A REVIEW OF VICTORIA’S EARTH RESOURCES INDUSTRY

DR MIKE HOLLITT , Executive Director of DPI Earth Resources reviews the Industry.

ONE of the inescapable conclusions in reviewing Victoria’s earth resources industries is that the contribution of these industries to economic development has a rather different complexion from that of earth resources industries in other States.

In the recent past I was privileged to have established and led the successful Rio Tinto Foundation for a Sustainable Minerals Industry, providing a very good grounding for my current role of Executive Director, Earth Resources Development in DPI here in Victoria.

In the work of that organisation, which was a partnership between Rio Tinto and the Commonwealth government, it quickly became evident that the very foundations of human wellbeing are material. Global correlations of life expectancy, social stability, gender equity, personal security, access to education and availability of food and good quality water with materials availability and consumption were clear and undeniable.

Subsequently I was able to see this confirmed at first hand, in the years that I lived and worked in South America before coming to this role.

In Victoria, as a result of a relatively small land area and high population density relative to other States (3% of Australia’s area having 25% of Australia’s population), our earth resources industries have the characteristic of mostly supplying the State’s own demands for materials and energy. We are distinguished in that regard from the large mining export States.

This characteristic carries some major challenges, in balancing the ability of the earth resources industries to continue to contribute economically in the face of other competing demands for land access, and in preservation of the natural environment. In other jurisdictions globally there is evidence that this balance has been lost. In Australia, Victoria seems to have somewhat unique circumstances for proving that the balance can be maintained.

The attractions of life in Victoria have made the State a centre of population influx in recent years, putting pressure on infrastructure, and demanding planning approaches that include the release of land for the expansion of Melbourne.

If we are to maintain our quality of life, and our enviable record of stability and security based on social equity, this pressure will inevitably result in increased supply of materials into the built environment, including for urban renewal, and in energy for homes, transport and productive industries. In Victoria, human wellbeing will continue to have material foundations.

At the same time our extractive industries have grown to meet the demands placed on them. The value of extractives production delivered to construction now exceeds the value of coal delivered into power production in Victoria. We are seeing the location of extraction move inexorably with urban boundaries, ensuring supply is available, but apparently with increased distances for supply of materials for urban renewal in established areas.

In addition, the availability of easily extracted materials is challenged by reservation of areas that act as off sets for the natural heritage values of areas consumed by urban growth. Demand for off sets is growing at a pace that suggests a coordinated approach to planning for materials supply is needed.

There are limits to the coordination of activities of competitors, established in law. It is these limitations, put in place to ensure that healthy competition is not impeded, that ensure a role for government in coordination.

With about 40% of supply of materials from well distributed quarries and sand pits associated with small operators, the evidence is of a presently competitive industry that has grown to meet Victoria’s needs. Our challenge is to ensure adequate coordination of planning for limited land resources that even in the presence of strong competition the costs of materials supply do not escalate to be felt by Victorians both in infrastructure costs and in materials used for housing and places of work.

A further challenge lies in balancing the needs of regulation of impacts of operation and eventual rehabilitation and closure with impact on costs or competition, so that best practices are promulgated rather than avoided. History shows that reduced impacts, improved safety and reduced real costs can be achieved simultaneously where regulation is well informed, risk based, and economically efficient (avoiding imposts that sum to more than the cost of overall risk mitigation).

We are not the only jurisdiction facing these challenges, so I look forward to considering innovative approaches taken globally to these issues, avoiding an insular approach, as we move to modify the Mineral Resources Sustainable Development Act, and its regulatory and guiding instruments.

Since taking on the role of Executive Director, I have had the opportunity to tour some of the operations of the extractives sector, resulting in a very high regard for the operators and their representative bodies.

It is clear to me that best practice in the sector is highly professional, innovative, and possesses a competitive, commercial core that supports ongoing success. I have also benefited from discussions with our separate regulations group, whose job it is to assist with permitting and compliance matters.

In these activities I have become acutely aware of the need to listen closely, with the purpose of establishing a modern regulatory environment that assists competition, reduces costs, and provides for best practice planning and impact management. This will be an ongoing need, as will be informed, frank and positive relationships with other government agencies.

I’ve also become aware that the extractives industry does not presently have clear, well understood aligning measures of health that can be used to guide these discussions.

For mineral exploration, which was also missing such clear measures, we have now developed a single measure, licence cycle time, which can be reduced by eliminating barriers to work on licences and by increasing competition amongst well resourced, modern explorers for access to licences.

This measure is correlated with outcomes of greater greenfields exploration expenditure driving a well fed pipeline of resources projects that ultimately can be facilitated into operating mines. It provides a single focus for conversation across government and industry, since there is no disagreement that a shorter cycle time should be a common aim, while also managing impacts.

I expect that we will be developing a similar, singular focus for discussions aimed at facilitating the planning and development of the extractives industries, providing for an aligned direction and a clear voice.

Work on that measure (related more to materials delivery cycle time arising from unimpeded competition), in collaboration with industry, has already commenced. This measure will assist with problem solving, informing decision makers of the outcomes attached to decisions made in the presence of multiple objectives and constraints that attach to the somewhat unique Victorian environment.

To achieve our goal of a sustainable, competitive extractives sector that supplies Victoria’s growth, we need to resource a facilitation activity to support the necessary work. As a first step in demonstrating its commitment, the Earth Resources Development Division is currently transforming its structure and processes fundamentally to provide for this long overdue need, defining core extractive facilitation roles and accountabilities. This activity will be focused at the industry level in the first instance, relying on work with industry associations and feedback from the separate Earth Resources Regulation team. We expect the new organisation to be in place at the end of April.

I encourage the State’s extractives operators to engage with their representatives in the discussions associated with the changes to the regulatory environment associated with the recent and proposed amendments to the Mineral Resources Sustainable Development Act.

Our Division has benefited greatly from our association with the industry in stage 1 of these amendments, particularly as they relate to statutory endorsement. We look forward to developing guidelines for that innovation, and to other changes relating to stage 2, which will focus on accelerating development processes.

Looking across the earth resources sector the benefits of a healthy extractives sector for other sectors, especially minerals, are immediately apparent.

Firstly, the obstacles to short development and delivery cycle times in one area are oft en the same or similar to those in another, so innovations have greater leverage (e.g. statutory endorsements have major advantages for mining projects as well as for quarries).

Secondly, reduced infrastructure and construction costs from competitively supplied materials have high impact on the value of mining developments. Just as importantly, the largest logistics network in Victoria’s earth resources industry is that associated with the extractives industry.

Fast improvements in the extractives sector have quickly translated to improvements in materials movement capabilities (e.g. to port) in the minerals area. Victoria seems to be uniquely positioned to show leadership in its approach to the extractives industry. We all look forward to participating in that challenge.

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