CORRUPTION RISKS: MINING APPROVALS IN AUSTRALIA Mining for Sustainable Development Programme OCTOBER 2017 TABLE OF CONTENTS 07 26 EXECUTIVE SUMMARY QUEENSLAND Description of activity - p7 Mining Leases Queensland - p26 Summary of risk assessment Coordinated projects - p29 outcomes - p8 11 37 NATIVE TITLE INTRODUCTION Determination of native title - p37 Transparency International Mining for Sustainable Development Programme The expedited process – exploration - p11 licences, Western Australia - p38 The M4SD Programme study - p11 Right to negotiate and ILUAs, Mining Glossary - p12 Leases – Western Australia - p38 Acronyms and abbreviations - p13 Background - p14 46 Methodology - p15 CROSS CUTTING ISSUES Industry influence - p46 16 Whistle blowing - p50 WESTERN AUSTRALIA Due Diligence - p50 Exploration Licence and Mining Lease Approvals Process Western Australia - p16 State Agreements Western Australia - p22 2 54 DISCUSSION OF RESULTS Distribution of results - p54 Risks distributed across approvals processes - p56 Large mining infrastructure projects - p56 Native Title - p57 Aggregated risks - p57 Other minor risks - p57 Limitations of results - p57 58 CONCLUSION 60 BIBLIOGRAPHY 68 APPENDIX A 3 FOREWORD For the past 15 years, I have been working in corporate Without adequate due diligence—even basic research into accountability, good governance, and business and human the track record of mining applicants—there is a risk that rights. This has included the mining sector, with a focus permits will be awarded to companies with a history of non- on the policy and practice of Australian mining companies compliance or corruption, including in their operations in operating abroad – often in corruption and conflict-prone other countries. countries. The risk assessment also identified a high potential for Understanding corruption risks in the mining approvals industry influence and state and policy capture in the process is vital to ensuring mining contributes to sustainable awarding of mining approvals. Greater regulation of political development, and shared benefits. donations, lobbyists and the movement of staff between government and industry, would help reduce risks that could If corruption risks are identified, and acted upon, before enable corruption to occur. mining activities get underway, better outcomes for impacted communities, the natural environment and all citizens, can be While Australia has systems of transparency and achieved. accountability in place, more needs to be done to address transparency of negotiation processes and agreements, This important research, Corruption Risks: Mining Approvals including native title parties. in Australia, documents the existing system of checks and balances that require transparency and accountability in the This report is an essential resource for government, exploration license, and mining lease, approvals regime in industry, civil society, and the public – those with an interest Australia. in ensuring mining contributes to economic, social, and environmental prosperity. The report identifies vulnerabilities in both the Western Australia and Queensland approvals process that could It shines a light on the corruption vulnerabilities in the mining enable corruption to occur. approvals process, and provides a roadmap for better policy and practice. Corruption risks are not just a developing country paradigm. This research confirms even mature mining jurisdictions, such as Australia, have vulnerabilities in the mining approvals process that could result in corruption and compromised decision-making. A key risk identified for large scale mining and coordinated projects (associated infrastructure), is inadequate due diligence investigation into the character and integrity of applicants for mining approvals. This includes a lack of investigation of beneficial ownership. Chief Executive Officer Transparency International Australia 4 ABOUT THIS REPORT This Report Disclaimer Transparency International’s Mining for Sustainable The research, language, views, conclusions and Development Programme (M4SD) seeks to enhance strategies outlined in this document have been created transparency and accountability in the awarding of by the Transparency International National Chapter mining-related permits, licences and contracts. in Australia and are not [necessarily] endorsed by Transparency International, Transparency International This report documents findings of research into the Australia or BHP Billiton Foundation. mining approvals process in Australia. The material set out in this publication is intended for general information only. To the extent permitted by Acknowledgements local laws, Transparency International, Transparency International Australia and BHP Billiton Foundation exclude liability for and are not liable to any person The BHP Billiton Foundation supports the participation with respect to the accuracy or completeness of the of Transparency International Australia in Phase I of the information set out in the publication. M4SD Programme. Globally, the M4SD Programme is also funded by the Australian Department of Foreign Affairs and Trade. Get in contact The Australian M4SD research was undertaken by Helen Langley on behalf of Transparency International For enquiries regarding the Australian research into Australia. Helen Langley is the author of this report. mining approvlas or other Transparnecy International Layout and design by Leapfrog International. Australia programmes please contact: [email protected] A summary report was prepared by Tim Grice on behalf of Transparency International Australia. The summary +61 3 9877 0369 report is available at www.transparency.org.au www.transparency.org.au Title Picture: Panorama of Coober Pedy, South Australia. Source: By edella/Shutterstock Report Information: Title: Corruption Risks: Mining Approvals in Australia Publication date: October 2017 ISBN: 0 9752439 1 8 5 Helen Langley Author 6 EXECUTIVE SUMMARY Description of activity The Australian research for the Transparency International Mining for Sustainable Development Programme investigated mining approvals in Western Australia and Queensland using the Mining Awards Corruption Risk Assessment (MACRA) risk assessment tool. In Western Australia, the research focussed on the investigation of exploration licences, mining leases, State Agreement Acts and Native Title mining agreements (expedited process and right to negotiate); and in Queensland, it focussed on mining leases and environmental approvals for large infrastructure mines under State and Commonwealth law. The research involved an investigation into the context of mining in Australia and the process for approving the grant of mining leases or licences and associated approvals required before mining activities can commence. The purpose of the research was to note where there are risks that could enable corruption to occur. Vulnerabilities identified in the mining approvals process led to a comprehensive analysis and assessment of risk. A number of risks ranging from low, through medium, high to very high risks were identified that could create an enabling environment for corruption to occur. Geologists Sampling Rocks in the Pilbara, Australia Source: By Adwo/Shutterstock. 7 Summary of risk assessment 4. The inadequate protection of whistle blowers was assessed as a weakness in the broader outcomes State and Commonwealth regulatory framework for mining approvals. The research identified that comprehensive law reform is required to facilitate disclosure and protect whistle blowers in the mining The risk assessment identified seven industry. risks for mining approvals in Western 5. Large mining infrastructure project approvals Australia and Queensland, and two risks in each state were assessed as having lower for Native Title mining agreement making. levels of transparency and accountability than The analysis showed risks that were mining lease approvals. The research revealed that distributed across approvals processes, Ministers or senior government representatives and that the aggregation of risks can be have considerable discretionary powers to make approvals and recommendations. This raises a compounding factor and lead to an considerable concern as when there is also increase in the potential for corruption to a risk of industry influence, and opportunities occur. for companies and their directors with a poor business record to operate in each state the risk of 1. The research found that the approvals systems corruption is significantly increased. for exploration licences and mining leases in Western Australia, and for mining leases in 6. The approvals process for large infrastructure Queensland, have a high level of transparency projects evaluated and approved through the and accountability that can act as a corruption Coordinated projects process in Queensland was deterrent for many of the vulnerabilities identified in assessed as having elements of transparency and the approval processes. Ministerial discretion was accountability for the assessment and evaluation identified as a weakness in the exploration licences of Environmental Impact Statements for State and and mining lease approval process in Western Federal environmental approvals. Yet, the level of Australia, which led to the assessment of the risk, discretion available to the Coordinator-General, and external influence in the awarding of approvals. the limited independent reviewing of the scientific The risk was assessed as a low level risk as the modelling