Last year Western Australia’s Water Corporation said water supply in the state’s west Pilbara was “under extreme pressure” from expanding towns and mines.
It said the region’s main supply, the Harding Dam and Millstream bore field, had a reliable supply of about 10 gigalitres a year, but current demand hovered around 16gl.
To meet demand the Water Corporation started overdrawing these sources, which allowed it to meet short term demand at a “high level of risk to supply security”.
As the water overdraw continued and the shortage worsened, attention turned to local miner Rio Tinto to provide a solution.
According to member for north-west Vincent Catania almost 50 per cent of the west Pilbara’s drinking water was previously allocated to Rio Tinto.
Of its 5.4 gigalitre entitlement Catania said almost 50 per cent, or 2.5 to 3 gigalitres, was being “wasted” as dust suppression on iron ore stockpiles.
Most other miners in the Pilbara sourced their own water, and Catania called on Rio to do the same and alleviate pressure on the Millstream aquifer.
In September this year Rio complied, and announced it would surrender its Millstream entitlement and spend $292 million developing its own supply from the Bungaroo Valley.
In return the Government agreed to release the company from a number of downstream processing agreements.
Rio’s move, coupled with the good rains this year, meant the WA Government could shelve plans to build a $420 million desalination plant in the area.
On the surface it initially seemed wasteful for Rio to spray large amounts of good quality potable water on its iron ore stockpiles.
Catania said so himself in parliament last year when solutions to the west Pilbara’s water shortage were being considered.
“To me, in this day and age, water is a precious resource,” he said.
“I cannot see how a major company … should be taking our drinking water.”
But Rio Tinto spokesperson Gervase Greene told Australian Mining that Rio, like all other miners, had no choice in this regard.
“There is no alternative, as seawater’s chemical composition would seriously damage the iron ore steel mills use in their blast furnaces,” he said.
Catania put strong support behind Rio’s plan to develop Bungaroo, and said he “applauded” the move.
But after the deal was struck some commentators questioned why Rio had been released from its state agreements.
Rio was released from its 1972 agreement to build a 1 million tonne per annum steel mill, and had a second 1996 steel mill agreement deferred for 12 years.
On the surface the Government seemed to be providing an incentive for the company to bring itself to the level most other miners had been at from the start.
To understand this, a broad history of the region and its water distribution must be considered.
Rio’s original water allocations were based on a 1960s state agreement, which worked well at the time.
Karratha was an early settlement at this stage and there was no demand on the Millstream aquifer.
But while times changed and local populations expanded, the region’s water arrangements remained centred on old agreements.
The changes in September thus represented a long overdue rethink of the west Pilbara water supply.
Rio’s previous Millstream allocation met the entire annual water needs of Karratha.
With the introduction of Bungaroo the company will now be able to meet the water needs of its major Pilbara expansions, and Karratha and the surrounding communities will have enough water to continue growing.
The Bungaroo development also represented a change in how state governments interacted with resource companies.
In sharing resources such as minerals or water governments need to derive a benefit from their dealings, but this benefit need not damage the miner.
In the past governments attempted to have miners support jobs by forcing them into developing downstream processing projects for their minerals.
In his debate last year WA Premier Colin Barnett conceded this approach was now outdated and unsuitable for the current economic climate.
“The old philosophy of trying to turn iron ore companies into steel companies does not make a hell of a lot of sense,” he said.
Rio previously operated the HIsmelt pig iron plant in Kwinana, but placed the project into care and maintenance in April last year due to low pig iron prices and a poor market outlook.
Greene told Australian Mining the WA Government had been sensible in releasing Rio from its old state agreements and allowing it to make other offsets instead.
“The Australian landscape is full of downstream projects that didn’t survive economically, and that’s primarily to do with the populations of regions,” he said.
“That’s particularly a simple fact of life in WA.”
However Greene did not detail how Rio would be making up its obligation to WA, and said the company’s state agreement offsets were “confidential”.
Ultimately Rio’s $300 million Pilbara investment highlighted the importance of water management on the expansion of the region’s mining operations.
And as long as the company makes good on its offsets, the outlay will represent a positive reworking of the west Pilbara’s water.