4. This Chapter examines GA’s strategic planning and the alignment of its products, services and activities with the Government’s priorities for geoscience information and data capability. Strategic planning is important for providing a frame for unifying management to a single understanding of key priorities and how they are to be achieved. If well done, strategic plans should: serve as a valuable reference when making decisions between competing options/investments; empower managers to tend to important challenges rather than react to transient pressures; and make it easier to decide longer term investments, commitments and capability development and ensure such decisions are consistent. Strategic planning also serves to provide visibility to external stakeholders as to how the priorities of the Government/shareholders drive what the organisation is doing and how it deploys resources. A problem in the past for governments in deciding resources of GA is in the visibility of and how well GA resources are being applied to delivering geoscientific and spatial data to meet Australia’s needs. Strategic planning Policy mandate While GA’s primary role is to provide technical advice to government to support policy decisions, GA does not have a specific legislated mandate. GA derives its role and responsibilities from relevant components of responsibilities set out for the Resources, Energy and Tourism portfolio under the current AAO. From time to time, GA is also provided with direction to take on additional responsibilities through specific Budget measures. The current AAO as it relates to GA in the Resources, Energy and Tourism portfolio includes: “Geoscience research and information services including geodesy, mapping, remote sensing, groundwater and spatial data coordination”. AAOs have been generally the same since GA was formed in 2001. The only material change since then was made on 14 October 2010 to specifically acknowledge ‘groundwater’ and change ‘land information coordination’ to the broader concept of ‘spatial data co-ordination’. Appropriation outcome GA’s main source of funding is through direct Budget appropriation which is provided for a single outcome. This outcome is: “informed government, industry and community decisions on the economic, social and environmental management of the nation's natural resources through enabling access to geoscientific and spatial information”. This has been GA’s outcome since the 2009-10 Budget. In the previous decade, GA’s outcome focused on enhancing benefits through the application of geoscientific research and information, and did not mention GA’s role in spatial information.
Table 9: New Policy Measures 2002-2010 excluding capital (Discrepancies in some totals are due to rounding) Year Measure 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 TOTAL 2002 Pre-commercial oil exploration 7.00 7.0 2003 Core petroleum programme 8.70 8.90 9.10 9.30 36.0 2003 Seismic data preservation 2.50 5.00 7.50 10.00 25.0 2004 Critical 0.20 0.20 0.20 0.20 0.8 2005 Tsunami warning 2.90 4.29 4.33 3.33 14.9 2006 Offshore energy security 5.02 22.38 21.25 13.25 11.26 73.2 2006 Onshore energy security 7.38 14.83 14.80 12.67 9.19 58.9 2007 Carbon capture and storage 2.64 2.40 2.25 2.00 9.3 2008 Critical 0.20 0.20 0.20 0.20 0.8 2008 Spatial data integration 0.40 0.80 1.2 2010 Additional GA resourcing 5.00 24.34 25.77 10.18 65.3 TOTAL 7.00 11.20 14.10 19.70 36.19 44.39 42.38 29.17 27.65 24.54 25.77 10.18
Had this arrangement applied since 2002, it is likely that the pool of staff available to service other Australian Government agencies would today be inadequate due to the growth in demand from other agencies for GA specialist services. Evidence from stakeholder consultations undertaken as part of this Review generally supported GA’s implementation of inter-agency cost recovery arrangements. A key feature of many these arrangements is the use of formal agreements or memorandums that set out the key principles, roles and responsibilities of each party. GA’s experience, supported by stakeholder feedback, in fact appears to commend this as a general approach. One advantage noted by the CEO of GA is that the agreements assist internal executive management by providing key benchmarks for comparing project progress and performance. The Review noted in particular that the isolated cases of client problems were also cases where such an agreement was not in place. The Review considers that, overall, these arrangements are working satisfactorily and that a shift to direct funding (or partial funding) of GA for services sponsored by other portfolios would be a regressive step in terms of assisting alignment between policy priorities and resource allocation. Areas for improvement in inter-agency cost recovery agreements include addressing the ‘ramping up’ and ‘ramping down’ of projects that require the acquisition of specialist capabilities and/or have ongoing costs once the main work is completed. Section 31 revenues for 2009-10 show an unexpected jump between the May 2010 prediction of $38.8 million and the final outcome of $56.1 million. A significant reason for this appears to be a distortion created by transactions related to funding by DRET of agreements with State and Territory governments – where funding for CCS initiatives was transferred to GA under Section 31 substantially for on-payment to the relevant states and territories. These moneys appear in GA accounts as if they were revenue yet they do not represent payment for GA services or products. It would seem more practical for a GA officer to either be authorised to draw from a DRET appropriation or to advise an appropriate DRET officer when payments are required.
In its submission to the 2001 Productivity Commission inquiry into Cost Recovery by Government Agencies, AGSO outlined the following impacts of the 30 per cent cost recovery target that applied from 1994: Cost recovery conflicts directly with the Government’s objective of encouraging investment in, and exploitation of, community owned mineral and energy resources and specifically may disadvantage Australia in competing for investment internationally. The pressure to attract funding can lead to distortion of a program away from efficiently meeting long-term strategic objectives to short-term tactical activities with more immediate investment prospects. Pricing of pre-competitive data can disadvantage small and medium enterprises that historically have had a major role in mineral discoveries. Potential for pricing can encourage creation of multiple datasets for any sector/field, reducing inter-operability and creating overall efficiency loss in terms of data management and innovation. The Productivity Commission in its report, noted that: “The high price of this [geophysical] information has implications for other objectives of Government. It is likely to reduce the amount of exploration of Australia’s mineral and petroleum resources”. Anecdotal evidence provided to this Review has also indicated that the cost recovery target pressed the organisation into offering services that many considered to be competing with the private sector or a significant departure from the agency’s core activities at the time. Examples included: use of the AGSO research vessel Rig Seismic for commercial work, which was viewed as unfair competition by the seismic exploration industry; and undertaking of overseas consultancies and mapping projects in countries such as Oman – as well as requiring the diversion of AGSO’s very best human resources from other tasks, it was questionable whether strengthening the quality of the geoscience capability of other competitor countries could be seen as in line with the agency’s primary objective of increasing exploration in Australia. The desire to avoid a repeat of the tensions between government and industry that resulted from AGSO’s foray into commercial services are a factor in GA’s current policy of not providing services that are available from the commercial market. Conclusion – Geoscience Australia’s cost recovery arrangements Overall, the Review has found GA’s arrangements for cost recovery to be in alignment with Government policies. Only a small proportion (typically less than $2 million) of GA’s Section 31 revenue falls within the technical scope of the Government’s cost recovery policy. A core concept in this policy is the definition of a ‘basic information product set’ being information funded by the agency’s appropriation.
Charge companies awarded an exploration permit from the acreage release process Provides a sustainable income stream for GA. Does not discourage companies from bidding for acreage. Relatively simple to apply prospectively. Targets a limited pool of users – namely those companies that respond positively to Government solicitations and are successful. Would require Commonwealth and State legislative change. Companies have not derived any financial benefit at this stage and there is no guarantee of future revenue stream. Tenuous link to information provided in terms of sending price signals on the appropriateness or quality of pre-competitive studies. Charge companies when granted production licences Provides a sustainable income stream for GA. Does not discourage companies from exploring acreage. At this stage companies should have derived tangible benefit from the GA work (especially if in a frontier area). Difficult to apply prospectively without creating sovereign risk for exploration already underway. Reasonably predictable number of licences and hence fee stability. Severely limits the pool of users from which contribution sought. This charge would require both Commonwealth and State legislative change. Negligible price signal effect and tenuous connection to cost recovery: long lead time between GA work and this stage (usually 10-30 years); legal representation as a non-tax relies on functional representation as a fee to access a known resource. The charge could result in marginally-profitable discoveries not proceeding to production. Companies have not yet derived any financial benefit at this stage.
ABARES.2010, Australian Commodities – December quarter 2010, Canberra, ABARES Association of Mining and Exploring Companies. 2010, Submission to the Policy Transition Group: The proposed Minerals Resource Rent Tax and exploration development options, AMEC Australasian Institute of Mining and Metallurgy. 2010, AusIMM Submission to the Policy Transition Group on the Mineral Resource Rent Tax – October 2010, Carlton Australian Bureau of Statistics. 2010, 2009-10 Australian System of National Accounts, cat. no. 5204.0, ABS, Canberra Australian Bureau of Statistics. 2010, 2009-10 Year Book Australia, cat. no. 1301.0, ABS, Canberra Australian Bureau of Statistics. 2010, Labour Force Australia, Detailed, Quarterly, November 2010, cat. no. 6291.0.55.003, ABS, Canberra Australian Bureau of Statistics. 2010, Mineral and petroleum exploration – September quarter 2010, cat. no. 8412.0, ABS, Canberra Australian Bureau of Statistics. 2010, Private new capital expenditure and expected expenditure Australia – September quarter 2010, cat. no. 5625.0, ABS, Canberra Australian Geological Survey Organisation. 1993, Evaluation of the Continental Margins Program 1992/93, Canberra, AGSO Australian Geological Survey Organisation submission to the Productivity Commission Review of Cost Recovery, 2000 Australian National Audit Office. 2010, Audit Report No. 22. 2009-10 Performance Audit: Geoscience Australia, Canberra Australian Petroleum Production & Exploration Association Limited. 2009, Energy White Paper discussion papers – April 2009 – APPEA comments, Canberra APPEA Australia’s Future Tax System Commonwealth Grants Commission. 2009, Report on State revenue sharing relativities 2009 update, Canberra Department of Finance and Administration. 2005, Australian Government Cost Recovery Guidelines – July 2005, Canberra Department of Industry, Science and Resources. 2001, Positioning for growth – Spatial Information Industry Action Agenda, Canberra
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Attachment C Table 11: Examples of pre-competitive Geoscience Australia data contributing to discovery (including area selection and targeting) Discovery (Deposit) Commodity Status (mine, closed mine, undeveloped deposit, prospect) Discovery Year Company Type of pre-competitive information Olympic Dam (SA) Operating mine 1975 Western Mining Corporation Ltd. Regional gravity and aeromagnetic data by BMR, regional mapping by SA Geological Survey and BMR. Nickel deposits in the Eastern Goldfields Province (EGP: WA) Nickel Operating mines 1966-present Kambalda near Lake Lefroy discovered by prospector with follow-up by WMC Resources Ltd; many other nickel deposits in EGP discovered by WMC and other companies using government-generated data. Regional aeromagnetic data and regional geological maps by BMR and GSWA. Duchess (Phosphate Hill) and other deposits (Qld) phosphate Phosphate Hill currently operating (First phase of mining by Queensland Phosphate Ltd - subsidiary of WMC - 1975-78) Other deposits undeveloped. Phosphate Hill 1966 Broken Hill South (discovered Phosphate Hill) currently owned by Incitee Pivot. BMR 1:250 000 geological maps used to locate the Duchess area for sampling.
South Alligator River uranium field (NT) uranium Historic mine Coronation Hill was discovered by a BMR geologist in 1953, another 13 deposits found by companies BMR and companies. Detailed regional geological mapping and radiometric surveys. Westmoreland (QLD) uranium Undeveloped deposit 1956 Mount Isa Mines -Conzinc Rio Tinto of Aust JV. BMR low level airborne radiometric survey. Oobagooma (WA) uranium Undeveloped deposit 1980 AFMECO. Found by targeting formations older than the Grants Group drawing on regional geology provided by BMR mapping. Cadia (NSW) Gold-copper Operating mine 1996 Newcrest Mining Ltd. Regional geological mapping (jointly with GSNSW) and GA geochemical data provided new geological framework. Nebo-Babel (WA) group elements undeveloped deposit 2000 BMR, and later by WMC Resources Limited. Regional aeromagnetic and gravity data and AGSO Research Newsletter 27 (1997); BMR Bulletin 239 provided a regional geological setting for the maficultramafic intrusions and possible analogues to major deposits in Canada.