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Does mining cost more than it's worth?


Truck at coal mineWhile mining is a source of great wealth for Australia, its socio-ecological benefits are mixed. Yet the power of the industry means a balanced conversation on these issues is yet to start. Debate about the efficacy of the existing Minerals Resource Rent Tax (MRRT)  notwithstanding, a broader discussion about the industry is unlikely, especially in an election year.

The role of mining in Australia is complex. Western Australia is rich in iron ore and there are significant deposits of natural gas, gold, coal, uranium, opals, lead and zinc across the country. Mining and exporting these minerals has proved extremely lucrative: according to the Australian Bureau of Statistics, mining has grown to just under 10 per cent of GDP, nearly doubling in the years between 2003 and 2008.

The industry is widely credited with allowing Australia to maintain its economy in surplus while similar European and North American economies adopt ever-tightening austerity measures to counteract the fallout from the banking collapses in 2008. Mining has made fortunes. Australia hosts the world's richest woman, mining tycoon Gina Rinehart. Mining magnates Clive Palmer and Andrew Forrest have spent millions on philanthropic causes.

Mining's status as a mainstay of the economy has its disadvantages. Both major political parties are beholden to the industry and fear the advertising power its money can buy. Two brief examples demonstrate the problem.

The Labor Government under Kevin Rudd announced a plan to overhaul the outdated royalties system which allowed miners virtually untaxed access to what are, by law, largely government assets. Australian Election Commission figures show that the mining companies spent AUD$22 million campaigning against the new tax until Rudd was removed as leader by the Labor Party.

After Rudd was replaced by Julia Gillard, the mining tax was reconsidered. Gillard entered into negotiations with three of the major mining companies (BHP Billiton, Xtrata and Rio Tinto) for a limitation of the tax and confinement of its effects to miners' extraordinary profits. Perhaps it's not surprising that revenue raised from this watered down version of the MRRT has fallen well short of expectations.

The Coalition, on the other hand, is now the major recipient of mining company donations: just over AUD$3 million in 2010–11 according to Australian Election Commission figures. It has promised to repeal even the current, weakened MRRT, along with the carbon tax (which was introduced by the Labor Government as the price of support from its junior coalition partner, the Greens).

All of this, not surprisingly, has implications in the socio-environmental sphere. The National Radioactive Waste Management Act 2012 (Cth), which allows for the dumping of radioactive waste, limits the ability of affected parties to challenge the Minister's decision to nominate a waste dump (although a challenge to the nomination of a site on Muckaty Station as a radioactive waste dump is currently before the courts).

Also, while mining in remote areas has undoubtedly created jobs for Indigenous peoples, there are claims of increased cancer rates in those living near uranium mines.

Government regulatory responses to mining pollution have been the subject of criticism. A 2012 Sunday Times investigation claimed that Western Australian authorities have failed to investigate dangerous levels of arsenic, cyanide, mercury and sulphur dioxide pollution in that state.

Meanwhile, in Mt Isa in Queensland, where Xstrata runs a lead mine, a medical survey in 2010 headed by Professor Mark Taylor of Macquarie University discovered that 11.3 per cent of children aged between 1–4 years in Mount Isa have dangerously high blood lead levels.

The outcomes of this study revealed clearly that not only are the policy approaches inadequate in Mount Isa [because they deal with secondary rather than primary prevention] but that the emerging evidence shows that current national policy guidelines for acceptable maximum levels of lead exposure are too high.

Significantly, the report attributed these levels directly to the mine. The Government's National Health and Medical Research Council maintains that the existing maximum level is appropriate as a 'level at which exposure to lead should be investigated' although it does go on to state that this is currently under review.

On the other hand, the mining lobby is increasingly competing with another important feature of Australian political life: agriculture. The hydraulic fracturing ('fracking') of rock to syphon off natural gas is particularly sensitive, with increased competition between farmers and miners over land, and the extraction process implicated in contamination of the water table and increased risk of seismic activity.

While there is no doubt that the mining industry offers great benefit to Australia, questions about the costs of those benefits (and not just the revenues from the MRRT) are long overdue.

Justin Glyn headshotJustin Glyn is a Jesuit scholastic studying theology and philosophy in Melbourne. He previously practised law in South Africa and New Zealand. He holds a PhD in international and administrative law. 

Topic tags: Justin Glyn, mining, Gina Rinehart, Rupert Murdoch, mining tax, Kevin Rudd, Julia Gillard



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Existing comments

Not a bad article: but the headline doesn't reflect the content, which is not about whether mining in Australia is, net, worth the costs: - it obviously is, in spades (pun intended) - but whether there are some incidental, albeit very serious, aspects, which government has been remiss at addressing. By the way, for the record: Gina Rinehart also funds charities. Even apart from doing us a great service by creating wealth. And yes, the MRRT has fallen well ludicrously short of the the expectations of Treasury and the Government. Justin Glyn is not surprised, and nor are most of us, the Federal Opposition, and Blind Freddie. What does that say about the quality of current Treasury advice, and this federal government's handle on basic economic realities?

HH | 11 February 2013  

Yes, the MRRT has fallen well short of the intended goals after the Gillard back-stabbing of Rudd and her subsequent gutlessness in modification of the Rudd vision. Poor old Julia has had a lot of practice at getting it wrong. I suppose the law of averages says that she may at some time or other get something right. Not holding my breath, though.

john frawley | 12 February 2013  

Having worked most of my life in mine rehabilitation and environmental management of mines, I am reasonable well aware of various challenges in the mining industry. Most of these problems were caused during the early part of last century. Mining of lead, asbestos, copper, gold etc. had lead to pollution of air, soil and water. A common slogan amongst engineers at the time was: “The solution to pollution is dilution”. In towns an sites across Australia, bad practices of the past are still causing potential health problems, especially with asbestos and lead. We still have problems with a few companies trying to cover up problems or to take short-cuts to maximise profits. It may be similar to agriculture, where widespread use of mercury and chlorinated hydrocarbons has led to problems with chemical residue in foods. The mining industry is aware of the importance of its image and has changed environmental practices in most cases. We can look around us and we see that virtually everything we have today has something to do with mining. The computer in front of us is made up entirely from products mined,as are most of the buildings we live in, the vehicle we drive in, the TV's we watch. Most of the clothings we wear and the food we eat has been produced with products which were mined. Mining is an extremely important part of our economy and much of our current wealth is a bi-product of mining. Today's challenges are not only to rectify existing problems (lead, asbestos, acid mine drainage, spontaneous combustion in coal mining etc.), but to ensure that best environmental practices are applied at any stage of a products cycle. It means we still have continuously to find ways to improve exploration, mining, processing, transporting and manufacturing. The best thing we can do is to help to reduce the need for more raw materials by conservation of energy and materials, recycling and re-use.

Beat Odermatt | 12 February 2013  

HH - you say that mining is "obviously" worth the costs on balance... does that mean you think all those listed externalities - lead poisoning in kids, the impacts of fracking coal seam gas on water quality and squandering prime agricultural land are reasonable consequences to tolerate? or is that what you mean by 'some incidental, albeit very serious aspects which government has been remiss at addressing'? Australia has been described as the potential middle east of renewables - with our bounty of solar/ wind/ geothermal resources set for capitalisation. So why is Aus wedded to old dirty technology, especially with what we now know about human-induced climate change and the health impacts of mining?

Elizabeth | 12 February 2013  

coal money=good money

sheehan | 12 February 2013  

Yes, Elizabeth, mining is unquestionably worth it, as Beat eloquently points out in his post above. As with any human endeavour, there are going to be associated problems and dangers that need to be addressed, such as the lead poisoning in Mt Isa. Even renewable energy technologies (which, BTW, depend on mining to exist) have associated problems: geothermal projects causing earthquakes and potholes, wind towers decimating bird and bat populations and causing distress to livestock and humans on adjacent farms, etc etc. Unlike renewables currently, the older "dirty" energy technologies deliver energy that is affordable to poor people (not that I'm opposed to economically efficient renewables if and when they arrive). And they're not so dirty anyway, if, like me you think that dangerous anthropogenic global warming is looking more and more like a myth and that additional CO2 is a boon for plant life. Personally, I favour mini-nuclear reactors (using thorium, if the hype about it is true) - of the size that drive nuclear submarines - in an underground lattice network across cities which could deliver "clean", safe energy with recyclable material at a tiny fraction of current costs.

HH | 12 February 2013  

I found this to be a very good article, by the way for the record, ABC reported on JJJ showed that Gina Rinehart , was under paying her oversea's workers.

ROGER DILERNIA | 12 February 2013  

Thank you for this thoughtful article. I am also reminded of CJDennis' poem 'The Glugs of Gosh' which is pertinent to this matter.

Jean Sietzema-Dickson | 12 February 2013  

Mining is NOT always worth the cost! Some of us, even some of our children, may have already inhaled asbestos fibres that will give us an agonising death in time to come. The miners of coal and other fossil fuels have a huge debt to pay to future generations by mining substances that continue to cause climate change. This is already over 150 000 people annually. The BIG POLLUTERS make huge profits and it is only since the implementation of a carbon tax that they are forced to pay even a small fraction of the social cost. Some mining costs may only become apparent in the future. The possible damage of coal-seam gas mining to underground aquifers is one such possibility. The unexpected Gulf of Mexico oil disaster is another example of the cost of mining. How could anyone even put a price on that huge, environmental disaster? Miners have a disproportinate influence in the making of Government decisions. Their advertising campaign against the Rudd Super Profits tax was instrumental in the demise of Prime Minister Rudd. Mining needs much greater scrutiny and much greater accountability. Voters, consider carefully the real costs of mining to our already severely compromised environment.

Grant Allen | 12 February 2013  

G.A., you need to look at what is written here. Overall, mining is incontestably worth it, or else snap! we're back at the stone age, and not using computers to spout our green opinions, and not able to sustain the levels of population at the standards of living we have today. But mining X or Y (eg asbestos) in this or that fashion may have associated dangers, in which case we have to weigh up the pluses and minuses. But it's not an easy calculus. Lead mining might lead to fatalities at the mine site, which possibility we should address. But lead also SAVES lives - go to an X-Ray room and ask the radiographer to doff his/her lead jacket and see what response you get. And as for coal/fossil fuel pollution - well, that just your point of view, isn't it? Some people, including ranking scientists would take issue with you on that. And...what Gulf of Mexico "disaster"? (Except for the hapless BP). The amount of oil released was less than is released from natural oil seeps around that part of the U.S. coastline per year, I hear. And it's all gone, now, due to natural causes! Plus: the only reason BP was in such deep water where accidents are more likely to occur is because Federal and State governments have squeezed companies out of more easily accessible sites.

HH | 12 February 2013  

Article generally measured but there are some points I take issue with. The sentence “the outdated royalties system which allowed miners virtually untaxed access to what are, by law, largely government assets” is not right on several grounds. Minerals belong to the Crown, the Crown being the State or Territory and not the Commonwealth. State royalties – by whatever system – is the charge or cost for the extraction of the mineral. Whether these change is a matter for the State who can charge what it wishes for the extraction, and they do. Whether they charge on % profits base or RRT or whatever is up to them. The problem with an RRT basis is – as we now know - it fluctuates much more and this does not help budgeting. As for “virtually untaxed access”, a report by Access showed in 2009-10 that royalties amounted to 17% of profits and company tax for a further 25% (and I would bet that this tax rate is higher than for nearly all other industries). Hardly untaxed access! I question the MRRT as an intrusion into State matters driven by an attempt to fill a Budget hole. Spending of money on advertising and influence: I think overstated, in any event I seem to recall the union movement contributed $30m to Labor’s coffers in the 2007 election. Is that also excessive influence? Yes, mining is doing a lot for indigenous employment - probably more than any other - and people such as Sam Walsh and Andrew Forrest have led the charge and good on them. “Claims of increased cancer rates”…is there any substance to this? I think more of an issue well beyond the mining stage. “Fracking” has some issues which I hope will be resolved because it has great potential to reduce our GHG emissions. For this reason I see this as a potential great positive, rather than a negative. I agree with the points Beat Odermatt has made - many environmental/health issues of yesteryear have been addressed. There are far more positives than negatives to mining.

Bill Frilay | 12 February 2013  

The mineral export boom is just the latest cargo cult which has driven Australian optimism - just shove some people from their homes and off their land, then blow it up and ship the dirt out overseas. We can, and should, do a lot better than that. We should screw the maximum value out of every tonne of dirt blown up, by processing the dirt in Australia, and exporting the metal only. For example, you could sell a tonne of iron ore for ~$170, or you could sell the 600 kg of steel it contains for ~$450 - and get to keep all the jobs that implies in Australia.

David Arthur | 14 February 2013  

Trouble with Labor is, they've no idea how to design a beneficial tax. All they did was identify a huge stream of cashflow (mining profits) and try to suck out a cut of that money. If, instead, they set up a Raw Material Tax, they'd encourage mining companies to create more jobs in Australia by processing minerals here. You could either export iron ore, and get ~$170 per tonne for it, or you could extract the ~600 kg of iron in that tonne of ore, turn it to steel, and export the 600 kg of steel for $450 - that is, you'd get 2.7 times as much export revenue for the iron ore. Put another way, for every billion dollars you're getting from iron ore exports, you're giving away $1.7 billion dollars to some other nation. A Raw Material Export Tax would tax that $1.7 billion dollars, whereas if the iron ore was turned to steel in Australia, the Raw Materials Export Tax wouldn't raise a cent. But then, with all the extra skilled jobs in Australia, we wouldn't need a Raw Materials Export Tax to raise a red cent.

David Arthur | 14 February 2013  

I have long alerted the community to the massive destruction of our iconic Great Barrier Reef & it's marine population by allowing mining to import water from the most polluted waterways of the world directly into the FBR lagoon .Any googleing will confirm that China has degraded a minimum of 10% of it's land to a level beyond repair ( chemical, nutrients, heavy metals etc ).Yet we allow shipping companies to dump <70,000 > tonnes of ballast water from waterways adjacent to this land / day on the reef near Abbott Point alone .The large bulk carriers need this ballast to render the 'dedicated cargo ' ships safe for travel & economic performance (they can set the trim of the hull as a pilot does with a plane to minimise friction )The destruction could at least be slowed by demanding they carry out a mid ocean exchange of ballast water but no level of Govt has insisted on this .The evidence of damage is glaring ,such as turtles around Abbott Point have skin lesions etc associated with contaminated 'urban ' runoff .Can the almost village sized Bowen (the nearest town where the major industry is very eco-friendly enaporative salt extraction from sea water ,or maybe the filming of movie " Australia " is the culprit ).Gladstone has had similar issues with fish diseases etc .Future generations will despise us for not treating this destruction as a 'cost '. regards John

john kersh | 20 February 2013  

This is an interesting read in the light of the new coalition government's commitment to scrapping the MRRT. That although iron ore prices have not shifted downwards greatly in the past 12 months, coal prices have taken a serious slide. This has posed some serious problems for the Qld LNP government in view of it's own commitment to returning to a surplus by 2015. Qld has been traditionally a low tax and low service state with the gap being plugged by coal mining royalties over the past decade. A drop in these royalties combined with decreased property investment post GFC has left Qld with a hole in revenue. The Qld Commission of audit identified as much however, the hole while real is not nearly as large as the Government and the media would have us believe. Judicious use of gross figures over net figures paint a dire picture, however when viewed from a Gross product position Queensland is most definitely in the red to the tune of $171 Billion (according to John Quiggan at UQ). Looked at this way the austerity measures imposed by the Qld government seem over he top. Mining revenue has been over used and under invested.

Frances Quan Farrant | 02 January 2014