ICAC says coal corruption was inevitable, recommends tighter controls

Corrupt conduct over New South Wales coal licences has been possible because of policy and regulation floors, the corruption watchdog says.

Released today, the Independent Commission Against Corruption’s report found that current regulation around the NSW coal industry lacks clear objectives, independent oversight, transparency, and allows for a high level of ministerial and bureaucratic discretion.

“Within this opaque environment, valuable state assets and rights were transferred to private entities,” the ICAC said.

“It is the Commission's view that, with so many risks and opportunities for corruption, it was almost inevitable that corruption would occur at some point.”

The report, titled Reducing the opportunities and incentives for corruption in the state's management of coal resources, outlines 26 corruption prevention recommendations to tighten up the process for managing the state's coal resources is an effort to prevent the recurrence of corrupt conduct that was exposed in its Jasper and Acacia investigations.

"The execution of the grand corruption was ultimately due to improper influences on an unfettered minister, his disdain for departmental advice and secret meetings with proponents," the ICAC said in its report.

"Question facing the Commission was not simply how the state's policy and regulatory framework could allow coal ELs of great value to be corruptly provided to favoured recipients, but how it could have been so easy to do so."

Operation Jasper investigated allegations former NSW mining minister Macdonald rigged a coal tender process in 2008, awarding an exploration licence in the Bylong Valley which benefited the family of former Labor powerbroker Eddie Obeid.

The Commission’s Operation Acacia investigated circumstances surrounding the allocation of the Doyles Creek coal exploration tenement. 

The recommendations include improving accountability and scrutiny of ministers and members of Parliament.

ICAC said future framework for managing NSW coal resources should provide greater certainty to both the community and the coal mining industry.

“This framework aims to remove the incentives and opportunities for corruption and is based on best practice identified in other jurisdictions along with extensive consultation,” ICAC said in a statement.

ICAC explains that many of the “opportunities for corrupt behaviour stemmed from private companies knowing that it was possible to have exploration rights directly allocated by government without accountability to the public and without the need for a competitive process”.

To combat this, the corruption watchdog suggests that NSW adopt an auction method for allocating coal resources, a process it recommends should be overseen by the NSW Treasury.

“In those cases where direct allocation is necessary, it should be the subject of oversight by the assessment panel,” the ICAC said.

The Commission has called for the current exploration licence decision-making committee, the Mineral Resources Branch to be replaced with a “steering group” made up of members with a broader skill set.

“This steering group should comprise senior officials from the Resources and Energy Division of the Department of Trade and Investment, Regional Infrastructure and Services, the Department of Planning and Infrastructure and the NSW Treasury,” the ICAC said.

The ICAC also recommends that the current renewal process for exploration licences should be overhauled, saying it should be replaced by “an exponentially escalating lease rent”.

It says the new process would provide certainty for commercial decisions and to renew ELs repeatedly without progressing to mining the stage.                                                                         

The commission’s recommendations will be submitted to the relevant public authorities for consideration.

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