SACOME's 2020/21 State Budget Priorities
Northern Water Supply Project
Continued expansion of mining in the Gawler Craton is highly dependent on access to water and will require major capital investment. Secure, sustainable and efficient water supply is key to unlocking economic potential in the Far North and has potential to reduce reliance on the Great Artesian Basin and the Murray River.
Recognising these potential state-wide benefits, SACOME submits that South Australian Government investment in shared water infrastructure via a high capacity pipeline and associated desalination plant in the Northern Spencer Gulf would provide foundational infrastructure for future investment in the Gawler Craton, contribute to improved environmental outcomes, and provide multiple stakeholder benefit across a range of industry sectors.
The development of a pipeline has potential to align with Department of Defence requirements in the Woomera Prohibited Area presenting further economic opportunities for the State.
SACOME notes the importance of water to hydrogen production and suggests that an industrial water strategy should also consider requirements for the development of a South Australian hydrogen industry.
SACOME calls for: ongoing commitment by the South Australian Government for business case development of the Northern Water Supply Project.
Resources Sector Economic Heatmap
Significant work has been undertaken by industry and government to define the location of economic resources across the State resulting in a sound knowledge of demonstrated mineral and petroleum reserves. These reserves represent yet-unrealised wealth for South Australia.
SACOME submits that realising growth targets for the resources sector will be materially assisted by development of a ’Resources Sector Economic Heatmap’, aligning requisite regulatory, development and investment attraction activity against South Australian resources projects capable of delivering Growth State targets.
SACOME suggests that this Heatmap prioritises:
- the potential economic value of a province/cluster to the State;
- the investment required to build a path to market for identified provinces;
- what action(s) the State can take to resolve infrastructure-related barriers to investment;
- opportunities to leverage Commonwealth funding/prioritisation;
- the timeframes necessary for implementing a solution;
- the opportunity cost of doing nothing.
SACOME calls for: development of a South Australian Resources Sector Economic Heatmap.
Regional & Remote Road Maintenance
South Australia has a road network comprising some 10,000km of road. Maintenance of these roads, and particularly regional roads with economic significance to the State, is not undertaken in a strategic manner that reflects their importance.
SACOME has been advised by member companies that maintenance of existing resources infrastructure should be prioritised for their continued efficient operation.
While this is a safety and efficiency issue for mineral and petroleum operators and their service industries, it also impacts pastoralists and tourists also using these roads.
SACOME calls for: the State Government to prioritise maintenance funding for regional and remote roads critical to the operation of South Australian minerals and petroleum projects.
SA Government Underwriting Facility
Recognising that the high cost of infrastructure continues to function as a drag on project development, a government underwriting arrangement has been suggested as a practical measure to balance risk and incentivise investment, particularly in cases where such infrastructure will have common use.
A government entity providing a guarantee arrangement for critical assets is suggested as a mechanism to free up company balance sheets for other investment opportunities, particularly for recently privatised or state-dependent entities. Further, the underwriting facility could be proactively used as an investment attraction measure to assist capital raising where appropriate due diligence justifies this decision.
Examples of projects for which development could be expedited through an underwriting facility include:
- Kanmantoo Underground Mine
- Summerfield 422MW Hybrid Power Station
SACOME calls for: the State Government to formalise a SA Government Underwriting Facility as a tool for facilitating development of South Australian resources projects.
Upgrade of Pt Augusta to Whyalla Route
Upgrade of the Port Augusta to Whyalla route (Lincoln and Eyre Highways) from single to dual carriageway would significantly improve the safety of what is a notorious, mostly single lane stretch of road with limited passing lanes.
This is a key route for transport of commodities to and from Whyalla, making upgrade of the road a priority for resources operators in the region and for the wider Upper Spencer Gulf community.
Funding to ensure the efficient and safe transport of product along this route should be prioritised, especially given the economic importance of this transport route to commercial activity in the Upper Spencer Gulf and the Far North; and on the Eyre Peninsula.
SACOME calls for: funding to upgrade the Port Augusta to Whyalla route from single to dual carriageway.
Resources Infrastructure Corridors
Infrastructure South Australia’s 20 Year State Infrastructure Strategy partly addresses the establishment of ‘Resources Infrastructure Corridors’ by establishing a program of evidence-based incremental interventions in the freight network that address supply chain constraints on key economic corridors, as an investment priority.
However, SACOME reiterates its calls to the State Government to also implement regulatory settings that act as a key infrastructure investment attraction tool to facilitate faster project development times through demarcating infrastructure project paths to major South Australian resources provinces.
SACOME calls for the development of ‘Resources Infrastructure Corridors’ to facilitate infrastructure investment by holistically resolving land access, approvals and logistics issues; and to operate as a jurisdictional advantage by providing operators with a de-risked and expedited path to project development.
Once implemented, these regulatory corridors can provide the State with a competitive advantage by reducing the time and cost associated with developing resources projects in South Australia.
SACOME calls for: the State Government to establish “Resources Infrastructure Corridors” to create a regulatory structure that incentivises investment.
Statutory Corporation - Infrastructure Development
The value and size of potential resources projects requires a collaborative effort to develop the shared infrastructure necessary to create the economies of scale to offset the expense of these projects.
The South Australian Government has looked to the private sector to resolve the detail of that collaboration; however, this approach has not produced significant outcomes given competitive tensions that often exist between operators.
SACOME suggests the South Australian Government play the role of first mover, by establishing a statutory corporation that develops common user infrastructure with ‘take or pay’ access conditions, and by doing so break the investment deadlock that has slowed the development of the State’s resources provinces.
SACOME calls for: the State Government to fund a business case into the establishment of a statutory corporation that develops enabling infrastructure that resources sector companies can access on a “take or pay” basis.
Maintenance & Expansion of the Accelerated Discovery Initiative
The Accelerated Discovery Initiative (ADI) is an important contributor to Growth State objectives given exploration activity is fundamental to growing the State’s mineral wealth.
While mineral exploration data fell nationally and in South Australia during the June quarter as a result of the COVID-19 pandemic, previous Department of Treasury & Finance data indicated increases in private mineral exploration expenditure but at levels below the national growth rate.
SACOME submits that ongoing funding of the ADI is consistent with the economic growth outcomes sought by the South Australian Government. While more recent economic data may indicate an increase in private mineral exploration expenditure due to the operation of the ADI, maintaining funding for the program should be paramount as a means of maintaining these expenditure trends and to assist in the post COVID-19 economic recovery.
SACOME also suggests expanding the ADI to fund a targeted critical minerals component, noting the increasing importance of critical minerals to the manufacturing supply chain, opportunities presented by the national Critical Minerals Strategy and the potential to further diversify the State’s mineral production.
SACOME calls for: ongoing funding of the Accelerated Discovery Initiative (ADI); and expansion of the ADI to encourage greater levels of exploration activity in South Australia.
Gas Acceleration Program
The ACCC July 2020 Gas Inquiry 2017-2025 Interim Report1 (the Report) indicates that both COVID-19 and significant falls in oil and LNG prices have impacted the East Coast Gas Market at all levels of the supply chain and brought into focus the pressure points and areas of dysfunction in the market.
In South Australia, gas generation comprises approximately half of all electricity generation, with this generation being reliant upon a secure, economic supply of gas to ensure affordable production of electricity.
Gas is key to enabling the orderly integration of renewable generation and ‘future fuels’ like hydrogen over the coming decades. SACOME reiterates that ensuring an affordable, diversified, reliable supply of gas is critical to meeting the State’s energy demands and development of new gas reserves should continue to be a public policy priority.
SACOME calls for the establishment of a Gas Acceleration Program to advance meritorious gas projects, such as Vintage Energy’s PRL 211 Joint Venture, and bring forward locally produced natural gas for local electricity generators and industry customers at a reasonable cost.
SACOME calls for: the State Government to establish a Gas Acceleration Program to complement the Accelerated Discovery Initiative and to incentivise the responsible development of South Australian gas projects.
State-wide Land Access Framework
Land access is fundamental to the viability of the resources sector. For minerals and gas operators to continue to explore, develop and produce they require access to land.
Junior explorers continue to communicate the importance of this issue given the time and cost attached to securing land access as a component of their overall activity
The resources sector acknowledges and welcomes the importance of community and stakeholder engagement during project development; not only as a requirement under the regulatory approvals process but also as part of being an active community member and neighbour.
Resources sector operators tend to have individual solutions to land access disputes and there are many positive examples of land access and community engagement. These positive examples provide an opportunity for State Government to consolidate and develop a state framework for land access and SACOME is committed to working collaboratively with DEM to progress this initiative.
SACOME calls for: development of updated State-wide Land Access Guidance to guide resources and infrastructure project development across the State.
Priority Funding for Voltage Management Technologies
The South Australian energy network needs to accommodate more dynamic and technologically diverse plant, including embedded resources that are geographically dispersed, to meet varying energy usage patterns that are vastly different to previous decades.
South Australian Government has brought forward $10 million of investment in voltage management in the network to improve the performance of appliances and solar generation, and to provide emergency backstop capabilities in case of extreme conditions.
Discussions with AEMO and the South Australian Government about Under Frequency Load Shedding requirements for major commercial and industrial operators have highlighted the need for urgent additional investment in system management technology to manage the overabundance of solar generation at peak periods.
While Project EnergyConnect is expected to resolve voltage management issues once completed in 2024-25, SACOME urges the South Australian Government to fund additional voltage management measures as a priority so as to reduce the risk of system black events for major South Australian commercial and industrial operators.
SACOME calls for: the State Government to urgently increase funding for implementation of storage and voltage management technologies to address under frequency load shedding requirements and intermittency in the South Australian electricity system.
Carbon Capture Storage Support
The development of commercial CCS may provide a viable pathway to reducing emissions; position Australia to continue as a leading energy exporter and manufacturer of energy-intensive materials; and enable new industries such as hydrogen.
SACOME member company Santos’ Moomba CCS project has the potential to be a large-scale carbon sink for power generators and other industries in eastern and southern Australia. Santos has been investigating the feasibility of a project to capture vented CO2 from the Moomba Gas Plant to enhance oil production in the Cooper Basin.
Santos has stated with the “right policy settings and incentives to accelerate the CCS deployment, the Copper Basin could become a large scale, commercial CCS hub capturing emissions from oil and gas but also from other industries such as power generation.”
SACOME calls for: the State Government to implement policies and incentives to support the development of commercial Carbon Capture Storage (CCS).
South Australian Nuclear Forum
South Australia is a world class uranium province, host to 25% of the world’s uranium resources and 80% of Australia’s uranium. Olympic Dam is the single largest known uranium deposit in the world and the fourth largest copper mine. Uranium is a key economic contributor to the South Australian economy, bringing in $118 million in royalties over the last 10 years over which time $346 million dollars of uranium has been produced and exported.
Nuclear energy offers a zero-emissions energy source with the ability to provide safe, reliable baseload power but is routinely excluded as both an emissions reduction and energy solution.
The Commonwealth announced in July 2020 that the Australian Radioactive Waste Agency (ARWA), responsible for operation of the National Radioactive Waste Management Facility (NRWMF) would be located in Adelaide. This provides further opportunity for development of a South Australian nuclear industry through the co-location of resources, expertise and a national facility.
SACOME submits that a forum to continue discussions about the economic and energy security/reliability opportunities offered by uranium and nuclear is consistent with the South Australian Government’s Growth Agenda objectives.
SACOME calls for: the State Government to fund a nuclear energy forum to progress discussions on opportunities arising from development of a South Australian nuclear industry.
Mining Rehabilitation Fund
SACOME continues to call for implementation of leading practice environmental bond models in South Australia.
SACOME members have repeatedly commented that the existing financial assurance/environmental bond mechanism used in South Australia captures capital in the early stages of a project that could be otherwise directed toward productive use.
SACOME advocates for a progressive mechanism that better balances risk with investment and project development outcomes, calling for adoption of a Western Australian two-part financial assurance model comprising:
- Full financial security if there is a high risk of the rehabilitation liability reverting to the State; and
- Mandatory payment into a mining rehabilitation fund based on a percentage of calculated rehabilitation cost.
SACOME submits that this approach is supported by a prioritised list of rehabilitation and remediations sites around the State.
SACOME calls for: reform of environmental bond mechanisms through the newly established Mining Rehabilitation Fund to better balance mine rehabilitation with investment and project development outcomes.