Submission to the Productivity Commission's study on resources sector regulations

The Productivity Commission’s study of resources sector regulation is a positive first step to advance the COAG strategic reform agenda for resources, but it needs to result in fewer and better regulations and better performance by regulators and governments.

Federal and state resources ministers agreed to six actions in December 2018, the first of which was to ‘establish a framework for the regular benchmarking of policies and regulation which will assess current settings and highlight best-practice across Australia and internationally.’ If the Productivity Commission is to achieve this objective, then its study must assess the cumulative effect of federal and state policies, regulations and regulatory practices on the international competitiveness of Australian mining.

Australia is underperforming competitor nations in critical areas. Business taxation is high. Federal and state environmental regulations are inefficient, prescriptive and uncoordinated. Statutory timeframes for approvals are often not met. Approved projects are subject to unmeritorious legal challenges. Energy costs are unduly high. Restrictive workplace relations rules hinder productivity.

A comparative analysis of regulatory processes within Australia, as well as benchmarking Australia against other mining regions, is necessary to guide a new wave of reform across jurisdictions.

The stakes for streamlining resources regulation are high. Australia’s resources sector generates more export revenue than all other industries combined (i.e. 58 per cent), pays the highest average earnings ($140,000) and directly employs approximately 240,000 highly skilled workers, predominantly in remote and regional Australia. The minerals industry paid $18.6 billion in company tax in 2017-18 alone, accounting for 22 per cent of all company tax paid that year.

Modern mining environmental practice is highly regulated, better implemented and more accountable than ever before. The minerals industry upholds high standards of environmental protection based on the use of sound science and robust risk-based approaches. The industry pursues continuous improvement in the areas of land use and mine rehabilitation, water use and biodiversity conservation. Companies may also offset significant residual environmental impacts and undertake voluntary conservation initiatives that go beyond regulatory compliance.

Government policy and regulatory settings vary significantly across Australian states – reflected in the Fraser Institute’s annual Survey of Mining Companies that rates mining regions on their public policies and mineral potential to assess their overall investment attractiveness. While Western Australia, South Australia and Queensland usually rate strongly for perceptions of public policy when compared to other mining jurisdictions around the world, perceptions of other states have deteriorated in recent years.

For example, only 14 per cent of respondents stated that environmental regulations in New South Wales either encouraged investment or were not a deterrent to investment. This ranks New South Wales 76th out of 83 rated jurisdictions - only one position higher than Venezuela (77th) and lower than Bolivia (66th). In comparison, five Canadian provinces are ranked inside the top 20.

The MCA urges federal and state governments to pursue important and overdue opportunities for regulatory reform, notably by streamlining environmental regulation while maintaining high standards of conservation, modernising workplace relations rules so managers can innovate and redesign jobs, and ensuring energy markets deliver affordable and reliable energy with lower emissions.

Australia’s complex and duplicative processes for approving major projects are generating unnecessary delays and uncertainty. Companies, workers and regional communities have been frustrated by long delays for projects such as Adani Carmichael (Queensland, eight years), Wallarah 2 (NSW, 16 years) and Cameco Yeelirrie (WA, five years).

The minerals industry appreciates that each project should be judged on its merits and should satisfy the rigorous requirements of federal and state jurisdictions. But what is highly concerning – and discouraging to international investors – is the excessive number of project approval conditions, their highly prescriptive nature, the inconsistency and overlap between jurisdictions, and the fundamental uncertainty of process. This damaging approach results in significant compliance costs and delays in wealth creation for little or no environmental gain.

When regulator performance is neither monitored nor measured, it is difficult to benchmark performance against timeframes, engagement effectiveness and the consistency with which the regulation has been applied. While statutory timeframes exist for approval decisions – including under the Environment Protection and Biodiversity Conservation Act 1999 – a range of mechanisms which provide opportunities to seek further information or require additional assessment, effectively ‘stop the clock’, often late in the process. These mechanisms are used by anti-development interests to block or delay regulators and projects, often combined with unmeritorious litigation.

More broadly, governments are increasingly taking a cursory and superficial approach to consultation, engaging stakeholders too late in the process or giving them too little time to understand proposed changes and provide meaningful input. Governments are also increasingly resorting to regulation in an attempt to quell public concerns, without first considering if other options would be more fit-for-purpose options, such as non-regulatory or co-regulatory approaches.

Australia is a world leader in providing precompetitive data through state geological surveys and Geoscience Australia, yet more must be done to retain this comparative advantage. Government funding for these programs has not been adequate, despite the growing tax and royalty revenue being generated by the mining industry.

Australia’s rising energy costs and supply risks are affecting the commercial viability of new mining and mineral processing projects in Australia. The key principle underpinning energy policy should be technology neutrality. This means avoiding providing subsidies, quotas or other non-market-oriented interventions to favour specific technologies.

A genuinely technology neutral approach should be applied to all low emissions energy sources – including renewables, gas, nuclear, advanced coal technologies (such as high-efficiency, low-emissions coal power), coal with carbon capture and storage (CCS) and bio-energy with CCS.

Australia’s openness to trade and investment continues to drive income and job creation across Australia. International investment is vital to the mining sector, facilitating transfers of technology, skills and capabilities, and access to global supply chains and export markets. Government policies must continue to support international investment flowing to Australia as domestic savings are not sufficient to meet the needs on capital intensive industries.

The minerals industry approach to community engagement has evolved over past decades. The sector has developed innovative approaches to engagement and is supporting multi-party dialogues and partnerships with local communities. The industry is increasingly focused on long-term community partnerships and strategic investment to support community priorities and aspirations for sustainable long-term development outcomes.

The Australian minerals industry recognises and respects the rights and interests of Indigenous Australians and proudly partners with Aboriginal and Torres Strait Islander groups and communities, including Traditional Owner groups, on exploration and development of minerals projects across Australia.

There is a role for government in improving community understanding of minerals development assessment and approvals processes. Government policy settings and efforts should seek to complement industry investment, enabling local communities to achieve their aspirations and provide for long-term community resilience.

Recommendations

  • Governments should make resources sector regulation more efficient and effective by:
  • Adhering to COAG principles of best practice regulation; that is minimum effective regulation that is enforceable, consistently administered and not unduly prescriptive
  • Improving coordination, integration and consistency between federal and state/territory project environmental approval processes
  • Adequately resourcing regulatory agencies to deliver assessments within required timeframes
  • Making decision-makers accountable for meeting statutory timeframes for approvals.
  • The federal government should address broader impediments to resources investment by:
  • Increasing public investment in precompetitive geological data by extending and expanding Geoscience Australia’s Exploring for the Future program
  • Making Australia’s business tax system more internationally competitive
  • Extending the duration of greenfields agreements to cover the life of projects
  • Developing and implementing an energy policy that delivers a reliable, lowest cost dispatchable energy supply that is available 24/7, while reducing CO2 emissions.
  • The MCA recommends that the government maintain policy settings that support trade and deeper regional economic integration, including the continued expansion of Australia’s network of bilateral, regional and plurilateral free trade agreements (FTAs). 
  • Investment policy settings need to ensure the foreign investment and foreign influence review process does not needlessly create political tensions, and provide clarity and transparency for foreign investors seeking to invest in Australia.
  • The government should ensure that Foreign Investment Review Board (FIRB) screening requirements are the same for all private investors, irrespective of their country of origin. Screening thresholds in non-sensitive sectors should be raised from $261 million to $1.13 billion for non-FTA nations, consistent with the level that applies to Australia’s FTA partners.
  • To deliver best practice benefit sharing, government policy settings and efforts should seek to complement industry investment, enabling local communities to achieve their aspirations and provide for long term community resilience.

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