As Adani draws public ire over its Abbot Point rail line, Gina Rinehart awaits the benefits of another NAIF deal to open up the Galilee. By Karen Middleton.
Gina Rinehart and the Galilee
Just under two weeks before Queensland’s state election, a Brisbane-based lobbyist caught up with two Liberal National Party shadow ministers and a member of the state parliament’s crossbench to talk about mining in the Galilee Basin.
On November 13, Resolution PR’s Josh Euler went to a fundraising dinner for the then shadow minister for infrastructure, state development, trade and investment, Deb Frecklington, who was elevated to the role of state opposition leader this week.
Earlier that day, Euler had been to a similar fundraising lunch with Katter’s Australian Party MP Robbie Katter, and three days before that, he’d been to another luncheon fundraiser for the shadow minister for the environment and heritage protection, Christian Rowan.
The meetings are recorded in the Queensland Integrity Commissioner’s disclosure log, which tracks contact between lobbyists and legislators at the state and local levels. The purpose of the meetings is described as providing a “project update”.
Euler’s public relations company was representing its major client: GVK Hancock Coal, jointly owned by Indian conglomerate GVK – whose assets span the energy, resources, aviation, transport, hospitality and life-sciences sectors – and Hancock Prospecting – the parent company in the gigantic corporate mining and pastoral portfolio of Gina Rinehart.
Euler says the meetings were no big deal and not designed to influence anyone. He also maintains contacts with Labor.
“There is always an assumption with those meetings that you’re trying to influence someone,” he said. “It’s more about understanding what their thinking is and what decisions they’re making.”
Before this sudden burst of meetings, little had been heard of the “project” for some time – GVK Hancock’s planned development of three major central Queensland coalmines and a railway line linking them to the coast.
Its mining plans have been delayed through legal challenges. It is now seeking final mining leases.
GVK Hancock holds the development licences for the Kevin’s Corner, Alpha and Alpha West coal projects in the so-far-unmined Galilee Basin, inland from Bowen and spanning 270,000 square kilometres down to its southern point inland from Rockhampton.
It is one of a series of companies with development licences for the area.
A massive untapped coal resource, the prospect of mining the Galilee Basin has sparked debate over actual job creation, the risks to the environment, including the Great Barrier Reef, and the proposed use of public money through a secretive federal government fund, the Northern Australia Infrastructure Facility, or NAIF.
The NAIF is an opaque $5 billion federal fund set up last year and run by a government-appointed board to support infrastructure projects in the north of Queensland, Western Australia and the Northern Territory. Its focus is on projects that would otherwise struggle to be built.
The NAIF’s secrecy provisions have prompted organisations including the Productivity Commission and National Australia Bank to raise serious questions about how it operates.
It refuses to reveal who has applied for a loan, how much they want and what they want to build until after it has decided to approve or reject the application. It has a full 30 days after making the decision before having to reveal details publicly.
It also refuses to announce details or locations of its board meetings in advance or to outline how it handles conflicts of interest involving its directors, most of whom are linked to mining.
When a senate committee asked in October for location information on the NAIF’s past meetings, a piece of paper was tabled with a list of names scribbled by hand. There were no dates.
What hasn’t been a secret is that companies involving two of the Galilee licence-holders have separately applied to the NAIF for taxpayer-funded concessionary loans to build rival railway lines connecting their mines to Abbot Point, north of Bowen.
Indian conglomerate Adani had applied for $1 billion. The size of the second application, lodged in March this year, has not been disclosed publicly. It involves the listed rail freight company Aurizon, formerly the state-owned Queensland Rail. Aurizon and GVK Hancock had planned a joint venture, but that deal was not finalised. Euler confirms the companies are still collaborating but “the application was made through Aurizon”.
Both applicants insist their rail lines would be multi-user facilities available to other mining companies in the basin, although not all of the companies are convinced they would have access to Adani’s line. Being accessible to more than one user is one of the eligibility requirements for funding infrastructure through the NAIF.
Adani has been the focus of a concerted public campaign variously opposing a NAIF loan to it in particular, a NAIF loan for a coal-transport rail line generally, and mining in the Galilee at all.
With all the attention on Adani, GVK Hancock has been able to promote its own interests quietly in the background, enjoying under-the-radar status while public controversy swirls around its competitor.
Partway through the Queensland election campaign in early November, Labor premier Annastacia Palaszczuk made a surprise announcement on the Adani application: her government had reversed its previous support for the loan and, if re-elected, would exercise the veto it was granted under the NAIF’s investment mandate.
She argued the Queensland Integrity Commissioner had advised her that because her partner, Shaun Drabsch, was employed by PricewaterhouseCoopers and had worked on the Adani application, she could face a conflict of interest.
She cited that as the reason for reversing her position.
Some of Labor’s critics argue it was little more than an excuse to justify adopting a position more politically popular in Labor’s vulnerable Brisbane seats.
A week after Palaszczuk’s announcement, Josh Euler had his catch-up chats with the LNP’s Deb Frecklington and Christian Rowan, and with Robbie Katter, consolidating relationships that would be important in the event of an LNP victory.
Katter confirmed to The Saturday Paper that when he caught up with Euler, Galilee Basin mining and the proposed rail line were both discussed.
But despite the close election result, the LNP did not make it into office.
This week, in her first official act after being sworn in as the returned premier of Queensland, Palaszczuk fulfilled her promise and wrote to the federal government, formally vetoing the loan to Adani.
As state government agreement is essential, that means the loan cannot proceed.
The minister for resources and northern Australia, Queensland Nationals’ senator Matt Canavan, is one of those in the federal government who have been talking up the basin’s prospects and the Adani proposal in particular.
Canavan says if Adani’s mine project does not proceed, it will “hang around the necks of the Labor Party”.
Speaking on Radio National, he said: “You’ve got a government in Queensland that’s in hock to the Greens and the first decision they make is putting thousands of jobs at risk.”
The Palaszczuk government says it still supports mining in the Galilee Basin, just not the NAIF loan to Adani.
A spokesman for Adani told The Saturday Paper that the company planned to proceed with its rail line proposal without the loan.
But bad news for Adani may be good news for Aurizon and GVK Hancock.
It seems the Queensland government may yet support the competitor rail line proposal, despite having suggested during the election campaign that it would not.
Before the election, activist organisation GetUp! surveyed Queensland political parties on their attitudes to a range of issues, asking among other things if they would “veto any NAIF loan that helps enable Adani’s mine, rail, power plant and/or port”.
Queensland Labor responded: “Yes.”
But on Friday, Palaszczuk confirmed she would not object to Aurizon’s alternative railway line proposal, even though it is designed to serve Adani’s Carmichael mine as well.
Once developed, the three GVK Hancock holdings alone are expected to produce 90 million tonnes of coal a year for export.
Another major holder is Waratah Coal, which is owned by Queensland magnate and former federal MP Clive Palmer.
But none of the coal deposits can be developed without a means of transporting their product to the coast for export. So a railway line is crucial.
As currently proposed, the Aurizon line would link the GVK Hancock and Waratah mines with existing rail infrastructure servicing mines in the nearby Bowen Basin, with an offshoot added to Carmichael further north in the Galilee.
Yet Gina Rinehart has good reason to want to avoid being dependent on another company to transport her commodities to port.
When she was establishing the Hope Downs iron ore mine in the Pilbara more than a decade ago, the project almost foundered when she could not access BHP Billiton’s rail line, an issue that was only resolved when she partnered with rivals Rio Tinto.
In this coal venture, her parent company, Hancock Prospecting, has partnered with another Indian mining conglomerate, GVK. After Hancock sold most of her stake to GVK, the Indian partner is the majority owner, with Hancock owning 21 per cent of Alpha and Alpha West.
GVK’s owner is Gunupati Venkata Krishna Reddy. In 2011, the year the two magnates joined forces, Rinehart flew to India to attend Reddy’s granddaughter’s wedding, taking then Nationals senator Barnaby Joyce and Liberal deputy leader Julie Bishop with her on a private jet as guests.
Aurizon invested $30 million in the rail line venture conceived with GVK Hancock. But public indications from Aurizon have suggested it thought the proposal was going nowhere in the short term.
In February last year, it wrote down the investment as an impaired asset.
“The amount represents directly attributable development costs such as engineering designs, environmental and building approvals, which could be recovered through the regulatory process at a future date,” Aurizon reported in its half-yearly statement to December 15, 2015, and released on February 16 last year.
“However a decision has been made to impair these costs due to uncertainty surrounding the project’s timing and the current market outlook. The carrying value of the project is now nil.”
The same wording was used to record what was described as a $29.9 million write-down in the company’s 2016-17 annual report.
A spokesman for Aurizon confirmed the company had lodged a NAIF application and said it would require long-term contracts guaranteeing the volumes of coal to be carried on a rail line before it would commit to investing.
He said the write-down was “a required accounting treatment of previous expenditure for proposed rail infrastructure in the Galilee”. But, he said, “It does not inhibit our current proposal”.
That proposal is awaiting the NAIF’s verdict. The spokesman said the discussions were commercial-in-confidence.
So far, the NAIF has only made one loan: $16.8 million to fund a port upgrade in the town of Onslow in Western Australia.
It has told the publicly listed renewable energy company Genex that its proposed solar and pumped-hydro projects near Cairns are being taken to the due diligence stage of its deliberations, along with nine other unnamed projects.
In its confidentiality policy, the NAIF says the board considers and treats “all deliberations relating to investment proposals, applications, expressions of interest or strategic assessments as being confidential information and that NAIF and its employees will not comment on whether any particular proponent has or has not approached the NAIF in regards to potential funding for a project or on its internal processes”.
It adds: “This is regardless of whether the subject matter of the information is inherently confidential.”
In a report this year, the Productivity Commission criticised the secrecy and also warned about the risk of political influence over the NAIF’s decision-making processes.
“The lack of transparency to date and the promotion of certain projects by politicians (in the absence of credible supporting investment data) has raised concerns about the viability of future investments under the NAIF,” it said in its trade and assistance review.
The commission noted that what it called “a current paucity around their governance” had prompted demands for further scrutiny.
A parade of witnesses before a senate inquiry into the NAIF was critical of its structure and processes and said it was unusually opaque and complex with unusually high-level secrecy provisions. They were also concerned that too much power was vested in a single minister – Resources Minister Matt Canavan – instead of being spread across relevant portfolios.
One of the inquiry witnesses, The Australia Institute’s Tom Swann, called for the Australian National Audit Office to investigate and the office has said it is considering doing so.
For all of GVK Hancock’s quiet progress, Gina Rinehart has certainly not hidden her close ties with the conservative side of politics and particularly her friendship with Nationals leader, Deputy Prime Minister Barnaby Joyce.
On November 21, while he was in the middle of his own election campaign seeking to be reinstated as the member for New England, Joyce flew to Canberra for a dinner at the Australian War Memorial to mark the inaugural national agriculture day, the brainchild of Rinehart, who awarded him a $40,000 agriculture “prize”.
After initially accepting it and joking about what it would help him do on his farm, Joyce issued a statement the next day saying he was returning it.
The thwarted prize was given a week after the GVK Hancock lobbyist went to his round of Queensland fundraisers.
On his website, GVK Hancock’s lobbyist Josh Euler proudly promotes his services in spin, especially on coalmining in the Galilee Basin.
“Our communications guidance brought about a 75% reduction in negative media exposure for the lead proponent in the Galilee Basin,” Resolution PR’s site says.
It doesn’t spell out who that is. But while Adani’s hopes for the region are met with huge protest and political pressure, Euler and Hancock are proof the low-key road may be more fruitful.
This article was first published in the print edition of The Saturday Paper on December 16, 2017 as "Gina Rinehart and the Galilee".
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