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OPINION: WA’s not getting a fair go from old ore deals

The Nationals WA have prosecuted an argument for more than two years that the legacy State Agreements which govern our State’s two biggest iron ore miners — BHP and Rio Tinto — no longer deliver a commensurate benefit to the people of WA for the sale of their precious and finite resource.

Like most West Australians, the Nationals are strong supporters of the agriculture and mining industries that have built this great State. For a party comprised solely of regional members, we are keenly attuned to how our communities rely on both of these industries to survive and thrive.

In the case of the mining sector, it seems that because WA has collected a head-spinning amount of royalties over the journey, there is a reluctance to step back, breathe and perform a stocktake. There is a view that we should just be thankful for royalties received or jobs created.

The reality is not all State Agreements were created equal. The legacy contracts were written in an era when no one could have foreseen just how big the iron ore industry was to become. Subsequent agreements, such as those signed by Fortescue and Roy Hill, are much more in line with the realities of a contemporary market and operating arena.

Sir Charles Court had to reassure the sceptics he was sound of mind when he predicted 150 million tonnes of iron ore would be dug up from the Pilbara every year. We now know this was a gross underestimate. In fact, last August more than 2.4 million tonnes was exported from the Pilbara Ports Authority alone in just 24 hours.

Although such large daily throughputs are not the norm, if that rate is multiplied over a full year it equals almost 900 million tonnes. Tonnes which, this week, were fetching more than US$80 each. You can use your imagination on the profit figure.

Putting aside our argument to have the special lease rental rate indexed, it is the view of the Nationals that the legacy State Agreements, which refer to the first four iron ore mining contracts signed between 1963-1964, do not reflect the economic, social or technological landscape in 2019.

Those State Agreements were signed at a time when no one could have foreseen record tonnages, Singapore marketing hubs, automated trains or international outsourcing of HR/administration functions.

We know that there have been amendments, negotiations and changes over the years — some to benefit the State, some the mining companies. We do not dispute that there have been changes and we do not wish to vilify the iron ore industry.

Rather, we ask BHP and Rio Tinto to work with the State in acknowledgement that both companies have been granted access to hundreds of millions of tonnes of iron ore, owned by the people of WA and worth billions of dollars, that has delivered astonishing wealth for the companies and their shareholders.

For decades, the WA Government has provided the companies with long-term leases, tax concessions and specific measures to cut through normal planning and environmental processes.

This was done, in part, to offset the companies’ obligations under their State Agreements to develop downstream processing.

As of this moment, WA has no downstream processing industry for iron ore. Are we to simply let those obligations slide?

It is appropriate that West Australians have an understanding of the context of these agreements and what obligations are and are not being met. Surely as the owners of the resource, the people have a right to know. There is very little transparency when it comes to these agreements so there is no way for anyone outside a select few to make a sensible judgment.

It is the role of government to ensure the State is getting the best value possible for West Australians and to protect our long-term interests.

It is incumbent upon me and my colleagues in State Parliament to ensure West Australians are still getting a good deal — and the only way to ensure this is to get a deeper understanding of what the current deal is delivering through a parliamentary inquiry. The Nationals don’t want to destroy confidence or hurt investment in the mining industry. We maintain that as elected representatives it is our role to strike a balance between the demands and the needs of the resource sector and the sustainable development of our State.

After all, it is your resource. And it won’t last for ever.

 

*This opinion piece written by Mia Davies appeared in The West Australian newspaper on 1 February 2019. 

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