Mike Elliott: Mobil Refineries Bill

Extract from Hansard

Legislative Council
13 November 2001

Mike Elliott
Leader Australian Democrats
Member of the Legislative Council

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The Hon. M.J. ELLIOTT: I rise to speak on the second reading on behalf of the Democrats. The transport spokesperson for the party will also be making a contribution to this bill. I do not believe that, at this time, the government has made a fully convincing argument for what is a significant case of corporate welfare in South Australia. In his second reading explanation, the Treasurer noted that in 1994 the government agreed to abolish charges payable on the imports of crude oil and condensate unloaded at Port Stanvac in return for a commitment from Mobil to a $50 million three-year investment program which, he noted, had now been completed. That was back in 1994.

This legislation removes further charges and also makes a very dramatic cut in local government rates paid by the company. I note that, on this occasion (unlike the previous occasion in 1994), there does not appear to have been any clear undertaking from Mobil in terms of how it will react to the generosity of the government. When he closes the second reading debate, will the Treasurer inform this Council whether or not there are any agreements of a similar nature to those struck with Mobil back in 1994 in relation to either an investment program by Mobil or any other commitment in terms of how long it intends to stay in South Australia?

In the absence of that, one is left with the impression that the government, not knowing whether Mobil would go, but threatened with the possibility that it might, has simply coughed up the money. If that is the case, that must be of great concern. In his second reading explanation, the Treasurer did note that Port Stanvac is a deep-sea port, one that can accommodate tankers, which Mobil's other refinery cannot. That being the case, there is a real incentive for Mobil to keep Port Stanvac at this stage because it can bring the very large ships into Port Stanvac and complete loading elsewhere.

In that case, a decision to close or not close Port Stanvac is more likely to be dependent upon decisions in relation to operations by Mobil elsewhere. Indeed, while the sums of money are significant to a state that is struggling to put enough money into education and health, etc., to a multinational the size of Mobil it is not much more than small change. In the absence of the government making a case in the second reading explanation in relation to this handout to Mobil, and unless the Treasurer is capable of doing that in response as to the undertakings we have from Mobil, the Democrats are not minded to support the second reading of this bill.

The Hon. M.J. ELLIOTT: During the second reading stage I noted that, back in 1994 when the government gave up certain service charges in relation to petroleum products at the wharf, part of the deal was that Mobil committed to an investment program which I think demonstrated a clear commitment to stay. I understand the Treasurer saying that he did not know whether or not Mobil would stay, but he did not respond to a question I asked about whether or not Mobil had made any investment commitments either, which would be a sign of goodwill by Mobil. Is Mobil committing to an investment program of any significance as a consequence of the deal that has been done?

The Hon. R.I. LUCAS: There is no specific investment program as part of this agreement. As the honourable member indicated, there has been a significant investment program at Mobil. I understand that there is ongoing investment, as there would need to be in any oil refinery. To answer the honourable member's question about whether there is a specific commitment to spend $X million as a result of this deal, the answer is that there is no specific commitment.

The Hon. M.J. ELLIOTT: In responding, the Treasurer also indicated that there is no commitment to stay for any length of time. There have been occasions when the government has sought to attract industries to South Australia and has given all sorts of concessions or other forms of financial incentive, but part of those deals has often been that moneys might be forfeited if the companies did not perform in certain ways or stay for certain periods of time. It would seem to me that, if the reason for doing this is to try to ensure that Mobil is staying, at the very least it could have been conditional on its actually staying and that should it leave within a certain period of time it would forfeit the amounts.

At this stage it seems to be very open-ended: the money is being handed over but there is absolutely no commitment of any sort in return. Will the Treasurer respond and say why we could not have taken a similar approach to that given previously in terms of incentives when we have tried to attract new companies?

The Hon. R.I. LUCAS: As I indicated in response to the honourable member's and other members' questions in answer to the second reading, ultimately after the short transition period the cost of this deal is not one for South Australian taxpayers but is one which ultimately will be felt by the ratepayers of the Onkaparinga council. The Onkaparinga council, after the three-year transition period, will have a rate revenue of $500 000 plus an inflation provision rather than the $1.2 million plus an inflation provision that it currently has.

It will not be like an ongoing payroll tax incentive, which I think is the sort of thing the honourable member is referring to, where governments in the past have provided payroll tax incentives-and I think in the long-distant past it might also have included land tax-and have provided exemptions or rebates on that and there are clawbacks. Ultimately, the cost is to be borne by the Onkaparinga council and its community, and obviously it is not a question of attracting somebody who is holding on to a company.

That is where this is significantly different to the other deals. From that viewpoint, if Mobil goes-as the Hon. Mr Crothers has succinctly put it-if the company decides to go, then it will not be paying the council any rates, and even if it were to be replaced in part by housing development, although I understand that there would be some environmental opposition to housing development in some of those areas-

The Hon. R.I. LUCAS: -I'm not sure, but there are some issues in relation to that-the rate revenue is unlikely to be equivalent to $1.2 million per annum, which was the old rate revenue coming from Mobil. That is why it is the government's view that this deal is different to the typical deal that the Hon. Mr Elliott has been talking about.

The Hon. M.J. ELLIOTT: While I was talking about the cost generally-and this covers clause 4, but I think the matters are of a similar nature so I will handle them together-the government, in terms of changes to the indenture, is removing service charges on the loading and unloading of fuel. I have not seen any estimate of the value of that agreement. Can the Treasurer inform this place what charges are being forgone?

The Hon. R.I. LUCAS: Perhaps the background noise during my second reading reply prevented the honourable member from hearing my response. The Hon. Mr Holloway asked that question and the advice I was given was that the abolition of charges on the outward movement of crude oil from Port Stanvac is expected to have a negligible impact. Since the indentures were last amended in 1994, charges have been levied on only two occasions, and both were exceptional circumstances. I repeat what I said earlier, that this last estimate of the number is still being checked by a couple of departments, so if there is a different figure later on I will come back and correct the record. At this stage the estimate of the total value of the charges levied on those two occasions is $126 214.

The Hon. M.J. ELLIOTT: I have an observation at this stage. As I understand it, Port Stanvac is processing some 11 million litres of fuel per day, and if my mathematics is correct that is a little over 3 billion litres of various fuels per year. While the sum of money that is going to be foregone, and ultimately foregone by the people of the City of Onkaparinga, is significant to them, the cost impact of this rate rebate, in terms of the actual cost of operating this refinery, must be relatively insignificant. Why does the government feel that this announcement is going to make any real difference in terms of the company's decisions, as distinct from the impact on the council?

The Hon. R.I. LUCAS: Again, repeating what I have said earlier, this issue in and of itself is not the only factor that is going to be the difference between a refinery staying in a particular location or not. As I said, local Mobil management, upon whom we need to rely in terms of their interrelationship with both regional and international management, have said to us that they needed to make a package of changes including, and I repeat again, enterprise bargaining arrangements with their employees. They needed to reduce costs across the board. They needed to make some other changes and one of the changes in this package was this significant reduction in the cost of the rate revenue that was paid to the local council.

I repeat the fact that similar refineries in other states are paying $200 000 to $300 000 in rates to their local councils. I am aware that Mobil was paying $1.2 million in the last financial year to the local council. So it is not to argue that this factor, in and of itself, will be the difference. There is a package of changes that local management at Mobil said they needed to make, some we could not impact, others we could, and we have worked hard, together with the local council, in the areas we could have some impact on. Ultimately, as I said, and to its credit, the local council has seen the value of keeping Mobil as a big employer of local people in the community and it has been prepared to compromise on its original position to see a reduction in its long-term rate revenue in the interests of keeping Mobil in its community.

The Hon. M.J. ELLIOTT: Just for the record, I note the total rate revenue of the Onkaparinga council is currently about $46 million. So the revenue coming from Port Stanvac is currently about 2½ per cent. This cutback really means that it is going to be losing something quite close to 2 percent of rate revenue as a consequence of this decision. Either it will have to trim services to that extent or it will have to raise rates by that extent to compensate for this gift that has been given to Mobil.

The Hon. M.J. ELLIOTT: I made an observation earlier that Port Stanvac is processing more than 3 million tonnes of fuel per year. The final rate forgiveness in three years will be worth $700 000 a year to the company. If my mathematics is correct, it turns out to be 1/40th of a cent per litre, so we are talking about .02¢ per litre. One cannot help but wonder whether or not that is even close to a significant figure when one sees fuel prices that move around 10¢ per litre in a single day. In fact, they move around by a factor of 200 or 2 000 times greater per day. As I said before, there will be a bit under 2 per cent of rate revenue to be forgone by this council for the sake of 1/40th of a cent per litre-in fact it will be something less than that-in terms of product coming from the refinery.