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Interview with Radio National Breakfast

5 December 2016

Interviewer: 
Fran Kelly

Subject: Northern Australia Infrastructure Facility; Adani Carmichael mine; meeting with energy companies on restrictions on gas exploration

E&OE

FRAN KELLY:

The Prime Minister, Malcolm Turnbull is expected to meet with the global head of mining giant, Adani today, amid reports that our Government's considering stumping up half the costs of a $2.2 billion railway line that will serve Adani's Carmichael Coal Mine in Central Queensland. The Adani Chairman, Gautam Adani, is set to meet Malcolm Turnbull on the sidelines of the Australia-India Leadership Dialogue in Melbourne. This meeting comes ahead of a major announcement due tomorrow, that is expected to see Townsville named as the regional base for the $21 billion coal mining project. Matt Canavan is the Minister for Resources and Northern Australia. Matt Canavan, welcome back to Breakfast.  

MINISTER CANAVAN:

Thanks Fran.  

FRAN KELLY:

Minister, the board of the Northern Australia Infrastructure Facility has given preliminary approval for a concessional loan for the 300km railway line that will run from the Galilee Basin, to the coal terminals at Abbot Point. Now you're the Minister responsible for Resources and Northern Australia, therefore for this facility. Is it true that the Government is considering backing this project? Loaning $1 billion to Adani? 

MINISTER CANAVAN:

Well what we've set up, Fran, is an independent expert board, the Northern Australia Infrastructure Facility, to manage the $5 billion we've put aside to invest in infrastructure in the north. So they're assessing this project at the moment. My understanding is that your characterisation is a little strong. It's not preliminary approval, they're conducting further due diligence on the project now. They've done an initial assessment. That will take them a few more months. Look under the act the board is independent. And as the responsible Minister, I can't direct the board. So it's up to them and we'll let them do their job.  

FRAN KELLY:

I'm sure, as the responsible Minister, you have looked at it and you do have views. Why would the Federal Government fund a railway line where the only purpose seems to be so serve and benefit a private enterprise? I mean as far as I understand, BHP didn't get federal funding when it built its Pilbara railway line, did it? 

MINISTER CANAVAN:

That's actually not the case. It's a matter for Adani to tell you their plans, but their proposal for the Galilee Basin rail line has always been envisaged as a multiple use rail line. There was some controversy a few years ago that each individual potential mine in the Galilee Basin would have their own rail line and the Queensland Government said 'no, we're not going to be like the Pilbara' - which has not necessarily been ideal - we're going to have a consolidated list of rail lines, one of which is the proposed Carmichael rail line. So it would always be a multiple use facility. Under the Northern Australia Infrastructure Facility mandate that we've given it, we want to invest in infrastructure which is multiple use, which can then of course be used by lots of people, open up new areas and provide wider economic benefits. 

FRAN KELLY:

To that end then - of multiple use - how much consultation has been done so far with local landholders? Because some local cattle and grain farmers say that there hasn't been any real consultation about the route for this line and how other producers other than Adani would utilise the line. They say the way it's proposed, as far as they know, it won't be much use to them.  

MINISTER CANAVAN:

Well approvals for the rail line are obviously a state government matter, and they've been working through those. My understanding is Adani has acquired rights for almost all of the land. I think there might be one land owner at the moment that they're working with. There are some complaints about another proposed rail line you might be referring to, I think. But my understanding is the Adani project is almost there in terms of those approvals.  

FRAN KELLY:

And your understanding is that the local landholders are happy with where it goes and their access to it? 

MINISTER CANAVAN:

Look, there has certainly been some complaints, as there is, Fran, with almost every major road, or highway, or rail line. Doesn't really matter what's on those lines, of course there are at times issues. There has been with the gas pipelines that have gone to Gladstone for the LNG terminal there. There's been quite a lot of anxiety over those. These things happen, we obviously have- particularly at the State Government level, there are processes in place to resolve those disputes and issues.  

FRAN KELLY:

If the Government is comfortable with the Northern Australia Infrastructure Facility financing such a project, why did the Federal Director of the Liberal Party, Tony Nutt, write to green groups during the election campaign, ruling it out? That was just back in June. 

MINISTER CANAVAN:

Well that's not my understanding, of course, we won't be funding the mine, that's not appropriate. And look no decision from the Government has been made here in this case, either. This is a matter for the Northern Australia Infrastructure Facility at this stage. As I say it's not my job to direct them in their work. The Australian Government partly owns the New South Wales Government coal network in the Hunter Valley. Indeed about 10 years ago we invested $150 million in that. In Central Queensland, the Queensland Government built all of the rail lines in the Bowen Basin, and still owns the rail network in the Surat Basin. So I mean it's not unusual for Government's to be investing in rail infrastructure … 

FRAN KELLY:

No but when Tony Nutt and others said any investment is up to the private company to make, it sounded like that would mean for the rail line as well. But that wasn't what was meant, is that what you're saying? 

MINISTER CANAVAN:

Well as I say it's a matter for the Northern Australia Infrastructure Facility to assess this particular project and the Australian Government, we don't need to make a decision until- and there may not be any proposal put to us on this particular proposal.  

FRAN KELLY:

You're listening to RN Breakfast, it's 19 minutes to seven. Our guest is Matt Canavan, he's the Minister for Resources and Northern Australia. Minister, under the Northern Australia Infrastructure Facility's mandate, proposals must be 50 per cent funded by the private sector. Adani has struggled to find private funding, not just for the rail line, but for the mine itself. Does that trigger alarm bells? I mean would any confirmation of this loan wait until funding for this mine is definite and work on the mine is underway? 

MINISTER CANAVAN:

Well, Fran, it's not for me to comment on Adani's finance capabilities … 

FRAN KELLY:

No I'm not asking you, I'm wondering about the timing of this, though. 

MINISTER CANAVAN:

Look, I can't quite accept your categorisation of matters, but I'll leave it for Adani to explain their finance. All I will say I suppose, is I find it interesting at times that there are a number of financial institutions who come out and say, we're not funding the project and I speak to Adani and they say they find it a little bit strange because they never asked that particular financial institution for finance. But some people here I think are trying to generate publicity for themselves when they're not actually anywhere near involved in the project.  

FRAN KELLY:

I suppose all I was asking you really whether as the Minister responsible you would anticipate that the fund would wait on certainly any lending of money until the funding for the project is definite and work on the project is underway, to assure it is going ahead. 

MINISTER CANAVAN:

Well as you mentioned under the mandate for the Northern Australia Infrastructure Facility, 50 per cent of the debt needs to be provided by the private sector- well, or an alternative financier I should say. And that provides the Commonwealth some protection obviously, and some risk sharing of any investment we make.  

FRAN KELLY:

And just before I leave this, because probity questions have been raised around this. Now there's plenty of different interests around this interest, I accept that. But the entity behind the Northern Galilee Basin railway project is apparently not Adani Enterprises, but a private structure controlled by the Adani family through offshore tax havens; Singapore and the Cayman Islands to name a few. Won't that make it hard to conduct due diligence? Or are you concerned about that? 

MINISTER CANAVAN:

Well that's why we've got an expert-based and independent board. The people on that board have extensive experience, particularly infrastructure finance from both a legal and financial perspective. And I mean not just of course on this project, but on all projects that we're seeking to invest in the North, I'll certainly be listening to their advice before the Government makes any decision.  

FRAN KELLY:

And the head of Adani projects, Gautam Adani, will be in Townsville tomorrow for an announcement. Will Townsville make a good central hub of the Carmichael project? Do you welcome that? 

MINISTER CANAVAN:

Well I'll leave it to Adani to make their own announcements, but it is good news for Queensland that this project is advancing, indeed it's good news for our country. It is a major project. It'll be the first time a new minerals basin's opened up for 40 years and this has the potential to be a platform for many other projects in our region as well. We have some of the highest quality coal in the world, so providing India with its energy needs from Australian coal is good for the environment, because it burns at a higher rate and produces less emissions per kilowatt hour produced. It's a major project … 

FRAN KELLY:

The quality of this coal is not the highest, though. It is low energy with high ash profile. That's one concern, isn't it? 

MINISTER CANAVAN:

It's higher than that that exists in Indonesia and South Africa. I met with the Indian Resources Minister a few months ago when we was out here, and he was very clear that India will need more coal. Indeed, projections say their imports of coal will increase by 185 per cent until 2040. But of course, they're kind of agnostic about where that comes from. They can obviously source it from countries like Indonesia or South Africa, which have lower quality coal than we do here.  

FRAN KELLY:

Minister, on another issue you're attending what's being described as crisis talks with energy executives today along with the Industry Minister, Greg Hunt, to discuss a looming gas shortage that's being blamed for spiralling prices and threatening jobs. What exactly is the crisis, as you see it? 

MINISTER CANAVAN:

Well unfortunately a number of state governments have put in place blanket bans on the development of gas. In Victoria's case a remarkable moratorium on conventional gas - not just unconventional gas - and the Federal Government does not believe that is the right approach. We need to look at things on a case by case basis. We are facing shortages of gas right now, due to certain pressures on the market and we expect that will exacerbate over the next five years. It's incredibly important, particularly for certain elements of our manufacturing industry, petrochemicals and the like, that they have access to affordable gas, and people can't sign long term contracts right now. So we'll be exploring with Minister Hunt and myself, exploring with some of those gas industry executives what we can do to unlock those resources. 

FRAN KELLY:

And Minister, just briefly and finally, do you accept any of the criticism that this is- the shortages are due to lack of leadership from the Federal Government? Because manufacturers and unions say it's the failure to bring any kind of domestic gas reservation policy to ensure that all the gas isn't exported. 

MINISTER CANAVAN:

Well, no, I reject that as well. I mean, if it wasn't for the Gladstone LNG facilities that have gone in, we wouldn't have had the projects developed in Queensland that we have. That's opened up a whole new industry, an alternative source of gas long term for this country. But it's like saying that somehow if we made farmers only sell their beef domestically that we'd get cheaper beef here. No, it wouldn't. It would completely decimate our beef sector and drive up costs, and we would have a less efficient sector, and that's the same with other industries as well. 

FRAN KELLY:

Minister, thank you very much for joining us. 

MINISTER CANAVAN:

Thanks Fran. 

FRAN KELLY:

Matt Canavan is the Minister for Resources and Northern Australia.