around fly-in, fly-out (FIFO) practices. In pre-election campaigning, Labor pledged to end 100% FIFO practices for major resources projects near regional communities.
This was later clarified by the now Deputy Premier, Jackie Trad, to only apply to future project proposals and would not involve a retrospective review of projects with 100% FIFO workforces.
However, subsequently Ms Trad’s office has said there were no changes to Labor’s FIFO policy and that 100% FIFO mines near regional towns would be reviewed by the new government.
In 2014, the LNP government introduced a raft of reforms to Queensland’s resources legislation, including passing the Mineral and Energy Resources (Common Provisions) Act 2014 (Qld) (MERA) and amending the Water Act 2000 (Qld) (Water Act).
It is unlikely that all the reforms introduced by the LNP will be supported by the new government. The Premier has indicated her government plans to reverse a number of LNP policies, including repealing the decision to remove the principles of ecologically sustainable development from the Water Act, the reintroduction of certain riverine protection permits, coastal planning and tree clearing laws, and restoring the rights of third parties to object to mining developments.
In a letter to independent member, Peter Wellington, before forming government, Ms Palaszczuk said Labor strongly opposed the removal of third party rights to object and appeal mining projects under the MERA, as well as the broadening of costs awards for community litigants who appeal planning decisions in the Planning and Environment Court. Labor says it will restore the rights of communities, residents and individuals to object to developments without the prospect of harsh financial penalties.
Reform of government-owned corporations
The government plans to merge the two electricity generators, CS Energy and Stanwell, into a single business, and consolidate Energex, Ergon and Powerlink into one electricity network business to generate cost and administration efficiencies. Aggregating the five government-owned electricity corporations into two entities is expected to deliver $150 million a year in savings, which will be used to reduce State debt.
Labor says it will ensure that the process of consolidation does not involve any forced redundancies by managing the staffing transition through natural attrition and voluntary separation.
Labor has committed to establishing a Queensland Productivity Commission whose first task will be a public inquiry into electricity prices. Regional power prices are also expected to remain subsidised under the new government.
Labor says it will provide a stable and welcoming regulatory environment to encourage private sector investment in renewable energy. It has set a target to have one million Queensland rooftops with solar panels by 2020 and will commission a review to determine a fair price for solar homes selling their power back into the grid which must not have an unreasonable impact on network costs for non-solar users.
The government will also trial a 40-megawatt renewable energy auction. Under this proposal, the government will only pay the generator for the difference between a feed-in tariff rate for large-scale renewable energy generation (contracted from the auction), and the prevailing wholesale price of electricity in the national electricity market. Labor says this will lower market risk for proponents, allowing them to access finance, generate investment and create jobs in renewable energy industries in Queensland.
With its commitment to jobs creation and responsible fiscal management, it is hoped the new government will establish a regulatory environment that allows participants in the energy and resources sector the opportunity to assist in fulfilling the Premier’s desire to restore Queensland as the nation’s “leading State”.