TMEC CEO Opinion piece: The factually incorrect Australia Institute Report’s Mining of Entitlement

Tasmania should be concerned that the factually incorrect Australia Institute Report’s Mining of Entitlement has been used as the basis of Christine Milne’s opinion piece in The Mercury (June 30) when the report has been strongly rejected in other states, writes Tasmanian Minerals and Energy Council's CEO, Jeremy Kouw.


Leading economist Professor Henry Ergas slammed the report in an article for The Australian on 30 June 2014, claiming the content makes no sense and “… treats investment in state-owned utilities serving the mining industry as a cost; but it doesn’t offset against those costs the revenues the utilities obtain from the services they provide.”

I would like to address a number of the claims that Ms Milne has made in her opinion piece.

She states that Tasmanian Government subsidies to mining and mineral processing have contributed $54 million over the past four years. This is completely inaccurate.

As a basis for its Report, the Australian Institute uses a six-year analysis period from State Government budget papers to obtain what it claims is a subsidy figure of $54.1 million for Tasmania and supports this with some specific line items.  The report claims that $16.6 million was spent on the Bell Bay Intermodal Terminal, when in fact very little of this allocated funding, which initially was a combination of Federal, State and local council funding has been spent.  In fact approximately $8 million, a combination of Federal Government grants, Tas Ports, Tas Rail and private enterprise funding was spent in upgrades at the Burnie port.  Does our industry benefit from this investment?  Of course, but then the users in our industry, just like anyone else moving freight in and out of Burnie, pay for that service.

The Report states $13.6 million was spent on West Coast roads.  My immediate reaction was that it’s not enough money.  Roads are vital infrastructure, not only for our industry, but also other critical industries in Tasmania including tourism and agriculture. 

$21.7 million was highlighted for the operation of Mineral Resources management and administration.  This is the operating cost of Minerals Resources Tasmania, which sits under the Department of State Growth and controls royalties and promotes expansion of mineral extraction for the benefit of the Tasmanian economy.

This demonstrates how devoid the report is of facts and evidence.  The $54 million is an inaccurate estimate of actual cost and ignores the millions of dollars paid by the industry to the State Government as a return to the Tasmanian community for extraction of a non-renewable resources, not to mention a myriad of state based taxes, fees, charges and levies. In other words it does not take into account the revenues government utilities receive from the services they provide to the industry.

It’s relatively easy to unpack the $54 million and challenge the accuracy and balance on how that data is used to inform public debate. However, what I find more frustrating is the Report infers that the $54 million understates the actual subsidy stating that “major mineral processing operations and other energy intensive industries have benefited from discounted electricity from the state-owned Hydro Tasmania.”  Again unsurprisingly, no data is used to support the smear with the Report authors using the excuse that “this discount is not easily identified in the budget papers.”

Well again, of course it’s difficult to find evidence of discount in the budget papers because it does not exist.  It is quite easy on the other hand to find independent and credible evidence that supports this fact.  Refer to the report by the Electricity Supply Industry Expert Panel which was set up by the previous State Government to conduct “An Independent Review of the Tasmanian Electricity Supply Industry.”

At the end of a rigorous 17-month process involving evidence-based investigation and extensive consultation with both industry participants and the broader Tasmanian community, the Panel stated in its Report that there was “no evidence that the major industrial customers receive an energy subsidy to stay in Tasmania.”  Furthermore, “the Panel has seen no evidence to suggest that, in contemporary commercial negotiations, Hydro Tasmania accepted lower prices from major industrial customers in return for whole-of-state benefits, such as the economic benefits of employment in the manufacturing sector”.  The Panel’s own analysis suggests that prices are broadly consistent with market prices and the prices paid by similar businesses interstate.

The quality and voracity of the Australia Institute Report does not seem to fit with how the Institute positions itself as “The country’s most influential progressive think tank: Conducting research on a broad range of economic, social and environmental issues in order to inform public debate and bring greater accountability to the democratic process.”.

Once again Ms Milne continues to voice damaging and biased comments, and closes her opinion piece by referring to our industry as “destructive losers”.  I can understand that you would do this if your real agenda is to close down the Tasmanian resources sector and ignore the contribution our sector has made to the creation and prosperity of our State and the progress we have made with modern environmental practices.

Just like the Australian Institute’s Report, in supporting her opinion Ms Milne ignores the big picture and simply focusses on money spent by government, ignorant to government agency returns, major employment opportunities, international economy links and the multiplier effects of 1:4 (for every one job in a major Tasmanian industry, four other jobs depend on that in the community).

The fact is that the resources sector in Tasmania is still going strong and still has significant potential.  Mining and metals processing in Tasmania is the biggest economic sector and a vital employer, particularly in regional areas.

We have great examples of world’s best practice applied every day to ensure our industries can respond to the challenging and volatile business environment they operate in.  Can we do better in terms of our safety performance, environmental performance and business performance?  Yes, we can and we have to.  That is just a reality of being in business.

So rather than using biased half truths, emotive language and smears, let’s take a look at the bigger picture and have a real discussion about how we can get our state moving again.