BHP Settles $250m Royalty Dispute with WA Government

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BHP will pay the state government $250 million after settling the barney over underpaid royalties.

The government had disputed a deduction applied to shipments of iron ore dug up in WA which had been applied since 2004.

As a result of the deduction, the state government started negotiations more than two years ago to claw back some of the $200 million to $300 million it claimed it was owed.

Premier Mark McGowan said the settlement resolved the disagreement with the miner and he would direct the $250 million towards worthy projects.

He will allocate $230 million to the construction of a new maternity hospital at the QEII site, replacing King Edward Memorial Hospital in Subiaco.

About $15 million is headed to Hedland Senior High School for upgrades and $5 million will go to Newman Hospital for extra beds and an expanded procedure room.

Mr McGowan said the agreement prevented taxpayers from being exposed to lengthy and expensive legal proceedings.

“This settlement resolves the dispute with BHP, and I’m pleased we’ve been able to negotiate a very positive outcome for WA taxpayers, with $250 million directed towards worthy projects,” he said.

“I am assured by BHP and its joint venture partners that they did not intentionally seek to minimise royalty payments, and I accept this advice, and thank BHP for working to resolve this dispute co-operatively with the state.”

BHP president operations Minerals Australia Mike Henry told Gareth Parker on 6PR Radio’s Mornings it had been “an issue of technical interpretation”.

A statement from BHP said the rift had been “a genuine dispute and there is no assertion by the state that BHP, or its JVPs, have deliberately or knowingly sought to avoid or minimise the royalties payable to the state of Western Australia”.

“As part of our agreement with the WA Government, BHP and its JVPs have ceased to claim the deduction in question and have agreed to a make a payment of A$250 million to the state in resolution of its retrospective claims”, it said.

BHP Western Australia Iron Ore Asset president Edgar Basto said BHP was pleased the matter had been resolved.

“We value our relationships with the WA Government and people of Western Australia and our priority in this matter has been to ensure a constructive and fair resolution without having to resort to lengthy and costly legal proceedings,” he said.

During the dispute BHP said the deduction had applied to its iron ore royalties for several decades, was clearly identified on its royalty returns and had been regularly audited and accepted by the state’s Department of Mines and Petroleum.

“The mines department has recently queried a long-standing and historically accepted deduction of costs related to the sale of iron ore,” a BHP spokesperson said.

“The long-standing deduction has been consistently audited and accepted by the mines department.

“It’s concerning that previously audited and accepted payments to the government are now being revisited and BHP is now working with the mines department to resolve the matter.”

BHP has contributed more than $11 billion in iron ore royalties in the past decade and more than $3 billion in social and Indigenous programs, community infrastructure, and training programs across the state over the last seven years.

Source: WA Today, 28 June 2019