Discuss about the Impact Of Regulatory Frameworks, Treaties, Agreement And Conventions On Bhp Billiton In Australia.
This report emphasises on the impact of regulatory framework and treaties, conventions and agreements on the products and services offered by the company. For this type of analysis, BHP Billiton an Anglo- Australian company has been selected. This is a multinational company that has its business operations in Australia and all over the world.
BHP Billiton was established in the year 1851 with its headquarters in Melbourne, Australia. It mainly deals with exploration, acquisition and development of natural resources across the globe. The main products offered by the company include copper, iron ore, coal, petroleum and potash. Besides this, it has its assets in Western Australia, United Kingdom, deep water of Gulf of Mexico, Trinidad, Tobago and Pakistan through which oil and gas is explored, developed and marketed. In addition to this, it also explores silver, lead, zinc, uranium, thermal coal, gold, iron ore, and seaborne metallurgical. Along with this, it also owns the Jansen potash project situated in Saskatchewan potash basin in Canada (IBIS, 2016). The company operates in industrial metals and minerals industry in basic materials sector. The company has 80000 full time employees. Its major management office is in London (BHP Billiton, 2016).
It is considered as the largest mining company in the world in terms of revenue. The company employs approximately 42829 employees in Australia including employees from all the subsidiaries which are under the control of the company (IBIS, 2016).
The Australian government grants different types of licenses to companies for the purpose of exploration and production of the minerals. The three types of licenses include exploration license, mining license and lease. Exploration license is issued by the government for the purpose of exploration and drilling of mineral sources and core samples. Besides this, it is granted for 5 years and provides rights to pursue drilling surveys and land entry on appraisal basis. In addition to this, mining license helps in extraction and selling of the minerals from license area and granted for specified time period in relevant State for example for 21 years in Western Australia. Along with this, lease provides a title over mineral discovery for 5 years and provides rights to explore and recover on an appraisal basis (Chambers, n.d).
The licensing system facilitates in transferring of the ownership of the mines from state to private organizations for the purpose of exploration, extraction and selling of metals and minerals. In context to this, BHP Billiton has also attained the licenses of different locations such as deep water in Gulf of Mexico and other mines for the purpose of exploration, extraction and selling of different minerals such as coal, iron ore and other metals to different companies in different countries for the production of final goods. BHP Billiton is the biggest employer in Australia; therefore, there is a significant impact of the workplace relation framework on the company. It is requisite for the company to have a access to safe and productive environment so that training of employees can be done in an effective manner (Environmental Defender’s Office of Western Australia, 2011).
Along with this, the company can also gain employment arrangements that help them to attain competitive advantage over others by selecting skilled employees. The workplace relations framework of Australia provides safe, high performing and highly competitive workplaces. It aids in providing leading edge of global innovation and competitiveness to different organizations. The Department of State Development is responsible for the administration, management and regulation of exploration of minerals and mining sectors. The mining activity has a significant impact on the environment; therefore as per the regulatory framework in Australia, it is requisite for the companies to provide environmental reporting where there is a requirement of providing different incidents as per the criteria defined. BHP Billiton also discloses information related to carbon footprints and the emission of harmful products in the environment along with the measures adopted by it to reduce the negative impact of the activities carried out by it on the society (Yang, 2011).
Besides this, there is also an occurrence of the fluctuations in the commodity prices due to changes in the technology, industry demand which has a significant impact on the financial results of the company. There is a decline of US $1 per tonne in iron ore prices and US $1 per barrel decline in the average price of oil which has impacted the profit after taxation of the company in the fiscal year 2015 to US $144 million and US $54 million respectively. In addition to this, the sales of the company is denominated in US dollar but the operating costs of the company is influenced by the fluctuations in the currencies of other countries such as Australian dollar, Chilean peso and US dollar. The main reason behind the impact of the foreign currency is that the mines and processing plants are located in these countries (BHP Billiton Annual Report, 2015).
Along with this, controls on imports, exports, greenhouse gas emissions have resulted in delaying the construction and expansion of existing operations. In addition to this, the company has to adhere with the requirements of the Native Title Act 1993 for the recognition and establishment of native title which negatively affects the operations of the business due to their complex nature and difficulty of prediction. The logistical and processing operations of the company are situated in onshore and offshore geographic locations. These are subjected to natural disasters such as earthquake, hurricanes, floods and tsunami. These incidents cause disruptions in production and loss of facilities (Jarvie-Eggart, 2015).
The changes in the climate and the regulations of the country regarding maintenance of climatic change adversely affect the operations of the company. This is because; it mainly produces fossil fuels such as coal, oil and gas which resulted in the emissions of greenhouse gases that contribute towards climate change. For instance, Australia has abolished carbon tax in 2014 which has resulted in increased productivity and positive impact on the sales and profitability of the company. This is because the operating cost of the company has got reduced as there is an emission of greenhouse gases in the environment due to production of fossil fuels (Runge and Shikwati, 2011).
Besides this, the Australian government regularly reviews different projects of the company as it is a signatory to the Minerals Council of Australia’s Enduring Value that provides the industrial guidelines for sustainable development at operational level and obligations for consultation and environmental management. For example at Olympic Dam, the legislative limits remained low with respect to management of radiation exposures. It also had complied with the Environment Protection (Air Quality) Policy 1994 (Connor, 2016).
BHP Billiton has entered the nuclear industry in the year 2005. The company has complied with the uranium stewardship principles by the development of national and international nuclear stewardship working groups to work with harmony in order to minimize the harm to people and environment due to the use of uranium as a fuel source. The company is engaged in a direct terms to the production of copper concentrate containing uranium. Application to the export of concentrate, and adoption of the Principles provides a responsibility to the company in the areas in which it operates and controls (Ashurst, 2012).
Various interim measures are put in place that reflects national and international regulation and the company like International Council on Mining and Metals, Sustainable Development Principles and the Mineral’s Council of Australia’s Enduring Value framework for sustainable development. In Australia, the sale and export of radioactive material and uranium concentrates are regulated by its government. This is why, there is a requirement of establishing a new bilateral safeguards agreement with third parties for the purpose of allowing company to export copper concentrates to China or any other third party. These agreements helps in ensuring peaceful use obligations applied to any uranium recovered in China, that presence of bilateral Nuclear Materials Transfer Agreement results in accounting BHP Billiton for contained Uranium. This also indicates that the company has complied with the Australia’s uranium export regulations, international law and Chinese law (Olympic Dam Expansion Supplementary Environmental Impact Statement, 2009).
Along with this, before the negotiations for bilateral safeguards agreement, the Australian government has considered many issues such as strategic issues. Therefore, the government has granted the export license to the company for exporting UOC to China. In addition to this, the uranium in Australia is sold exclusively for peaceful purposes such as electricity through nuclear energy. Along with this, it is also subjected to safeguards agreement with IAEA and bilateral safeguards agreement. In the year 2010, multiple shipments have been sent to China from Australia containing Uranium as the country has satisfied that the sold uranium in China is used exclusively for peaceful matters and has not been used for making nuclear weapons (Olympic Dam Expansion Supplementary Environmental Impact Statement, 2011).
In the year 2003, a convention between government of Australia, government of the United Kingdom of Great Britain and Northern Ireland is made for the purpose of avoidance of double taxation and the prevention of fiscal evasion in terms of taxes on income and capital gains at Canberra. This has a significant impact on the operations of the company as the tax is imposed either by the government of Australia or UK and does not be imposed by both the governments. This has resulted in increasing the profits of the company as less amount of tax is levied on the products and services of the company. This treaty helps in enhancing the economic relations between both the countries. The UK is considered as the second largest source of foreign investment and third largest trading partner (Miller and Oats, 2012).
There are various Australian companies that are considered being active in UK such as Commonwealth Bank, BHP-Billiton and Boral. This also results in increasing the financial integration which has also resulted in substantial increase in the foreign investment by the companies operated in Australia. The dealings of mining companies with indigenous groups have changed due to establishment of reconciliation movement in the early 1990s in order to create bridge between mainstream Australia and indigenous Australians. The regulatory body which supervises it is Reconciliation Australia (Huang and Austin, 2011).
In context to this, BHP Billiton a large resource company has developed Reconciliation Action Plans for the purpose of providing information related to commitments with indigenous Australian. Indigenous land use agreements are used by the companies for the purpose of maintaining harmonious relations with indigenous communities. In addition to this, there is also an integration of socio-economic concerns in the community development policies and strategies for indigenous communities for the purpose of prevention of negative impact and encourage positive influence on the socio-economic outcomes (Centre for Social Responsibility in Mining, n.d).
Conclusion
It can be concluded that BHP Billiton is one of the largest resourcing companies of Australia with established operations in many countries across the globe. It was founded in the year 1851 and deals in the exploration, development and selling of natural resources such as coal, petroleum, potash, copper and iron. Besides this, the company has to complied with regulatory frameworks of the country in order to operate in a successful manner. The Australian government grants different types of licenses to companies for the purpose of exploration of fossil fuels and natural resources. The company has attained the permission for exploration of the natural resources such as coal, petroleum, potash copper and iron.
It has owned license for deepwater in Gulf of Mexico. Besides this, there is also a significant impact of the treaties and conventions made by the country on the products and services of BHP Billiton. It is requisite for Australia to make a bilateral agreement with China for the purpose of export and sale of uranium to China so that BHP Billiton can export uranium to companies operating in China for the purpose of peaceful use of the product.
References
Ashurst. 2012. Uranium in Australia. [Online]. Available at: https://www.google.co.uk/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=4&cad=rja&uact=8&ved=0ahUKEwjezoix_bPOAhWJvI8KHRuHAu0QFgguMAM&url=https%3A%2F%2Fwww.ashurst.com%2Fdoc.aspx%3Fid_Resource%3D7227&usg=AFQjCNGBa4Cwtm4dxmgYJZGf_xyhRE4xpA&bvm=bv.129389765,d.c2I [Accessed on: 9th August 2016].
BHP Billiton Annual Report. 2015. Resourcing Global Growth. [Online]. Available at: https://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-reports/2015/bhpbillitonannualreport2015.pdf [Accessed on: 9th August 2016].
BHP Billiton. 2016. About us. [Online]. Available at: https://www.bhpbilliton.com/aboutus [Accessed on: 6 August 2016].
Centre for Social Responsibility in Mining. n.d. Agreement-making with Indigenous Groups. [Online]. Available at: https://www.csrm.uq.edu.au/Portals/0/docs/Agreement-making-with-Indigenous-Groups.pdf [Accessed on: 9th August 2016].
Chambers, R.H. n.d. An Overview of the Australian Legal Framework for Mining Projects in Australia. [Online]. Available at: https://www.chamberslawyers.com/wp-content/uploads/downloads/2013/10/060518-Presentation-Eng.pdf [Accessed on: 9th August 2016].
Connor, L.H. 2016. Climate Change and Anthropos: Planet, People and Places. Routledge.
Environmental Defender’s Office of Western Australia. 2011. Mining Law. [Online]. Available at: https://www.edowa.org.au/files/factsheets/me_mining.pdf [Accessed on: 9th August 2016].
Huang, X. and Austin, I. 2011. Chinese Investment in Australia: Unique Insights from the Mining Industry. Springer.
IBIS. 2016. BHP Billiton Limited – Premium Company Report Australia. [Online]. Available at: https://www.ibisworld.com.au/car/default.aspx?entid=2 [Accessed on: 6 August 2016].
Jarvie-Eggart, M.E. 2015. Responsible Mining: Case Studies in Managing Social & Environmental Risks in the Developed World. SME.
Miller, A. and Oats, L. 2012. Principles of International Taxation. A&C Black.
Olympic Dam Expansion Supplementary Environmental Impact Statement. 2011. Product Stewardship and the Nuclear Fuel Cycle. [Online]. Available at: https://www.bhpbilliton.com/~/media/bhp/documents/society/regulatory/_copper/olympicdamproject/supplementaryeis/chapter-27-product-stewardship-and-the-nuclear-fuel-cycle.pdf?la=en [Accessed on: 9th August 2016].
Olympic Dam Expansion Supplementary Environmental Impact Statement. 2009. Introduction. [Online]. Available at: https://www.bhpbilliton.com/~/media/bhp/documents/society/regulatory/_copper/olympicdamproject/drafteis/odxeischapter1introduction.pdf?la=en [Accessed on: 9th August 2016].
Runge, J. and Shikwati, J. 2011. Geological Resources and Good Governance in Sub-Saharan Africa: Holistic Approaches to Transparency and Sustainable Development in the Extractive Sector. CRC Press.
Yang, B. 2011. Regulatory Governance and Risk Management: Occupational Health and Safety in the Coal Mining Industry. Routledge.
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