State Election South Australia

Transcription

1 Proposed State Election Policy Priorities for the South Australian Chamber of Mines & Energy 2014 This document outlines the policy recommendations SACOME will lobby political parties in the lead up to the 2014 State Election. 1. Stimulation of infrastructure for resource development SACOME recommends that the State Government in conjunction with Federal finance bodies develop innovative funding arrangements to stimulate infrastructure projects that are failing due to gaps in funding. SACOME recommends that the initial development of a cape size vessel port in the Spencer Gulf on the Eyre Peninsula, and the upgrade to a 275kV transmission line along the eastern flank of the Eyre Peninsula be the first projects the State Government pursues. 2. Maximising access to land SACOME recommends the adoption of a policy of maximising land use access for the mineral and petroleum sectors when determining access arrangements to all areas of South Australia. 3. National Resources Skills Centre of Excellence SACOME recommends that a National Resources Skills Centre of Excellence be set up in South Australia with an official launch no later than February Environmental policy reform A. EPBC Act bilateral agreements SACOME recommends that the State Government through COAG revisit this issue and work to establish a framework to enable bilateral agreements for assessment and approvals under the EPBC Act. B. Green tape reduction SACOME recommends that the State Government conduct a review of environmental regulation in South Australia to streamline environmental assessment as a seamless part of the whole of government approach to minerals and petroleum development approvals. 5. Plan for Accelerated Exploration (PACE) continuation SACOME recommends that the PACE program is continued to be funded, crucially in times where there is reduced demand, and depressed commodity prices and to keep South Australia at the forefront of mining and energy investment. Page 1 of 18

2 (Recommendations continued overleaf) 6. South Australia land use support expansion SACOME recommends the State Government expand the Eyre Peninsula Land Use program concept to the Yorke Peninsula and South-East regions to support multiple land use planning and regulation. 7. Proper housing of Data Metallogenica collection for careers promotion SACOME recommends that the Data Metallogenica Collection be relocated from its current stored location and relocated at Mines and Energy House and managed by SACOME to enable this world class collection be available to the Public and Industry. 8. Exploration Development Incentive (EDI) support SACOME recommends active support by all major political parties in South Australia of the Federal Coalition s announcement to implement an Exploration Development Incentive (EDI) to stimulate the Exploration sector. 9. Drill Core Reference Library New facility SACOME recommends that the State Government fund the housing of the State s Drill Core Reference Library in a new purpose built facility at Tonsley Park. 10. Domestic Gas Reservation policy SACOME does not support a domestic gas reservation (DGR) policy, which has been shown to distort markets, and recommends the State Government works within the Standing Committee on Energy and Resources (SCER) and COAG to develop strategic energy policy which stimulates exploration and investment in gas projects. Page 2 of 18

3 1) INFRASTRUCTURE FOR RESOURCE DEVELPOMENT Policy Recommendation SACOME recommends that the State Government in conjunction with Federal finance bodies develop innovative funding arrangements to stimulate infrastructure projects that are failing due to gaps in funding. SACOME recommends that the initial development of a cape size vessel port in the Spencer Gulf on the Eyre Peninsula, and the upgrade to a 275kV transmission line along the eastern flank of the Eyre Peninsula be the first projects the State government assists. A key component of any resource industry is the access to infrastructure that links production to international markets. In South Australia there is a combination of needed logistical and utility infrastructure with a lack of capital capacity of junior mining companies that has resulted in key infrastructure projects failing in the market. Such examples include a cape-size port for bulk commodity export and reinforcement of existing electricity transmission to allow higher loads to be placed on the network. Since 2009 the Resources and Energy Sector Infrastructure Council (RESIC) has released reports studying the infrastructure requirements for future resource projects in SA. The 2009, 2011, and 2012 reports have all identified key regions and corridors where there will be in increase in demand for logistical and utility infrastructure. Presently Deloitte in partnership with the State Government is conducting a report into the infrastructure needs of resources projects with a wider scope. The Regional Mining and Infrastructure Project (RMIP) will identify infrastructure options that will be assessed on the basis of their economic, social and environmental implications and contributions to South Australia and each of the regions, including interaction with other sectors. Reports such as the RMIP and previous RESIC studies have consistently shown that in key regional areas such as the Eyre Peninsula, Far North, and Yorke Peninsula/Braemar there are recurring themes of infrastructure need. There is a critical need for a deep sea cape size port, and a transmission line upgrade on the Eyre Peninsula. These projects will have the dual benefit of stimulating the mining projects on the Eyre Peninsula while significantly contributing to the local economies though economical flow on effects and capacity to develop with the upgrade of the existing 275kV transmission line. Along with examples that exhibit a market failure to develop infrastructure for the delivery of product from a project, logistical infrastructure to service the project is equally important to assist where there are gaps in capacity and need. The announcement of an upgrade to the Strezleki track is one key piece of infrastructure that will allow all year access to the Cooper Basin ensuring that service providers in South Australia are utilised rather than those in Queensland. While reports identifying key infrastructure requirements are necessary the funding arrangements are equally necessary to allow projects to be viable in the marketplace. SACOME has received a positive response from the Australian Labor Party, and the Coalition that bodies such as Infrastructure Australia (IA) and the Export Finance and Investment Corporation (EFIC) should on a case by case basis provide funding arrangements for infrastructure projects where there is a genuine market failure. The facilitation and support by the State government is essential to argue for South Australian resources projects where there will be significant benefit through the assistance from EFIC and IA. Page 3 of 18

4 2) MAXIMISING ACCESS TO LAND POLICY Policy Recommendations SACOME recommends the adoption of a policy of maximising land use access for the mineral and petroleum sectors when determining access arrangements to all areas of South Australia. With recent changes to land access arrangements in areas such as the Flinders Ranges, Woomera Prohibited Area, and National Parks South Australia has a 121,000km 2 area of no access for mining activities and a further 213,678 km 2 of land that has conditional access for mineral and petroleum exploration and development which combined equates to 34% of the State s land. Calculated in Table 1 are the relevant areas for the different zones within South Australia that have different access arrangements. The table shows that resources production in South Australia occupies only 0.8% of the total land area. These figures are based upon the lease area and not the physical footprint of the project; therefore the mining and petroleum areas listed below are larger than they physically are. TABLE 1: Land Area of South Australia % of SA Area Type of land use 0.1% 1,201 km 2 Mining Production 0.8% 7,388 km 2 Petroleum Production 13% 128,296 km 2 Defence Areas 0.2% 2,069 km 2 Reserved from Mining Act 21% 207,326 km 2 Parks and Reserves 11% 110,214 km 2 Parks w/ No Mining access 12% 121,099 km 2 No Access to Mining (All Areas) 22% 213,678 km 2 Conditional Access to Mining 55% 536,490 km 2 Agricultural land 4.1% 40,537 km 2 Agriculture Cropping land 0.3% - - Mining % of Cropping land 1.6% - - Resources % of Agri. land 0.2% - - Mining % of Agri. land 1.4% - - Petroleum % of Agri. land Government planning decisions that impact land access and land use arrangements should be transparent, evidence based, and consider the social, economic, environmental and cultural implications of developing or sterilising mineral or petroleum resources. Changes in land use values, mining practices or technology may provide for future compatibility for minerals or petroleum development. Any restrictions on land access should allow for future re-evaluation. Mining, conservation, agriculture and other land uses can be complementary as sequential or neighbouring activities. SACOME endorses the application of leading practice which can enhance the integration and coexistence of these activities. For example, Iluka s Jacinth-Ambrosia mine in the Yellabinna Regional Reserve shows that the management of mining in sensitive areas can be achieved sustainably. With 32% of the State under some sort of restrictions to the mineral and energy sector, there is a growing perception that the State Government is slowly restricting land access to these vital sectors. SACOME asks for assurance that the State Government has policies in place that maximises access to land for exploration and mining and petroleum projects. Page 4 of 18

5 3) NATIONAL RESOURCES SKILLS CENTRE OF EXCELLENCE Policy Recommendation SACOME recommends that a National Resources Skills Centre of Excellence be set up in South Australia with an official launch no later than February South Australia is well placed to become a national (if not world) leader in the provision of skills training and development to the minerals and energy sector. There are a number of initiatives and discussions regarding the provision of skills training including the development of an onshore petroleum training facility at Tonsley, the potential for the former Brukunga Mine site to become a hands-on mining industry skills centre, the building of the Mining and Engineering Centre at Regency Park and the development of the Mining and Petroleum Services Centre of Excellence. The development of an onshore petroleum training facility at Tonsley. The current status of this facility s development is as follows: Santos have committed to the relocation of their oil industry training equipment from O Halloran Hill TAFE to Tonsley, to be operational by 1 February This is Phase 1 of the proposal. Phase 2 consists of a joint industry collaboration toward building a production training facility. To date Santos have committed to the relocation of their gas industry training equipment from Moomba to Tonsley by the end of Q The approximate replacement value of this equipment is $600,000. The State Government is now seeking additional offers of support for this facility before final scoping and planning is determined Phase 2 training facilities are aimed at providing students with real life scenarios and equipment in a training environment (rather than on site). It is likely that there is considerable overlap between Santos training needs and equipment, and the training needs and equipment of other industry participants. The desire of DMITRE and of Santos is for the creation of a shared use training facility, in which different companies can: - conduct oil and/or gas training using the equipment contributed by Santos, and - contribute their own equipment (if different from that already contributed by Santos) for additional training delivery. An excellent location has been identified within Tonsley for the location of this training equipment. It is a 1950m² bay on the ground floor of the new Sustainable Industries Education Centre (SIEC), which will also host Tonsley TAFE. All of South Australia s construction trade training TAFEs will relocate to this new, purpose built facility. SIEC has excess space, which is proposed to be sub-leased for the creation of the oil and gas industry shared training facility. The design of the shared use training facility, including the provision of new services (power, water, air, toilets, doors) to support the training equipment, is currently being finalised. Mining and Petroleum Services Centre of Excellence In the 2013/14 State Budget, the Government announced $6 million over four years to support a Mining and Petroleum Services Centre of Excellence. The Centre will... bring together major resource companies, mining services companies and the expertise within our local universities to solve the problems that will allow us to unlock our resource potential. Page 5 of 18

6 Mining and Engineering Centre Regency Park In May 2012, the State Government announced that a new Mining and Engineering Centre will be built at Regency Park, supported by an allocation of $38.3 million in the 2012 State Budget. The Mining and Engineering Centre is designed to provide South Australia with a centre for training excellence support the growth of the mining, engineering, advanced manufacturing, transport and defence industries. The Mining and Engineering Industry Training Centre at Regency Park will consolidate and integrate programs previously delivered across the TAFE SA network. The new centre will result in the closure of the Croydon Campus and the relocation of the following programs to Regency; Geo Science and Land Information Management Systems from O Halloran Hill Mechanical and Civil Engineering from Panorama Heavy Vehicle Transport and Diesel Mechanics from O Halloran Hill Automotive and Light Vehicle Transport from Croydon Potential of the former Brukunga Mine Site for a Mining Industry Skills Centre The State Government, Deep Exploration Technologies CRC and the Australian Training Alliance have written a discussion paper on the potential of the former Brukunga Mine Site for a Mining Industry Skills Centre. The former pyrite mine at Brukunga is located just 40km east of Adelaide in the Mt Lofty Ranges. The CFS State Training Centre is located within the mine site and has the capacity to simulate a real fly-in, fly-out lifestyle using the 69 person capacity camp facility. The following training activities with a large hands-on component could be conducted at Brukunga: - Mineral, oil and gas exploration and drilling; - Mine and Energy Site Safety; - Mine site equipment and machinery training; - Mine Closure and Acid and Metalliferous Drainage. This site is unique in that it can facilitate practical training and professional development with the added advantage of simulating the fly-in, fly-out lifestyle of the mining industry. More than any training facility in Australia, the site lends itself to supporting the supply chain of the complete mine life cycle (exploration/feasibility, construction, operations, expansion and remediation). SACOME recommends the setting up of a taskforce to examine the current and potential plans for skills training in the resources and energy sector with a view to South Australia becoming the skills training centre of choice for industry, with an official launch no later than February Page 6 of 18

7 4) ENVIRONMENTAL POLICY REFORM A) ENVIRONMENT PROTECTION and BIODIVERSITY CONSERVATION (EPBC) Act BILATERAL AGREEMENTS Policy Recommendation SACOME recommends that the State Government through COAG revisit this issue and work to establish a framework to enable bilateral agreements for assessment and approvals under the EPBC Act. Bilateral agreements are prescribed in Part 5 of the Environmental Protection and Biodiversity Conservation Act 1999 (EPBC Act), allowing the Commonwealth, subject to certain requirements, to delegate to the States and Territories the responsibility for assessing and/or approving development proposals under the prescriptions of the EPBC Act. This currently applies to developments that fall under the Development Act 1993 with environmental aspects that require Commonwealth assessment and approval. In April 2012, the Council of Australian Governments (COAG) discussed the establishment of standards for accrediting state based mining and petroleum legislation (in South Australia, the Mining Act 1971 and Petroleum and Geothermal Act 2000) where the environmental approval component (Program for Environmental Protection and Rehabilitation (PEPR) or Statement of Environmental Objectives (SEO)) satisfies the requirements of the EPBC Act. To date, COAG has been unable to come to an agreement on accreditation standards and thus this policy has been shelved temporarily. Efficiency of the environmental approvals process A bilateral agreement to accredit a PEPR under the Mining Act 1971 and SEO under the Petroleum and Geothermal Energy Act 2000 would streamline the environmental approvals process, eliminate process duplication, reduce assessment and approval timeframes and provide decision-making clarity and consistency. This would ultimately reduce costs and make investment more attractive. Page 7 of 18

8 4) ENVIRONMENTAL POLICY REFORM B) GREEN TAPE REDUCTION Policy Recommendation SACOME recommends that the State Government conduct a review of environmental regulation in South Australia to streamline environmental assessment as a seamless part of the whole of government approach to minerals and petroleum development approvals. South Australia is viewed as having well developed arrangements for the approvals of resource developments characterised by a more integrated, whole of government approach driven by Cabinet and the nomination of a Lead Assessment Agency to direct assessment of projects. This was validated in the 2013 National Audit of Regulations Influencing Mining Exploration and Project Approval Processes commissioned by the MCA and State Chambers The report also noted that critical to the acceptance and effectiveness of the arrangements was the involvement of Cabinet. The authority of Cabinet is essential to determine the culture within which approval assessments and decisions are made within government. Despite the well-established institutional framework in SA and clarity of the approval process for resource development, the National Audit implies a divergence in governance arrangements between the lead agency (DMITRE) and competent authorities (other agencies involved in the approval process). Competent authorities returned low scores in the areas of having clearly articulated objectives, clearly established roles and responsibilities, competency and capacity, and discipline to follow due process. The process for resolving disputes within the assessment process also seems to be uncertain. Some of these issues are being resolved through better defining relationships and decision making parameters between agencies within the approvals system (for example inter-agency agreements, delegated authority). However the industry remains of the view that some agencies are not aligned to the risk-based approach to decision making. In addition to a review to identify efficiency opportunities in environmental compliance within the whole of government approach to minerals and petroleum development approvals SACOME seeks a strengthening direction for agencies to comply with the government s own risk-based policy to the approval of resource development in South Australia. SACOME see opportunities to improve the institutional framework in SA and clarity of the approval process through agencies adopting the Case Manager model of DMITRE. Consistency in dealings with agencies cannot be underestimated for the certainty and clarity of regulatory compliance it provides for project proponents. Page 8 of 18

9 5) PLAN for ACCELERATING EXPLORATION PROGRAM Policy Recommendation SACOME recommends that the PACE program continues to be funded, crucially in times where there is reduced demand, and depressed commodity prices and to keep South Australia at the forefront of mining and energy investment. Successive South Australian Governments have identified the importance of Greenfield exploration in finding the commercial deposits for the South Australian resources industry. Previous initiatives such as the South Australian Exploration Initiative (SAEI, ) and Targeted Exploration Initiative (TEiSA, ) have allowed junior exploration companies to further uncover South Australia s mineral wealth whilst adding to the geological understanding of the state. The Plan for Accelerating Exploration (PACE) added onto these successful programs to further stimulate exploration from the levilised expenditure $10 million per annum at the beginning of the 1990s to the present $300 million per annum it is today. The current Plan for Accelerating Exploration and its expansion PACE 2020 have provided a pool of funds and information to assist explorers to drill and identify the future mines of South Australia. The current program is divided into four key areas; PACE Exploration, PACE Mining, PACE Energy, and PACE Global. Each of these areas has between three and four initiatives that also contain a list of programs (see pages 10 & 11) designed stimulate exploration and mining investment in South Australia. SACOME is currently conducting a comprehensive review of these programs to ensure that they are meeting the expectations and providing value to the industry. The level of pre-competitive data the SAEI, TEiSA, and PACE programs have provided explorers wishing to invest in South Australia has consistently been ranked world s best by the Fraser Institutes survey of mining companies. This data reduces the risk of exploration and allows investors to identify the areas of interest through the recent up to date, electronic data on the SARIG database. PACE can continue to be a positive impact upon the industry through constant evaluation of these programs and assessing key initiatives with their outcomes. This assessment should be reinforced by advice from industry representatives to the PACE program coordinators to effectively distribute human and financial capital to programs of greatest importance. Through this partnership and government assistance the junior exploration sector can continue to develop in South Australia. This is critical in a time where commodity prices are normalising with respect to the previous years of inflated prices pre and post GFC. Page 9 of 18

10 PACE program areas and programs under review by SACOME PACE exploration Pathways to prospectivity 1. New Tieyon 1:100K map sheet and data 2. New Mulyungarie 1:100K map sheet and data 3. New Marree 1:250K map sheet and explanatory notes 4. 1st edition 1:2M statewide regolith map and data package 5. Callabonna 1:250K explanatory notes Pathways to discovery 6. New statewide gravity map 7. Statewide hydrogeochemical survey (100+ analysis) 8. Statewide ASTER coverage (16 new layers) 9. Mount Woodroffe MyMap mineral maps (9 datasets and report) 10. Multi-element calcrete reanalysis (15,400+ samples) 11. Cariewerloo Basin AEM data, 3D model and data package Innovation through integration 12. New 3D models (including Gawler Craton depth to basement and Eastern Gawler IOCG cover) 13. 2nd edition 1:2M statewide paleochannel map and data package 14. New uranium map and SA uranium systems report book 15. Frome AEM regional survey (Geoscience Australia (GA) led partnership) 16. Gawler Craton MT workshop and online delivery Partnerships 17. PACE Discovery Drilling 2010 (complete) and 2012 (in progress) 18. New collaborative geophysics (PACE Targeting) and geochronology (PACE Geochronology) 19. PACE Geochronology 2010 and 2012 Report Books 20. Establishment of DET CRC Drilling Centre at Brukunga 21. New geoscientific partnership with China National Nuclear Cooporation (CNNC), and Saskatchewan Government, Canada PACE mining Discovery to development 22. Process mapping and optimisation program (59 licensing and regulation processes) 23. Compilation on the online tracking of exploration licence applications Next generation policy 24. Multiple land use framework (MLUF) 25. Assessment of South Australian mining regulatory framework (internal) 26. South Australian rehabilitation liability calculator Page 10 of 18

11 Water and mining 27. Goyder Institute for Water Research Collaboration 28. DMITRE/DEWNR partnership to streamline assessment, permitting and licensing processes Communities 29. Community engagement framework situation analysis and engagement strategy (internal) 30. Regional Development Australia Far North (RDAFN) Indigenous mining employee mentor program 31. APY Exploration and Mining Liaison Officer position PACE energy SA Geothermal 32. $500,000 research funding to the South Australian Centre for Geothermal Energy Research (SACGER) Unconventional gas resources 33. Cooper Basin Atlas 34. Research funding of $50,000 per annum to the Geofrac Consortium at the University of Adelaide ( ) 35. Research funding of $50,000 per annum to the ARC Linkage Project at the University of Adelaide ( ) CO2CRC 36. Commitment of $50,000 per annum to the CO2CRC ( ) PACE global Data pathways 37. Launch of SARIG Seismic lines with SEG-Y images on SARIG 2020 (including links to approximately 35,000 new records) 39. New electrical survey map layer (900+ reports) 40. New petrophysical data layer (1600+ records) 41. New mines and mineral deposits map layer (project status, statistics, company links) 42. New RESIC infrastructure data on SARIG 2020 (26 map layers) 43. Delivery of the online tracking of exploration licence applications 44. Auto-population of SARIG 2020 forms and registration of online applications in tenement systems South Australian resources analysis 45. South Australian mining project application (SAMPA) delivered through SARIG South Australian Mineral Exploration Review ( ) 47. Social assessment study (internal) 48. South Australian copper review (internal) Building awareness 49. SAMPEG ambadassors 50. International, national, state and regional promotions through targeted events Page 11 of 18

12 6) SOUTH AUSTRALIAN LAND USE SUPPORT PROJECT Policy Recommendations 1. SACOME recommends the State Government expand the Eyre Peninsula Land Use program concept to all regions of South Australia with an initial focus on the Yorke Peninsula and South-East regions to support multiple land use planning and regulation. 2. SACOME recommends that funding be made available to industry through SACOME to inform and educate resource and energy companies on best practice landowner and community engagement and work with government, communities and other relevant stakeholders to create a balance in multiple land use. The growth of the resources industry in South Australia has seen a rapid expansion of exploration into more settled areas of SA. Unlike the pastoral region of SA these areas are characterized by higher population density, highly productive agricultural land and freehold land; regions where the community is unfamiliar with resource related activities and development, and maybe uncertain and apprehensive about the impact on agriculture, the environment and life styles. Landholders also feel a greater level of responsibility as to how their decisions in relation to resource development may impact on their neighbours and communities futures. At the same time the resources endowment of the state is to be developed for the benefit of all South Australians in a sustainable and responsible manner. Companies are afforded conditional rights by government to explore and develop resources in return for economic returns to the state. This has brought into focus balancing multiple land uses to enable them to coexist to the overall economic, social and environmental benefit of the regions. SACOME supports the concept of the Eyre Peninsula Land Use Support Initiative (EPLUS) as a model to support landholders and communities as part of multiple land use planning and regulation in South Australia. The model must have clarity of purpose as a service to support landholders on the broader issues of resource development and not a mechanism for complaints handling. Communities and landholders need support and access to information that is regionally tailored to economic, social and environmental characteristics. Establishment of land use assistance initiatives on the Yorke Peninsula and South East is necessary given current and future mineral and petroleum activities in these regions respectively. More informed communities with access to services to support multiple land use planning will realise the benefits from resources development for regions in coexistence with ongoing sustainability and development of traditional economic activities. The EPLUS program s charter is to create a balance in multiple land use by equipping landholders and community with information and access to support services to maximise outcomes for their farm enterprises. SACOME would argue that the mineral and energy companies must also have access to information and support services to be able to best work with Government, landowners and communities to create the balance that the State Government seeks through the EPLUS program and any expanded programs across the State. Page 12 of 18

13 7) PROPER HOUSING OF THE DATA METALLOGENICA COLLECTION Policy Recommendation SACOME recommends that the Data Metallogenica Collection be relocated from its current stored location and relocated at Mines and Energy House and managed by SACOME to enable this world class collection be available to the Public and Industry. Data Metallogenica Collection is a global encyclopaedia of ore deposits containing information on over 3000 mineral deposits from more than 70 countries which was relocated from Canada to Adelaide in This world renowned resource is currently stored in boxes, not physically visible by the resources industry, students or the general public and only accessible on-line. That the government consider relocating the Data Metallogenica Collection from its current location to Mines and Energy House so that SACOME could display and administer this world renowned collection in the form of a museum and utilise its benefits as a teaching facility for students from junior classes through to university. This resource could also be utilised if marketed and advertised successfully as a mode of increasing tourism and could also be utilised as a tool to increasing the awareness and benefits of mining to the local communities within South Australia. Currently the only access to this resource by the mining industry and or interested parties is online, which technically does not have the same benefit and impact as being able to see the minerals first hand. Part of SACOME s role is to assist in the state s education of both junior and secondary students by keeping them abreast of the latest information on minerals, the environment and mining which in turn encourages students to give more consideration in the selection of both maths and science subjects as part of their curriculum. If this collection was relocated, physically visible and easily accessible it could also be used to assist university students with their studies which in turn would complement their real life learning educational experiences. Both secondary and primary school students would also be able to undergo a more realistic learning environment within the complex world of geology and the environment and could also be used to enhance a number of their current science experiments. Interest would also be energized within the general tourism areas, as visitors and students from interstate and overseas would be able to come and visit this world renowned minerals collection, similarly to that which occurs in the gold mining towns of both Bendigo and Ballarat. The facilitation of this model requires the support from the South Australian Government if SACOME is to be able to utilise this world renowned resource that the public of South Australia is currently unaware of to increase awareness of the benefits of mining, enhance student s education and assist in increasing the state s tourism numbers. This proposal is of value to its stakeholders, the state s students, resources industry, general public and the tourism industry. SACOME recommends that Government allocate sufficient budget funding to pay for the refurbishment of the lower level of Mines and Energy House to accommodate the Data Metallogenica Collection in the form of a museum and training facility along with an on-going annual rental expense and allow SACOME to manage and market the entire collection. Page 13 of 18

14 8) EXPLORATION DEVELOPMENT INCENTIVE SUPPORT Policy Recommendation SACOME recommends active support by all major political parties in South Australia of the Federal Coalition s announcement to implement an Exploration Development Incentive (EDI) to stimulate the Exploration sector. Resource companies typically have huge upfront exploration costs and little or no revenue. That means they won't need the tax deductions they would incur as income-generating companies. To finance that exploration, shares could be potentially issued with the tax deductions to "flow through" to investors. With recent downtrends in exploration expenditure (ABS; Cat. 5368), softening commodity prices (Bloomberg), and constrained capital markets (Ernst & Young; Business risks in mining and metals ) junior resources companies are facing significant pressure to develop deposits into economical projects. In a bid to boost exploration in Australia, the new Federal Government has committed to introducing an Exploration Development Incentive that will allow investors to deduct the expense of mining exploration against their taxable income. The Australian Taxation Office will decide on a portion of costs that investors can claim as tax credits. The scheme will be capped at $100 million over the forward estimates. Policies such as a Flow-Through-Shares scheme (also known as a Minerals Exploration Tax Credit) and now named as an Exploration Development Incentive by the Coalition Government will allow junior companies to access extra funds for capital raising via shareholders. SACOME has been at the forefront of designing a scheme, that SACOME initially called an Exploration Tax Credit, better suited to the Australian Taxation system. A discussion paper was produced for SACOME in 2008 outlining the scheme. The author of the paper, Ms Alice McCleary (see bio below) is a SACOME Councillor. Some of the design features are that it: 1. Not be distortive between existing companies and IPOs, or between new and existing shareholders. 2. Reward risk takers in small companies, so that providing capital to risky exploration companies is more attractive. The most risky companies are often the smallest, which have fewer projects across which risk may be spread. This risk concept also fits best with the policy behind the R&D concession, which the ETC seeks to emulate in the conceptual base for this proposal. 3. Be easy to implement and easy to regulate/monitor. 4. Ensure that a credit is only allowed for exploration expenditure actually incurred, so that only genuine exploration is being rewarded. This is why the credit would only be available after the expenditure is incurred, rather than upfront (say, at the time of a share subscription) or based on expected expenditure (say, based on IPO budgets). 5. Be practical for the companies to implement. A franking-account-like mechanism, where the companies themselves choose when to pass out the credits, ensures that small amounts of eligible expenditure could be accumulated and then passed out in later years when enough had been spent to make the distribution cost effective. Page 14 of 18

15 6. Use existing definitions as far as possible, to assist with compliance costs for both companies and the ATO. 7. Not distinguish between minerals. In practice this is very difficult anyway, as different minerals occur together and knowing in advance which mineral might ultimately be discovered is uncertain at best. 8. Deal with disallowed exploration expenditure efficiently and effectively, preferably at the corporate level rather than the individual shareholder level. 9. ETCs would only be allowed for Australian exploration expenditure, with the broadest definition of Australia and its offshore resources being used. These definitions already exist and are well understood. Alice McCleary - Biography Alice is a director of a number of listed and unlisted companies, and until December 2009 was Deputy Chancellor of the University of South Australia. She is a respected accounting professional with a wide variety of experience in leadership, corporate governance, professional practice, and policy development. She has been a tax partner in Coopers & Lybrand, was intimately involved with the Ralph Review of Business Taxation, and in 2001 was national President of the Taxation Institute of Australia the first woman President in the Institute s 65-year history. Since 1998 Alice has pursued a career as a professional director, undertaking non-executive leadership roles for variety of organizations, which together make up a full professional workload. Prior to that, Alice was a fulltime corporate taxation consultant. In recent years, Alice has played a pivotal role in floating four companies on the ASX, including the first Chinese manufacturer to list here. The other three companies are in the mining sector. She also developed an innovative way to invigorate investment in the mineral exploration sector with a new flow-through share tax regime (known as the Mining Exploration Tax Credit model) which was rapidly adopted by the mining industry as its preferred stimulus model. Page 15 of 18

16 9) DRILL CORE REFERENCE LIBRARY Policy Recommendation SACOME recommends that the State Government fund the housing of the State s Drill Core Reference Library in a new purpose built facility at Tonsley Park. There is a legislative requirement to store drill samples under several State Acts. The State Drill Core Reference Library houses drill core and rock cutting samples from resource exploration and mining activity across the State. The archives date back from the present day to the late 1800s. The specimens provide essential information in the search for ore deposits and petroleum reserves, for reinterpretation of structural and stratigraphic relationships, and for geoscientific research.. The State s Drill Core Library facilities are operated by the Resources and Energy Group of DMITRE. The main Drill Core Library facility at Glenside was established in 1978 and has undergone extensions in 1982 and This facility is recognised by the minerals and petroleum industries as one of the best purpose-built drill core reference libraries in the world. The Fraser Institute s Annual Survey of Mining Companies gauges the opinions of Mining executives and exploration managers operating worldwide. South Australia has regularly held the No.1 ranking for geological information over the last 8 years. The award winning South Australian Resource Information Geoserver (SARIG) online delivery system and world class Core Library have been critical to South Australia achieving this international standing. The current holdings of the Drill Core Library consist of over 7.5 million metres of core which is notionally valued at in excess of $1.0 billion (based on 2013 terms), stored across four drill core library sites (i.e. Glenside, Thebarton, Moonta and Whyalla). In the 2012/13 State Budget it was announced that there would be $960,000 of funding over the next two years for initial design and scoping work to ensure the development of the state's drill core library facilities to promote exploration for minerals, petroleum, gas and geothermal energy in South Australia. This Government funding has enabled initial design and scoping work for the development of a new consolidated facility at a greenfield Adelaide site to be completed and recommended Tonsley as the preferred site option. The critical issue is that the current facilities will reach capacity in 2014 with the need for a new storage solution exacerbated by the anticipated increase in oil and gas exploration activity over the next three years. There is an urgent requirement to deliver a sustainable storage solution that allows for continuation of services to the resources sector and the South Australian community generally. There is significant potential to build a national focus on unconventional gas technologies and training and act as a catalyst and an anchor to attract investment to the State for mining supply and services/manufacturing. Importantly the new State Drill Core Reference Library will: continue to deliver high quality and world s best practice online geoscience information and related services for the resources sector; consolidate four existing libraries into one, confirming a one-stop shop approach to service to industry; provide cutting edge characterising services, technology testing facilities and visualisation by allied service providers; Page 16 of 18

17 build on the Plan for Acceleration Exploration, delivering new pre-competitive mineral exploration data which through research at the new facility will lead to the next generation of discoveries and the pipeline of mines. Investment in the next generation State Drill Core Reference Library at Tonsley will deliver a world class facility for the resource sector, a focal point that will drive exploration in the State and achieve and sustain growth in this important sector. Page 17 of 18

18 10) DOMESTIC GAS RESERVATION Policy Recommendation SACOME does not support a domestic gas reservation (DGR) policy, which has been shown to distort markets, and recommends the State Government works within the Standing Committee on Energy and Resources (SCER) and COAG to develop strategic energy policy which stimulates exploration and investment in gas projects. Exploration for gas and the development of gas projects is an expensive and high-risk venture. Investment attraction heavily relies on certainty, stability and consistency in policy and regulation, and commercial returns. For the community this investment will deliver royalties, infrastructure, employment and facilitate broader economic develop in regions. While domestic demand for gas is projected to increase steadily over the next two decades 1, the demand and prices in the Australian market is not going to be sufficient alone to drive investment in new reserves. What will drive new investment is the export gas market demand, largely driven by Asia to support economic growth and the rate of urbanisation, as well as the global transition to a low carbon economy. This demand for energy means these markets are prepared to bear significantly higher gas prices than Australian consumers, and has driven unprecedented investment in developing new gas reserves (CSG, shale, offshore) and LNG facilities. The shift towards export has and will put upwards pressure on domestic gas prices in the near team. This has fuelled calls for quarantining gas for domestic supply to maintain prices below export parity. These calls have come predominately from the manufacturing industry which is concerned for their trade competitiveness. A number of studies have been completed recently that assess the implications of a domestic gas reservation policy. Domestic Gas Reservation places a simultaneous tax on gas production and subsidy on gas consumption 1. So while in the short term gas prices are kept artificially low, in the long term DGR has the effect of stimulating demand and restricting supply, leading to shortages and higher prices over the long term 2. This market distortion does not guarantee the best possible returns on investment or production; deterring exploration and investment 3. International pricing and export markets, combined with favourable geology, has created the North American shale revolution. As investment has brought on new supply, the USA and Canada now have some of the lower prices in the world; stimulating industry and diverting reliance away from coal lowering the emissions profile of both countires 2. Export markets will stimulate exploration and development of gas projects, and while in the short term will inflate prices (due to the high risk nature and expense of developing new unconventional reserves and LNG infrastructure), in the longer term the increased supply brought on by the investment will lower prices for domestic consumers. The most recent Australian Government Energy White Paper (2012) did not support domestic gas reservation. 1 Deloitte Access Economics. The economic impacts of a domestic gas reservation. Prepared for APPEA, October Energy Quest Report (2013). Domestic Gas Market Interventions: International Experience. 3 Bureau of Resources and Energy Economics. Gas Market Report. Australian Government, July 2012 Page 18 of 18