CORRUPTION RISKS IN APPROVALS AUSTRALIAN SNAPSHOT: MINING FOR SUSTAINABLE DEVELOPMENT

October 2017 2 - Corruption Risks in Mining Approvals: Australian Snapshot

ABOUT THIS REPORT

This Report Acknowledgments Disclaimer

Transparency International’s Mining for The BHP Billiton Foundation supports The research, language, views, Sustainable Development Programme the participation of Transparency conclusions and strategies outlined in (M4SD) seeks to enhance transparency International in Phase I of this document have been created by and accountability in the awarding of the M4SD Programme. Globally, the the Transparency International National mining-related permits, licences and M4SD Programme is also funded by the Chapter in Australia and are not contracts. Australian Department of Foreign Affairs [necessarily] endorsed by Transparency and Trade. International, Transparency International This summary report documents findings Australia or BHP Billiton Foundation. of research into the mining approvals M4SD research was process in and undertaken by Helen Langley on behalf of The material set out in this publication . The report also outlines the Transparency International Australia. is intended for general information only. ways in which Transparency International The full report is available at: To the extent permitted by local laws, Australia is engaging with government, www.transparency.org.au Transparency International, Transparency and civil society to strengthen International Australia and BHP Billiton transparency and accountability in the This summary report was prepared by Foundation exclude liability for and are awarding of mining-related permits, Tim Grice on behalf of Transparency not liable to any person with respect to licences and contracts. International Australia. It is based on the the accuracy or completeness of the full report authored by Helen Langley. information set out in the publication. Desktop publishing of this summary report Get in contact is by Leapfrog International.

For enquiries regarding the Australian Report Information: research into mining approvals or other Transparency International Australia Title: Corruption Risks in Mining Approvals: programs please contact: Australian Snapshot Publication date: October 2017 ISBN: 0 9752439 2 6 [email protected] Cover page: +61 3 9877 0369 www.transparency.org.au Geologist Prospecting for , , Australia, Source: Adwo/Shutterstock

Corruption Risks in Mining Approvals: Australian Snapshot - 3

FOREWORD

Serena Lillywite, TIA CEO

For the past 15 years, I have been Corruption risks are not just a developing and industry, would help reduce risks that working in corporate accountability, good country paradigm. This research confirms could enable corruption to occur. governance, and business and human even mature mining jurisdictions, such rights. This has included the mining sector, as Australia, have vulnerabilities in the While Australia has systems of with a focus on the policy and practice of mining approvals process that could result transparency and accountability in place, Australian mining companies operating in corruption and compromised decision- more needs to be done to address abroad – often in corruption and conflict- making. transparency of negotiation processes and prone countries. agreements, including native title parties. A key risk identified for large scale mining Understanding corruption risks in the and coordinated projects (associated This report is an essential resource for mining approvals process is vital to infrastructure), is inadequate due diligence government, industry, civil society, and the ensuring mining contributes to sustainable investigation into the character and public – those with an interest in ensuring development, and shared benefits. integrity of applicants for mining approvals. mining contributes to economic, social, This includes a lack of investigation of and environmental prosperity. If corruption risks are identified, and beneficial ownership. acted upon, before mining activities get It shines a light on the corruption underway, better outcomes for impacted Without adequate due diligence—even vulnerabilities in the mining approvals communities, the natural environment and basic research into the track record of process, and provides a roadmap for better all citizens, can be achieved. mining applicants—there is a risk that policy and practice. permits will be awarded to companies with This important research, Corruption Risks: a history of non-compliance or corruption, Mining Approvals in Australia, documents including in their operations in other the existing system of checks and countries. balances that require transparency and accountability in the exploration license, The risk assessment also identified a and mining lease, approvals regime in high potential for industry influence and Australia. state and policy capture in the awarding of mining approvals. Greater regulation The report identifies vulnerabilities in both of political donations, lobbyists and the the Western Australia and Queensland movement of staff between government approvals process that could enable corruption to occur.

Chief Executive Officer Transparency International Australia 4 - Corruption Risks in Mining Approvals: Australian Snapshot

MINING FOR SUSTAINABLE DEVELOPMENT

Global M4SD Programme Combatting Corruption in Mining Approvals

Transparency International’s (TI) Mining Mozambique, Niger, Peru, Papua New with key stakeholders as part of a global for Sustainable Development Programme Guinea, Sierra Leone, South Africa, strategy to enhance transparency and (M4SD) addresses where and how Zambia, and Zimbabwe. accountability in the mining approvals corruption can get a foothold in the mining process. The programme will advocate approvals process. The aim of the M4SD M4SD’s first phase, 2016-2017, assessed for the improvement of national and Programme is to identify the systemic, corruption risks in 20 resource-rich international policy and practice, and regulatory and institutional vulnerabilities countries using the Mining Awards the strengthening of existing mining to corruption in the awarding of mining Corruption Risk Assessment Tool (MACRA). transparency initiatives and standards. licences, leases and contracts. A soon-to-be-released global analysis report presents the global snapshot By combatting corruption before ground Led by Transparency International of the corruption risk factors found to is even broken, TI national chapters Australia, participating M4SD national be most common across participating from across the globe are helping to chapters are Armenia, Australia, Cambodia, countries in Africa, Latin America, Central build the foundations for accountable Canada, Chile, Colombia, Democratic Asia, Asia Pacific and North America. In and transparent mining that benefits Republic of the Congo, Guatemala, M4SD’s second phase, beginning 2018, communities, and supports social and Indonesia, Kenya, Liberia, Mongolia, participating TI national chapters will work economic development.

The Problem: Corruption Risks in Mining Approvals The mining sector has the potential to contribute to inclusive development through shared infrastructure, the creation of economic opportunities and increased revenue to government. However, corruption at the start of the mining chain, in mining approvals, can have a domino effect by undermining good governance in the rest of the mining cycle. Transparency International defines corruption as the abuse of entrusted power for private gain. Types of corrupt conduct specifically in mining approvals include a senior official soliciting speed-money or facilitation payments for processing a licence application, a member of a tender bid review panel favouring a particular applicant because of personal interest in the company, a company committing to licence conditions that it has no intention or ability to fulfil, and community leaders using land access negotiations for Super pit,, Western Australia private benefit. Source: Taras Vyshnya/Shutterstock

Australian M4SD Research: Mining Approvals in WA and Qld

The Australian research for Transparency research focussed on mining leases and integrity frameworks; Hansard, court International’s M4SD Programme environmental approvals for large mines cases, journal articles, books and other investigated mining approvals in Western and infrastructure projects under State and published research to understand Australia and Queensland. Commonwealth law. the context of mining approvals, and to analyse risk; and news articles for The research involved an investigation Forty-seven interviews were conducted evidence of risk. into the context of mining in Australia and with experts from government, industry, the process for approving the granting of civil society, academics, Indigenous A number of risks that could create an mining leases or licences and associated traditional owners, and consultants in enabling environment for corruption approvals required before mining activities Perth, regional Western Australia and to occur were identified and ranked. can commence. In Western Australia, the Brisbane. Desktop research involved Representatives of civil society, industry research focussed on the investigation the collection of data from relevant Acts and academia validated the risks of exploration licences, mining leases, and regulations, published government assessments. Government officials were State Agreement Acts and Native Title guidelines and policies to map the awards also involved in reviewing process maps mining agreements. In Queensland, the processes and collect information on wherever possible. “M4SD SEEKS TO ENHANCE TRANSPARENCY & ACCOUNTABILITY IN AWARDING MINING-RELATED PERMITS, LICENCES

& CONTRACTS

ACROSS A RANGE OF NATIONAL “ JURISDICTIONS.

Port Hedland, Western Australia Source: Adwo/Shutterstock 6 - Corruption Risks in Mining Approvals: Australian Snapshot

MINING IN WA & QUEENSLAND

The Mining Industry in Western Australia

Western Australia is a resource rich In the 2015–2016 year, 37.6 million state. It is the world’s largest producer hectares, slightly less than 15% of and exporter of iron ore. In the year Western Australia’s land area was covered 2015–2016 the value of minerals mined by mining tenements, the majority, 83%, in Western Australia was $69.5 billon and being exploration licences. the royalty revenue paid into the state’s Consolidated Revenue Fund was $4 billion. Western Australia is consistently the top ranked state in Australia in all three Fraser Iron ore is the state’s highest value Institute categories. Since 2012, Western commodity and accounts for 71% (more Australia has annually ranked in the global than $48 billion) of total mineral sales. top six, coming in at number one in 2015 , alumina and , and and number two in 2013. are the next highest value commodities. Other commodities mined in the State are The Government of Western Australia base metals (, , and ), , regulates mining, and the ownership construction materials, , gems of minerals resides with the Crown. and semi-precious stones, manganese, The Minister for Mines and Petroleum mineral sands (garnet, , leucoxene, administers the Mining Act 1978 (WA) and ), rare earths, salt, , spongolite, the Mining Regulations 1981 (WA). and .

The Mining Industry in Queensland The Queensland coal and minerals sector projects in the Land Court. However, the produced 286 million tonnes at a value current administration has reinstated the of $28 billion, and accounted for 1.4% community right to object. of the workforce and 6.4% of Gross State Product in 2015-2016. The coal Queensland is also Australia’s top and minerals sector contribution to State producer of silver, lead, zinc and copper. exports was 59% in 2014-2015. Other minerals mined include bauxite, copper, gold, zinc, magnetite, , New coal mines approved or going , , nickel, apatite, ceramic through the approvals process, namely and structural clays, bentonite, kaolin, the Adani Carmichael Coal Mine and the diatomite, dimension stone, gemstones, New Hope New Acland Coal Mine, have gypsum, limestone, dolomite, magnesite, recently been the focus of significant peat, perlite, rock, salt, silica attention by community and environmental and zircon. groups. Protest groups are concerned with the adverse impacts of proposed The Fraser Institute Annual Survey ranks coal mine developments on climate Queensland number 10 out of 104 change, groundwater, threatened species, countries for investment attractiveness. Indigenous rights, and the Great Barrier The Crown in Queensland has property Reef. There have been a number of court in gold above or below the surface of the challenges to both Commonwealth and land; coal above or below the surface1; State environmental approvals. and all other minerals on or below the surface of the land2. In response, the previous State administration legislated to take away 1 Except where alienated before 1 March 1910. community objection rights to coordinated 2 Except where alienated pursuant to various stipulated Acts in the mid 1800s. Corruption Risks in Mining Approvals: Australian Snapshot - 7

STRENGTHS IN MINING APPROVALS

The research found that the approvals »» Public access to statistics on »» Publicly available information on systems for exploration licences and resources and approvals performance mining tenements and resource mining leases in Western Australia, and for authorities mining leases in Queensland, have a high In addition, DMP has integrity systems in »» Comprehensive information on Qld’s level of transparency and accountability place and inducts, trains and mentors staff geoscience available to the public that can act as a corruption deterrent. in the Code of Conduct. All staff that have »» First-in-time system a decision-making role are required to The research also revealed that the level »» The Land Court will hear objections sign a declaration stipulating that resource from any party unless it is outside the of public interest in the approvals process shares or interests are not held. DMP for large mining projects, an active civil jurisdiction of the court or frivolous or does not have a public register of financial vexatious society, a robust media, and a competitive interests though staff are required to and entrepreneurial mining industry are register all gifts, hospitality and conflicts of »» Criteria for assessment and powerful agents that work to expose interest with the department. DMP also has recommendations by the Land Court and grant by Minister clearly defined and deter corruption, and increase the integrity strategies and policies to prevent accountability of approvals processes in corruption and promote transparency and »» More than one department officer Western Australia and Queensland. engagement: Fraud and Corruption Control assesses the applications Plan, Transparency Policy, Stakeholder and Community Engagement Policy. Further, the Government of Queensland Strengths in the has put in place integrity systems and Further, the Government of Western Offices and/or Commissioners for approvals process – Australia has put in place integrity oversight, education and corruption Exploration Licences systems, oversight mechanisms and prevention for public authorities and and Mining Leases, education measures such as: Ministers and Members of Parliament: »» Corruption and Crime Commission, »» Code of Conduct for the Queensland Western Australia Public Sector Commission, Public Service, declaration of interests Ombudsman, Information register for chief executives, and a The Department of Mines and Petroleum Commissioner, the Auditor-General gifts and benefits register (DPM) has robust systems in place, which »» Ministerial Code of Conduct and »» Crime and Corruption Commission, promote transparency and accountability, Code of Conduct for Members of the Integrity Commissioner, Information create a level playing field, and mitigate Legislative Assembly Commissioner, Ombudsman, and the risk of corruption including: »» Lobbyist Code of Conduct / Register Audit Office »» Register of Members of the »» Code of Conduct for Ministerial »» Comprehensive information on the Legislative Assembly financial Staff Members, Ministerial Code of department’s website regarding the interests available online Conduct, Code of Ethical Standards approvals process for Members of Parliament, Lobbyist »» Online and first-in-time application Register, Register of Members’ system, and public access in real Interests time to applications being lodged Strengths in the »» Publicly available information on approvals process Despite these strengths in mining mining tenements – Mining leases approvals processes in Western Australia »» Comprehensive information on and Queensland, significant risks were Western Australian geology, Queensland also identified in the approvals systems geophysics, and geochemistry that can enable corruption. available to the public The Department of Natural Resources and »» Timelines tracked on Minerals Titles Mines (DNRM) has some systems in place to promote transparency and accountability »» Applications assessed by Mining that could mitigate corruption risks such as: Registrar and by departmental officer »» The Warden’s court will hear »» Information on the department’s objections from any party, and website about the approvals process decisions are published »» Online application system » Criteria for assessments by Mining » »» Public access to applications lodged officials clearly defined once a mining notice is issued 8 - Corruption Risks in Mining Approvals: Australian Snapshot

INADEQUATE DUE DILIGENCE

minimise risk, the research found that ownership of companies operating mines Due Diligence of government departments involved in in Australia is unknown, opening the Applicants the mining approvals process do not possibility for corrupt players to be mining undertake adequate due diligence into the resources in Australia. It is important to Inadequate due diligence investigation into character and integrity of applicants for lift the veil of secrecy over those who the character and integrity of an applicant mining leases. Further, there is inadequate ultimately own or control companies company and its principals was assessed investigation into the company track to ensure that wrongdoing is exposed as a high corruption risk for mining leases record of responsible business conduct in and any illicit financial benefits flowing in Western Australia and Queensland. Australia and overseas. into or through the company (including those from corruption) are disrupted. This Although it is common for mining The due diligence that is currently could prevent the misuse of companies companies to investigate the background undertaken relates to financial capacity for illicit activities such as tax evasion, of partners, contractors and agents to and environmental records. While money laundering, bribery, corruption approvals for large infrastructure projects and terrorism financing. There is often in Western Australia and Queensland a web of corporate structures or other require financial investigation into the arrangements, often quite complex, which capacity of the proponent, the financial the currently investigation does not involve an cannot penetrate.5 examination of beneficial ownership to understand who the real owners are. The lack of investigation into the ultimate beneficial ownership of mining companies In Queensland, proponents are required applying for mining rights can allow for to provide details of their environmental those with a record of corruption and/or record when applying for suitable operator noncompliance to mine for resources in status from an environmental authority, Australia. or when submitting an Environment Impact Statement (EIS) for a coordinated project or a controlled action.3 The proponent must also provide in the EIS details of any proceedings under a law of the Commonwealth or State.4 However, THE LACK OF there is no requirement to report non- INVESTIGATION INTO THE compliance with environmental law or ULTIMATE BENEFICIAL breaches outside Australia. OWNERSHIP OF MINING COMPANIES APPLYING Inadequate due diligence creates the risk FOR MINING RIGHTS CAN that companies or principals with a history of non-compliance, criminal or corrupt ALLOW THOSE WITH A behaviour, a record of environmental RECORD OF CORRUPTION damage, or other poor business conduct, AND/OR NON-COMPLIANCE such as human rights violations, can TO MINE FOR RESOURCES operate in Australia—a number of these IN AUSTRALIA factors have arguably been at play in the case of Adani’s Carmichael Coal Mine. Inadequate due diligence also has the potential to allow mineral rights to fall 3 Environmental Protection and Biodiversity Conservation into the hands of companies that may not Regulations 2000 (Cth) sch 4; Environmental Protection Act practice responsible business conduct, 1994 (Qld); Department of Natural Resources and Mines, which creates the potential for significant Queensland Government, Queensland mining and petroleum industry overview (July 2016) https://www.dnrm.qld.gov. adverse environmental and social impacts. au/__data/assets/pdf_file/0004/238072/queensland- mining-petroleum-overview.pdf 1.

4 State Development and Public Works Organisation Beneficial Ownership Regulation 2010 reg 35, sch 1 item 6.

The lack of investigation into beneficial 5 See TIA submission to Australian Government ownership means that the ultimate consultation http://transparency.org.au/tia/wp-content/ Large open cut coal mine in rural Australia uploads/2016/10/17_03_20_Beneficial_Ownership.pdf. Source: THPStock/Shutterstock Corruption Risks in Mining Approvals: Australian Snapshot - 9

“INADEQUATE DUE DILIGENCE CAN RESULT IN COMPANIES OR PRINCIPALS WITH A HISTORY OF NON- COMPLIANCE, CRIMINAL OR CORRUPT BEHAVIOUR, ENVIRONMENTAL DAMAGE, OR OTHER POOR

BUSINESS CONDUCT,

INCLUDING HUMAN RIGHTS VIOLATIONS,“ OPERATING IN AUSTRALIA.

Large quarry mining of iron ore Port Hedland, Western Australia Source: Trubitsyn/Shutterstock Source: Adwo/Shutterstock 10 - Corruption Risks in Mining Approvals: Australian Snapshot

VERIFICATION OF ENVIRONMENTAL MODELLING

Verification of the Accuracy of Environmental Impact Statements

The Australian M4SD research also Inadequate review and verification of information that does not adequately identified the risk of inadequate modelling systems, theories and data address negative environmental impacts, verification of the accuracy of can lead to inaccuracies in the EIS, and information that exaggerates Environmental Impact Statements and subsequently have significant economic and employment outcomes. (EIS) in the approvals process for large environmental effects. infrastructure projects evaluated through Independent review and verification would the Coordinated Projects process in There are some mechanisms for review add to the cost of the approvals process, Queensland. that are built into the EIS process: the however it may also lead to greater Independent Expert Scientific Committee efficiencies, as objections in the Land (IESC) provides advice on the impact Court over the adequacy of the scientific on water resources by coal mines, the information presented in the EIS can public can review the EIS and make significantly extend costs and approval submissions, and the Commonwealth timelines.9 Minister may order an independent review when it affects ‘matters of national environmental significance’. However, in practice, these mechanisms can have limited effectiveness ensuring adequate independent scientific verification of the accuracy of an EIS. THE AUSTRALIAN M4SD RESEARCH IDENTIFIED The legal system can also provide opportunities to test scientific data. While THE RISK OF INADEQUATE the Queensland Coordinator-General’s VERIFICATION OF decisions are not judicially reviewable, nor THE ACCURACY OF subject to a merits review6, the subsequent ENVIRONMENTAL IMPACT application for a mining lease and STATEMENTS IN THE environmental authority in the Land Court APPROVALS PROCESS FOR can be challenged on merit and any party can apply for judicial review.7 LARGE INFRASTRUCTURE PROJECTS EVALUATED Commonwealth decisions under the THROUGH THE COORDINATED Environment Protection and Biodiversity PROJECTS PROCESS Conservation Act 1999 are open to IN QUEENSLAND. judicial review, with broad provisions relating to what must be demonstrated in order to have standing to seek judicial review.8 Although these opportunities for merit-based decisions and judicial review can provide avenues for independent examination of technical and scientific evidence, the costs involved are often 6 New Acland Coal Pty Ltd v Ashman (No 4) [2017] QLC prohibitive. 24 at [16].

7 Mineral Resources Act 1989 s 370. Enhanced independent scientific review and verification built into the EIS 8 Environment Protection and Biodiversity Conservation process would allow for greater integrity Act 1999 s 487. of information, surety and scientific 9 President of the Land Court, Queensland Courts, Review rigour. Greater independent review and of the Mining Objections and Related Jurisdiction of the Land Court of Queensland (1 March 2017) www.courts.qld. verification could also mitigate against gov.au/__data/assets/pdf_file/0007/511558/lc-rpt-review- proponents and their consultants providing of-mining-objections-and-related-jurisdiction.pdf 2.

Large open cut coal mine in rural Australia Source: THPStock/Shutterstock Corruption Risks in Mining Approvals: Australian Snapshot - 11

INCONSISTENT TRANSPARENCY

Transparency in Large Mining Agreement-Making Infrastructure Projects

A significant vulnerability identified in the Large mining infrastructure project negotiation process for State Agreements approvals, such as a railway or a is that there is no public notification of the port, were assessed in each state as terms of the negotiation or transparency having lower levels of transparency and of the negotiation, prior to executing the accountability than mining lease approvals. agreement. The research revealed that Ministers A State Agreement Act is a contract or senior government representatives between the State and a developer that have considerable discretionary powers, is ratified by a statute of the Western particularly in Queensland, to make Australian Parliament. State Agreements approvals and recommendations. When set out the rights and obligations of the there is both a risk of industry influence, State and the proponent, and can only and opportunities for companies and their be changed by mutual consent. The directors with a poor business record to agreement is only publicly available operate in each state, the risk of corruption once Parliament has ratified it and it is is significantly increased. published.

Once the State Premier and the mining Whistleblower company sign an agreement, it is a binding Protection & Integrity agreement that operates for the life of the projects. There is no opportunity for public Frameworks interest groups to have input into the terms of reference or negotiations or challenge The inadequate protection of the agreement in the courts. Parliament whistleblowers was assessed as a can ratify agreements in a relatively short weakness in the broader State and time, which provides little opportunity Commonwealth regulatory framework for for parliamentary debate. This lack of mining approvals. transparency creates the potential for government to be unduly influenced by a The existing regulatory frameworks for mining company, and can allow Ministerial the private sector provide inadequate discretion to be exercised without public protection: victimisation is not prohibited, oversight. there are no provisions for compensation, and there is limited privacy protection. The The Department of State Development’s research identified that comprehensive law website contains a list of agreements, reform is required to facilitate disclosure but no links to the agreement, and no and protect whistleblowers in the mining guidelines to State Agreements or process industry. charts. In 2004, the Auditor-General Exploration Drilling recommended that procedural guidelines Integrity systems and institutions have Source: Adwo/Shutterstock should be developed for State Agreements. an important role to play in reducing If they were developed they have not been the capacity of industry to influence 10 made available to the public. government, and deter corruption. The 10 Richard Hillman ’The Future Role for State Agreements lack of a national anti-corruption agency in in Western Australia,’ (2006) Australian Resources & Energy Australia is a failure in promoting integrity Law Journal, 293, 318. and combatting corruption. 12 - Corruption Risks in Mining Approvals: Australian Snapshot

STATE CAPTURE & CUMULATIVE RISKS

Industry Influence interest groups to attempt to influence injudicious application of Ministerial policy and decision-making. The political discretion. Industry influence in resource sector donation system has been criticised for development has been identified as a systematic loopholes, the inconsistency In Queensland, the level of discretion corruption risk relating to the governance across jurisdictions, and the lack of trans- available to the Coordinator-General, of mining, particularly in regard to large parency.13 Political donations can be made coupled with the limited independent infrastructure projects in Western Australia review of the scientific modelling used in through ‘associated entities’ to hide the and Queensland. The risk relates to the an EIS, led to both the high risk of external opportunity for industry to influence both source of funds. influence in the awarding of approvals, and the policy and the political agenda of of inadequate verification of the accuracy government in the development of major The ‘revolving doors’ of personnel between of environmental impact statements. resource projects. government and industry was also iden- tified as a risk. As of September 2016, of The states’ stated goal for economic 538 lobbyists registered by the Depart- Cumulative Risks development, investment promotion, and ment of the Prime Minister and Cabinet, job creation through large infrastructure The aggregation of significant risks was 191 are former government representa- found to compound cumulative impact projects can drive the policy agenda. 14 tives. Revolving doors can be between and the likelihood of a risk occurring. For There is a fine line between the public lobbyists and government representatives good of economic development and example, when inadequate due diligence and officials, and industry and government ‘bad’ decisions where the effects on is undertaken into mining companies and the environment and community are not representatives and officials. their principals, it can allow companies adequately taken into account. Policy and directors with a corrupt record to mine development needs to consider both the Australia takes considerable pride in the for resources in Australia. This has the objectives of interest groups, including ethos of mateship as a defining national potential to increase the severity of the the mining industry, while ensuring there characteristic. Yet, this lauded attribute impact of the other risks assessed and increase the likelihood of corruption. is not undue influence or interference in can create a corruption vulnerability in the business of government, including the mining approvals process when the In the case of coordinated project mining approvals. Notably, there have relationships, and revolving doors between been documented corruption and crime approvals in Queensland, allowing government, industry and lobbyists are companies with a poor business record investigations in Australia that have examined. In investigations into mining involved the investigation of politicians to operate in the State can increase the corruption and misconduct in Queensland, with close ties to industry, and for corruptly severity of the impacts of state and policy influencing the mining approvals process, Western Australia and NSW, and subse- capture, external influence in the approvals which in some cases has led to convictions quent convictions in Queensland and NSW, process, and the lack of independent and imprisonment.11 the friendship, or the lack of it, between review of an EIS. It can also increase the politicians and miners or their lobbyists likelihood of the occurrence of state and was raised as a defence. policy capture and external influence in the Avenues for Influence approvals process happening in the first place. Further, inadequate due diligence The mining industry has disclosed Ministerial & into a company when it is applying donations of $16.6 million to major for a mining lease has the potential to political parties over the last ten years Coordinator-General increase negative impacts on native title (2006-07 to 2015-16).12 Discretion parties, having negative consequences for Indigenous communities and their land. The research noted that the inadequate State capture is of particular concern when regulation of political donations and the approvals process allows the exercise 11 ICAC NSW, NSW public officials and members of lobbyists, the movement of staff between of discretion either by a Minister or senior Parliament - allegations concerning soliciting, receiving and government and industry, and the culture concealing payments (Operation Spicer) 30 August 2016 government representative. www.icac.nsw.gov.au/investigations/past-investigations/ of mateship are significant factors that investigationdetail/220. could enable inappropriate influence to Ministerial discretion was identified as a occur in the approval of State Agreements 12 Aulby, H. (2017). The tip of the iceberg: Political weakness in the exploration licences and donations from the mining industry. The Australia Institute. in Western Australia, and coordinated mining lease approvals process in Western projects in Queensland. 13 Joo Cheong-Tam, Money and Politics: The Democracy Australia. The risk was assessed as a low We Can’t Afford (UNSW Press, 2010). level risk as the assessment demonstrated The under-regulated system of political that the checks and balances in the 14 George Rennie, ‘The revolving door; why politicians become lobbyists and lobbyists become politicians’, The donations in Australia can allow special approvals system mitigate against the Conversation 26 September 2016. Corruption Risks in Mining Approvals: Australian Snapshot - 13

NATIVE TITLE

The Native Title Act 1993 (Cth) defines Native title parties’ interests may not imbalance of financial capacity, and an native title as the communal, group or be represented in negotiations with imbalance of power. individual rights and interests of Aboriginal mining companies because of poor people or Torres Strait Islanders in relation representation or because of the politics Native title parties enter negotiations from to land and water under traditional law of representation within different groups. a considerable position of disadvantage. and custom. Three vulnerabilities have Poor representation may occur due to They can often lack the skills, knowledge been identified for future act negotiations: unprofessional behaviour, self-interest or and financial resources to enter into the representation of native title parties in corruption. The sometimes divisive nature negotiations on an equitable basis. The negotiations, the low level of transparency of group representation and the tensions inequity is further compounded by the of the agreement-making process and that can occur between family groups and imbalance of power built into the future act the imbalance of resources and power sub-groups, creates an opportunity for negotiation process, and by the systematic between parties. manipulation by either mining companies and historical disadvantage of Indigenous or representatives. people in Australia. Representation of Native Title Parties in Transparency of Negotiations Agreement-Making The low level of transparency of The negotiation of agreements with mining agreements between native title parties companies involves the mining company and mining companies has been identified and their consultants, representatives of as a vulnerability that could enable the native title parties, and the native title corruption in the future acts negotiation party. Native title representatives can be process. Native Title Representative Bodies (NTRBS), Prescribed Body Corporates (PBCs), other Low levels of transparency can enable Aboriginal Corporations, service providers, corrupt practices by service providers, or private agents. A vulnerability has been private agents, and applicants leading identified where native title parties appoint to significant adverse impact on a negotiator who may fail to represent their communities. Compensation negotiated by interests. The Report to Government by native title parties with mining companies the Taxation of Native Title and Traditional may not be distributed to the wider native Owner Benefits and Governance Working title group in whose name the agreement Group noted that it “is aware of instances was negotiated. Mining companies have where individuals have diverted for their the opportunity to negotiate agreements own benefit the proceeds (or significant that may not distribute benefits to native portions of them) from native title-related title parties in accordance with native ‘future act’ agreements that were intended title rights, and the lack of accountability by the Native Title Act or the terms of an means that implementation of agreement agreement to be enjoyed by an entire terms are not monitored. However, native community”.15 title and future act negotiations are contested and complex, and this should be The research has shown that in the taken into account when viewing the risk agreement-making space there are assessment. representatives who act professionally and make agreements with mining companies that can bring benefits to Indigenous Imbalance of people and that many negotiations have been conducted to the satisfaction of Resources & Power native title parties. However, there are It is widely recognised that there is an reports of incidences where this has not imbalance of resources between mining occurred. companies and native title parties at the negotiating table. The imbalance 15 Treasury, Australian Government, Taxation of Native Title of resources can be categorised as an and Traditional Owner Benefits and Governance Working imbalance of knowledge and skills, an Group, Report to Government 2013, 1 July 2013. Hamersley Gorge Source: By Tim Pryce/Shutterstock. 14 - Corruption Risks in Mining Approvals: Australian Snapshot

CASE STUDIES

The gap in both State and Commonwealth law regarding the investigation of the record of proponents in jurisdictions outside Australia is potentially significant as the case of Adani Mining shows. In the Environmental Impact Assessment for the Carmichael Coal Mine, February 2013, the proponent Adani Mining, an Indian multinational corporation, stated that it ‘has not been subject to any proceedings under a Commonwealth, State or Territory law for the protection of the environment or the conservation and sustainable use of natural resources’. Yet there is evidence that Adani has failed to comply with laws and environmental permits in India. An investigation in December 2010 by officials from the Indian Ministry of Environment Protection and Forests into the Mundra Port and Special Economic Zone (Mundra SEZ) operated by Adani Ports found destruction of mangroves, creek systems and natural seawater flow by reclamation, and development of a township, airport and hospital without the proper environmental approvals. In April 2013, an independent committee established by the Indian Ministry found ‘incontrovertible evidence’ of Adani’s violations of its environmental approvals in the Mundra SEZ including failure to protect mangroves, allowing changes to water courses, attempting to bypass statuary procedures; allowing construction of an airstrip without environmental approval, failing to use lining in storage ponds and intake/outlet channel to protect groundwater against salinity intrusion; and failing to comply with its environmental approval requirements for monitoring and auditing. Adani obtained its first environmental authority in Australia in 2010. The EPA Act 1994 (Qld) was amended to require a proponent to be a registered operator in 2013, but existing holders of environmental authorities were automatically awarded ‘suitable operator’ status. Environmental Justice Australia reports that Adani failed to disclose that one of its directors and the CEO of the Adani Group’s operation in Australia was previously an executive officer of a company that pleaded guilty to criminal charges of serious water pollution of the Kafue River, Zambia and of failure to report environmental pollution. In addition to environmental non-compliance, Adani is facing multiple financial crime and corruption probes in India, including reportedly inflating the quality and value of coal, alleged illegal export of iron ore, and

ADANI MINING: INVESTIGATING MINING: INVESTIGATING ADANI THE CHARACTER OF PROPONENTS associated allegations of bribery.

The Oakley Coal Action Alliance Group, a group of 60 landowners and townspeople, were represented by the Environmental Defenders’ Office in an objection to a coal mining lease application by New Hope for the New Acland Coal Mine in the Land Court. The project was initially assessed under the Bilateral Agreement between the Commonwealth and the State of Queensland and in December 2014 the Coordinator-General published an evaluation report for the project. The recommendation of the Land Court pointed to deficiencies in the advice provided by the IESC and in the Coordinator-General’s evaluation. On the 31 May 2017, in New Acland Coal Pty Ltd v Ashman (No 4) [2017] QLC 24 the Court recommended that the New Acland Coal mining lease application not be granted citing the inadequacies in the modelling in the EIS and the advice provided by the IESC. A significant amount of evidence regarding the impacts of groundwater was presented to the Court. In key areas NAC’s [New Acland Coal’s] own experts agreed with major shortcomings of the current model. I was also highly concerned regarding the modelling of faulting and other aspects of the groundwater studies undertaken to date. These issues have not been answered by the 2016 IESC Advice for reasons including the unfortunate fact that the IESC did not have the advantage of the material before the Court on groundwater. Groundwater considerations are such that the revised project should not proceed given the risks to surrounding landholders and the poor state of the current model. An observation was made by the Court on the thoroughness of the Coordinator-General’s evaluation of the EIS and the reliance of the Coordinator-General on incorrect modeling. The CG evaluation of the EIS and AEIS was no doubt thorough but it was not as thorough as the evaluation of those documents in the court proceedings before me. Nor did the CG have the assistance of expert opinion tested by cross-examination. Consequently what I find to be errors in expert reports and modelling in many vital areas such as water, noise and dust were only ascertained as part of the Land Court proceedings and not discovered by the CG in his evaluation process. The inconsistency requirement has an unwelcome hindering effect on the court in circumstances where the CG has relied upon incorrect modelling and the court is unable

NEW ACLAND COAL: NEW ACLAND COAL: MODELLING ENVIRONMENTAL to correct conditions made by the CG in reliance on that incorrect modelling. The court also made observations regarding the impact of economic input output modelling to overestimate economic benefits. Corruption Risks in Mining Approvals: Australian Snapshot - 15

The Rhodes Ridge Joint Venture, a JV, was granted an exploration licence over the Shovelanna iron ore CAZALY IRON & ELLENDALE MINE MINISTERIAL DISCRETION: deposit on 27 August 1989. The licence was due to expire at midnight, 26 August 2005. Rio Tinto (Rio) had been granted exemptions to surrender twice, partial exemptions from expenditure on ten occasions, and had been granted 11 extensions for a period of one year. Rio dispatched forms to apply for another extension but the Marble Bar Mining Registrar did not receive the documentation before the deadline, and the licence expired. Cazaly Iron applied for an exploration licence on 29 August 2005. Rio subsequently lodged three mining lease applications over the Shovelanna deposit. Cazaly objected to the grants arguing that their application for an exploration licence was first-in-time. Rio wrote to the Minister requesting that he exercise the power to refuse the grant of Cazaly’s application. The Minister terminated the Cazaly application in the public interest. Whilst not obliged under the Act to publish his decision the Minister did so citing his reasons: the State’s iron ore policy, fairness, and promoting investment. Cazaly appealed to the Supreme Court who refused to overturn the Minister’s decision arguing that the Minister is entitled to take into account matters of policy and principle. The decision was viewed as a judgement in favour of big business, and the Association of Mining and Exploration Companies commented that there were different sets of rules for different players.

Another example of ministerial discretion is the recent Ellendale mine closure. The Kimberley Diamond Company who held the tenements entered into administration in July 2015. By disclaiming the tenements as onerous property under the Corporations Act 2001 the liquidators managed to shift the lease and the responsibilities for care, maintenance, security, and rehabilitation back to the government instead of selling the lease. The Minister refused all subsequent applications for an exploration licence for the tenement, as it would have meant the licence holders weren’t responsible for the rehabilitation costs of the mine site. As such only applicants for a mining lease are able to successfully apply for the tenement. This case illustrates the importance of the application of Ministerial discretion in the public interest.

The Yindjibarndi Aboriginal Corporation (YAC) is the authorised applicant for the Yindjibarndi native title claim in the CORPORATION YINDJIBARNDI ABORIGINAL Pilbara region being determined by the Federal Court. The native title claim is for exclusive possession of the land in the Yindjibarndi # 1 Claim Area. YAC and the Ngarluma Aboriginal Corporation are the registered PBCs that manage the native title rights from an earlier determination for non-exclusive possession of the Ngarluma Yindjibarndi Native Title Area. FMG entered into negotiations with YAC for the Solomon Hub iron ore project, which covers both the # 1 Claim Area and the Native Title Area. YAC did not accept FMG’s offer of capped compensation, a signing fee, and employment and training, arguing the compensation paid should match the royalty percentages paid by BHP and Rio Tinto. A breakaway group of elders set up the Wirlu-Murra Yindjibarndi Aboriginal Corporation (WMYAC) and entered into an agreement with FMG. WMYAC were also contracted by FMG to undertake Aboriginal Heritage Surveys, and entered into lucrative joint ventures with FMG contractors for provision of services to the Solomon Hub. In June 2015 WMYAC held an authorisation meeting in Roebourne in June 2015 for which FMG provided considerable support including assistance with promotion, convening and conducting the meeting, and arranging the voting procedure. Resolution 5 of the meeting asked the attendees to vote to apply to change the applicant to the native title claim; and to consent to a determination of native title like the Ngarluma Yindjibarndi determination, which meant they would be voting to consent to non-exclusive native title. The Federal Court dismissed the application to change the applicant to the Yindjibarndi #1 Claim. The Court found that none of the Yindjibarndi elders ‘had any understanding whatsoever of the nature of the authorisation and direction that resolution 5 would have required her to carry out’. And further ‘it is a matter of very serious concern that these three trusting elders were asked to affirm, in affidavits, that they would support the Court making a consent determination that would deprive the claim group, in whose interests they thought they were acting, of the critical right to control access’.

The compensation that native title parties can negotiate with mining companies is significantly reduced where there is non-exclusive native title. A determination of non-exclusive possession for the Yindjibarndi #1 Claim Area would have been of benefit to FMG.

Bright green gum-tree against grey background of mine tailings dam wall Source: Metriognome/Shutterstock 16 - Corruption Risks in Mining Approvals: Australian Snapshot

STRENGTHENING MINING APPROVALS

Transparency International Australia Partnering with Stakeholders

The Australian research for Transparency Drawing on the findings of the Australian improvements to existing legislation, International’s Mining for Sustainable research, TIA is now seeking to engage procedures and practice Development Programme has identified a further with government, industry and civil number of significant corruption vulnerabil- society to strengthen transparency and The third pillar of our engagement strategy ities in the awarding of mining-related per- accountability in the awarding of mining- is global partnerships. Our focus here is mits, licences and contracts in Australia. related permits, licences and contracts. to seek opportunities to work with global stakeholders on combatting corruption While the mining approvals process The first pillar of TIA’s engagement in mining-related permits, licenses and in Western Australia and Queensland strategy is stakeholder dialogue. Through contracts through leading policy and has elements of transparency and a targeted serious of round tables and practice. As a mining giant, Australian accountability, significant risks were stakeholder discussions, we seek to companies must demonstrate best identified in the approvals systems that create awareness of the research findings, practice when operating abroad. can lead to adverse impacts and enable develop a shared understanding of the corruption. way forward, and commitment to multi- We are also seeking to partner with stakeholder action. Australian mining companies and METS Importantly, significant risks were also providers to reduce mining approvals assessed that had a distribution across The second pillar of our engagement corruption risks in the jurisdictions in approvals processes and both jurisdictions. strategy is policy and practice reform. which they operate. This distribution suggests that there Through multi-stakeholder forums, we is an underlying regulatory, contextual are inviting government, industry, civil and cultural risk for mining approvals in society and other stakeholders to develop Western Australia and Queensland. a shared understanding of practicable

A TRANSPARENCY INTERNATIONAL AUSTRALIA WILL BE WORKING WITH STAKEHOLDERS TO HELP COMBAT CORRUPTION RISKS IN MINING APPROVALS WITH A FOCUS ON IMPROVED DUE DILIGENCE AND B DISCLOSURE, AND STRENGTHENED INTEGRITY SYSTEMS GLOBAL PARTNERSHIPSTIA PARTNERSHIP Global partnerships to support Australian mining companies & METS providers to reduce mining STRATEGIES approvals corruption risks in the jurisdictions in which they operate. TIA’s focus on strengthened integrity M4SD Phase II systems to combat corruption risks in mining approvals will target due diligence In Phase II (2018-2020) the M4SD and disclosure, as well as addressing Programme will see a shift from assessing identified corruption risks with state and corruption risks in the mining approval policy capture. This is fundamental to process to addressing those risks. ensure mining approvals are awarded to ‘fit and proper’ companies. Transparency International Australia (TIA) will be working with stakeholders TIA will continue to call for a public to help reduce corruption risks in mining register of beneficial ownership, approvals with a focus on improved establishment of a national anti-corruption due diligence and disclosure, and agency, and robust whistleblower strengthened integrity systems. protection legislation. C Corruption Risks in Mining Approvals: Australian Snapshot - 17

STAKEHOLDER DIALOGUE To create awareness of the research findings, develop a shared understanding of the way forward, and commitment to multi- stakeholder action.

GLOBAL PARTNERSHIPSTIA PARTNERSHIP STRATEGIES “ POLICY & PRACTICE “

Multi-stakeholder forums to discuss good practice guidance and improvements to existing legislation, procedures and practice.

Geologist in Active Iron Ore Exploration Field - Australia C Source: Adwo/Shutterstock 18 - Corruption Risks in Mining Approvals: Australian Snapshot

MINING RISKS

Distributions of Results by Risks Below is a summary of all risks identified in the Australian research using the Mining Awards Corruption Risk Assessment Tool (MACRA).

Risk Approvals process and location Score

What is the risk of external interference in Mining leases and exploration licences, WA the cadastre agency’s awarding of licences Low and leases?

What is the risk that confidential information Mining leases and exploration licences, WA regarding applications for mining leases and Low exploration licences will be leaked?

What is the risk there is no verification Coordinated Projects Qld of the accuracy of environmental impact Medium statements?

What is the risk of external interference in Coordinated Projects Qld the Coordinator-General’s recommendations, Medium evaluations and imposition of conditions?

What is the risk that there is inadequate due Mining leases and exploration licences WA diligence on applicants’ integrity such as Mining leases Qld past unlawful conduct and compliance? State Agreements WA High Coordinated Projects Qld

What is the risk of policy capture, and state State Agreements WA capture by mining companies? Coordinated Projects Qld High

What is the risk that the negotiation process State Agreements WA and the components of the negotiations, including what is negotiable and non- High negotiable, will not be publicly knowable?

What is the risk that those negotiating with Native Title a mining company on behalf of a Native Title Party will not represent community High members’ interests?

What is the risk that the content of final Native Title agreements between mining companies and Indigenous parties will be kept secret? Very high Corruption Risks in Mining Approvals: Australian Snapshot - 19

Distributions of Results by Approvals Process

Number and Approval process Risks score of risks

Mining leases Qld What is the risk that there is inadequate due diligence on applicants’ integrity such as past lawful conduct and compliance? 1 High

Mining leases and exploration licences, What is the risk of external interference in the cadastre WA agency’s awarding of licences and leases? What is the risk that confidential information regarding applications for mining leases and exploration licences 2 Low will be leaked?

What is the risk that there is inadequate due diligence on applicants’ integrity such as past lawful conduct 1 High

State Agreements WA What is the risk that the negotiation process and the components of the negotiations, including what is negotiable and non-negotiable, will not be publicly knowable? What is the risk of policy capture, and state capture by mining companies? 3 High What is the risk that there is inadequate due diligence on applicants’ integrity such as past unlawful conduct and compliance?

Coordinated Projects Qld What is the risk of external interference in the Coordinator-General’s recommendations, evaluations and imposition of conditions? 2 Medium What is the risk there is no verification of the accuracy of environmental impact statements?

What is the risk of policy capture, and state capture by mining companies? What is the risk that there is inadequate due diligence 2 High on applicants’ integrity such as past unlawful conduct and compliance?

Native Title What is the risk that those negotiating with a mining company on behalf of a Native Title Party will not 1 High represent community members’ interests?

What is the risk that the content of final agreements between mining companies and Indigenous parties will be kept secret? 1 Very high CORRUPTION RISKS IN MINING APPROVALS

AUSTRALIAN SNAPSHOT: MINING FOR SUSTAINABLE DEVELOPMENT

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