PUBLIC ACCOUNTS COMMITTEE INQUIRY INTO FUNDING ARRANGEMENTS FOR WESTERN AUSTRALIAN INFRASTRUCTURE PROJECTS Report No. 9 in the 37th Parliament 2008 Published by the Legislative Assembly, Parliament of Western Australia, Perth, May 2008. Printed by the Government Printer, State Law Publisher, Western Australia. Public Accounts Committee Inquiry into Funding Arrangements for Western Australian Infrastructure Projects ISBN: 978-1-921355-34-9 (Series: Western Australia. Parliament. Legislative Assembly. Committees. Public Accounts Committee. Report 9) 328.365 8355-1 Copies available from: State Law Publisher 10 William Street PERTH WA 6000 Telephone: (08) 9321 7688 Facsimile: (08) 9321 7536 Email: [email protected] Copies available on-line: www.parliament.wa.gov.au PUBLIC ACCOUNTS COMMITTEE INQUIRY INTO FUNDING ARRANGEMENTS FOR WESTERN AUSTRALIAN INFRASTRUCTURE PROJECTS Report No. 9 Presented by: Dr S.C. Thomas, MLA Laid on the Table of the Legislative Assembly on 15 May 2008 PUBLIC ACCOUNTS COMMITTEE COMMITTEE MEMBERS Chairman Mr J.R. Quigley, MLA Member for Mindarie Deputy Chairman Dr S.C. Thomas, MLA Member for Capel Members Mr D.T. Redman, MLA Member for Stirling Mr P.B. Watson, MLA Member for Albany Mr B.S. Wyatt, MLA Member for Victoria Park COMMITTEE STAFF Principal Research Officer Ms Katherine Galvin, BSW (From 7.4.08) Dr Julia Lawrinson, BA (Hons), Grad Dip Ed, PhD (From 23.7.07 to 4.4.08) Ms Liz Kerr, BA, PG Dip Pol St (Until 5.6.07) Research Officer Ms Dawn Dickinson, BSc (Hons), MURP COMMITTEE ADDRESS Public Accounts Committee Legislative Assembly Tel: (08) 9222 7494 Parliament House Fax: (08) 9222 7804 Harvest Terrace Email: [email protected] PERTH WA 6000 Website: www.parliament.wa.gov.au - i - PUBLIC ACCOUNTS COMMITTEE TABLE OF CONTENTS COMMITTEE MEMBERS ................................................................................................................................ i COMMITTEE STAFF........................................................................................................................................ i COMMITTEE ADDRESS ................................................................................................................................. i COMMITTEE’S FUNCTIONS AND POWERS.............................................................................................. v INQUIRY TERMS OF REFERENCE ............................................................................................................ vii CHAIRMAN’S FOREWORD.......................................................................................................................... ix ABBREVIATIONS AND ACRONYMS ....................................................................................................... xiii GLOSSARY .................................................................................................................................................. xvii EXECUTIVE SUMMARY ............................................................................................................................ xix FINDINGS.................................................................................................................................................... xxix RECOMMENDATIONS........................................................................................................................... xxxvii MINISTERIAL RESPONSE........................................................................................................................... xli CHAPTER 1 INTRODUCTION.......................................................................................................................... 1 1.1 BACKGROUND.................................................................................................................................... 1 1.2 CONDUCT OF THE INQUIRY ............................................................................................................ 3 1.3 SCOPE OF THE INQUIRY ................................................................................................................... 3 1.4 SUBMISSIONS AND EVIDENCE ....................................................................................................... 4 CHAPTER 2 FACTORS AND ARRANGEMENTS IMPACTING ON INFRASTRUCTURE FUNDING. 7 2.1 INTRODUCTION.................................................................................................................................. 7 2.2 AGREEMENTS AND LEGISLATION................................................................................................. 7 (a) Offshore petroleum developments ........................................................................................ 7 (b) Land-based mineral developments........................................................................................ 9 2.3 ROLE AND PRIORITIES OF AGENCIES IN PROVIDING OR FACILITATING INFRASTRUCTURE FUNDING ........................................................................................................ 10 (a) Federal................................................................................................................................. 10 (b) State..................................................................................................................................... 12 (c) Local governments.............................................................................................................. 14 CHAPTER 3 CURRENT FUNDING ARRANGEMENTS FOR INFRASTRUCTURE PROJECTS ........ 17 3.1 RAVENSTHORPE NICKEL PROJECT ............................................................................................. 17 3.2 GORGON GAS PROJECT .................................................................................................................. 24 3.3 BURRUP FERTILISERS..................................................................................................................... 28 3.4 BURRUP GAS PROCESSING DEVELOPMENTS ........................................................................... 32 3.5 BROWSE BASIN GAS AND CONDENSATE PROJECTS............................................................... 38 3.6 PILBARA IRON ORE AND INFRASTRUCTURE PROJECT.......................................................... 45 3.7 SUMMARY ......................................................................................................................................... 50 CHAPTER 4 THE ADEQUACY OF FUNDING ARRANGEMENTS .......................................................... 53 4.1 ISSUES EMERGING FROM EVIDENCE PRESENTED TO THE COMMITTEE........................... 53 (a) The disadvantage faced by regional areas........................................................................... 53 (b) Insufficient consideration of ‘soft’ infrastructure................................................................ 56 (c) The lack of coordination between levels of government..................................................... 60 (d) The unfair cost burden on local government in the provision of infrastructure and maintenance of infrastructure provided by third parties...................................................... 65 (e) Federal government investment .......................................................................................... 68 (f) State government planning, investment and coordination................................................... 76 CHAPTER 5 STRATEGIES FOR IMPROVING FUNDING ARRANGEMENTS FOR WESTERN AUSTRALIAN INFRASTRUCTURE PROJECTS.................................................................. 85 5.1 MECHANISMS FOR INCREASING WESTERN AUSTRALIA’S SHARE OF FEDERAL FUNDING ............................................................................................................................................ 85 (a) Reforming federal-state financial relations ......................................................................... 85 (b) Negotiating favourable terms for revenues from offshore projects..................................... 89 (c) Re-examining tied funding to the state in the area of infrastructure provision, particularly - iii - PUBLIC ACCOUNTS COMMITTEE in relation to AusLink ..........................................................................................................93 5.2 IMPROVING EFFICIENCY OF FEDERAL GOVERNMENT PROCESSES....................................96 (a) Creation of a federal infrastructure strategy and fund/s.......................................................96 (b) The Canadian model ............................................................................................................98 5.3 IMPROVING THE EFFICIENCY OF STATE GOVERNMENT PROCESSES...............................102 (a) Creating plans for major infrastructure provision overseen by a Coordinator General......103 (b) Coordinator General...........................................................................................................103 (c) SEQ Regional Plan and SEQ Infrastructure Plan...............................................................110 (d) Applicability of the Queensland model to Western Australia............................................113 (e) Dedicated state infrastructure fund ....................................................................................118 5.4 ASSISTING LOCAL GOVERNMENTS ...........................................................................................123 (a) Improving the efficiency of infrastructure funding processes............................................125