The 2008 Hunter Valley mine tender which netted the Obeids $100 million is a case study in poor government.
What I am finding puzzling about this is that it seems to have been known (exactly how widely seems to be one of the points at issue) that there would be an enormous windfall available to landowners as a result of a Government decision, before that decision was announced (and even made) – so why did the Government not act to ensure that most of that windfall would go to the Government, rather than to landowners? In one sense, the public loses no more from the windfall going to the Obeids than it would if the windfall went to Joe Blow (although it loses a great deal compared to the money going to the taxpayer).
This case does not seem to relate to a situation in which there is uncertainty as to whether there is any commercially exploitable mineral deposit to be found, and any exploration company could well spend a great deal of money and yet find nothing of value. Allegations of corruption aside, I cannot understand the rationale for the process. Is this the normal procedure?
(HT: SB)
Sam
Because the government of the day – and one uses the term in the loosest sense of the word – was effectively a branch office of Obeid and Tripodi Enterprises Inc ( incorp Nauru ).
Former Premiers Morris Iemma and Nathan Rees in evidence before ICAC have pretty much made it clear that The Terrigals faction – lead by O&T Ent Inc – ran the government and rolled both of them when they wouldn’t play ball.
There have certainly been instances where the government extracted heaps of upfront hurt money from tenement bidders – BHPB and Shenhua paid heaps to get exploration licenses in the Gunnedah Basin.
Conversely, Ministerial Discretion ( cough ) was used to limit the award of a slew of Authorisations to Mates’ Mates.
I think this process is changing on the back of the ICAC-referred episodes, but opaque and unfettered ministerial discretion is a potential cash-grab. Look at Stephen ‘Red Underpants’ Conroy, who believes he has unfettered legal power within a portfolio that literally has billions of dollars washing through it.
Myrrdin Seren
25 Jan 13 at 6:13 pm
Amen, brother. And the same logic would apply if the decision in question were to grant permission for land to be subdivided, or to build a railway or freeway to service certain locations, or to build a school to service certain locations, etc.
Gavin R Putland
25 Jan 13 at 6:18 pm
BTW
I am willing to stand corrected, but the mooted $100 mill wasn’t anticipated to be for the sale of the rural properties to the lucky winners of the exploration Authorisations.
Yes, if a project goes ahead the mining company will buy the overlying land from the owners. And the landowners will get a premium compared to normal rural land values – everyone can negotiate nicely or it can wind up in a mining warden’s court to arbitrate.
But $3 mill worth of farm does not turn in to $100 mill of Obeid Family Trust earnings.
And which I doubt the government could capture even if that sort of multiple was possible, except by appropriating the farm land and inserting itself into the transaction with the mining company.
The big dosh was to be had from the re-valuing of the holding companies of the Authorisations when on-sold for hoped for huge profits.
Have a look at White Energy and Cascade Coal references in the ICAC hearings to date.
( And may I say again Kate McClymont is doing an outstanding and I am sure courageous job of investigative reporting at the Silly that any number of her colleagues could well learn from ).
Myrrdin Seren
25 Jan 13 at 6:27 pm
Isn’t the main problem that it was those in government who abused their position to rip off the state and consequently the NSW taxpayers?
Unfortunate landowners who sold before the decision became public were totally ripped off.
These powerful “public servants” being paid multiple of $100k’s for their employment breached public trust and their respective codes of conduct.
They should be made and example of and be jailed if (when) proven guilty of corruption.
This more than confirms our lowly placing in the world’s transparency.
A witch hunt should also be made to find out whether these matters where brought to the attention of the departments supposedly ensuring these things do not occur.Who knew what and when.
Those sweeping it under the carpet should be jailed.
They are a party to allowing this to happen.
Their negligence allows corruption to thrive.
Whether there are commercially viable minerals in the lease is irrelevant.
This abuse of power should never,EVER happen.
Note also in the commercial field,success is not guaranteed.Just like working in the private sector,
jobs are not guaranteed (ask Albanese of RioTinto).
Exploration companies do surveys either as they are paid for the service or they are searching on their own
behalf.Tough luck is the survey produces no results
(share holders generally bear the costs).
Similar to medical research.Putting in the time doesn’t guaranteed success.
What I find amazing is that there wasn’t better probity to ensure this situation never happenned in the first place.Where were the safe guards?
How can a minister by-pass the system?
(floating helipads,casino approvals,etc).
Incredibly almost the entire investigation was made by the media because the government agencies were either complicit,criminally negligent or utterly incompetent.
How many complaints were made to the government which were ignored???
David Ipp,ICAC Commissioner release a report in July 2011 stating “corruption rife in procurement”.
Why is Ipp involved after the media has done all the investigative work??How long did Ipp know??Why did it take ICAC so long to start a from al investigation??
Where was the auditor general,Achterstraat in this?
He is supposed to check the books.
What about the NSW Ombudsman??
Barbour is supposed to investigate misconduct and maladminstration.How many complaints did he ignore??
What about him and the allegations of pirated sofware in his department which supposedly resulted in a multi-million dollar settlement??
The media has proven itself to be more of an independent regulator than any of the so-called government departments like ICAC and Ombudsmans Office.
I suspect O’Farrell and his cronies are also using this for
both politcal purposes as well as a wishful distraction from his casino and helipad debaucles.
Baird has shown that he is grossly incompetent (loosing $1Billion off the books),Stoner is useless,Pearce is useless,Piccoli is a liability,etc.
This state is totally corrupt.
Just look who’s in charge and what they are doing.
Where is O’Farrell’s open,transparent & accountable government.
We haven’t seen one yet.
O’Farrell nor his ministers can be trusted.
Kennett advised him to sack the heads of departments to sort out the problems.
What does O’Farrell do? Appoints a convicted drug dealer Coutts-Trotter as head of DFS,the states biggest agency.After Coutts-Trotter was sacked as head of DET because he was incompetent.
We need more whistle blowers like Wikileaks,Four Corners,etc.
Peter
25 Jan 13 at 6:48 pm
“… I cannot understand the rationale for the process. Is this the normal procedure?”
Sorry, but ‘NSW Labour Government’ and ‘normal procedure’ do not belong in the same universe, let alone the one blog article.
I think Myrrdin has it just about right. Absolutely shameful – appalling even by the standards of the State that gave us everything from the Rum Corps to Robert Askin.
ACTOldFart
25 Jan 13 at 6:49 pm
Labour or Liberal is immaterial.
Leave any government too long in power and it starts to believe in it’s own infallibility.
Look at Howard/Rudd in the children overboard.
ABC’s piece on this showed how low politicians are willing to go if something suits their own purposes.
Let’s re-animate Don Chipp and keep the bastards honest
Peter
25 Jan 13 at 6:53 pm
And jail time for these people is a must.
Time to show that these people in their high office that they have the same rights as any of us lowly,tax paying citizens
Peter
25 Jan 13 at 6:57 pm
ALP had Burke, Wran, Carr, Dunstan, Cain etc. etc.
Rudd shredded in Qld.
Gillard did what?
So what is new?
NSW now who pick for PS? They all probably are suspect.
stackja
25 Jan 13 at 7:52 pm
All about our mates. Kapisch?
JakartaJaap
25 Jan 13 at 7:57 pm
As Myrrdin said, the $100 million can’t be in the farmland value. Usually the resource company will pay a premium over market value, which may be more than the landholder would get if it went to land court ( my understanding is the LC usually goes market plus ten percent).
There were more complex shenanigans going on here to push it up to $100million.
Entropy
25 Jan 13 at 7:57 pm
Yes, it is the normal procedure, I’m afraid.
Theoretically, the tendering process should result in the level of future royalty payments being set at the market price.
Prior to tender, however, land such as that purchased by the Obeids is discounted due to the uncertainty over whether any mine would be approved at all. Holding land on the mere speculation of this is a very expensive lottery ticket, and generally not worth it if land tax needs to be paid.
Having the inside information of the opening of the tender like Obeid did is the key to making a quick profit here. He could then purchase the land prior to the tendering process.
It doesn’t matter then who wins the tender, as any winner needs to then buy the land or the rights to it from the property owner. They take this into account in their tender offers, so the windfall gain is always at the taxpayer’s expense.
Possibly the best way around this would be to:
1. Prior to approval, the state offers to buy the land (at the discounted price).
2. If they don’t get takers or the purchases are too expensive, it simply does not approve.
3. The mine with the land is put up for tender as a job lot. The taxpayer collects the gain.
4. This would also save a lot of the wasteful legal wrangling in the mining warden’s court.
2dogs
25 Jan 13 at 8:28 pm
the problem with that scenario is that the government gets the blame for the land being taken away from the noble farmer. Directly. Whereas under the current system the evill miner gets most of the approbation.
entropy
25 Jan 13 at 8:34 pm
Hee, hee…..
The Obeid’s , et al, are my guess to get more years than any non mass murderer in NSW history. Eddies looking at 20.
Let’s see tho, judicial (there but for the grace of god go I) sympathy with insider white collars is legendary.
In this case we have the financial Scaf bros……
Alfonso
25 Jan 13 at 9:19 pm
“Time to show that these people in their high office that they have the same rights as any of us lowly,tax paying citizens”
Hilarious. If it were true then High Office would not be worth their while pursuing.
Paul
26 Jan 13 at 12:34 am
That’s correct Myrrdin Seren, it’s the whole licence to win the resource / assured access via options to purchase land package which brings the big money, even more so if the State planning approvals have been negotiated, which is rare so early in the piece.
I’ve not bothered following this Obeid enquiry much at all however I recall enough of the processes to know there are now no longer many secrets about what quality of resource is located where. Landowners in the affected areas are acutely aware of how vital their holding is to the prospective miner (whether it’s in the likely support facilities area, access area, buffer zone or smack in the middle of the main pit).
The target for these blokes seems to have been a worked up proposal with the mining licence granted to them all ready to flog to an enthusiastic mining company. That to me means continuous updates from within the department of assured inside running pre granting of approval.
In my time Mineral Resources had top class professionals running the show and serious minded operators well schooled in resisiting external influence.
Things sure have – ummmmm – evolved.
Mick Gold Coast QLD
26 Jan 13 at 1:16 am
Fresh from her 8 speeding infringements in 3 months in the Prime Minister’s private vehicle, Juliar has bought herself a clapped-out, broken-down, clapped out unroadworthy old wreck of a second-hand used Carr.
It was put off the roads as a danger to life and limb some years ago when it nearly bankrupted NSW.
It only ever had one previous owner – Eddie Obeid.
Whatever happened to Juliar’s “Cash for Clunkers” idea? Maybe it wasn’t such a bad idea after all?
Up The Workers!
26 Jan 13 at 6:53 am
Well I’d like to have freehold land title like Jed Clampett had in the Beverly Hillbillies.It’d sort out a lot of the problems that farmers have with miners and drillers.If I owned the gas under my farm I’d be happy to allow a driller on at 5/8 the farmer,3/8 the driller (so long as I could be assured that the aquifers were not destroyed).
The money would be handy too!It would allow me to improve the farm,employ people, make investments,pay tax and have enough left for some philanthropy.
If every dusty old farmer down every dirt track had a gas well pumping away,we’d soon get the road tarred!
barnaby palin
26 Jan 13 at 8:50 am
I have just read all comments and I think people have missed the major point that the Dept had spent a lot of money on exploratory drilling under large Exploration Licence (EL) held by the Dept for the “Crown”. Then in Oct 2009 an EL was granted to MT PENNY COAL PTY LTD covering the areas of best coal potential which was one of the first steps in this dodgy process.
Samuel J says – “What I am finding puzzling about this is that it seems to have been known…”
The potential for a coal mine was pretty well known Samuel J because the “Mines Dept” at taxpayers expense had carried out a lot of drilling over a decade or more. So in this case there was little “mineral exploration risk”. I have maps of the EL’s and the drilling which I will try and get on the www later in the weekend.
There has been a lot of misinformation around the media – including landowners saying they were unaware of the coal on their lands. If that is true, then they are like no landowners I have ever met.
Thats enough just now.
For sure this is a colossal scandal that will reverberate in as yet unknown ways and will also further harm the hard working mineral exploration industry for years.
Warwick Hughes
26 Jan 13 at 9:45 am
And you have to ask about Whitehaven’s purchase of Tony Windsor’s family land. There are hypocrite sell-outs all over the Hunter/New England if the money’s good enough.
mareeS
26 Jan 13 at 9:47 am
Bear in mind – ICAC has taped conversations going back some time.
I have reason to believe Barry O’Farrell was aware of ICAC interest before the last state election.
This thing started rolling under one of Carr’s successors – Iemma, Reese or KK.
Looks like Larry Pickering will have plenty of grist for his Labor Sopranos blog for quite a time to come yet – given the Labor Party seems to have about zero displayed interest in cleaning out its Augean Stables.
Myrddin Seren
26 Jan 13 at 10:55 am
Your earlier comment,Myrddin,on Kate McClymont was spot on.If Fairfax had half a dozen Journalists of her quality they might produce a newspaper that has a daily circulation of somewhat more that the 180,000 they currently manage to sell in a City with a population of 5 million.
Lew
26 Jan 13 at 11:34 am
Myrddin, it doesn’t look like the Libs have much interest either.
Here’s a chance to damage the Labor brand beyond repair, and the public get SFA.
Why haven’t passports been confiscated?
Why haven’t tax files been consulted? (Probably because of the ruling kleptocracy no doubt)
My rusted on sister hasn’t even heard of the investigation, FFS.
Winston Smith
26 Jan 13 at 11:40 am
I am interested in the question which mareeS in respect to Tony Windsor. Has any investigation been done on that transaction which resulted in a huge windfall to him.
Peter
26 Jan 13 at 11:56 am
Interesting that Shenhua paid the seemingly extraordinary sum (at the time) of $500 million for exploration rights to part of the Gunnedah Basin: the same figure that Cascade Coal was seeking from Whitehaven a little later. Cascade (Eddie et al) paid $1 million for the ER. It does suggest the NSW coal market was lively and ‘informed’ for some.
pablo
26 Jan 13 at 5:44 pm
pablo
minor correction – Cascade Coal was trying to sell itself to White Energy, not Whitehaven.
The interesting ‘connections’ being – the founder directors of private Cascade are the founder directors of publicly listed White Energy.
No conflict of interest there of course, but the deal got shouted down in the finish despite, as we have now learned from the ICAC tapes, all sorts of invective and malice leveled at the independent directors of WEC who had the temerity to query the deal.
White Energy is a business continuation of enterprises and directors originally set up under White Industries. There is a long pedigree of successful business engagement with State governments.
Myrddin Seren
26 Jan 13 at 6:16 pm
Winston
For my own reasons I am going to give Barry the benefit of the doubt on this one, and trust that he is playing a long game to see where and under how many rocks the ICAC investigation shines a light.
As for your other points – and believe me I am fingers crossed that this investigation will shut down some of NSW’s more outrageous political grifters:
Why haven’t passports been confiscated?
Don’t know if ICAC has the power to order this ? Passports are a federal responsibility – I am sure that more than a few folk in Canberra would be delighted if Eddie disappeared back to Lebanon, never to be seen in a witness box again.
Why haven’t tax files been consulted?
One sincerely hopes that officers of the ATO and ASIC are collecting the transcripts of the hearings every day.
But unlike how the Yanks got Al Capone, when did we ever hear the ATO dare go after all those Underbelly types with inexplicably large lifestyles compared to their declared incomes ?
Paul Hogan – yes.
Bra Boys – not so much.
I presume the government won’t provide the ATO the sort of security that mid-level ATO officers would need to go after Underbelly Australia Inc, without getting bumped off in the process ?
The professional criminal class is largely given a free pass as long as they don’t blatantly upset the punters over their corn flakes eg Milperra bikie massacre – bad.
Day-to-day bikie drug, prostitution, gun trafficking and extortion operations – meh.
Myrddin Seren
26 Jan 13 at 6:34 pm