ISAAC REGIONAL COUNCIL SUBMISSION HOUSE STANDING COMMITTEE ON INDUSTRY, INNOVATION, SCIENCE AND RESOURCES - INQUIRY INTO HOW THE MINING SECTOR CAN SUPPORT BUSINESSES IN REGIONAL ECONOMIES Current as at 10.08.2018 Presented by Office of the Mayor & Chief Executive Officer TABLE OF CONTENTS PRECIS 4 RELEVANCE OF THE INQUIRY TO THE ISAAC REGION 4 CASE STUDIES: THE ISAAC EXPERIENCE 5 LOCAL BUYING PROGRAM 5 ANGLO AMERICAN E-BUSINESS DIRECTORY/E-DIRECTORY 6 INAPPROPRIATE PAYMENT TERMS 7 BARRIERS TO GREATER USE OF REGIONAL BUSINESSES IN THE PROCUREMENT OF SERVICES BY THE MINING SECTOR 8 BARRIERS IN PROCUREMENT PROCESSES 8 BARRIERS TO INNOVATION 9 BUILDING THE SKILLS AND EXPERTISE OF REGIONAL BUSINESSES TO LEVERAGE OPPORTUNITIES IN THE MINING SECTOR 10 HOW THE FEDERAL GOVERNMENT CAN ENSURE THAT BUSINESSES IN REGIONAL ECONOMIES BENEFIT FROM MINING DEVELOPMENT 10 FLY-IN, FLY OUT (FIFO) WORKFORCES 11 REGIONAL CONNECTIVITY 12 ANY OTHER RELATED MATTER 12 DIFFICULTY IN CONDITIONING OPERATIVE RESOURCE PROJECTS 12 WHAT’S IN A NAME: THE DEFINITIONS OF ‘LOCAL’, ‘REGIONAL’ AND ‘MINING SECTOR’ 13 ISAAC.QLD.GOV.AU ISAAC REGIONAL COUNCIL SUBMISSION – 10.08.2018 02 INTERNAL MINING SECTOR PROCESSES 14 POTENTIAL FOR UNIQUE TREATMENT OF THE SUPPLY OF GOODS AND SERVICES TO WORKFORCE CAMPS (CAMP ACCOMODATION) 17 ROYALTIES FOR REGIONS 17 PROVISION OF SEED MONEY TO REGIONAL BUSINESSES TO INCREASE MACHINERY CAPACITY 18 RESOURCES 2030 TASKFORCE 18 DATA 18 SUMMARY OF RECOMMENDATIONS 18 CONCLUSION 23 ISAAC.QLD.GOV.AU ISAAC REGIONAL COUNCIL SUBMISSION – 10.08.2018 03 SUBMISSION: INQUIRY INTO HOW THE MINING SECTOR CAN SUPPORT BUSINESSES IN REGIONAL ECONOMIES Isaac Regional Council (IRC) welcomes the opportunity to provide a submission to the Standing Committee on Industry, Innovation, Science and Resources in relation to how the mining sector can support businesses in regional economies. IRC extends its appreciation to the Minister for Resources and Northern Australia, Senator the Hon Matthew Canavan for requesting the inquiry. PRECIS In this submission, IRC, through its experience, explores examples of collaboration between the mining sector and regional businesses in addition to specific areas where the mining sector and the government could offer improved support to businesses in regional economies. To that end, the approach adopted by IRC in this submission is multi-focal, with a dual focus both on current and potential contributions by the mining sector as well as the potential for policy/legislative and financial support to be provided by the Government. Specifically in relation to the current and potential contributions by the mining sector to regional businesses and regional economies, IRC’s submission is underpinned by the broad concept that such support is reliant on “commitment and alignment across a broad range of functions, including: those who make the decisions on contract strategy, those who administer the tender process, end-users who are managing the contracts, major contractors responsible for managing smaller contracts and staff tasked with building relationships with the community”.1 IRC considers that the increased support of regional businesses by the mining sector will result in better outcomes for both regional businesses and the mining sector. IRC has identified and emphasised the importance of effective mining sector local procurement processes and strategies in increasing support for regional businesses. IRC is encouraged by the existing local procurement measures put in place by the mining sector but acknowledges that there remains room for improvement. This submission is based on several decades of empirical evidence as the host region to currently 26 primarily metallurgical Bowen Basin coal mines. The Greater Whitsunday Alliance (GW3) has also made a submission on behalf of and in the context of the broader Mackay, Isaac and Whitsunday Region, and same is supported by Isaac Regional Council. RELEVANCE OF THE INQUIRY TO THE ISAAC REGION The Isaac region is a local government area in Central Queensland situated approximately 1,000km north- west of Brisbane and 900km south of Cairns, with access to world-class export infrastructure. The Isaac region is a resource rich region spanning a large portion of the Bowen and Galilee Basins and is home to 26 active coal mines, many further coal mines under development and gas exploration in the early stages. The Isaac region produces more than half (approximately 54%) of Queensland’s saleable coal, with the majority of that coal being metallurgical coal. The Isaac economy is largely driven by the mining and resource sector, which contributes $5.9 billion (over 78%) to the region’s total GRP and directly employs 37.7% of the Isaac region’s workforce. Mining, construction and manufacturing accounts for over 86% of the region’s total output. 1 Esteves, AM. et al 2010. Procuring from SMEs in Local Communities: A Good Practice Guide for the Australian Mining, Oil and Gas Sectors. University of Queensland Centre for Social Responsibility in Mining (SMI-CSRM), Brisbane, Queensland. ISAAC.QLD.GOV.AU ISAAC REGIONAL COUNCIL SUBMISSION – 10.08.2018 04 Given the heavy mining related footprint in the Isaac region, as a matter of course, IRC has been heavily involved in providing feedback regarding the Environmental Impact Statement (EIS) and Social Impact Assessment (SIA) for a number of major resource projects in the Isaac region and understands the differing challenges related to the regulation of mining projects which have been approved compared with the regulation of mining projects which are currently undergoing EIS and SIA processes. IRC acknowledges the important efforts of the Moranbah Traders Association, Clermont Community & Business Group and Nebo Community Development Group in advocating for regional businesses within the Isaac region. As part of this submission, IRC conducted a survey of local Isaac businesses. The overwhelming sentiment from businesses within the Isaac region was summed up by one business owner who stated that “Mining is important to regional businesses in [the] Isaac [region] and it would benefit us all further if they would look at local businesses first”. CASE STUDIES: THE ISAAC EXPERIENCE At the outset, it is noted that IRC does not have any affiliation with any mining proponent referred to below. IRC purely wishes to provide examples of initiatives taken by the mining sector within the Isaac region, which may assist the Federal Government in developing any models that arise from the Inquiry: LOCAL BUYING PROGRAM In 2012, BHP Billiton Mitsubishi Alliance (BMA) in partnership with other stakeholders developed a local procurement program, the ‘Local Buying Program’ (LBP) to increase the visibility and availability of sourcing opportunities for goods and services available to local businesses located within the region. In 2013, BHP Billiton Mitsui Coal (BMC) also joined the program. The program has since extended interstate in association with other BMA and BMC projects.2 It is understood that the LBP has two components: 1. Sourcing transactional mechanism delivered through an Agent Partnership with C-Res (a cost neutral organisation). The program encourages the competitive supply of goods and services to BHP Billiton; and 2. Local Buying Foundation (LBF) which is the trust where payments are held and disbursed by C-Res on behalf of the Local Buying Foundation Advisory Committees (LBFAC).3 The Program enables small local businesses to supply goods and services to BHP, BMA and BMC operations via a competitive tender process with reduced payment terms. Businesses also receive direct support from C-Res Business Engagement Advisors and the Program Administration Team. C-Res outlines that the benefits for businesses in participating in the LBP include: “Greater supplier exposure to BMA and BMC operations through an online supplier directory Greater exposure to work opportunities; A simplified engagement tool (Local Buying Program website); Appropriate payment terms (21 days from receipt of invoice); Simpler supplier on boarding process; 2 Local Buying Foundation 2016, About: Building Capacity through the Local Buying Foundation (Qld & NSW), Accessed 11 July 2018, <http://www.localbuyingfoundation.com.au/about> 3 Ibid. ISAAC.QLD.GOV.AU ISAAC REGIONAL COUNCIL SUBMISSION – 10.08.2018 05 Qualification criteria specific for small business; and Continuous support from C-Res”.4 In order to qualify, businesses must employ less than 20 full time equivalent employees (not including casual staff, subcontractors, trainees or apprentices) and have a significant physical presence near one of BHP’s core assets. Between 1 July 2017 and 30 June 2018, LBP reported the following data relevant to the Queensland operation: $83,495,537 - Approved spend to local Suppliers;5 6,318 - Approved Work Opportunities created by BHP employees;6 772 - Businesses approved to supply via the LBP;7 and 12.9 - Day average payment period from receipt of Invoice.8 IRC has also conducted an independent survey of local businesses in the Isaac region. The responses to the survey indicate that the majority of businesses who cited mining/manufacturing related to mining as their major source of income received at least 30 purchase orders or contracts through the LBP during the life of LBP and in excess of $5,000.00 in contract/purchase order income per annum through LBP. To break that figure down further, 28% of business surveyed who cited mining/manufacturing related to mining as their major source of income