Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

On 2 and 3 September in this place, two Labor senators, both Western Australian senators, made speeches—or, should I say, the same speech, because each replicated the other and followed the other almost verbatim—highly critical of the Chevron company, and, in particular, the Gorgon project and, to a lesser extent, the Wheatstone project, off the Western Australian coast. I do not need to quote from both; I can just quote from one of them. One was Senator Lines and the other was Senator Sterle. They made reference to direct construction jobs—3,500 on Barrow Island where Gorgon is established; 10,000 direct or indirect jobs at the peak of construction; 300 direct jobs afterwards. That caused me to ask the question: why would two Western Australian senators stand in this place and be highly critical of projects that are bringing billions of dollars, millions and millions of dollars of employment, and hundreds of thousands of jobs, going over 30 or 40 years, and make allegations about mismanagement? They—I repeat, one or the other—were making allegations that:

The Gorgon project—

say both—

unfortunately—

says one, but now I am quoting from both:

… is quickly becoming synonymous—

each word the same—

with white elephant megaprojects. Some analysts show that it is the most delayed and over-budget LNG project in Australia.

Yet Chevron, each of them says, gave:

… its shareholders extremely rosy projections and has only … slowly revised cost and delay estimates.

Each of them went on to make disparaging comments about the occupational health and safety records on those particular projects, and called into question the actual undertakings of the Chevron company to the Western Australian and the Australian governments in relation to the size of these projects.

The speeches finished up slightly differently, I must say. One of them actually said:

So concerned am I about this project in Western [Australia] …

and the other said:

As a Western Australian senator, I am so concerned about the failure of Chevron to live up to its obligations—

I will come back to the other one—

to the people of Western Australia …

that one of them wrote to the US Securities and Exchange Commission asking for a full accounting of Gorgon's projects, risks and prospects, and the other wrote to Chevron in the USA:

… expressing my concerns about what I believe are Chevron's over promised and under delivered commitments …

It caused me to ask: what are Western Australian senators doing bucketing what is probably the largest oil and gas exploration and production project in our history? And of course I immediately came to an article in The Sydney Morning Herald of 28 August 2014—some four days before Senator Lines's contribution—in which the Maritime Union of Australia was said to be considering:

… legal action against US oil and gas giant Chevron …

with regard to breaching its obligations. Both of these speeches were clearly written by the MUA.

It causes you to ask: why would the MUA be wanting to go into bat against Chevron? That goes back even further. I will quote from another article, from The Australian on 16 August:

ENERGY giant Chevron is suing the militant Maritime Union of Australia for more than $20 million over an illegal strike the company says caused delays and cost blowouts at its $57 billion Gorgon gas project in Western Australia's Pilbara.

That goes back to 2012, when a strike took place at the Australian Marine Complex at Henderson south of Perth in Cockburn Sound in which there was clearly a slowing of project work, completion work, loading and transport up to Barrow Island for the Gorgon project. At that time, the company, Chevron, went to Fair Work Australia. Fair Work Australia ruled that the strike was illegal and that these people should return to work, but of course the company would say that they then went on a go-slow, costing them more than $20 million. It is a bit ironic that two colleagues in this place would actually then start complaining about the antics, apparently, of the Chevron company.

As a Western Australian senator, I was so concerned about these allegations by my colleagues that I actually made it my business to find out the truth. Senator Lines, I think, made the observation that these were claims by Chevron which cannot be easily validated or measured—these are the claims relating to construction jobs, completion jobs, operation jobs and the value of the project. Well, I did not find it all that hard to get the figures. I actually got in touch with the company—strangely enough, I did not have to do too much.

Let me tell you what the actual figures are. Remember the claim by Senators Lines and Sterle: 3,500 jobs in construction and 10,000 in direct or indirect jobs. Here are the figures: not 10,000 but 20,000 jobs; 7,000 on Barrow Island building Gorgon, which is now 80 per cent complete; 5,000 at Wheatstone, off Onslow, and nearly 40 per cent complete. The projects have injected over $30 billion in local content and jobs, and that will climb to $40 billion over the next couple of years. Six hundred Australian companies, over 90 per cent Western Australia, have been awarded contracts. These projects will go for 30 or 40 years.

Let me tell you a little about the salary levels of people on these projects. According to APPEA, the Australian Petroleum Production and Exploration Association, the barge welders are earning around $400,000 a year, and maritime workers covered by the federal offshore maritime agreements are paid over $200,000 for working five weeks on, five weeks off and they still get annual leave. Not a bad deal—none of us would mind it. The Prime Minister of Australia does not earn $400,000 for working half the year or less, yet these are the levels of the salaries about which my colleagues have been bitterly complaining and exercising criticism of this company.

Onslow, where the Wheatstone project is under construction, is the beneficiary of some $250 million of the social infrastructure funding—improvements to power and water, an extension to the hospital, a new community swimming pool, airports, roads, and $60 million awarded to Onslow based firms. Why would colleagues be complaining about a project of this scale when it is creating this level of employment and wealth in our state? There are 50 new homes. For those of you who do not know Onslow, it is a very small, humble, coastal location.

The second allegation for which I object most strongly and sought information on was an apparent claim of occupational health and safety so severe that the union was caused to make direct contact with Mr Roy Krzywosinski, the managing director of Chevron in WA. To my information, Mr Krzywosinski has had no contact from the MUA. Therefore, I sought the information. I seek leave to place on the record in Hansard graphs indicating the number of days away from work per 200,000 hours worked.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Is the senator seeking leave to table the document?

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

Yes.

Leave granted.

Let me give you the figures. This is the company that, apparently, is so shocking in its occupational health and safety that in 2013, it recorded some 20 million days free of a single day away from work. When you look at that graph, as I have invited people around the chamber to do, you will see the construction industry has the highest rate, about 1.8 to two days per 200,000. Coming right down the graph, you will find oil and gas generally down around 0.2 and less. The Chevon company is less than 0.1 days per 200,000 hours worked. I do not mind a decent debate, but I will not stand by and watch the high repute of companies such as this one being trashed when this information is clearly available to anybody who wants to see it. It has six times the safety rate of others in equivalent industries. But the news gets better.

The Gorgon project has awarded more than 500 contracts to Australian companies and spent more than $27 billion already on Australian goods and services, principally of course in Western Australia. The flow-on effect: 270 Pilbara based organisations benefiting from the Gorgon project; and in Perth, 10,000 jobs as well as more jobs in the Pilbara. To date, 30,000 have completed the project induction course during construction. These are very, very fine figures. Allegations and challenges have been made about cost overruns—yes, $37 billion, I think, up to $54 billion and a delay in the completion time. Given it is the biggest oil and gas project, I think, ever undertaken, you would expect to see some of these factors.

I asked why the maritime union and the Senate colleagues are not supporting projects of such a scale and such a nature. I could go on at length about the training programs, about the training undertaken in occupational health and safety, but of course all of that information is there to be seen. When one reflects on the figures and on the contribution of this particular company and this project not only to the West Australian economy but to the Australian economy, one can only ask why would they be levelling these allegations?

Mr Martin Ferguson, once a highly respected minister in the Labor government, made the observation that, industry wide, the LNG industry in 2011-12 earnt $12 billion in export revenue and put $30 billion into the Australian economy. It paid $8 billion in tax. There are $200 billion in new projects underway and there are 100,000 jobs in this economy as a result of oil and gas activity. By 2020, if we can keep the big players in the game and if we can remain or become competitive again, the opportunity is there for Australia to be earning annually in excess of some $12 billion in tax revenues.

This evening is not the time for me to expand on where the risks and the problems associated with our offshore oil and gas industry are, except to say we are rushing towards non-competitiveness. Already our costs to deliver gas into the Japanese market are some 30 per cent higher than some of our competitors, including Canada and Mozambique. But I will talk about that in greater detail when the time permits.

This evening I want to extend my comments on the oil and gas industry, because it goes to the competitiveness of the Western Australian economy. It goes to competitiveness, the industry's value to the Australian economy, and what is being held back and why. When I came into this place in 2009, in my first speech in the Senate I made the observation that the Western Australian community was getting 87c back for each dollar of GST contributed and that was costing the Western Australian economy some $300 million a year. That 87c went down to 57c by 2011. Today, for each dollar that Western Australia generates, we are getting back 37.6c. That is costing the Western Australian economy some $3.7 billion per annum. This is the top performing state. Can you imagine that in a relay race you would penalise—put heavy boots on—your fastest runner? That is exactly what is happening in this state at the moment.

In the GST component, Western Australia is contributing some $20 billion to the other states and territories. Where is it going? Queensland receives $600 million—$1,475 per person. South Australia receives $746 million—over $4,000 per person annually. Tasmania receives $500 million—$7,600 per person. Even the ACT receives $140 million that is coming out of Western Australia's pockets. And the Northern Territory receives some $1.73 billion—about $10,000 per person. Time does not permit me, this evening, to go fully into the background of the whole question of GST distribution. Senator Scullion should certainly not think for one minute that Western Australia is in any way trying to deprive the Northern Territory. But what has happened since the GST has come in is that where once the Commonwealth supported the Northern Territory and the ACT, that has now shifted. Most of the contribution from the four larger states' GST contributions now goes to the territories, particularly to the Northern Territory. The states are now funding the Northern Territory. No-one is suggesting the Northern Territory does not need these funds, but we need to consider the origin of those funds.

People say that traditionally Western Australia was favoured in the Grants Commission process. The Grants Commission process came about after 1933, when the Western Australian community voted during a referendum at an election to secede. The Grants Commission came into existence and—let me make this point very strongly—the equalisation process took place in Western Australia's favour to compensate for unfair tariff protection, which existed in the larger and manufacturing states. It was never a subsidy; it was compensation. It was compensation for the high tariffs that then existed in the manufacturing states.

We all know what the impact of tariffs is. That has been discovered now. The impact of tariffs is to remove competitiveness. Industries are no longer encouraged to compete internationally because they are receiving protection. I would also remind colleagues that, while we heard the other day of the efforts of the then Menzies government and documentation signed by the grandfather of Prime Minister Abe of Japan, it was the David Brand-Charles Court team in Western Australia in the 1960s that had to fight Canberra, tooth and nail, to open up the iron ore export industry.

Today we take it for granted. Today we take for granted the value of more than a million tonnes a day that is exported out of our northern port of Port Hedland. In the 1960s, Brand and Court had to fight tooth and nail to establish that industry with Japanese investment. Of course, we know the history. With respect to the North West Shelf, the Alcoa company agreed to take gas on a take-or-pay basis. The Western Australian government, led by Sir Charles Court, took the risk of a take-or-pay arrangement when there was no gas available in the south.

So, with respect to the circumstances that existed around GST, the very strong point that I want to make is this. Along with other factors in the formula, there should be an inclusion of a capacity, in each of the states and territories, to earn revenue. The performance of a state or territory against that pre-set goal for revenue should determine, in some way, the contribution that that state or territory receives. GST distribution must be on a per capita basis up to a certain level beyond which there is a reserve fund from which the government, under a formula—be it through the Grants Commission or whatever replaces it—can make those allocations to states and territories that require it.

But when you get to a circumstance in which Western Australia has deteriorated from 87c to 37c, surely anybody can see, in the analogy of the relay team, that the team will not do well if the best performer is being held back. That is the circumstance we find ourselves in now. In fact, the state Treasurer and Premier have made the observation that that 37c is at risk, as iron ore prices today went down to below $80 a tonne. That is $43 a tonne less than the Western Australian Treasury's estimate for iron ore prices.

That impact is massive. For each dollar below the forecast figure, you can look at $50 million of lost revenue. This must have an impact on the Western Australian, and therefore the Australian, economy. Again, time does not permit me to go further this evening, except to say that we have a circumstance now, as a result of imbalance, where the federal government is earning 80 per cent of the revenue and expending about 50 per cent of the national expenditure. On the other hand, the states are earning 15 per cent of the revenue and are responsible for somewhere around just under 50 per cent—the balance being made from local governments.

This federation is in somewhat of a quandary. I come back to the point I made at the beginning of this contribution. If we are not going to have leg from this Australian parliament, leg from the senators in it, leg from those in the Senate who are representatives of the states, if we are not going to have a circumstance in which we parliamentarians support the sorts of industries that create wealth then we are in a very, very unfortunate circumstance.