Chris Ellison-led MinRes says it won’t pay US oil and gas major
The WA government has dragged embattled MinRes to court after failing to persuade Chevron to waive port fees.
Oil and gas giant Chevron stands to pocket more than $1bn from Mineral Resources over the life of a major iron ore project under the terms of a secret port agreement with the West Australian government.
Chevron has so far stood its ground in talks with the government about waiving its rights in regard to third-party use of a shipping channel and cargo wharf at the Port of Ashburton, even though the channel and wharf are classed as state-owned public infrastructure.
Under the terms of a secret deal with Chevron, the WA government’s Pilbara Port Authority imposed a 90c per tonne shipping channel levy and a 50c per tonne cargo wharf levy from mid-2024 just as MinRes’s Onslow Iron project was coming into production.
Based on Onslow Iron hitting its production target of 35 million tonnes per year, Chevron stands to reap $945m over the 30-year life of the project plus additional fees every time MinRes uses the cargo wharf for crew changes or maintenance on its fleet of transhippers. The port authority will pass the fees on to Chevron in full with the charges likely to rise in line with inflation.
It is understood the WA government started talks with Chevron about waiving its rights in 2022 but has been unable to reach agreement with the US company.
The WA government is now using taxpayer funds to take legal action against MinRes to recover more than $5m it alleges is already owed by the embattled Perth-based company.
MinRes regards the charges as invalid, has said it will not pay and has accused Chevron of refusing to show it the relevant contract between the energy major and the WA government.
In response to a series of questions put to Ports Minister Stephen Dawson, the WA government told The Australian it wanted “all parties” to resolve the dispute.
“The matter is before the courts, with Pilbara Port Authority (PPA) exercising its rights and obligations as a government trading entity to take appropriate action to recover unpaid, overdue port charges by instituting debt recovery proceedings in the Supreme Court of WA,” a government spokesman said. “The state government recognises the strategic and economic value of the Port of Ashburton in diversifying our economy, assisting the resources industry and delivering quality jobs and supports all parties reaching an agreement to resolve the matter.”
The secret deal between Chevron and the WA government dates back to the construction of the Wheatstone LNG project in 2011 at a cost of about $US34bn. Chevron spent about $3bn of the total project cost building the Port of Ashburton near the town of Onslow and dredging a shipping channel now being partially used by MinRes.
Chevron handed over the Port of Ashburton to the PPA in stages between 2017 and 2018, making it a state-owned asset. However, Chevron has retained some rights as reflected in the charges levied against MinRes.
Chevron has declined to answer questions from The Australian about the issue, or to confirm the existence of the secret deal with the WA government. It did not comment on whether it stood to reap $1bn if the Onslow Iron project lived up to expectations, or on whether it had been asked by the WA government to waive payment rights.
“The PPA is responsible for administering port fees and charges in relation to the Port of Ashburton. Port user fees are a known cost of doing business, and Chevron Australia itself makes significant payments to the PPA for our use of the Port of Ashburton,” a Chevron spokesman said. The levies represent another major blow to MinRes as it fights to stay afloat in the wake of problems with the 150km-long Onslow Iron haul road that connects mining operations to the port operations. It has savaged Houston-headquartered Chevron over the shipping channel and wharf charges.
“All of the money collected from these levies would go straight to Chevron, with no benefit to the public whatsoever,” a MinRes spokesman told The Australian in an exclusive report on Friday.
“This money would be taken from a WA company and gifted to an oil and gas giant in Houston for sailing our own ships from our own port facilities in Australian waters through a public channel.
“Chevron should have handed the channel back to the state as a matter of course – not tried to skim off the top of the hard work of others to send even more cash back to the US.”
The outburst came with MinRes fighting to save thousands of jobs as it struggles with a $5.8bn debt, low prices in its lithium business and the fallout from tax evasion and other scandals involving co-founder and managing director Chris Ellison.
MinRes launched its legal action in the WA Supreme Court about a fortnight ago after requests to view the secret deal on the Port of Ashburton were denied.
The company is digging in for a legal fight with the WA government and Chevron over the levies, and may rely on a section of the WA Port Authorities Act that stipulates charges must be based on “prudent commercial principles”.
The levies would apply to any new owner of Onslow Iron if MinRes had to sell the asset or collapsed.
MinRes knew about the prospect of having to pay the levies as far back as 2020 while planning Onslow Iron, according to a document seen by The Australian.
MinRes received verbal and written indications from WA government authorities that the levies could be waived pending the outcome of talks with Chevron, but received notice it would need to pay up around June last year.
The diversified mining services provider and iron ore and lithium producer has been heavily criticised over disclosure standards over the past 12 months. It never told the market about the levies or the payment dispute.
“MinRes disputes the validity of the charges and has not been provided with evidence to justify their basis,” a MinRes spokesman said on Sunday. “The state has informed us that the originating basis of the charges relates to a confidential contract between the state and Chevron, which Chevron has refused MinRes’ formal request to view. We have begun interlocutory proceedings in the Supreme Court in an attempt to discover these documents.
“These charges were only introduced after MinRes began operations and are over and above the millions of dollars of standard port charges that MinRes pays to operate from the Port of Ashburton. Until the matter is resolved, MinRes continues to consider these new charges invalid and thus not due and payable.”
Alannah MacTiernan, who was ports minister in WA’s Labor government from 2018-2021, said it was not uncommon for big resources companies that built what became state-owned infrastructure to retain some commercial rights.
“Should these deals be secret? Probably not,” she said.
“What happens with companies is they try to assert their advantage and maximise their asset. Government has to use its best endeavours to get them to behave in a way that is reasonable and actually does also advance the interests of the broader community.”
As part of a $3.5bn spend on Onslow Iron, MinRes built its own wharf and port infrastructure west of the Chevron-built cargo wharf and oil and gas port facilities.
MinRes relies on a haul road that needed major repairs and upgrades after just a few months of regular use and jumbo road trains that have been plagued by rollover problems to get iron ore to port. It then loads the ore onto transhippers for transfer to carriers anchored about 22 nautical miles offshore.
The shipping channel dredged by Chevron for use by LNG carriers is about 10 nautical miles in total, and MinRes uses about 4 nautical miles of this. Chevron has priority on use of the channel, which is dredged to a depth suitable for LNG carriers that far exceeds the needs of the MinRes transhippers.
MinRes and Chevron were in talks about Onslow Iron for at least 18 months before MinRes pulled the trigger on the investment.
Chevron acknowledged potential impacts on its Wheatstone operations during WA’s environmental assessment process, raising concerns about social surroundings at Onslow, air quality, vegetation loss and harm to marine life.
In a statement issued in 2022 as MinRes faced opposition to the project from Andrew Forrest and others, Chevron said it supported “industrial development in the Ashburton North Strategic Industrial Area, which contributes to the economic growth and future prosperity of Onslow”.
“As anchor tenant, Chevron has invested more than $3bn in the development of the Port of Ashburton, which continues to provide neighbouring operators the opportunity to export from the port,” Chevron said at the time.
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