Parliament looks at changed royalty deal

Premier Colin Barnett has introduced amended legislation into state parliament to implement the royalty agreement struck with BHP Billiton and Rio Tinto in June.

The Iron Ore Agreements Legislation Amendment Bill (No. 2) 2010 will be debated next week.

The legislation has a number of amendments which Mr Barnett said would give BHP and Rio the flexibility to improve their efficiency and facilitate expansions of their operations, with further flow-on benefits for the people of Western Australia.

Under the agreement reached in June, the two mining companies agreed to pay iron ore royalties at all their Pilbara mines at a rate of 5.625 per cent for fines and 7.5 per cent for lump.

The agreement is expected to generate about $350 million, which the state government has committed to a new children's hospital.

Mr Barnett said that while Rio and BHP had abandoned their joint venture in the Pilbara the changes to the Bill will allow them to integrate their operations should they choose to do so in the future.

"Under the State Agreements, the companies are actually restricted in what they can do with their own operations," Mr Barnett said.

"After 50 years of operation of the Pilbara iron ore industry, the State Government will allow the industry to modernise and give the companies the option of integrating their operations should they choose to do so in future," he said.

He said some of the changes included, unrestricted ability for existing facilities and infrastructure to be used by other Integration Proponents.

The changes also included the ability for existing infrastructure to be expanded, new infrastructure to be built and for connections between Integration projects

See statement from the Premier below:

Changes to 11 Iron Ore State Agreements held by BHP Billiton and Rio Tinto will enable the integration of infrastructure, modernise definitions and allow the
State Government to allocate $350million toward the new children's hospital, to be built at the QEII Medical Centre.

Premier Colin Barnett today introduced the Iron Ore Agreements Legislation Amendment Bill (No. 2) 2010, which will be debated next week, to State Parliament.

Mr Barnett said the amendments would give the companies the flexibility to improve their efficiency and facilitate expansions of their operations, with further flow-on benefits for the people of Western Australia.

"Under the State Agreements, the companies are actually restricted in what they can do with their own operations. After 50 years of operation of the Pilbara iron ore industry, the State Government will allow the industry to modernise and give the companies the option of integrating their operations should they choose to do so in future," he said.

"In recognition of the value these changes will deliver to the companies, BHP Billiton and Rio Tinto have agreed to make a one-off payment of $350million to the State once the Bill receives royal assent. These monies will assist in the funding of the new children's hospital.

"The two companies have abandoned their joint venture proposal, however these changes will allow them to integrate their operations should they choose to do so in future."

Some of the changes include:

- unrestricted ability for existing facilities and infrastructure to be used by other Integration Proponents
- ability for existing infrastructure to be expanded, new infrastructure to be built and for connections between Integration projects
- ability for an Integration Proponent to receive and use electricity generated by another Integration Proponent, and for nominated Integration Proponents to be able to expand or construct new electricity generation facilities and transmission lines to supply electricity to other Integration Agreement project

-a clause has been added to enable development of private railways, subject to the Minister's prior approval, as there is no current provision in these Agreements or other legislation which enables either new mainlines or spur lines to be developed
- a range of minor amendments have been included to modernise and standardise definitions, terms and procedures across all 11 State Agreements.

BHP Billiton and Rio Tinto are two of the most significant contributors to the State's economy, directly employing more than 17,000 people and contributing more than $29billion to the economy each year. Their combined royalty contribution to the State is expected to reach $1.5billion this year, equal to 45 per cent of the total royalties income for the State.

Legislation to bring royalty payments by BHP Billiton and Rio Tinto into line with other iron ore producers received royal assent on August 26, 2010.