Alannah Mactiernan (Perth, Australian Labor Party) Share this | Hansard source

It was obviously cause of great celebration in Western Australia when the golden rocks were discovered. The rocks—or islands, as they may officially be called—are about the size of a kitchen table. They are about three metres across and penetrate a mere one metre beyond the surface of the water. I have had some conflicting advice—whether it is a metre above the low water mark or a metre above the high water mark. It is probably the high water mark because that seems to be the reference point for making the determination on the territory of the coast surrounding them. It is very exciting that Western Australia's sphere of influence has now expanded quite considerably into the Browse Basin and, in particular, into the Torosa retention lease. There has been a great deal of celebration about the added benefits that this will bring to Western Australia financially if the project does indeed go ahead.

I am slightly less optimistic about the benefits that will accrue to Western Australia, because we know from the way that the Grants Commission works that for every additional cent that we receive in royalties we receive a direct reduction in our GST return. From the last figures I saw, we are down to giving about 32c in the dollar back from our imputed GST contributions. The actual benefit to Western Australians is going to be somewhat more muted than the headline 'Golden rock story' first implied. Certainly, there is some short-term advantage in that you get the money before you have to take your cut in the GST. There is a three-year rolling average process, so you have a small window of opportunity when you get the dough when you are not having your GST massively cut, but of course that has a problem at the back end, as Premier Barnett is now experiencing, where the royalty growth is drying up and the GST disbenefit is continuing. I just put this word of caution to those who see these rocks as golden: it may indeed be, in the immediate and direct royalty sense, something of fools gold.

However, as the member for Brand pointed out, very considerable benefit comes to the state government by way of being able to influence the manner in which these retention leases are ultimately developed. On the basis of the material that we are considering here today, in relation to the Torosa lease there will be a majority share in the hands of Western Australia. That will give Western Australia much more say in the determination of the technology to be used. The member for Brand described it as having 'skin in the game'. I point out again that the amount of the skin that one has is diminished very considerably by the GST arrangements and that the direct financial benefit is, in fact, very limited.

I go on to say that I do think that there has been a lot of wasted opportunity in Western Australia surrounding Browse. The insistence by the Premier that the development take place at James Price Point was a unilateral decision that he made—that it had to be an onshore development—and it saw us spend a hell of a lot of time and effort for very little gain. I agree with the member for Brand: you have to be prepared to go with the most cost-effective and environmentally sound technology. It is not reasonable for us to expect in this globally competitive environment that we are going to have a company proceed with a development that uses a technology, which some would argue has been superseded. Having said that, I would also say there is a hell of a lot more scope for us to insist in the development of FLNG that we have a much greater slice of the action in Western Australia. I do not accept that we should accept without any critique the industry participation plans that have been proposed by Woodside around this project.

Before I go on to that, I should also mention that, in terms of the environmental impact, by about 2011 a very strong view had emerged in the Kimberley that they did not want to see a facility developed on the coast. They did not want to industrialise the Kimberley and they believed the offshore option was a much better option, but that is not to say that there was not a degree of diversity in opinion within the community. Over those years I was travelling regularly to the Kimberley and it was my very strong sense that the community on balance was in favour of a development proposal that involved the protection of the coast. That has indeed been borne out by the subsequent election results in 2013, when this was still a very contested issue. I think most of us realise that Woodside had probably already made its decision well before that election, though it did not share that decision with the community at that point.

As a project in this location, FLNG has great economic and environmental benefits. From my discussions with Woodside, I do believe that the analysis from the member for Brand about developing the anchoring technology for the first FLNG facility in Western Australian waters is sound. There certainly are benefits to be gained from that. I also think that we need to be far more vigilant in determining the way we lock in the requirement for this work to be done in Western Australia—the front-end engineering and design and the detailed design should be done in Western Australia. From reading the industry participation plan that Woodside put out through Browse, I am concerned that we have not demanded enough. I have in the past quoted, as others have, the experience of the Hebron development in Canada. There they specified in man hours—or person hours—the amount of FEED. From the top of my head, I think it was something like 25,000 hours of FEED—man hours that had to be directed towards FEED in Newfoundland. For their detailed design, it was over a million man hours.

I have to say that we have a much bigger problem here than we sometimes acknowledge. We have engineering schools producing young oil and gas engineers who cannot get an entry-level or a graduate job. The major companies are no longer bothering to turn up to careers days put on by engineering schools, because they are not offering any jobs. Unless we do more to insist that we get more of that detailed design locked in locally, our young people are going to miss out on getting those entry-level jobs. They are not going to get the jobs which go to Paris and Seoul. We have to be stronger on that point. There is a lot of concern that if other countries are providing the engineering design then they will also have an advantage in competing for the maintenance work. Unless we demand it, unless we lock it in and unless we make it part of these agreements, then we will not see those benefits go to Australia and, indeed, Western Australia. I hope that one outcome of this new arrangement is a greater focus on extracting the benefit. The benefit will not come from the royalty alone; that will be lost in GST. The benefit will emerge from ensuring that we get good jobs out of this. We are not luddites; we are not resisting—well, I am not—FLNG. We should be arguing for FLNG, but we have to do more than accept the expressions of best endeavours by the company to ensure that we bring home the bacon on this one.

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