Meeting with Deputy Premier

DR ELIZABETH GIBSON, General Manager CMPA comments on the recent meeting with Deputy Premier Peter Ryan.

DUE to the changes in Victorian Government Departments, that is, as of 1 July 2013 Earth Resources formerly of the Department of Primary Industries has now moved to the Department of State Development and Business Innovation and will be called Minerals Development Victoria. Th is has meant that there has been a change in the Minister at the top to the Deputy Premier Peter Ryan.

John Mawson, Chairperson of CMPA arranged a meeting with the Deputy Premier through John’s local member Paul Weller (Member for Rodney). Th e meeting was held on 11 June 2013 at Parliament House. As requested, an Issues Paper was developed. Though there are numerous issues impacting on the business of construction material processors, it was decided by the Management Committee to focus on 2 issues: Work Authority Process and Rehabilitation Bonds.

The meeting was attended by the Deputy Premier Peter Ryan, Paul Weller (Member for Rodney) and Garry Tepper (Adviser); and from CMPA John Mawson (Chairperson); Basil Natoli (Management Committee member), Ron Kerr (Hon CEO) and Elizabeth Gibson (General Manager).

Following is the Issues Paper presented to the Deputy Premier that was also sent to the Hon Nicholas Kotsiras MP (Minister for Energy and Resources) and to the Department of State Development, Business and Innovation.

An overview was given of CMPA, and then the following was stated:

The CMPA supports responsible, balanced legislation that is in the best interests of the State.

The CMPA urges the State Government to acknowledge through legislative and regulatory reform the pivotal role of the construction materials sector. The CMPA welcomes the Government response to the EDIC Inquiry that has focused on this issue.

The continued and cost effective availability of construction materials is fundamental to the government realising its future growth ambitions for Melbourne and Victoria.

ISSUES

1. Work Authority Process
   A Work Authority grants the holder a conditional license to extract construction materials:
   • Construction Materials are essential, non-renewable assets that must be identified and protected for future use. Sterilization of these assets due to poorly planned urban sprawl and misguided legislation such as that applicable to native vegetation, cultural heritage and planning needs to be urgently addressed. The CMPA welcomes the progress made on this issue in the Government response to the Economic Development and Infrastructure Committee (EDIC) Inquiry;
   • The impact of unnecessarily complex and often overlapping legislation on the cost, time and risk attached to obtaining a Work Authority is enormous and a major impediment to development. Work Authorities for larger operations can take up to 5 years to be granted and cost up to $5m with no guarantee of approval. The CMPA welcomes the review of the Work Approval process proposed in the Government Response to the EDIC Inquiry, however, CMPA is concerned that the issues outlined above will not be addressed;
   • The extraordinarily onerous operating conditions that various departments and local government (the ‘Responsible Authority’) impose to appease vocal minorities and special interest groups can render otherwise viable resource developments inaccessible or uneconomic.
2. Extractive Sector Rehabilitation Bonds
   Rehabilitation Bonds are payable as part of the Work Authority approval process. The bond value is determined by a formula which calculates the cost of rehabilitating the work site in the event of the Work Authority holder relinquishing responsibility for the site. Bonds are provided to the State Government in the form of a Bank Guarantee at a typical cost of 2.3% per annum. Additionally, where land is offered as security, the bank will only provide surety for approximately 70% of that value.
   • Five bond reviews conducted in 2010-11 saw increases from:
     • $12,000 to $235,000 (1,858%),
     • $95,000 to $1,200,000 (1,162%),
     • $80,000 to $380,000 (375%),
     • $140,000 to $810,000 (479%), and
     • $480,000 to $2,900,000 (504%);
   • The Victorian Government has spent just $18,000 of bond funds rehabilitating five sites over the last 20 years. Currently, $105 million is tied up in bonds, this figure was $72 million in 2010;
   • The industry (not mines) has an extraordinarily good site rehabilitation record. The long-term environmental impact of quarrying is minimal. Ever increasing Rehabilitation Bonds are placing unsustainable financial pressures upon Work Authority holders, especially smaller regional operators.

RECOMMENDATIONS:

Establish a Standing Advisory Panel comprised of government (DSDBI and other Departments as required) and construction material industry representatives to:

1. Consider how Victoria’s finite supply of construction material resources can be protected for future generational use and development;
2. Review the Work Authority application process under the Mineral Resources (Sustainable Development) Act 1990 as it applies to the construction materials sector. The review should consider how other legislation and approval processes impact upon Work Authority applications and day to day operations. The aim should be to simplify and reduce the financial burden and risk attached to making an application or variation and operating a quarry; and
3. Review the need for Rehabilitation Bonds and how the security of construction materials work sites rehabilitation can be achieved without the quarantining of large sums of private capital.

The Deputy Premier was receptive to the issues faced by the construction materials industry and noted the impact of bonds on private equity investment. See the bar chart above. He stated that he would formally respond to the Issues paper sent to him by CMPA. He also said that the Commissioner responsible for reducing red tape, John Lloyd and David O’Brian, MP may be able to assist.

CMPA will discuss the response from the Minister at the AGM and report in the next issue of Sand & Stone.

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