The Hunter Valley, while blessed with resources is a region in conflict.
With three internationally renowned industries competing for land, infrastructure at breaking point and the environmental impact of all this activity beginning to show, Australian Mining sat down with Nationals candidate for the Hunter Valley Michael Johnsen to talk about the opportunities and challenges he sees ahead for the region’s mining sector.
According to research released by the NSW Minerals Council mining contributes 25 per cent to the Hunter Valley’s gross regional product [GRP] which Johnsen told Australian Mining is integral for the area’s prosperity and future.
“The mining industry is important to the Hunter Valley it employs thousands of people at high levels of income,” he said
“To have such a strong industry that employs so many people, at two to three times the national average wage is something you can’t ignore, it is very significant.”
This month treasury admitted the mining tax would not raise the forecasted $2 billion it was expected to and the reasons for under performance are being investigated at a Senate's economics committee.
Johnsen said it is not the job of a government to impose barriers to business.
“Governments shouldn’t be putting barriers in the way of confidence in investment,” he said.
“There’s no doubt that is currently happening.”
Johnsen has vowed that the current mining tax will be repealed under a coalition government.
“Rather than maintain a failed policy platform, the coalition will come in and get rid of it,” he said.
“It has to be done because the bottom line is, we need confidence.
“The mining tax hits confidence more than anything,” Johnsen stated.
Rio Tinto’s recent announcement that they are one of the largest contributors to the country in terms of tax paid, and yet they have not paid any mining tax was rendered as a “joke” by Johnsen.
“It’s been a complete waste of time,” he said.
He explained that “it’s not rocket science”, inviting the industry to effectively design their own tax isn’t going to provide the government with an effective tax.
Rather than penalise mining companies with the mining tax, Johnsen said “the coalition would rather see the mining companies willingly invest into the community”.
To ensure such investment Johnsen outlined a number of ways to entice miners to invest, including incorporating infrastructure contributions into mine approval conditions.
“One thing I would like to get going in the Upper Hunter is a transport corridor,” he said.
Johnsen suggested that by making infrastructure investment part of the approvals process it will eliminate the double handling of money at the state and federal levels of government, and cut out “tens of millions of dollars” wasted “on administrating a scheme which raises not much more than that”.
“If you made it as part of the conditions for consent for a mining project to invest in an infrastructure project, the mining companies have the expertise,” he said.
“I’m sure the mining companies themselves would be more than willing to directly contribute to such a project.”
With the beauty of hindsight Johnsen said the government “should’ve identified 20 years ago what would’ve been a suitable corridor”.
If this was done and mining contributions has been made on an ongoing basis, “for all the conditions of consent that have been made over the past twenty years, I’ve got no doubt we’d have a world class rail system and four lane highway running right throughout the Hunter Valley”.
He stated that this infrastructure would get rid of the travelling to work problems experienced in the region and “could’ve increased capacity to enhance the mining industry’s ability to do their job”.
“It’s never too late, we need to have the mining industry as active participants,” Johnsen reiterated.
Three uses for land
The Hunter is not short for opportunity with an established mining sector, an internationally recognised wine industry and a competitive thoroughbred district, all located in a geographically small area vying for space.
“Scone and the Upper Hunter is the horse capital of Australia, second only to Kentucky in the world in terms of concentration of thoroughbred breeding, there are billions of dollars in that industry,” Johnsen explained.
In a relatively small area there are three strong industries attempting to cohabitate and compete for land.
Balancing the needs of the wine, horse, and mining sectors as well as maintaining the environment and managing the needs of local residents poses a real challenge, one which Johnsen said is tough.
“The NSW government has introduced new regulations for strategic land use but the bottom line is you will never please everyone,” he said.
“There is more than enough opportunity for coexistence for those three industries.
“There are certain areas where thoroughbred, wine and traditional agriculture activities can occur side by side to mining,” Johnsen stated.
According to Johnsen opportunities in the region are in abundance for mining.
“Mother nature has created an opportunity where resources are plentiful,” he said.
“The challenge we have is the management of land use conflicts, some of them perceived, others very real.”
The Independent Commission Against Corruption (ICAC) has been investigating allegations that ex-mining minister Ian Macdonald rigged a 2008 tender process for a coal licence in the NSW Upper Hunter to benefit Labor powerbroker Eddie Obeid and has family.
“There was very little credence given to any scientific data around mining applications, [though] there looked like there was,” Johnsen said.
“They say the Labor government spend like drunken sailors, and while they were drunk they were just handing out licences willy-nilly to anyone and everyone in the hope that someone was going to make them money, and as evidenced at ICAC it wasn’t the New South Wales taxpayer, and it wasn’t necessarily always the residents of the Hunter Valley.”
The two exploration licences currently being investigated by the ICAC include the Mount Penny tenement and the Doyles Creek mine both located in the Hunter.
“It’s been a debacle, residents are shocked and angry,” Johnsen said.
“They knew what was going on; they just needed a system like ICAC to bring it all out into the open.”
Johnsen supports ICAC and said “there should always be defined and transparent development process for mining applications”.
“Once the strategic land use plan is regulated and implemented and there is a clear, transparent process for projects to go through…everyone knows the rules that they’re working with, everyone knows the expectations at each level and if you know that in advance with some degree of confidence,” he said.
“Having these regulations of where mining can and can’t occur, gives the industry confidence to turn around and say ‘that’s a waste of time there and that’s opportunity there.”
The upcoming federal election will test voter support for the Labor government’s controversial taxes on resource profits and carbon emissions.
Past bouts with the mining lobby and politicians opposed to the MRRT and carbon tax has seen the Gillard government come out bruised and battered.
The resources sector "will likely be the one that displays the most reaction to campaign developments in the lead up to September 14," Tim Waterer, a senior trader at CMC Markets said.
There have been reports the election will be won in the western suburbs of Sydney, but while this area certainly holds a key demographic Johnsen warns the Hunter region should not be underestimated.
Johnsen explained that the two areas share similar characteristics; both areas are very “aspirational”.
“People want to get ahead, people want job security, and they want to make their own choices for their own lifestyles. What we as a government need to do is provide that structure for them to do so,” he said.
The structures Johnsen would put in place if the coalition was to win the upcoming election would be formed around eliminating the mining tax, building business confidence and empowering people.
“Get rid of job destroying taxes, build confidence, and make it easier for people to make their own decisions,” he said.
“The more you hinder people with taxes or anything else, the more you lead them down the garden path.”
Johnsen explained that what people, small business, and large industries want is simplicity.
“People want a nice flat structure, so they can say ‘we know what we have to deal with, we’ve got confidence to invest and we can make our own choices about how we want to live our life or run this industry’,” he said.
“That’s not a sexy thing, but it’s simple.”
He said the Gillard government has systematically failed to implement the structure the mining industry needs.
“They’re making policy based on political ‘butt protecting’ issues rather than good policy issues,” Johnsen stated.
Criticising the government’s campaign to date, Johnsen said “they [Federal Labor] aren’t actually going out and talking to the real people, it’s a complete staged managed farce.”
The industry that accounts for the majority of Australia’s exports is also one of the government’s loudest critics.
Especially when it comes to Gillard’s claims that the MRRT and carbon tax legislation have been a success.
Critics argue that the policies were watered down under pressure and have been largely ineffectual; instead saying they have made the industry less competitive with high costs eating into profits.
Hunter road improvements
Mining activities are taking their toll on the Hunter’s infrastructure.
Johnsen told Australian Mining that the Singleton and Muswellbrook bypasses and Scone’s level rail crossing are all transport issues which need to be looked at.
“Even though the Upper Hunter Shire has no mines in it, the reason the Scone level crossing is causing a problem is because of the coal freight out of North West New South Wales and according to the industry and the ARC it’s only going to become more significant,” he said.
“To say that we’re not affected [is wrong], we are affected, half the town is on one side of the rail line, and all the emergency services are on the other side, potentially blocked by a coal train going through.
“It’s not the coal industry’s fault; I’m not blaming the coal industry but we need to fix this,” Johnsen said.
“There is an opportunity for the mining industry to directly contribute to these developments.
“I’ve spoken to members of the industry and in principle they agree.”
How a political candidate will tackle their new found responsibility and represent their locality it an extremely important factor which needs to be considered by voters.
“I’m a big believer of policy and getting the underlying structure of policy right,” Johnsen explained.
“In reality if you get the policy settings right everything else can flow on from there, you can actual have a thriving community that has a sense of security and confidence.
“If you don’t get that underlying structure right then all you do is create frustration and lose jobs, which we’re already seeing in the Hunter Valley, mining jobs and associated services are going,” he stated.
Government isn’t in the business of running business, Johnsen said the most important role for government is to “get the policy settings right and make sure that business can run business”.
“We want to restore confidence, restore the trust and take out the failed policy areas to get people to want to invest, to do business, therefore employ people, and provide security,” he stated.
In his position as Upper Hunter mayor, Johnsen recently called for the Upper Hunter to receive more royalties from the NSW state government.
The state government has promised the region $160 million over a four year period.
Two years in the region has received $16 million.
“We’re a long way short,” he said.
“The royalties program needs to be invested into capacity increasing assets. There’s no point investing like the Federal Government did, borrowing $10 billion to invest in what I call ‘Harvey Norman bonuses’.
“The simple analogy is you don’t borrow to go on a holiday, you save up to go on a holiday, you borrow to invest in an income producing asset that’s going to increase your capacity to earn.
“The same principle can be applied to government; we need to invest in infrastructure.”