CEMENT CONCRETE & AGGREGATES AUSTRALIA
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1 CEMENT CONCRETE & AGGREGATES AUSTRALIA Response to the Greenfields Mineral Exploration and Project Development in Victoria Inquiry Economic Development and Infrastructure Committee October 2012
2 Planning for our future infrastructure The heavy construction materials industry produces concrete and its constituent parts - sand, aggregate and cement - which are quite literally the foundations upon which our modern lives are built. Without concrete we would not have our roads, footpaths, schools, hospitals, workplaces and our homes. The extractives industry is a vital contributor to the Victorian economy indeed for every $1 million of economic contribution in heavy construction materials, $2 million is returned to the State s economy, in addition to 17 jobs. However in recent years, the extractives sector in Victoria has been beset by a number of issues which have impacted upon both the productivity of the industry and the incentive for industry players to invest in new projects. Concerns about the decreasing availability of resources and a lack of planning around future suitable quarry sites have been compounded by an increasingly complex regulatory system and unprecedented red tape. Recognising these challenges, a Parliamentary Committee - Economic Development and Infrastructure Committee (EDIC) recently released its Inquiry into Greenfields Mineral Exploration and Project Development in Victoria and the relevant recommendations are included here in an appendix. We were pleased to note that the report reiterated the importance of our industry to Victoria and the critical issues which are presently impeding its development. The Committee, led by Neale Burgess MP, has presented a series of low cost recommendations that will streamline processes, reduce red tape and reposition Victoria as an attractive place to do business for both local and foreign investment. Specifically, analysis from KPMG concludes that the timely implementation of these recommendations could result in: Time savings of 25 percent in administrative processes, Over $28 million savings in value add to the Victorian economy, and Saving up to 128 Victorian jobs. CCAA welcome the Committee s positive contribution and is seeking the adoption of the listed recommendations to facilitate a self-sufficient and cost effective industry via a whole of government reform approach. As this document will show, a failure to act on this opportunity will not only stymie the extractives industry, but will have direct repercussions for the wider Victorian economy. With Governments in all jurisdictions concerned about future infrastructure funding, there has never been a more important time to ensure a vibrant, functioning extractive industry. Paul Dalton Chairman, Vic State Committee Cement Concrete & Aggregates Australia October 2012 These low cost solutions will have tangible positive impacts for both the extractive industry and for the wider Victorian economy. 2
3 The Extractives Industry The Cement Concrete and Aggregates Australia (CCAA) is the peak national body representing Australia s heavy construction materials industry. Our sector plays a vital role in providing some of the key ingredients for the construction of our nation s infrastructure and housing needs. We source and produce important cement and premixed concrete used to build our roads, bridges, buildings and housing. In particular, the sector includes the extraction and processing of quarry products, production and supply of cement and supplementary materials, production and supply of premixed concrete and supply of associated plant and equipment. Generating some $7 Billion in revenues and directly employing over 18,000 Australians right across the country, the construction materials industry is central to Australia s $160 Billion building and construction industries, a powerhouse of the Australian economy. As such cement, concrete and quarry products form a vital and enduring foundation to Australia s built environment. Victoria In Victoria in 2010/11, materials sourced from 640 operational quarries produced 52.2 million tonnes of stone, limestone, gypsum, sand and gravel. The premixed concrete industry produced 6.2 million m 3 of premixed concrete in 2011/12. To put this in perspective, this is enough concrete to build around 100,000 new homes, 100 Eureka Towers or 44 Bolte Bridges. The estimated direct economic contribution (value-add) of the sector was $845 million to GSP in 2010/11 1 which directly employs 6,682 people in Victoria, over half of whom live in regional Victoria. Did You Know? Each Victorian person requires 8-9 tonnes of rock, sand and cement each year to support the building of roads, houses and other infrastructure to service their needs. A major new quarry needs to be approved every year to meet this demand. 1 The economic contribution of the Heavy Construction Materials Industry in Victoria, September 2012, KMPG 3
4 Hurdles to Productivity Across Australia, the demand for extractive material is expected to grow in line with the increasing demand for new housing, the need to build new roads and maintain the existing network, and the facilitation of new infrastructure and construction projects. Unfortunately, the Victorian sector is facing a number of hurdles which will limit our capacity to meet this demand in a cost effective and timely manner. The sector has a heavy regulatory burden. Approvals processes are conducted through a myriad of agencies, lengthy approval processes and costly delays. In addition, lack of appropriate land use planning and rising transport costs due to the increasing distance between the quarry and the market are limiting the ability of the sector to maintain its productivity levels. In particular, there are a number of issues currently impacting upon our ability to operate effectively and efficiently. Did You Know? If activity in the heavy construction material industry was just 10 per cent higher, it would lead to an overall boost to the Victorian economy of $175 million in valueadded terms per annum and approximately 1,476 jobs. There has been insufficient regard for quarries as an important land use within planning frameworks, increasing the distance to market, and therefore the costs, for extractive materials as quarries in the Greater Melbourne area come to the end of their operational lives; The lack of a long term land use planning model has seen the approval of land uses which are incompatible with quarrying activities, such as urban development, being approved in areas where quarrying could occur; The need for a long term land use planning model that incorporates and balances the requirements for both future quarrying activities and urban development; A costly, time consuming and complex approvals process for new quarry proposals and proposals to vary existing quarries; Industry fees, charges and royalties acting as a disincentive for investment; and The absence of a lead agency for managing new quarry proposals and proposals to vary existing quarries. 4
5 What does this mean for Victoria? An inefficient extractives industry has clear implications for the wider Victorian economy, primarily: Rising infrastructure costs Rising housing costs, and An unattractive investment climate. Higher operator costs be it via increased transport costs, expensive approvals processes or unwieldy fee structures -are passed on to the consumer. In turn, this results in rising costs of local infrastructure and decreased housing affordability. The delivery of critical infrastructure will be further constrained by the diminishing supply of suitable resources the consequence of an ineffective sustainable resource plan. The structure of the Victorian extractives industry has changed in recent years from an industry consisting of purely domestic companies, tied historically to the Victorian market, to one where there is increasing globalisation of major companies. There is also greater competition for capital to develop projects within these organisations, similar to global mining companies. The existing approvals process has created much uncertainty around the costs of doing business in Victoria. Potential investors have viewed the development application process as carrying a high degree of uncertainty and risk, and ultimately capital has been redirected interstate or overseas. As a result, no new projects are being added to the development pipeline, forcing market consolidation and depletion of existing scarce resources. The existing legislative and regulatory framework not only stifles innovation and threatens investment; it risks the capacity for Victoria to remain self-sufficient in its supply of extractive material. Did You Know? It is estimated that rising construction material costs will increase road construction costs by approximately $150 million per year. (CCAA/VicRoads analysis) The real impact of regulatory red tape While the need for a robust regulatory framework in our sector is readily acknowledged, we consider the current planning and development systems in Victoria to be unduly onerous and time consuming. Approval for a new extractive operation, or extension of an existing one, will generally require consent from a range of referral authorities operating under multiple pieces of legislation. The average approval process will be reviewed by up to 9 government agencies administrating at least 10 sets of legislation. The table below demonstrates the current time and cost hurdles faced by the extractives industry in Victoria. Type of approval Cost to gain approval Time to gain approval Planning Permit $10,000 to $1.25 million Average 2 years with no appeal to VCAT Environmental Effects Statement Average 4 years with appeal to VCAT $1.9 million - $5.1 million Average of 6 years 5
6 It is important to note that the costs to gain approvals to develop a reasonable sized quarry have increased 300 per cent over the last 17 years (accounting for inflation) due to additional red tape. As recommended by the EDIC report, there is considerable scope to streamline the process of development approvals, thereby reducing the associated time and cost burdens. In its analysis, KPMG assumed that if implemented the EDIC recommendations could generate time savings of 25 per cent relative to current time requirements. As the diagram demonstrates, the adoption of these recommendations does not reduce any avenues for appeal from opponents to development. Rather, they simply speed up the decision making process which is of benefit to all parties. Develop DWP/WPV Site meeting Submit DWP/WPV to DPI Potential referrals Statutory endorsement process Lead agency: DPI DPI assesses DWP/WPV (~28 days) DWP/WPV referred to referral authorities as required (30 days) Objections may or may not be made to the DWP/WPV conditions may be attached DPI consolidates referral responses DPI is responsible for statutory endorsement (~14 days) Proponent may appeal conditions and/or endorsement decisions to VCAT Proponent makes planning permit application Third parties may appeal to VCAT DWP/WPV amended as required and Work Authority is sought when rehabilitation bond is paid Decision authority: DPI following consultation with referral agencies Planning decision by Local council CHMP 19 Native vegetation 19 6 assessment Planning amendment EPA works approval Commonwealth assessment Ground and surface water Traffic management EES process Lead agency: DPCD Minister for Planning determines if an EES is required (~ 20 days) Scoping requirements documented released for 15 days public comment EES prepared Technical Reference Group Public review (20 30 days) Ministerial assessment (~25 days) Decision Authority: Minister for Planning makes a recommendation on the EES to the Minister for Energy & Resources If DWP/WPV is approved, a Work Authority may be granted VCAT appeals WORK AUTHORITY 1 Legend Recommendation number Figure 1 : Areas of the Extractive Industry Planning Approvals framework that could be affected by EDIC recommendations 6
7 Case Study A proposed extension of an existing quarry west of Melbourne has been assessed through the EES process. Proposal referred to the EES process in July Minister for Planning s assessment report received in September Cost to proponent of the EES process was $2 million Initial extraction area was reduced by 40 ha to provide a vegetation offset, effectively sterilising 8 million tonnes of rock worth $120million. Proponent proposes offsets of Very High Conservation Significance vegetation that is not like for like. EES panel recommends a flexible approach to offset provisions if the proposal demonstrates overall significant environmental gains. However in 2009, the Minister for Planning defers a decision on this issue to the Minister for Environment. Eight years after commencement, the issue is still unsolved and the Work Plan is yet to be approved by DPI. Case Study Some projects have simply failed to progress through the development pipeline. Extension of existing hard rock quarry on Melbourne s eastern fringe. Government referred project to an EES process Proposal cost $5.1 million to applicant and took 6.5 years Environmental concerns were addressed Despite meeting requirements, Minister refused to allow project to proceed Existing resources now close to exhaustion The increased transport cost to source material from the nearest alternate source leads to increased infrastructure costs. For example, for a project similar to Eastlink, costs would increase by $30 million. Eight years after commencement, the issue is still unsolved and the Work Plan is yet to be approved by DPI. 7
8 The importance of strategic land use planning Access to local construction material resources is a fundamental issue for the industry and for Victoria s continued economic prosperity. The distance between quarries and market is an issue for the extractive industries sector due to the associated cost implications. The average haulage distance is currently 30 kilometres and costs $8 per tonne if the average haulage distance were to increase to 70 kilometres, due to the exhaustion of existing quarries and/or an inability to establish new quarries close to end markets, the average transport cost would increase to $13 per tonne, an increase of 62 percent. Increased operator costs would be passed on to the consumer, further eroding housing affordability and increasing infrastructure costs. Up until now, the Melbourne industry has enjoyed a distinct advantage over our Sydney counterparts due to the positioning of our quarries and subsequent lowered transport distances. In fact, the delivered cost of material is 70 percent greater in Sydney than in Melbourne, attributable solely to their greater travel costs. In order to protect vital infrastructure projects from cost increases and maintain Melbourne s competitive advantage, it is necessary to plan for future quarries to be situated close to market. To do this, is it imperative to identify key resources locations, protect these areas from incompatible land use and streamline planning mechanisms. The Victorian industry is currently self-sufficient in heavy construction materials, largely consuming all that is locally produced. This provides a significant economic benefit to the Victorian economy which would be severely impacted if local supply were to be replaced with imported products and their associated increased transport costs. Increasing demand from an increasing population, continued housing developments and future infrastructure development is best met from local supply. This supply risks being limited by excessive red tape acting as a barrier to the development of new quarry operations. Current forecasts indicate demand for sand in Melbourne will exceed supply in 2019 and for hard rock in Implementation of the EDIC recommendations into land use planning will provide the industry with the ability to work with the Government and its Departments in mapping out the areas of prospectivity, provide appropriate planning protection and thereby guaranteeing a level of security around future development. Case Study Unsustainable Supply of Quarry Products in Western Victoria. Approximately 2900 wind turbines are proposed to be built in Western Victoria in the near future. To build these wind farms will require approximately 600 million tonnes of material for the turbine s concrete bases and access roads. This is 13 times the total annual Victorian production of crushed rock and sand. The Intergovernmental Regional Forum established to facilitate wind farm developments in Western Victoria recognises that the sustainable supply of high quality aggregates is a key risk in delivering the wind farm projects. Given the significant projected demands from wind farms, VicRoads estimate that the existing local supply of high quality aggregates is limited to 2-3 years. Such a limited supply has a ripple effect, impacting on the cost and availability of material into other markets such as roads and housing. The long, costly approvals process limits the ability of new quarries to come on-stream quickly to satisfy demand. The Department of Primary Industries is unable to provide details of potential future resources or facilitate a streamlined approvals process. There s plenty of room for everyone... The extractive industry has a very small foot print within Victoria, currently occupying some 53,500 hectares, or just 0.24% of the State. 2 The Impact of the Native Vegetation Framework on Extractive Resources in the Melbourne Supply Area, Environmental Resources Management Australia Report for CCAA, June
9 An opportune time for reform Over the past twelve months, a number of reviews have occurred within the Victorian Government and its Departments that have directly impacted upon CCAA and our members. These include the review of the Mineral Resources (Sustainable Development) Act 1990, the review into the Native Vegetation Framework, and the EDIC Inquiry into Greenfields Mineral Exploration and Project Development in Victoria. More widely, the Independent Review of State Finances (of which one area of consideration is service delivery and infrastructure) coupled with the Government s commitment to a 25 percent reduction in red tape by 2014 has provided the setting to tackle the existing problems around process bottlenecks and stymied project delivery in the extractives sector. The Victorian Government has demonstrated that it is keen to promote and develop the State s mineral and resources industries and has recognised the wider implications for the State s economy from a vibrant extractives sector. An effort made to reduce unnecessary costs and delays in the industry s processes will not only impact favourably upon the delivery of low cost infrastructure, it will have significant flow on effects into the provision of housing, road building and asset maintenance. Against this backdrop, the recommendations of the EDIC Inquiry have created a window of opportunity for the Government to pursue the necessary legislative and regulatory reform that will maintain productivity in the vital extractives sector, as well as the wider mining industry. Quote Minister for Energy and Resources Michael O Brien said the extractives industry was vital to Victoria and improved productivity would bolster the security of the industry. Victorian Government Media Release New Boral Dunnstown Quarry Processing Plant to boost economy in regional Victoria, 5 September
10 Ensuring a productive extractives industry The extractives industry in Victoria is currently facing a myriad of complex challenges there is a scarcity of available extractive resources, regulatory limitations in both the environmental and planning spheres, market proximity concerns and transport cost pressures. At the same time, urban development remains unconstrained by many of these limitations and continues to render depleting resources unusable, further compounding the problem. To achieve the maximum benefit for the Victorian economy, the extractives industry is seeking an ongoing partnership with Government so that our interests are considered part of the Government s strategic land use planning policy. We believe that the adoption in full of the recommendations of the EDIC Inquiry into Greenfields Mineral Exploration and Project Development in Victoria would be an important step in this regard. Implementation of these recommendations requires very little regulatory or legislative change. Rather, they are about the application of more efficient processes and streamlined methods for how the various Departments and agencies work together. By identifying improvements for both regulatory and planning issues, the Committee has recognised that a whole of Government approach is warranted to ensure that extractives in Victoria continue to be a dynamic industry, attractive for further investment. The Committee should be commended for recommending these low cost solutions will have tangible positive impacts for both the extractive industry and for the wider Victorian economy, whilst protecting the environment, community rights and balanced development. They will unlock investment potential in the State and enable our industry to continue to deliver essential projects on time and on budget. In line with the Baillieu Government s economic agenda, the adoption of the Committee s recommendations will: Reduce the cost of infrastructure and housing construction, Encourage investment and development by making it easier to do business in Victoria, Reduce red tape and streamline regulatory processes, and Have a positive impact on jobs growth 10
11 Inquiry into greenfield mineral exploration and project development in Victoria list of recommendations relevant to the heavy construction materials industry Recommendation 3: That the Victorian Government adopts an integrated, whole-of-government approach to the state s resources sector, supported by clear and consistent policies, and that this policy be widely communicated to the resources sector and the broader Victorian community to demonstrate strong support for the sector and its future. Recommendation 4: That the Victorian Government works with industry to develop and support a comprehensive community education program that promotes the value of the resources sector to the state. Recommendation 6: That the Victorian Government develops a state-wide integrated, strategic land use policy framework to better manage competing land uses in Victoria. This framework should be subject to periodic review giving consideration to economic, social and environmental factors. Recommendation 7: As part of the development of an integrated state-wide strategic land use framework, that the Victorian Government ensures studies are undertaken to determine areas of high prospectivity for extractives and future extractives needs in metropolitan Melbourne and regional Victoria. Recommendation 8: That the findings of the extractives prospectivity and future needs studies be incorporated into the state-wide strategic land use framework, be protected in local planning schemes, and have appropriate post-extractive uses identified that are consistent with and sensitive to abutting areas. Recommendation 9: That the Victorian Government reviews the system in which landholders are notified by mineral or extractive licence applications covering their land, to ensure, where appropriate, directly affected receive timely, written notification. Recommendation 15: That the Victorian Government reviews the current rehabilitation bond system in comparison with alternative existing mechanisms, taking into account the end-of-mine-life environmental legacies, whilst honouring obligations for rehabilitation of specific sites. Recommendation 16: That the Victorian Government examines the feasibility of reducing or removing royalty charges on overburden material for extractive developments. Recommendation 17: That the Victorian Government develop a clear policy position on the future role of the Mining Warden. Recommendation 18: That the Victorian Government establishes statutory timeframes under the Mineral Resources (Sustainable Development) Act These timeframes must be binding upon the Department of Primary Industries and its referral agencies, incorporated into annual reporting requirements and be equivalent to Australian best practice. Recommendation 19: That the Victorian Government considers redirecting the regulatory focus of exploration, mining and extractive work plans towards outcomes and away from prescriptive conditions, in order to better manage risk and achieve socially, economically and environmentally sound outcomes. Recommendation 20: That the Victorian Government considers the recommendations of the Victorian Competition and Efficiency Commission s report A sustainable future for Victoria: getting environmental regulation right (2009) to improve the transparency and efficiency of the Environmental Effects Statement process in Victoria. Recommendation 21: That the Victorian Government develops a one-stop-shop framework to provide a single point of entry into Victoria s regulatory system for the full range of resource sector activities from exploration to production under the Mineral Resources (Sustainable Development) Act Recommendation 24: That the Victorian Government strengthens Victoria s role in research and innovation, through facilitation of partnerships between the Government, universities and the resources sector. 11
12 CCAA Melbourne Office 2nd Floor, 1 Hobson St South Yarra Vic 3141 TELEPHONE (61 3) FACSIMILIE (61 3) WEBSITE 12
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