Category Archives: Australia

How resource companies exploit a corrupt and dysfunctional government

There has been a barrage of media recently about mining companies teaming up with a range of parters to deliver health-care and other services direct to the community.

Newcrest Mining and the Australian government have announced a partnership to improve maternal health, Exxon-Mobil is partnering the Cancer Foundation and The Voice, Barrick Gold is delivering agriculture training in Porgera.

Praise be to the resource companies, willing and able to step in where government fails its people – and no matter the role these same companies play in causing the very diseases, illnesses and other problems they are so happy to patch up with their band-aid PR!

But there is an even more sinister side to these good news stories that further illustrates how mining and other resource companies feed off a corrupt and dysfunctional government.

If government was doing its job and delivering decent basic services to the population, mining and resource companies would not have the opportunity to appear as ‘knights in shining armour’ the good news stories would disappear and, most importantly, customary landowners would not feel compelled to give away their land in the desperate hope that mining and logging companies might provide some basic services.

Resource companies are able to thrive in PNG because of, not despite, a corrupt and dysfunctional government. They rely on bad governance to open the doors to what they most desire – land and the resources it contains.

No matter the environmental and community destruction, their logging and mining cause, no matter the deaths, the violence against women, the unwanted pregnancies, the rape and prostitution, the pollution of rivers and loss of sustainable livelihoods when they can parade their social conscience in the media and have us all believe they are our saviours – just as long as we continue to give them what is most precious to us, OUR LAND!

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Filed under Australia, Corruption, Human rights, Papua New Guinea

How the free market failed Australia and priced them out of their own gas supply

While Asia is enjoying low prices for Australian gas, back home things are getting worse. (Origin Energy)

Ian Verrender | Business Editor | ABC News

Fashion has a habit of turning full circle.

Remember that old shirt, the super tight one with the stretchy material and weird collar that you found at the bottom of the wardrobe? What on Earth possessed you to buy it, you wonder. What were you thinking?

For anyone who lived through the ’70s, the memories of those fashion crimes often come back to haunt us.

It was also an era when free market ideology began to assert itself in public policy. And with good reason.

Government-run businesses were inefficient, bloated and bureaucratic. Letting them loose would free up scarce public funds, competition would lower prices and scarce resources would be allocated with the greatest efficiency.

When Margaret Thatcher came to power in the UK in the 1980s, she unleashed a wave of privatisations that transformed the economy and contributed to decades of economic growth.

It didn’t take long for the fad to gain ground here. Government-owned businesses from airlines to banks and insurance companies were jettisoned.

Even vital infrastructure like roads, telecommunications and power generators were flogged to the highest bidder with little thought about the long-term consequences.

But have we gone too far? Free market theory, while it’s terrific in theory, has some almighty shortcomings and, as we now are discovering, may not be the economic cure-all we once imagined.

Suddenly, the winds have shifted. Business leaders talk in hushed tones, openly uttering a phrase once considered unmentionable: market failure.

In the past few days, there has even been a call for part nationalisation of our energy industry from a free market wheeler dealer. More on that later.

A fortnight ago, competition chief Rod Sims let fly with his annual swipe at the fee-gouging taking place at our airports.

Airlines and the travelling public were forking out an extra and largely unnecessary $1.6 billion in fees.

What’s going on with gas?

The problems arise when the business being sold is a monopoly, when the buyer, having paid an exorbitant price, is given carte blanche to extract its tonne of flesh. The benefits flow from the community to private interests, often offshore.

Generally, we’re talking about utilities — things like power companies, for instance. And then there is gas.

For years, electricity and gas operated independently. But the two have become intertwined as the shift towards a cleaner environment and lower emissions has thrust gas firmly into the box seat as the transition fuel to generate electricity.

We’ve suddenly discovered, however, we don’t have enough. It’s no exaggeration to describe the power situation now facing eastern Australia on both fronts as a catastrophe. And here’s why.

Within the next four years, Australia will overtake Qatar as the world’s biggest supplier of gas. We are sitting on vast gas reserves. In fact, we’re swimming in the stuff.

And yet, we face critical shortages at home which could starve manufacturers of fuel, see power outages across the eastern states and force energy prices through the roof while any profits that are made will be shipped offshore.

This is a public policy fail of epic proportions.

And it’s worth getting a handle on how it all came about and the shenanigans employed by the gas majors that have deliberately created this crisis and the supposed shortage which is a total con.

How could this happen?

First, however, consider this: the gas we are exporting does not belong to the energy giants. It belongs to us.

Companies like Woodside, Origin and Santos and their foreign partners merely have bought the right to exploit those gas reserves, which was supposed to lead to massive benefits for ordinary Australians.

Here’s the scorecard so far. Having spent close to $250 billion building new export facilities, no-one seemed to think that flooding the globe with extra energy would see global prices drop.

They have. Gas prices into Asia, where we export, have now dropped below what it costs to extract, process and ship the stuff. In fact, the east coast suppliers so far have written off around $6 billion on their new plants.

It gets worse. Extracting the gas from coal seams in Queensland was a little more problematic than originally thought. Then farmers, incensed at the activity taking place on rich agricultural land, began shutting the gates.

That meant the companies couldn’t get enough to satisfy the huge supply contracts they’d written in Japan, South Korea and China. So they plundered the supplies, much of it from Bass Strait, that once powered the domestic market. That’s why we have an artificial shortage.

But wait, there’s more. No-one ever considered that once we were plugged into the global market, we’d be paying global prices. Around the time all these new gas plants were developed, prices in Asia were up to $25 a gigajoule. Back then, we were paying between $2 and $4.

Prepare now to be outraged. Global prices have more than halved to $10 and under. Domestic prices, meanwhile, have soared, to well above $10 because of the domestic shortage.

By putting the domestic market under pressure, they deliberately pushed local prices higher.

The upshot is that we now are paying more than Japanese manufacturers for our own gas. In fact, power company AGL is actively considering buying Australian gas in Japan and shipping it back home. And why not? It’s cheaper there.

That means energy-rich Australia is subsidising Asian manufacturers while penalising our own, a situation likely to force many to the wall.

Just to rub salt into the wound, the ramp-up in exports has not delivered the resources rent tax bonanza once promised by US giant Chevron. In fact, thanks to a shifty cash shuffle, ExxonMobil, Chevron and Shell until two years ago were booking around $3 billion a year in profit, tax free.

That’s seen our Petroleum Resources Rent Tax proceeds, which in the past delivered around $2 billion a year, plummet. In fact, by the time we overtake Qatar for global gas domination, it’s anticipated our resources tax will collect just $800 million.

Qatar, on the other hand, is expected to receive $26.6 billion in royalties that same year for roughly the same volume of exports.

So what’s being done about it?

Treasurer Scott Morrison last year declared he would urgently look into the matter. He’s called a review to get to the bottom of why soaring exports have coincided with a halving in the resources rent tax collections.

The review panel could do worse than read a report sent out last week by global investment bank Credit Suisse.

Hardly a bastion of left-wing ideologues, the report — entitled The Wolf Who Cried Boy — raises the prospect of Australia establishing a national oil company as one possible solution to the concocted crisis. And it goes straight for the jugular.

“If the gas producers and sellers are the wolves, they themselves are seemingly calling foul just as the danger is truly upon us,” it begins.

“We wonder whether a national oil company, a la Kumul Petroleum in PNG, could work? Instead of the petroleum resources rent tax on future projects, could we see state participation instead?”

Could we indeed? There undoubtedly will be howls of protest from the business lobby and their associated hangers-on. But consider this. Is this not the ultimate form of capitalism?

We are the landlords. The energy companies are tenants. If we had a controlling stake in the business, it would be much easier to ensure the kind of chicanery that has taken place in the past few years was never repeated. There would never be shortages.

And just perhaps, we’d end up with a dividend cheque, maybe even along the same lines as Qatar’s.

Just a thought.

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BHP Billiton slammed for tax avoidance and dishonesty by former treasurer Wayne Swan

BHP-Billiton-Logo

Rebecca Hyam | ABC News

Former Labor treasurer Wayne Swan has taken a huge swipe at the mining giant BHP Billiton, accusing the company of tax evasion and lying to the former Labor Government during the height of the mining tax debate.

Mr Swan told Parliament yesterday that BHP employed the practice of transfer pricing, or profit shifting to lower-tax overseas jurisdictions, to avoid paying taxes on billions of dollars in profits between 2005 and 2014.

He accused the miner of selling Australian minerals to its Singapore marketing hub to avoid paying taxes on the profits, which totalled $5.7 billion.

Speaking to Radio National this morning, Wayne Swan said the company had been engaging in practices that were against the national interest.

“For a long period of time, they’ve been involved in very aggressive transfer pricing, that is profit shifting – taking profits that they’ve made in Australia, shifting them to Singapore and then paying no tax in Singapore, or very little tax, and pretending that this is all done in the name of a marketing hub,” he said.

“It is terrible behaviour from the big Australian, it’s un-Australian behaviour.”

Mr Swan said that BHP Billiton had since been forced to pay a $1.4 billion bill for back taxes to the Australian Taxation Office.

BHP Billiton responded to Mr Swan’s allegations, saying it paid its “fair share” of tax both in Australia and globally.

The company said it has paid about $65 billion in taxes and royalties over the past decade, and the amount in dispute with the ATO is less than 2 per cent of that figure.

“Our Australian adjusted effective tax rate, inclusive of corporate tax, Petroleum Resource Rent Tax and royalties in financial year 2016 was approximately 57 per cent,” a BHP Billiton spokesperson said.

“Our global rate was slightly higher at 59 per cent.”

Mr Swan told Radio National those figures were fanciful.

“That’s just laughable and I don’t know where they get that figure from and they’ll have to justify that figure in the court of public opinion,” he said.

Mr Swan also said that when the mining tax debate was dominating politics in 2010, BHP Billiton had inflated the impact of the Minerals Resource Rent Tax on its business, while it channelled its profits through foreign tax havens.

He also accused BHP Billiton of failing to publicly disclose the fact that the Australian Taxation Office had been auditing its tax arrangements at the time.

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Only 5% of oil and gas companies operating in Australia pay resource tax

lng-australia

LNG projects are at the heart of a “fossil-fuelled rort”

Heath Aston | Sydney Morning Herald | 11 October 2016

Just five per cent of oil and gas projects operating in Australia are paying anything towards the Federal Government’s royalty-like scheme designed to share the wealth generated by the nation’s resources with the public that owns them.

As pressure builds for a parliamentary inquiry into the petroleum resource rent tax, Fairfax Media can reveal that just eight out of 149 resource projects currently generating revenue contributed a cent in PRRT in 2014-15.

The Australian Tax Office is concerned that the petroleum resource rent tax will not deliver anything over time. 

The as-yet-unpublished figures from the Australian Tax Office will add to concerns by some academics and tax transparency campaigners that Australians are being short-changed by the boom in liquified natural gas exports.

On Monday, the Greens backed a parliamentary inquiry into what Senator Larissa Waters called a “fossil-fuelled rort” while Treasurer Scott Morrison hinted at some concern within government.

“The Treasurer will continue to take advice on sensitive tax matters such as this,” said a spokesman.

ATO data shows the oil and gas industry, which is now dominated by multinational-operated LNG projects off the Western Australian coast and Queensland’s coal seam gas sector, had revenues of $25 billion last year.

But the design of the PRRT, which is a rent based on super-profits rather than a flat royalty, allows companies to write off exploration and other capital costs against revenue before being forced to pay any PRRT.

The ATO figures shows the total “carry-forward expenditure” of the industry has risen to $187 billion. Effectively, that means the sector can pocket sales of $187 billion before being forced to pay any PRRT.

Resource tax experts like Diane Kraal, a senior lecturer at Monash University, say the picture is worse because generous “uplift rates” like the 18 per cent rate applied to exploration costs mean carry-forward expenditure grows by that percentage every year that they are not used against revenue.

According to the ATO, total carry-forward expenditure grew sharply from $128 billion in 2012-13.

Ms Kraal has warned that the PRRT will not deliver any significant revenue “in her lifetime” if its design is not overhauled.

On Monday, Fairfax Media revealed that Qatar, which will lose its crown as the world’s biggest LNG exporter to Australia in 2020, will receive $26.6 billion from its LNG sector in that year.

Treasury forecasts Australia to receive less than $1 billion in PRRT in 2020.

Oil and gas peak body, the Australian Petroleum Production & Exploration Association, defended the industry on Tuesday, saying “PRRT was never intended to be paid by all projects at all times”.

“It is a super-profits tax so it only applies when projects achieve super-profits,” said APPEA chief executive Dr Malcolm Roberts.

“The PRRT is just one of many taxes paid by the industry. The combination of company tax, state and federal royalties and the PRRT adds up to more than 50 cents in every dollar of profit.

“Taking all these taxes into account, the oil and gas industry pays the highest effective tax rate of any industry in Australia.”

In October last year, Chevron, the US-owned company that owns Gorgon, the world’s largest LNG plant, which is located in Commonwealth waters off WA, was hit with a $300 million bill by the Federal Court for tax avoidance.

When it sought approval for Gorgon and sister project Wheatstone, Chevron promised it would contribute “$338 billion to Federal Government revenue” by 2040.

Asked whether this was guaranteed, Mr Roberts said: “The revenue to government from any project will depend on market conditions over the life of the project – when commodity prices rebound, government revenues will benefit.”

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Calls to halt Australia’s McArthur River mine operations over safety and remediation concerns

The McCarthur river mine in the Northern Territory has been plagued by technical, social and environmental issues since it began in the 1990s. Photograph: Ilya Naymushin/Reuters

The McCarthur river mine in the Northern Territory has been plagued by technical, social and environmental issues since it began in the 1990s. Photograph: Ilya Naymushin/Reuters

Report demands mining stop until it can be determined how and at what cost the operation can be made safe

Michael Slezak |The Guardian | 21 August 2016

The huge McArthur river mine must stop operations until a public commission of inquiry is set up and has examined whether it can be made safe and at what cost, according to an independent report being released on Monday.

Based on the limited public data on the mine, up to $1bn will need to be spent to safely remediate the site, according to Gavin Mudd from Monash University and the Mineral Policy Institute, who wrote the report.

The McArthur River mine in the Gulf of Carpentaria is one of the world’s largest zinc, lead and silver mines. It has been plagued with technical, social and environmental issues since it began in the 1990s.

It has involved the diversion of the McArthur River in the Northern Territory, and resulted in fish eaten by the traditional owners being contaminated.

The piles of waste rock that are dumped alongside the open-cut pit have been reacting with the air and smouldering, giving off toxic fumes.

Mudd says the technical and environmental problems caused by the mine have been a result of the environmental assessments underestimating the difficulties faced by the site.

For example, the smouldering of the waste rock shows that the concentration of dangerous acid-forming rock is much higher than originally thought.

Mudd showed that in 2005 an environmental impact statement estimated that the dangerous rock type made up just 11% of the waste.

But in 2015, an independent monitoring report found that more than 90% of the waste rock was the dangerous acid-forming type, partially explaining why the mounds of waste had been smouldering.

Mudd said that despite being asked by both government authorities and community groups, Glencore, which operates the mine, has not released information about how much waste rock is actually produced.

Mudd says this has made it difficult to assess exactly how the site can be rehabilitated: “We can’t be clear on that because they haven’t published a lot of the data.”

Based on the amount of ore thought to be left at the site, Mudd estimates there could be another 30 years of mining there. He said what happens to the site after that needs to be decided ahead of time and planned for both technically and financially.

Mudd found that, given the high proportion of acid-forming rock in the waste product, the company’s plan to leave a giant open pit in the ground, and a giant pile of waste rock along site it, was not viable.

With that much acid-forming rock, there wouldn’t be enough clay to properly encapsulate the mound and it would leach acid into the environment for years or centuries.

Mudd said the only viable option was to insist the company backfill the pit. He said that would minimise the amount of acid that would leach into the environment in the long term.

In Australia, very few mines have been properly backfilled, and none the size of the McAurthur mine has.

Mudd said it could cost as much as $1bn to move the dirt from the mound into the pit and properly rehabilitate the site: “That’s just the cost of doing business.”

Ensuring the company has put aside enough money to cover that was one of Mudd’s key recommendations.

Currently the size of the company’s rehabilitation bond is unknown, and a recently leaked government report from Queensland revealed that rehabilitation bonds regularly fall short of the actual cost.

Mudd called for a public commission of inquiry set up under the Northern Territory’s inquiries act to be set up “immediately”. It could consider how, if at all, the site could be made safe, and how much it would cost.

“Until then, mining should stop,” he said.

Glencore has been contacted for comment.

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Minister criticises Australia for focus on mining and petroleum…

But why does the  government always allow Australian and other mining companies to do what THEY want in OUR country?

If there is too much focus on mining already, lets hear the government say NO! to Frieda river and Wafi-Golpu!

Papua New Guinea Against PACER Plus

Delly Waigeno | EMTV News

Papua New Guinea will not participate in PACER Plus.

Minister for Trade, Commerce & Industry, Richard Maru, bluntly told the Australian Trade Delegation that PNG will not partake in trade that will not directly benefit the country.

The PACER Plus is the Pacific Agreement on Closer Economic Relations negotiated between 14 Forum Island countries with Australia and New Zealand.

Australian Assistant Minister for Trade and Tourism Investment, Keith Pitt, and his trade delegation were in Port Moresby this week, however Minister Maru has maintained his position that PNG will not participate in PACER Plus.

Minister Maru said PACER Plus does not have any benefits for PNG and it will not participate further in the bilateral agreement.

This week, he told the Australian trade delegation that PNG’s trade relations with Australia need to be reviewed to suit the country’s economic growth aspirations.

He said trade relations haven’t been as good as they could have been with PNG unable to attract Australian investment in the sectors that are important to PNG, like agriculture, tourism and education. All the investments have been focused around the mining and petroleum and the service sectors.

Minister Maru further said the government’s intention is to deepen trade relations with Australia, which is guided by clear policy framework and commitment between the two countries to reduce the current trade deficit.

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Glencore zinc mine must be shut down, say traditional owners

Protests will occur in Bangladesh, South Africa, Zambia and London against Glencore, which has been the target of previous protests. Photograph: Fabrice Coffrini/AFP/Getty Images

Protests will occur in Bangladesh, South Africa, Zambia and London against Glencore, which has been the target of previous protests. Photograph: Fabrice Coffrini/AFP/Getty Images

A protest planned outside the company headquarters in Sydney will be matched by others around the world by people affected by Glencore mines

Michael Slezak | The Guardian | 18 May 2016

The McArthur River mine in the Northern Territory – one of the world’s biggest zinc, lead and silver mines – must shut immediately and owner Glencore must cover the clean-up costs, say traditional owners who will protest outside the company’s headquarters in Sydney on Thursday.

Coinciding with Glencore’s annual general meeting in Switzerland on Thursday, a delegation of the four groups that share responsibility for the river – the Gudanji, Garawa, Yanyula and Mara people – will be joined by protests in other communities impacted by Glencore mines around the world. Protests will occur in Bangladesh, South Africa, Zambia and London, organising under the banner #makethempay.

A 2014 independent report found the mine contaminated the McArthur river, concluding 90% of fish stock in a nearby creek had shown dangerously high levels of lead.

Residents and environmentalists have also complained of a large pile of smouldering waste, which the independent report said was polluting surrounding water and emitting poisonous fumes.

glencore protest australia

Glencore then delayed erecting signs warning of the contaminated fish for over a year, despite members of the clans that control the river fishing extensively from it for food. The mining group, which turned five executives into paper billionaires when it floated on the London stock market in 2011, later said it was waiting for regulatory approval from authorities for the signs.

Government documents later showed the Northern Territory government and Glencore knew about the signs of contamination but did not fully inform the communities.

Glencore now has plans to double the size of the mine, but will need to submit an application to the federal government for approval.

The company has denied polluting the river, pointing to other 2014 findings which did not show evidence of “mine-derived lead” in McArthur river and Surprise creek, and only recorded elevated levels in “small non-eating fish deep within the mine itself”.

“Glencore had no right to poison our river and damage the land,” said Gadian Hoosan, spokesman for the Garawa Land Trust, whose land is situated downstream of the mine. “All four clan groups rely on that river. It was our main food source and livelihood and they took that away from us.”

Lauren Mellor from the Mineral Policy Institute’s legacy mines project, said the mine has been a disaster for people living downstream.

“Instead of digging itself into a bigger hole by pursuing expansion plans, Glencore must move its operations to a closure and clean-up phase and guarantee rehabilitation of the site.”

ActionAid helped facilitate the protests, and have been fighting what they say is Glencore’s “tax dodging” around the world.

Archie Law, the executive director of ActionAid, said:

“Glencore is robbing communities all over the world of their livelihood and the public funds that should be paying for basic infrastructure and public services.”

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