Extractive Resources in Victoria: Demand and Supply

ELIZABETH GIBSON, General Manager of the CMPA provides a review of the Extractive Resources in Victoria: Demand and Supply Study 2015-2050.

The Department of Economic Development, Jobs, Transport and Resources (DEDJTR) commissioned a report – Extractive Resources in Victoria: Demand and Supply Study 2015-2050, PWC. A review of this report found that the conclusions underplayed the urgency of the current situation. This was due to a number of reasons including: the limitations on reporting due to privacy concerns; the significant deviation of net immigration, major infrastructure projects and industry annual returns reporting; and the emphasis provided in the reports.

Over the last 15-20 years there has been a shift in perception about the role and place of quarries and their importance to the sustained growth of Melbourne and Victoria. Community attitudes towards quarries have developed into extreme NIMBYism where no-one wants quarries located nearby. These attitudes have been reflected in recent VCAT hearings (See: Review of VCAT Decisions for the Extractive Industry, CMPA) where it is clear that outcomes have increasingly favoured local objections and available extractive resources are being sterilised.

Victoria and Melbourne has a rich history of localised quarries that have readily and efficiently supplied the needs of Melbourne’s ongoing development through the supply of rock and sand. This efficient supply of extractive resources is ending due to several compounding factors including lack of clear direction by Government; commercially unrealistic massive increases in regulatory compliance. On the demand side Melbourne is experiencing unprecedented demand due to sustained population growth and the commitment to a significant number of major projects never before experienced within Victoria.

On the supply side it has become increasingly difficult to instigate new quarries or even increase production at existing quarries through variations to Working Authorities.

This sharp increase in demand and restriction in supply has led to a situation where there will most likely be a severe shortage of locally supplied extractive resources in the next few years across metropolitan Melbourne. New quarries serving the metropolitan market, due to significant transport costs, should logically be located within the new growth areas and the peri-urban regions.

The Extractive industry is a heavily regulated industry and it has become clear that the market is not able to readily respond to rapidly increasing demand. Hence it is the responsibility of the State Government to help facilitate the approval and extension of quarries to ameliorate the failure of the market to be able to respond.

Short Term Demand and Supply Study

The area of highest priority is the Melbourne metropolitan market as defined by the current Urban Growth Boundary (UGB). (Go to www.planmelbourne.vic.gov.au/maps, refer to Map 1.) A subsequent report is required that focuses on the supply and demand requirements for the next ten years.

The initial report should concentrate on the most important components of the industry to ensure a timely outcome:

• Aggregates:-asphalt-sealing-low shrinkage concrete-normal concrete;
• Crushed Rocks:-VicRoads Class 3 and above used for road, construction; and
• Sand:-concrete-asphalt-mortar-bedding/packing.

On the demand side the geographic scope is readily defined by the current UGB (Appendix 1). Within the UGB specifically to Major projects need to be geographically identified. Demand needs to be cognisant of the lumpiness of major projects and that demand categories should be divided into:

• Underlying demand due to population growth
• Maintenance of existing infrastructure
• Major Projects

It is evident that recent demand projections in the Demand and Supply Study 2015-2050 have been underestimated due to significant population growth and an increased appetite for major projects.

On the supply side, the definition of the market is less clear. At present the bulk of resource material is sourced from within the UGB and within relatively short distances from the edge of the UGB. However, as resources are depleted and demand increases material is increasingly being sourced from further away, for example, concrete sands.

To this end we propose that existing quarries are divided into categories:

• within UGB
• Within 40 km of UGB
• Any remaining assets within 120 km form the Melbourne GPO

The study is also to concentrate on what is readily feasible and supply is divided into:

• Information held by ERR
• Approved Work Authorities
• Endorsed work plan
• An application for a Work Authority has been lodged
• Applications for work plan variations

Information held by industry

• Variations to extractive limits within existing WA boundary
• Extensions to existing WA areas and their extractive limits
• Green-field sites which have identified and proven resources unencumbered

Credibility of reserves

To provide reporting credibility, the individual sites must have verified reserves using the methodology of the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves.

The estimation of resources should include correction formulas and differentiate the declared tonnage to verify a realistic yield for each WA within the 10 year time frame. Also to ensure the veracity of the data the material declared must be contained within the nominated extractive area and the percentage that is unsaleable should be declared. This ensures that there is clear information about what is actually available and that there is clear information about the status of the resource.

Planning limits

Planning permits and operational issues that may be containing or restricting extractive or sales activity will also need to be considered.

Compounding impact of Work Authority closures

Imminent closure of currently operating WA’s in relation to other WA within that market e.g. accelerated depletion of known reserves, restricted access to sections of the demand side of the market, increased material and transport costs and the accelerated depletion of life of outer metro WA’s must be taken into account.

Matching the demand and supply outcomes will provide a simple understanding of the state of the market. By separating out the supply locations the cost of transport due to substitution between quarries in different locations can be highlighted. The impact of cartage could cover issues such as road capability, community and environment.

Administrative and Planning Considerations

Complementing the short term review of extractive resources there is a compelling need to review the entire process of approving Work Authorities and variations to Work Authorities.

Fifteen to twenty years ago quarries were considered an essential part of developing infrastructure within the planning framework. This has changed dramatically with quarries facing increasingly difficult constraints such as native vegetation, water catchment management and aboriginal heritage. There has also been a shift whereby residential development has assumed primacy within the planning process. The approval system has also led to a reticence of existing quarries to seek variations to extend the volume and/or life of the quarry as invariably new constraints and impediments are forced upon the existing quarry.

This has led to a dearth of new supply. There is ERR evidence or areas with previously issued work authorities, holding special use extractive or owned by quarrying companies have been sold as a result of the above pressures. The essential nature of quarries needs to be reasserted within the planning system and there is a need to understand the role that DEDJTR can play and the nature of the interaction with the planning department of DELWP. (The CMPA paper Review of VCAT Decisions for the Extractive Industry provides several suggested actions).

Documents and studies including the above proposed study need to be given weight within the planning system. This study should also investigate whether there is a need for a Ministerial Direction or other planning mechanism to add emphasis on the relative importance of quarries. Also there should be clear recognition, preservation and updating of The Melbourne Supply Area – Extractive Industry Interest Areas Review 2002/3 and its proceeding geological survey work must be recognised in the Act reference to the EIIA.

Annual Report on Extractive Resources

An annual census based on the annual return documents that DEDJTR would provide valuable information regarding the state of the market and provide signals to trigger supply and provide planning authorities with reliable facts about the current state of the extractive resources market.

This information is collected yearly and can be easily collated. The yearly reporting includes:

• Resources Future WA applications (Victoria)
  • Rock Type
• Resources in Endorsed WA variations/ applications and (Victoria)
  • Rock Type
• Reserves Approved WA (Victoria)
  • Rock Type
• Sales (Victoria)
  • Aggregates
  • Class 1 + 2
  • etc
• Stock (Reserves) (Victoria)
  • Aggregates
  • Class 1 + 2
  • etc.
• New WA by tonnage (Victoria)
• Variations to WA by tonnage (Victoria)
• Regional Reporting (subject to confidentiality)
  • Reserves
  • Sales
  • Stock

We suggest (subject to confidentiality concerns) that Victoria is first divided into regional and metropolitan markets and then subdivided into four metropolitan markets – East, West, South and North – and that the regional areas are suitably aggregated, in particular emphasis on the peri-urban areas so that they relate to the four metropolitan markets.

These reports are seen as the minimum required for the short term and it is expected that they will provide templates to investigate the entire market both geographically and across all material types.

Additionally, there needs to be a Technical Oversight Committee to support ERR consisting (but not limited to) an economist; a person with skills in understanding Victoria’s extractive resources and a person with an understanding of the demand for extractive resources with the ability to estimate tonnages required, for example, in major projects. This will enable the report to be focused, meet the set objectives and be technically correct.

The CMPA is actively working collaboratively with Minerals Development Victoria and Earth Resources Policy and Programs (DEDJTR) to develop a survey to be released shortly by DEDJTR to gauge the current supply of construction materials into the Victorian market. Please fill in the survey as accurately as possible so that DEDJTR can assess the current supply against current demand.

Additionally, DEDJTR is developing an Extractive Resources Strategy at the request of the Minister for Resources which is expected to be released before the end of the financial year.

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