Chapter 2Employment and industry, economics and government support, and the environment
Employment and industry
2.1As with other major infrastructure projects, the project’s proponent argued it will boost national employment. As noted in Chapter 1, East West Line Parks (EWLP) suggested that the project will create 75 000 construction jobs ‘over a 7to 8-year period’ and 35 000 jobs during operations, across steel, rail, ports and ships. Mr Condon from EWLP further outlined that 60 000 of the 75 000 jobs will be in Australia, and the 35 000 jobs are in Phase 1.
2.2The jobs are further broken down geographically; 20 000 at Abbot Point, Queensland; 12 000 in Newman, Western Australia (WA); and ‘the rest spread around Australia’. For rail specifically, there are 6 000 jobs in rail construction, and 1 500 in rail operations and maintenance. Captain Steve Pelecanos from EWLP described the current size of Australia’s merchant fleet as a ‘matter of national disgrace’ and asserted that the construction and use of ‘roll-on, roll-off’ ships in Project Iron Boomerang (PIB) operations would create ‘vast opportunities for employment’.
2.3EWLP placed these prospective employment figures in the context of Australia’s major industries—agriculture and mining—and services in general. It submitted that by ‘investing in Australia’s industrial productive capacity’, PIB would add ‘stable, high-paying jobs’ beyond these industries and services. EWLP representatives reinforced the connection between PIB, employment, manufacturing and industrialisation, providing evidence that the project would ‘reinvigorate manufacturing in this country’ and, further, that ‘there would be 500 000 jobs within five to 10 years in reindustrialisation, because we’ve got competitive steel’.
2.4The Department of Industry, Science and Resources (DISR) noted that the iron ore, metallurgical coal and steel production industries currently account for hundreds of thousands of jobs across several companies. Table 2.1 shows the structure, employment and economic benefits associated with each industry.
Table 2.1Iron ore, metallurgical coal and steel industry structure, employment and economic benefits
| | | |
Iron ore | Top four producers accounted for 93percent of total production (2022) | Over 60,810 jobs in 2020–21 (WA) | $9.8 billion in royalties (WA) |
Metal-lurgical coal | Top five producers accounted for over 58per cent of production; over 50 companies for remaining 42 per cent (2022) | 42 000 direct jobs, a majority in regional QLD and NSW) | Over $10 billion in expected royalties for 2021–22 (thermal and metallurgical coal combined) |
Steel | Three primary steel producers | More than 116 000 people; 22 000 in primary steel production remainder in fabricating and manufacturing | $13.7 billion contribution to gross domestic product, industry value add (2020–21) |
Source: DISR, Submission 11, pp. 4–8.
2.5DISR commented that PIB’s additional 44 mtpa ‘far exceeds current levels of domestic steel demand’, and the ‘global steel market can be cyclical in nature’, which could in turn affect the ‘feasibility and timing of any project investment in the sector’. This suggests that any cyclical impacts would extend to employment from PIB, including the number and location of jobs and the length of construction jobs, over several years. The Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA) subsequently noted that Australia met approximately 85 per cent of total steel demand in 2021 from domestic production, and exported about half as much steel as was imported.
2.6In addition, broader economic factors would affect the pace of construction and operation, and therefore employment, including the unemployment rate, materials prices and availability, and requisite skills. The remoteness of the proposed rail line would be an additional factor. For instance, on rail construction, Mr Greg O’Rourke from EWLP commented:
In terms of complexity, it was assessed that, of the distance, about 2,430-odd kilometres is what we would consider relatively easy construction. It's fairly flat. Obviously there are logistical issues in relation to remoteness, but there are also enormous efficiencies in relation to size.
2.7The nature of jobs created by PIB may also be affected by workplace conditions in the construction and manufacturing industries, including the use of labour hire and contracts. The fourth interim report of the Senate Select Committee on Job Security observed that it had heard from workers in those industries ‘who have spent up to a decade employed by labour hire companies, on rates of pay 24 to 40 per cent less than their directly-employed peers doing the exact same work’.
2.8A division of the Construction, Forestry, Maritime, Mining and Energy Union highlighted evidence suggesting the coal industry has become majority casualised since 1996, although it also noted the rate of casualisation was disputed, and the union submitted that construction industry employers were ‘particularly adept at… entering into non-standard, insecure contractual arrangements’.
2.9Mr Condon explained that the jobs generated by the project would not be ‘fly in, fly out’ jobs, nor ‘hand-me-down jobs’. He confirmed that the jobs on offer would be permanent and suggested that this would be welcomed by stakeholders such as the Central Land Council.
2.10The project proponent also suggested that there would be a number of wider industrial benefits to the project, summarising this broadly as ‘reindustrialisation’, as mentioned earlier in this chapter. EWLP contended that the project would additionally benefit the cement and fertiliser industries, which presently contribute to national employment and the economy. Representatives from the Australian Mining Cities Alliance (AMCA), a collaboration between five local governments in Australian mining regions, agreed there would be support for the industrial development associated with steel mills in both the Pilbara region and Mount Isa.
2.11Some submitters to the inquiry tied employment and industrial considerations into the broader socioeconomic viability of some towns. AMCA submitted that for some members, ‘the most significant long-term issue is that of economic and social sustainability of their communities, particularly as global commitment to decarbonisation has a direct impact on the outlook for fossil fuel mining and gas extraction’. Accordingly, AMCA offered ‘in-principle’ support for the proposition that ‘creation of large numbers of jobs in locations such as Newman… would offer new economic prospects for these communities, which would greatly enhance their outlook for economic and social sustainability’.
2.12Mr Michael Apathy from the Northern Territory Manufacturers Council reinforced this connection. He confirmed PIB would be a ‘real opportunity for sustainability and job prospects across Australia’, and suggested it could be leveraged to increase the population of the Northern Territory—one of the territory’s challenges.
2.13The first public hearing examined whether the potential increase in domestic steelmaking capacity would enhance Australia’s national security; an issue explored further in Chapter 3.
Economics and government support
2.14As outlined in Chapter 1, EWLP argues PIB will result in a range of economic benefits alongside employment, including increases to national gross domestic product, an improvement to the balance of payments, taxation receipts, and supply chain cost efficiencies and technology transfer benefits. Offering a top‑level figure on economic benefits, Mr Condon said PIB ‘will provide US$740billion in economic benefit’, and compared it to New South Wales being ‘$630 billion as an economy’.
2.15The economics of development in the Pilbara were also cited as an impediment to the establishment of a steelmaking plant in the region. In response to a question asking why such plants have not been established in the past, CrPeterLong, an AMCA witness and Mayor of the City of Karratha, observed ‘there have been’ proposals to do so, as far back as the 1960s, but ‘it’s always been an economic issue’ as to why it has not occurred.
2.16Mr Colin Donegan from EWLP estimated the taxation growth at ‘$23 billion’ compared to the $21 billion submitted by EWLP, and noted the calculation was based on figures from prior to the COVID-19 pandemic and Russia’s invasion of Ukraine. Mr Donegan suggested the benefit of the full project, at four phases, could be $100 billion, which he contextualised as Australian Government debt paid off ‘in 10 years’, and the acquisition of nuclear-powered submarines under AUKUS ‘in three and a half years’.
2.17Accordingly, PIB would require significant investment. EWLP provided evidence that, other than the feasibility study, the project would be privately financed. The total figure of $100 billion includes:
approximately $21–$22 billion (US$16.0 billion) for rail, including contingency; or around $6–7 million per kilometre;
approximately $6.2 billion (US$4.1 billion) for the steel plants;
unquantified costs for land acquisition; and
$370 million for the bankable feasibility study, of which the proponent is seeking 20 per cent to be funded by the Australian Government.
2.18In EWLP’s first submission, Mr Condon specified that the $300 million would be funded by the Australian Government through ‘bond issuance’, which DITRDCA noted would require advice from Treasury along with foreign investment approvals. This would, in Mr Condon’s words, show private investors that Australian governments had ‘skin in the game’, allaying any sovereign risk concerns from sovereign funds. This figure in the second hearing was revised to $370 million, but Mr Condon confirmed public funding was being sought for only 20 per cent, or $74 million.
2.19Mr Condon advised that the land acquisition would need to be undertaken (and paid for) by the Australian Government, with the government to own the land and lease it to PIB. He characterised this lease arrangement as EWLP financing a ‘national asset’ that would be publicly owned for the benefit of Australia. MrPeter Rimmington from EWLP confirmed that costs for land acquisition were not contained in the PIB financial model.
2.20In addition to funding for the feasibility study, the project proponent is seeking a range of other support measures from the Australian Government, including project listing, ministerial appointment and assistance with other tasks such as land acquisition. Mr Condon repeatedly emphasised the need for government support, calling for a ‘whole-of-government approach’, and suggesting EWLP had ‘been waiting for the government’ to endorse PIB’s merits.
2.21The project proponent suggested that such support would be important to navigate the array of approvals and to ensure the project’s overall ability to proceed on schedule. For example, EWLP’s first submission outlined that the development process for the project would necessitate applications to ‘ten (10) local governments and multiple Aboriginal Land Trusts’ as well as referrals under the Environment Protection and Biodiversity Conservation Act 1999, and the confluence of multiple decision-making processes could cause delays, risking the project’s viability.
2.22EWLP representatives emphasised that the employment, economic and industrial benefits of PIB should be viewed as interlinked components of a major socioeconomic development package. According to Mr Jock Bell:
By creating thousands of job opportunities in engineering, construction, research, manufacturing and more, the Iron Boomerang would fuel economic growth critical to the quality of life. The project's implementation will result in the re-establishment of critical industry and a significant surge in job opportunities…
Employment prospects would inject new-found vitality into local communities which are now struggling, bolstering their economies and providing a much-needed boost to regional development. By promoting job creation and fostering economic growth, the revival of Australian steel manufacturing through the Iron Boomerang would play a pivotal role in reinvigorating our regions and laying the foundations for a prosperous future.
Environment
2.23PIB’s construction, operation and steel production, including effects on the existing iron ore and metallurgical coal industries, would have environmental impacts. The project’s proponent contended that proceeding with the project would have a range of environmental benefits, or would use processes and machines that are more environmentally friendly than alternatives. EWLP summarised this positive impact as PIB augmenting and complementing global steel supply chains ‘in a more environmentally sustainable way’. EWLP asserted the project would have the following benefits:
elimination of ships and trains returning empty after transporting goods to ports and exporting overseas;
use of ‘environmentally best practice’ locomotives and wagons to achieve 100 percent decarbonisation by 2040, including fuel use efficiencies through reduction in aerodynamic drag;
energy efficiency benefits;
exportation of slab steel with carbon credits; and
a reduction in maritime traffic in ‘ecologically sensitive areas’, such as the Great Barrier Reef.
2.24PIB argued that some of the environment benefits would overlap, such as ecological and freight efficiency benefits from changes towards shipping practices. EWLP’s Mr Donegan provided evidence that 55 of the custom ships wold ‘replace 200 large-scale bulk carriers and container ships’ going through the Great Barrier Reef, leading to around a 75 per cent reduction in maritime incident risk. Further, Mr Condon argued that such benefits would not be exclusive to the environment, claiming that the ‘economic benefit of the ships’ would lie in options for slab steel to be exported with carbon credits.
2.25Mr Donegan further noted that the designer of the rail corridor ‘took into account… known environmental sites and environmental communities’. However, the impact the construction will have on these was not elaborated on.
2.26Environmental regulatory approvals would need to be among the support measures provided by the Australian Government. EWLP acknowledged in its submission that a referral under the Environment Protection and Biodiversity Conservation Act 1999 is required for PIB, and this view was echoed by officials by DITRDCA, who advised it would be a matter for the Department of Climate Change, Energy, the Environment and Water.
2.27A variable in the environmental impact of PIB is the prospect for ‘green steel’. Green steel is the colloquial term for steel produced without metallurgical coal. In the case of PIB’s plan to use metallurgical coal, Mr Condon noted that green steel (produced with hydrogen instead of fossil fuels) would be ‘very good’ for scrap metal, but that ‘there are no secondary products from hydrogen green steel’ which are ‘worth more than the steel’.
2.28Mr Andrew Trotter, the Chief Executive Officer of Aussie Farmers Mutual, explained that one such secondary product, nitrogen, could be used to produce cost-effective urea for use as a fertiliser, which would be an otherwise uncompetitive industry in Australia. Urea is also used as an additive to diesel engines to reduce emissions, and when there were global shortages in 2021 following export restrictions by China, the Australian Government provided a $29.4 million grant to Incitec Pivot to ramp up production.
2.29Some witnesses considered PIB unviable for environmental reasons—both the environmental impacts of the project and environmental factors impacting its business model. Mr David Arthur, President of the Wide Bay Burnett Environmental Council (WBBEC), summarised his opposition to the project as a consequence of the need to address climate change:
The consequence of this is that while a railway across northern Australia may be of benefit, and we've just heard that it would certainly be beneficial for Mount Isa to be connected to the rail network, we do not see that the Iron Boomerang concept—that is, transporting coal from the Bowen Basin to Western Australia to use for the smelting of iron—is worth doing. The world needs to cease using all fossil fuels. And there are alternatives available—in particular, the use of hydrogen as a reductant in place of carbon for iron smelting.
2.30For examples of how climate change would affect the project’s viability, MrArthur highlighted his expectation that a ‘green steel’ industry will be developed in Europe by the time construction would be complete, as well as the risk of construction itself being disrupted by severe weather events:
Our expectation is that by the time a railway is constructed across northern Australia, there'll be substantial amounts of hydrogen already being produced for steel. Not only that, but I would also expect that the construction of the railway itself will be somewhat disrupted, from time to time, by weather events—weather events that will be becoming somewhat more severe.
2.31WBBEC endorsed an alternative to PIB’s plan—the construction of steel plants which use hydrogen in the Pilbara to produce and export green steel—avoiding both the transcontinental railway line and the use of metallurgical coal. Mr Arthur suggested this would avoid the risk that returns on investment from the use of metallurgical coal (as would be the case for PIB) do not eventuate.
2.32Mr Arthur acknowledged that this alternative was not without its own implementation issues. He agreed that he would be concerned about the impact on Australia’s freshwater systems if the electrolysis of water was being used to produce hydrogen. As a possible alternative, Mr Arthur cited recent research from the University of Adelaide which successfully produced hydrogen through the electrolysis of non-desalinated seawater. On the electrolysis of desalinated water, Mr Arthur said he was ‘open minded’ about the risks of brine disposal into the Great Barrier Reef. Mr Arthur also mentioned the technology a company is using to process methane into hydrogen and graphite.