The Senate Economics References Committee Governance and operation of the Northern Australia Infrastructure Facility (NAIF) July 2018 © Commonwealth of Australia 2018 ISBN 978-1-76010-801-4 This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License. The details of this licence are available on the Creative Commons website: http://creativecommons.org/licenses/by-nc-nd/3.0/au/ Printed by the Senate Printing Unit, Parliament House, Canberra. ii Senate Economics References Committee Committee members Senator Chris Ketter (Chair) Queensland, ALP Senator Jane Hume (Deputy Chair) Victoria, LP Senator Sam Dastyari (to 5 February 2018) New South Wales, ALP Senator the Hon Kristina Keneally (from 15 February 2018) New South Wales, ALP Senator the Hon Ian Macdonald Queensland, LP (from 12 September 2016 to 5 December 2017 and from 15 February 2017 to 22 March 2018) Senator Jenny McAllister New South Wales, ALP Senator Amanda Stoker (from 22 March 2018) Queensland, LP Senator Peter Whish-Wilson (from 14 November 2017) Tasmania, AG Senator Nick Xenophon (to 31 October 2017) South Australia, NXT Substitute members for this inquiry Senator Andrew Bartlett Queensland, AG (Substitute member to replace Senator Whish-Wilson from 8 February 2018) Senator Janet Rice Victoria, AG (Substitute member to replace Senator Whish-Wilson from 16 October 2017 to 8 February 2018) (Substitute member to replace Senator Xenophon from 8 August 2017 to 31 October 2017) Senator Larissa Waters Queensland, AG (Substitute member to replace Senator Xenophon from 15 June 2017 to 18 July 2017) Participating members for this inquiry Senator Richard Di Natale Victoria, AG Senator Patrick Dodson Western Australia, ALP Senator Malarndirri McCarthy Northern Territory, ALP Senator Barry O'Sullivan Queensland, NATS Senator Dean Smith Western Australia, LP Senator Murray Watt Queensland, ALP Secretariat Mr Mark Fitt, Secretary Ms Jessica Strout, Principal Research Officer Ms Sarah Batts, Research Officer Ms Hannah Dunn, Administrative Officer PO Box 6100 Ph: 02 6277 3540 Parliament House Fax: 02 6277 5719 Canberra ACT 2600 E-mail: [email protected] iii Table of Contents Membership of the Committee ........................................................................ iii Chapter 1 .............................................................................................................. 1 Introduction .............................................................................................................. 1 Conduct of the inquiry ............................................................................................ 1 Background ............................................................................................................. 2 Purpose of inquiry .................................................................................................. 5 Recent developments .............................................................................................. 6 Scope and structure of report .................................................................................. 7 Chapter 2.............................................................................................................. 9 Governance Framework .......................................................................................... 9 Legislative framework ............................................................................................ 9 Investment Mandate ............................................................................................. 11 Governance policies ............................................................................................. 23 Resourcing ............................................................................................................ 25 State and territory governments............................................................................ 26 Committee view .................................................................................................... 29 Chapter 3............................................................................................................ 33 Board of Directors .................................................................................................. 33 Role of the NAIF board ........................................................................................ 33 Appointments ....................................................................................................... 33 Composition ......................................................................................................... 36 Conflicts of interest .............................................................................................. 41 Committee view .................................................................................................... 45 Chapter 4............................................................................................................ 49 Project assessment process .................................................................................... 49 Selecting projects for funding .............................................................................. 49 Risk Appetite Statement ....................................................................................... 51 Public Benefit ....................................................................................................... 56 Investment Decisions ............................................................................................ 63 Committee view .................................................................................................... 69 v Chapter 5............................................................................................................ 73 Transparency, accountability, and communication ............................................ 73 Public disclosure of information .......................................................................... 73 Communication .................................................................................................... 81 Committee view .................................................................................................... 85 Coalition Senators' Dissenting Report ............................................................ 89 Australian Greens' Additional Comments ..................................................... 97 Appendix 1 ......................................................................................................... 99 Submissions and additional documents ................................................................ 99 Appendix 2 ....................................................................................................... 105 Public hearings ...................................................................................................... 105 vi Chapter 1 Introduction 1.1 On 14 June 2017, the Senate referred matters relating to the governance and operation of the Northern Australia Infrastructure Facility (NAIF) to the Senate Economics References Committee (the committee) for inquiry and report by 7 December 2017.1 The committee received two extensions to report by 6 July 2018.2 1.2 The terms of references for the inquiry are: The governance and operation of the Northern Australia Infrastructure Facility (NAIF), with particular reference to: a. the adequacy and transparency of the NAIF's governance framework, including its project assessment and approval processes; b. the adequacy of the NAIF's Investment Mandate, risk appetite statement and public interest test in guiding decisions of the NAIF Board; c. processes used to appoint NAIF Board members, including assessment of potential conflicts of interest; d. the transparency of the NAIF's policies in managing perceived, actual or potential conflicts of interest of its Board members; e. the adequacy of the Northern Australia Infrastructure Facility Act 2016 and Investment Mandate to provide for and maintain the independence of decisions of the Board; f. the status and role of state and territory governments under the NAIF, including any agreements between states and territories and the Federal Government; and g. any other related matters.3 Conduct of the inquiry 1.3 The committee advertised the inquiry on its website and wrote to relevant stakeholders and other interested parties to draw attention to the inquiry and invite them to make written submissions. 1.4 The committee received 116 submissions as well as additional information and answers to questions taken on notice, which are listed at Appendix 1. 1.5 A significant number of the submissions received by the committee broadly responded to the inquiry's term of reference g. any other related matters. These 1 Journals of the Senate, No. 43, 14 June 2017, pp. 1411–1412. 2 On 27 November 2017, the Senate granted the committee an extension to report by 24 April 2018; Journals of the Senate, No. 72, 27 November 2017, p. 2283. On 24 April 2018, the committee tabled a progress report requesting a further extension to 6 July 2018; Journals of the Senate, No. 95, 8 May 2018, p. 3026. 3 Journals of the Senate, No. 43, 14 June 2017, pp. 1411–1412. 2 submissions mainly commented on the possible economic and environmental impacts of the Indian multinational Adani Group's (Adani Group) proposal for NAIF funding to build a railway line from the Carmichael coal mine to the Abbot Point port in Queensland, also referred