❓ The Minister for State Development addresses a question regarding the removal of concessional royalties for iron ore fines, detailing the history of the concession and ongoing negotiations with BHP Billiton and Rio Tinto to eliminate it.
AnsweredQoN 263Legislative Assembly
QuestionView source ↗
I refer the minister to recent commentary regarding his efforts to remove concessional royalties in the iron ore industry. Will the minister advise the house when the decision to remove those concessions was made? Mr A.J. CARPENTER
AnswerView source ↗
I thank the member for Riverton for the question. The government is currently engaged in interesting and very enjoyable negotiations with BHP Billiton Ltd and Rio Tinto Ltd seeking to remove a historical anomaly that gives those companies a concessional royalty rate for what are known as fines in the iron ore industry; that is, 2c-size iron ore pellets. The royalty concession dates from the early 1960s when the original state agreements were put in place and fines were unproductive or unwanted in the market. The state government of the time provided the royalty concession in an effort to encourage the companies of the day to find a market for the fines, as well as the lump ore, on which they pay a royalty of 7.5 per cent. The concessional royalty for fines is 3.75 per cent. In 1981, the first Court government - it might have been the O’Connor government - recommended that the concessions be removed, as they were no longer justifiable, on the basis that there was a strong international market for iron ore fines. In fact, today, more than 60 per cent of iron ore production in Western Australia that is exported internationally is fines rather than lump ore. The concession has delivered a huge benefit to the companies over a long period. The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
Mr A.J. CARPENTER replied: I thank the member for Riverton for the question. The government is currently engaged in interesting and very enjoyable negotiations with BHP Billiton Ltd and Rio Tinto Ltd seeking to remove a historical anomaly that gives those companies a concessional royalty rate for what are known as fines in the iron ore industry; that is, 2c-size iron ore pellets. The royalty concession dates from the early 1960s when the original state agreements were put in place and fines were unproductive or unwanted in the market. The state government of the time provided the royalty concession in an effort to encourage the companies of the day to find a market for the fines, as well as the lump ore, on which they pay a royalty of 7.5 per cent. The concessional royalty for fines is 3.75 per cent. In 1981, the first Court government - it might have been the O’Connor government - recommended that the concessions be removed, as they were no longer justifiable, on the basis that there was a strong international market for iron ore fines. In fact, today, more than 60 per cent of iron ore production in Western Australia that is exported internationally is fines rather than lump ore. The concession has delivered a huge benefit to the companies over a long period. The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
I thank the member for Riverton for the question. The government is currently engaged in interesting and very enjoyable negotiations with BHP Billiton Ltd and Rio Tinto Ltd seeking to remove a historical anomaly that gives those companies a concessional royalty rate for what are known as fines in the iron ore industry; that is, 2c-size iron ore pellets. The royalty concession dates from the early 1960s when the original state agreements were put in place and fines were unproductive or unwanted in the market. The state government of the time provided the royalty concession in an effort to encourage the companies of the day to find a market for the fines, as well as the lump ore, on which they pay a royalty of 7.5 per cent. The concessional royalty for fines is 3.75 per cent. In 1981, the first Court government - it might have been the O’Connor government - recommended that the concessions be removed, as they were no longer justifiable, on the basis that there was a strong international market for iron ore fines. In fact, today, more than 60 per cent of iron ore production in Western Australia that is exported internationally is fines rather than lump ore. The concession has delivered a huge benefit to the companies over a long period. The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
The government is currently engaged in interesting and very enjoyable negotiations with BHP Billiton Ltd and Rio Tinto Ltd seeking to remove a historical anomaly that gives those companies a concessional royalty rate for what are known as fines in the iron ore industry; that is, 2c-size iron ore pellets. The royalty concession dates from the early 1960s when the original state agreements were put in place and fines were unproductive or unwanted in the market. The state government of the time provided the royalty concession in an effort to encourage the companies of the day to find a market for the fines, as well as the lump ore, on which they pay a royalty of 7.5 per cent. The concessional royalty for fines is 3.75 per cent. In 1981, the first Court government - it might have been the O’Connor government - recommended that the concessions be removed, as they were no longer justifiable, on the basis that there was a strong international market for iron ore fines. In fact, today, more than 60 per cent of iron ore production in Western Australia that is exported internationally is fines rather than lump ore. The concession has delivered a huge benefit to the companies over a long period. The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
Mr A.J. CARPENTER replied: I thank the member for Riverton for the question. The government is currently engaged in interesting and very enjoyable negotiations with BHP Billiton Ltd and Rio Tinto Ltd seeking to remove a historical anomaly that gives those companies a concessional royalty rate for what are known as fines in the iron ore industry; that is, 2c-size iron ore pellets. The royalty concession dates from the early 1960s when the original state agreements were put in place and fines were unproductive or unwanted in the market. The state government of the time provided the royalty concession in an effort to encourage the companies of the day to find a market for the fines, as well as the lump ore, on which they pay a royalty of 7.5 per cent. The concessional royalty for fines is 3.75 per cent. In 1981, the first Court government - it might have been the O’Connor government - recommended that the concessions be removed, as they were no longer justifiable, on the basis that there was a strong international market for iron ore fines. In fact, today, more than 60 per cent of iron ore production in Western Australia that is exported internationally is fines rather than lump ore. The concession has delivered a huge benefit to the companies over a long period. The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
I thank the member for Riverton for the question. The government is currently engaged in interesting and very enjoyable negotiations with BHP Billiton Ltd and Rio Tinto Ltd seeking to remove a historical anomaly that gives those companies a concessional royalty rate for what are known as fines in the iron ore industry; that is, 2c-size iron ore pellets. The royalty concession dates from the early 1960s when the original state agreements were put in place and fines were unproductive or unwanted in the market. The state government of the time provided the royalty concession in an effort to encourage the companies of the day to find a market for the fines, as well as the lump ore, on which they pay a royalty of 7.5 per cent. The concessional royalty for fines is 3.75 per cent. In 1981, the first Court government - it might have been the O’Connor government - recommended that the concessions be removed, as they were no longer justifiable, on the basis that there was a strong international market for iron ore fines. In fact, today, more than 60 per cent of iron ore production in Western Australia that is exported internationally is fines rather than lump ore. The concession has delivered a huge benefit to the companies over a long period. The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
The government is currently engaged in interesting and very enjoyable negotiations with BHP Billiton Ltd and Rio Tinto Ltd seeking to remove a historical anomaly that gives those companies a concessional royalty rate for what are known as fines in the iron ore industry; that is, 2c-size iron ore pellets. The royalty concession dates from the early 1960s when the original state agreements were put in place and fines were unproductive or unwanted in the market. The state government of the time provided the royalty concession in an effort to encourage the companies of the day to find a market for the fines, as well as the lump ore, on which they pay a royalty of 7.5 per cent. The concessional royalty for fines is 3.75 per cent. In 1981, the first Court government - it might have been the O’Connor government - recommended that the concessions be removed, as they were no longer justifiable, on the basis that there was a strong international market for iron ore fines. In fact, today, more than 60 per cent of iron ore production in Western Australia that is exported internationally is fines rather than lump ore. The concession has delivered a huge benefit to the companies over a long period. The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
The first answer to the question is 1981, although it did not happen then. In 1995 the government of Richard Court took a decision to eliminate, where possible, the concessions on fines. On 27 March of that year, the government decided that royalties paid under the Mining Act 1978 on the realised value of iron ore, on an arms-length basis, were to be amended to a flat 7.5 per cent for lump ore, 5.625 per cent for fine ore and five per cent for beneficiated ore. To be fair to the then Premier, he said that the existing iron ore state agreement royalty rates would be changed to the new arrangements as the opportunities arose. Those opportunities have now arisen. Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
Last year the Auditor General reported to the Parliament that progress needed to be made on the elimination of concessional royalties. He was critical of governments for not having done this. The first of his key recommendations in that report was that the Department of Industry and Resources should develop a strategy, in consultation with industry, to implement government policy to phase out royalty concessions. That is exactly what I am doing at the moment, in consultation with BHP Billiton and Rio Tinto. The companies are now going through a process of applying for approvals to extend their operations considerably in Western Australia, and to ramp up production. As we all know, there has been a huge increase in the international price for iron ore. The moment has arisen for the government to renegotiate, from a position of some strength, this historic anomaly. It is worth pointing out that no other companies in the iron ore industry benefit from those concessional royalties. Companies like Hope Downs Ltd and Fortescue Metals Group Ltd will not be receiving a concessional royalty; they will be paying a higher royalty than BHP Billiton and Rio Tinto, unless we are successful in eliminating this concession. Last year the Auditor General estimated that the concession was costing the state of Western Australia something in excess of $40 million in forgone royalties. This year, that figure would be well over $50 million, and heading towards $60 million. The projection is for that figure to increase even further as the price of iron ore rises and the production of those companies under the state agreement acts increases. This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
This is the time, if ever there was one, for the state to negotiate successfully with those companies to remove that concessional royalty. It is unfair on all the other producers that those companies get that royalty concessions and smaller companies do not. I intend to pursue this issue very vigorously. I have made that known to the companies, and we are now at a very interesting point in the negotiations. There should be an element of support for the government’s position, from the Western Australian perspective, and from the other side of politics. The Leader of the Opposition, erroneously I think, perhaps not knowing the full details, asserted that the government was trying to raise royalties across the board. Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
Mr M.J. Birney : I did not say that. I was referring to state agreement acts. Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
Mr A.J. CARPENTER : Okay, but I interpreted it in that way, and I think other people did as well. There are other state agreement acts, but we were not trying to increase royalties across the board. We are particularly targeting these particular state agreements under which the concessional royalty is in place. There is no justification for it any more and it should be stopped.
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