07 May 2016
by Jon Altman

The Half Billion Dollar Black Slush Fund, Controlled By Nigel Scullion

Indigenous affairs minister Senator Nigel Scullion.

For over 40 years, royalties from mining on Aboriginal land in the Northern Territory has been directed towards Aboriginal projects. But which projects, and why?

When the Aboriginal Land Rights Act was passed in 1976 there was great optimism that the return of ancestral lands to their rightful owners might result in economic improvement, sometimes thought of just in mainstream ways, sometimes in accord with Aboriginal aspirations and wishes.

At the stroke of a pen in 1976, lands that had been reserved for exclusive Aboriginal use under the Crown Lands Ordinance – about 20 per cent of the Northern Territory – was vested in land trusts and was the real estate property of traditional owners. Subsequently Aboriginal ‘land rights’ ownership (as distinct to ‘native title’ determination) has expanded to just on 50 per cent, after a protracted claims process.

But economic improvement could not come from land ownership alone, especially when that land is extremely remote and has low commercial value, financial capital is also needed for any profitable engagement with market capitalism or to support alternate forms of Aboriginal economy.

And so the major architect of land rights law, Justice Woodward who was appointed by Prime Minister Gough Whitlam to head the Aboriginal Land Rights Commission, devised a scheme to assist in the generation of financial capital alongside the natural capital of land rights.

Woodward recommended that Aboriginal people in the Northern Territory be vested with a full royalty right; that is that the royalties usually paid to governments as the asserted sovereign owners of subsurface minerals be instead paid to Aboriginal people.

This was a progressive masterstroke that was influenced by two logics.

The first was historical precedent. In 1952, in another progressive masterstroke from an earlier era, the Minister for Territories Paul Hasluck earmarked all statutory royalties raised on Aboriginal reserves to be held in trust for Aboriginal people.

This was an extraordinary decision for its time because it at once recognised that crown land was exclusively reserved for Aboriginal use and benefit. If mining was to occur on reserves then compensation was to be paid.

What is more, Hasluck marshalled in the introduction of a legal requirement that this compensation would constitute the royalties that would have been paid to the Commonwealth (then administering both the Northern Territory and reserves) and that the royalty rate would be double the standard rate stipulated in the Mining Ordinance.

Hasluck’s policy intent was that such financial resources paid into the Aborigines (Benefits from Mining) Trust Fund (ABTF) could be deployed to assist the process of economic integration of Aboriginal people in accord with the policy of assimilation formally espoused in 1951.

The second was a form of political compromise with Aboriginal interests.

Prime Minister Whitlam had instructed Woodward to vest title in land with the Aboriginal inhabitants of the Territory, as well as ‘sovereign’ rights in minerals and timber.

After intense lobbying by the peak mining industry association, Woodward decided that attaching mineral rights to land rights was a step too far. His compromise was the provision of a royalty right: all royalties raised on Aboriginal land would be foregone by the Commonwealth and paid to a new institution, the Aboriginals Benefit Trust Account (ABTA).

While the ABTA had been legally established in 1952, it only became operational in 1969, when royalties from mines established on Groote Eylandt and Gove started flowing to Commonwealth coffers. A key challenge that the ABTA faced was how to divide its income between those directly impacted by mining and Aboriginal people in the Northern Territory more generally. Eventually a decision was made to allocate 10 per cent to those in areas affected, with the remaining 90 per cent to be either allocated as grants or loans to Aboriginal individuals and groups, or held in trust.

Woodward proposed a radical change to this arrangement and recommended a legal formula whereby 40 per cent of royalties be earmarked to meet the cost of running land councils, with one of their key roles being to mediate and represent traditional owners in negotiations with mining corporations; 30 per cent to be paid as compensation to land owners and others directly affected by mining; and 30 per cent to be retained by the ABTA to be applied to or for the benefit of Aboriginal people in the Northern Territory.

Woodward’s recommendations were all incorporated in the Aboriginal Land Rights Act passed two years later.

I interpret Woodward’s rationale for this three-way division as follows.

First, owners of the land, whether they approved of mining or not, should be compensated for loss of land and the social disruption associated with resource extraction ventures. Arguably all royalties could have been paid to these people but this was sailing too close to a full mineral right and might result in excess wealth for some, with potentially negative transformative effects.

And so 30 per cent was arbitrarily chosen, better than the 10 per cent precedent, but far short of 100 per cent. However, this payment was only in relation to statutory royalties foregone by government, the right of consent provisions embedded in land rights law from 1976 also allowed for the negotiation of additional mining payments to be made to traditional owners.

Second, during the Aboriginal Land Fund Commission from 1973, Land Councils had been established to represent Aboriginal interests. Woodward experienced directly the value of these representative organisations: he referred to them as an unqualified success as institutions that reflect an Aboriginal viewpoint and recommended their establishment as statutory authorities.

Woodward also saw great merit in land councils having revenue independent of standard government budgetary appropriations, hence the recommendation that 40 per cent of royalties be used to fund their operations. Keen on checks and balances, he recommended ministerial approval of land council budgets.

Third, the balance was to be applied to or for the benefit of Aboriginal people in the Northern Territory to reflect in part that not all would be vested with land rights — freehold land, for example, was not available for claim — and in part to ensure some redistribution. This balance was to be held by the ABTA and granted to Aboriginal groups and corporations by the Minister of Aboriginal Affairs on the advice of an all-Aboriginal Advisory Committee nominated by land councils.

In 1982 when I was what is termed today an ‘early career academic’, I embarked on a study sponsored by the Commonwealth Department of Aboriginal Affairs (DAA) to look at the institutional arrangements that had evolved to receive and manage mining royalties in the Northern Territory.

What I discovered and documented was that these new arrangements were not only complicated and incomprehensible to the people who I worked with in Arnhem Land, but they were also poorly understood by a diversity of stakeholders including DAA and the Minister.

And aspects of Woodward’s schema had fundamentally changed both in translations into law and by the granting of self-government to the Northern Territory. And so the law vested control of the new ABTA with the Canberra bureaucracy and the federal Minister.

Furthermore self-government in 1978 saw primary royalty rights allocated to the Northern Territory Government, as was the case with the States, except in relation to uranium, a prescribed substance whose ownership remained with the Commonwealth.

From 1978, when these new financial arrangements were operationalised, the ABTA did not receive royalties from mining companies, but rather their near equivalence from the Commonwealth. This led me to invent the clumsy term ‘mining royalty equivalents’, or MREs, which is still in common use today.

Significantly, MREs were paid from consolidated revenue, and this raised enduring ambiguity as to whether MREs are public moneys (which they are technically) or Aboriginal moneys (which they are in the spirit of Woodward’s adjudications).

This in turn raises questions around who should control the financial resources raised from mining on Aboriginal-owned land and who should be accountable for how they were used. This lack of clarity provided considerable structural opportunity for these new financial institutions to be dominated by politicians.

In 1984 as a not much older early career academic, I was greatly honoured to be appointed by one of those politicians, Clyde Holding, to chair a wide-ranging review of the role, structure, functions and operations of the ABTA. This review was conducted in a spirit of productive cooperation with a working party, with membership from land councils, the ABTA Aboriginal Advisory Committee and the DAA.

Some of the findings from that review tabled in Parliament in early 1985, over 30 years ago, still have purchase today. It was highlighted that there was a lack of clarity between the clearing house and granting functions of the ABTA, and that there was a need for a process to establish strategic financial (how much to spend, how much to save), expenditure (what to spend on) and investment (where to invest) policies. These issues, on which there was consensus, needed urgent attention.

There was some disagreement within the working party whether royalty equivalents are public or Aboriginal moneys, and associated questions around the form of financial accountability required for their utilisation.

But there was unanimous recognition by all members of the working party that complete Aboriginal control of the ABTA was a desirable objective and a comprehensive plan and timetable for the systematic and responsible shift to Aboriginal control over a five-year period was proposed.

The review was conducted at a time when ‘self-determination’, if not quite the policy of the day, was at least perceived as desirable. A basic principle accepted by the working party was that control of the ABTA must be transferred to Aboriginal people.

Many of the 73 recommendations from this first and last independent and comprehensive review of the ABTA were implemented by government, in particular in relation to transparency and proper reporting, with a separate annual report being published and granting policy and practice being placed on a sounder and more strategic footing. For a time, advice provided to the Aboriginal Advisory Committee by federal bureaucrats was supplemented with independent advice from land council professionals operating as a Sub-Committee.

But the key issue of whether MREs are public or Aboriginal moneys (or both) has never been properly addressed. And the key recommendation for complete Aboriginal control was never seriously countenanced.

This in turn has resulted in a lack of clarity about the proper purpose of grant expenditure, much of which has underwritten the functional responsibilities of governments. And it has left open possibility for political interference in the operations of the ABTA that has escalated rapidly in recent years, especially since the abolition of ATSIC, which managed the ABA from 1990 to 2004.

Banjo Morton, an Ampilatwatja elder bordering the Utopia homelands.

Looking back today to the optimism of the early days of the land rights movement, one has to ask what has the innovative ABTA institution, now renamed the Aboriginals Benefit Account (or ABA) with the word ‘trust’ of great symbolic value deleted, delivered? And where has it disappointed?

In terms of sheer numbers a rare tallying of income and expenditure from 1978–79 to 2014–15 is impressive: over this period, over $2 billion of MREs has been paid to the ABA (I use contemporary nomenclature) with expenditure roughly according with Woodward’s intention, bearing in mind that the income of the ABA exceeds annual allocation of MREs owing to interest and other income.

To complicate this financial picture, payments of MREs out of the ABA have attracted an unnecessary and inequitable – arguably racist – mining withholding tax introduced by then Treasurer John Howard in 1978. And it is certainly difficult to make historic comparisons because over this 37-year period, the consumer price index has seen a dollar in 1978–79 worth over $4 today.

I estimate that $670 million – or $18 million per annum – has been allocated to the now four land councils. It is hard to say if this allocation represents good value for money. I suspect that from an Aboriginal standpoint, those who have benefitted from the more than doubling of the Aboriginal land base and the successful legal recognition of ownership rights over 85 per cent of the coastline and the statutory mediating role played in literally hundreds of negotiations for land and resource use agreements, might say excellent value. Others, like the minister, might disagree.

In 2006, the ALRA was amended by the Howard government to replace the 40 per cent of MREs guaranteed to land councils with a higher degree of ministerial discretion in calculating their budgets. This has provided a ready means for the minister to exert unconscionable political pressure on land councils to acquiesce to the agenda of the government of the day, rather than prioritise the views of their constituents: Aboriginal land owners.

I estimate that just over $600 million has been paid in ‘areas affected’ moneys, with most going to just a few regions where there are major resource extraction projects like at Gove, Groote Eylandt, Jabiru in the Top End and the Granites, Tanami, Palm Valley and Mereenie in the Centre.

These payments are similar to private compensation payments for surface and social disturbance paid to other Australians. Some payments have been used productively, others wasted. It is unclear what accountability metrics should be attached to these moneys, although clearly it is tragic when expenditures exacerbate negative impacts they are supposed to ameliorate.

Finally, nearly $500 million have been expended in hundreds of grants to or for the benefit of Aboriginal people in the Northern Territory. To my knowledge, the net benefit of these grants has never been rigorously assessed, even though concern was raised back in 1984, that too often grants were substituting for the citizenship entitlements of Aboriginal people.

There is no doubt that many grants have provided important contributions of community and environmental benefit, be it in underwriting funerals or caring for country activities or capital allocations for community stores and art centres.

But there has also been some scandalous ministerial interference from both sides of politics in pre-empting, overriding or reversing the considered views of the Advisory Committee — starting with the notorious decision of Mal Brough in 2006 to direct $100,000 to support the Woodford festival, that just happened to be in his electorate in Queensland, well outside the Northern Territory.

In other egregious examples, it has been reported that ABA funds have been allocated to fund a number of initiatives that have originated from the minister, thus reversing statutory intent that proposals originate with the Advisory Committee.

Perhaps most controversial has been the decision of current Minister Scullion in early 2014 to overturn an Advisory Committee decision to allocate $10 million to support the work of a foundation established to assist Aboriginal people suffering from the debilitating Machado Joseph Disease. This decision was successfully challenged in the Federal Court in late 2015, and is currently being appealed by the minister.

In the same round a supportive decision by the Advisory Committee to allocate $1 million to the Karrkad-Kanjdji Trust – of which I am a director – to assist ranger groups ‘caring for country’ in Arnhem Land was similarly overturned at ministerial whim.

The ABA has increasingly become a highly-politicised stash fund, with grant allocations made at ministerial discretion, and with timing of grant announcements aligned with electoral cycles rather than Aboriginal priorities.

Unfortunately this growing politicisation has occurred during the long mining boom, over the past decade the ABA has regularly averaged well over $100 million per annum in mining royalty equivalents. These are serious amounts that should have generated serious beneficial outcomes.

Instead, ABA funds have been deployed, after statutory amendment in 2006 and 2007, to promote ideologically-driven proposals for land tenure changes most evident in the underwriting of the activities of the Office of the Executive Director of Township Leasing and the push for 99-year leases of Aboriginal townships lubricated with upfront sweeteners from the ABA.

According to the latest financial statements and annual report of the ABA for the 2014–15 financial year, deeply concealed in the annual report of the Department of Prime Minister and Cabinet, there is equity of over $500 million held in reserve, a massive financial bucket of extraordinary developmental potential.

But its use remains at ministerial discretion — one wonders what rabbit-out-of-the hat grants the minister might announce in the near future to maximize electoral prospects federally and in the Northern Territory, underwritten by the ABA?

The financial underpinnings of land rights law and the role of the ABA have slipped from public scrutiny in recent years. It has been a decade and a half since a parliamentary inquiry Unlocking the Future in 1999 examined their operations.

When I first worked in this area the ABA was regarded as a progressive institution for Aboriginal economic empowerment and development. Now it has been transformed into a ministerial slush fund, an institution for dependence to underwrite neoliberal experimentation for reforming land tenure to ‘develop the North’ and to depoliticise and manipulate Aboriginal statutory authorities and community organisations.

The inability of well-intentioned reform to unshackle the ABA from increasingly politicised ministerial control and limited accountability has been very costly to Aboriginal interests in the Northern Territory.

One has to ask why were we able to openly and productively inquire into such fraught issues in the past, but not today?

Who should control the financial resources generated from mineral resource extraction on Aboriginal land? Who is benefiting from the status quo? How can Aboriginal people wrest control of the ABA from the Commonwealth to ensure that it works in their best interests and according to their priorities?

If complete Aboriginal control of the key financial institution of land rights was accepted unanimously as a desirable objective in 1984, why is this not the case in 2016, 40 years after the passage of ALRA?