Tuesday, 29 August, 2006

Adelaide Advertiser

Climate change has created a new dimension to the debate on uranium and nuclear power.

Add global terrorism and soaring energy costs and it is clear why South Australia has a unique responsibility to make the right choices.

An SA Business Journal Roundtable forum, brought together Foreign Affairs Minister Alexander Downer, Mineral Resources Development Minister Paul Holloway, SA Chamber of Mines and Energy chief executive Phillip Sutherland, University of Adelaide associate professor and nuclear physicist Derek Leinweber and Australian Conservation Foundation campaingher David Noonan to discuss the issues.

Business Editor Christopher Russell, Chief Reporter Paul Starick and Chief Business Reporter Cameron England see how the arguments stack up.

ADVERTISER: Australia is a uranium exporter. The Federal Government wants uranium exports to increase. One of the major obstacles to this is community opposition over nuclear waste. That concern is based on two aspects - firstly the environmental problems of radioactive material and secondly the security issue of the danger of either terrorists or a rogue state getting hold of nuclear material.

So, would it be in the best interests of Australia in terms of its moral responsibility and its security responsibility, to try to swing public acceptance toward Australia taking back nuclear waste. For example, the U.S. has been touting a system of licensing rather than existing regulatory procedures to control nuclear material. Is the return of nuclear waste something Australia should be looking at?

ALEXANDER DOWNER: The approach of the Federal Government can best be summed up this way - we think the market on the one hand should determine the demand for Australian uranium. There has obviously been an increase in market demand in recent times and our expectation is that that market demand will continue to grow as countries like China and India - although we don't sell uranium to India - build more nuclear reactors. Other countries are likely to do the same, so you will see overall an increase in demand for uranium and, obviously, it makes sense for Australia to be part of that market.

The second thing is that we take the view it is better for countries to buy uranium from Australia, not just for us financially, but in the context of the non-proliferation regime.

This is because we apply the world's strictest safeguards to exports of uranium, that is uranium can only be used for non-military purposes.

Our uranium is not to be used not only in nuclear weapons but it is not to be used to power ships and submarines for example.

We have very strict safeguards. We think it's best, since the nuclear industry is there, that there continues to be supply coming from Australia.

I don't really agree that there is widespread community opposition, I think there's elements of the community which have always been opposed but I don't think that's the view of the great mainstream of Australia. I think the great mainstream understands the virtue of exporting.

When it comes to nuclear waste, I don't think there's any enthusiasm for us to become a repository of nuclear waste or to enter into lease-back arrangements.

On the other hand it's important that under the present regime countries look at not just ensuring that they store their waste safely, and many do, and according to the guidelines laid down by the International Atomic Energy Agency. It's important Australia continues to support that.

But that Australia would become a kind of waste depot? I just don't think that's going to happen.

THE ADVERTISER: So you don't think there's a moral responsibility to take back the waste?

ALEXANDER DOWNER: No, I don't. Certainly there's not a moral responsibility.

When it comes to responsibility, then it's the people who build nuclear power stations and use nuclear power and who are the main beneficiaries of it, not us as the producer. All we do is produce the raw uranium.

The people who generate the power have the responsibility to look after the waste and they accept that. There's not really any real international debate about that. Most if not all countries accept that they have the responsibility for the waste.

THE ADVERTISER: In terms of security, how can we be sure that countries that we do export to - some of the European Union countries, South Korea and so on - that in 50, 100 years time that they will still be compliant with international inspections which we essentially rely on at the moment.

ALEXANDER DOWNER: Well, there's no reason to believe they won't be. In the European Union I would have thought it was fanciful to think that any of those countries would walk away from the nuclear non-proliferation treaty and the IAEA safeguards arrangements. I think that's true of South Korea as well. Obviously in circumstances like that where a country breached its undertakings we would cease exporting uranium to that country but there's not much sign of that. There has been only one case of a country walking out of the nuclear non-proliferation treaty and that's North Korea and not surprisingly we have never exported uranium to North Korea.

DEREK LEINWEBER: I think that touches on the issue that is at the forefront for most people, the worry about the fact that you breed plutonium in nuclear reactors, that that is part of the waste. That is then able to be extracted and used to make nuclear weapons. So the people that I am talking to are saying that we really need to do the processing of uranium here, get it into some sort of form that we can package up and monitor quite carefully as it gets shipped around the world and they feel that we should get it back. It's the only way to be sure.

THE ADVERTISER: Isn't that the key question? We are already in the nuclear fuel cycle because we mine it. Isn't the question now how far we go and what limits we put on our exports. Whether we retreat or go further in the nuclear fuel cycle.

ALEXANDER DOWNER: Sure and we've set up a review to have a look at that. To look at the safety issues, the non-proliferation issues and the economic issues and what more we could do. Should we, for example, get into the area of further processing here in Australia. Would it be better for uranium to be enriched in Australia rather than in some of the countries where it is enriched. With the democratic and responsible nature of Australian society - and it's likely to remain that way I suspect indefinitely into the future - we need to look at those issues without necessarily coming to immediate conclusions. There's no rush to do that but we need to look at them.

THE ADVERTISER: Do you have a personal view on enrichment?

ALEXANDER DOWNER: Well, I look forward to seeing the results of the Ziggy Switkowski report.

PAUL HOLLOWAY: It really isn't an immediate issue. I mean, there's economic reasons for a start. Is there demand for it? But beyond that of course once you start going in that direction you start to raise these international questions of non-proliferation and the like. They are really federal issues and they really need careful consideration so I just don't think it's really an issue, or a question, that we are going to face in the next five or ten years.

THE ADVERTISER: Do you find the public is receptive and ready to debate the issue at a mature level? In the state election it was raised and Treasurer Kevin Foley said he didn't believe that the public was ready to debate it. Do you feel that's a fair assessment of the public at large?

PAUL HOLLOWAY: I think that views are changing on this issue and people are well aware the greatest environmental threat to the world is climate change. Nuclear energy is not the sole answer to that but nonetheless as a transitional measure it can make a significant contribution to climate change issues. Given that we have got more than a third of the world's discovered, commercially viable reserves within our state and in the country, I don't think we can run away from the responsibilities that that leads to. I see our role as a supplier of ore rather than becoming involved further in the cycle. Economically, given the alternative supplies of energy - both conventional and renewable - we have in this state, I don't think the nuclear energy is really an option. Certainly in this state or Australia for many years to come. We just have too many cheaper alternatives. Similarly with those downstream issues, we don't have to deal with those yet, they are not really a pressing issue.

ALEXANDER DOWNER: My take on where the public is at is that there has been a quantum shift in public opinion on this issue in the last 10 years. The single issue that has changed public opinion is, as Paul says, the climate change issue. The public understand - I think better than a lot of critics suggest - what the downsides to the nuclear fuel cycle are but the public are smart enough to know that it doesn't matter which option you choose there are definitely problems with it. Since 1970 about 20,000 people have died in coal mining accidents around the world. The public may not know that exact figure but they see the stories about coal mining accidents so I think where they are is they are sitting on the fence a bit. I think they think this is a very interesting debate and I think when the Federal Government's report is published, there will be a great deal of interest in what that report has to say.

THE ADVERTISER: Isn't it a big ask for those on the side of the political fence that favour uranium mining and going down the enrichment path? If you look at what happened in SA with the low-level waste repository, there was a failed attempt at swaying public opinion and it had to be abandoned. Here we are talking about something that is a far bigger step than the dangers that that posed.

ALEXANDER DOWNER: I suppose it's a bit cheap to say this and you might not thank me for it but we certainly failed to persuade the Adelaide Advertiser. It ran a day-by-day campaign against the nuclear waste dump, and it was a low-level waste dump. It was a low-level waste dump where they would store, you know, gloves that are used to handle nuclear medicines and so on. That material now is just housed in hospitals, including in Mount Barker in my own electorate. I'd rather have that low level waste out at - well it will be in the Northern Territory now. I would rather have it the Northern Territory than in Mount Barker just down the road from my electorate office.

THE ADVERTISER: What effect has the enthusiasm for uranium mining exploration, driven by the increases in price, had on the mining industry in South Australia?

PHIL SUTHERLAND: We have certainly seen a lot more exploration activity for uranium. Our estimate is there are at least 30 companies now exploring for uranium, either exclusively as a commodity or as part of their portfolio of commodities that they are looking for. So that's made a substantial contribution to the spend on exploration in SA which has had a downstream effect on our economy. Of course, the greater the level of exploration, the greater the probability of further discoveries beyond the current three-mine arrangement that we have. And we are all looking to the Federal ALP to change their policy to allow further mines in South Australia, should they be discovered. But we shouldn't under estimate the difficulties associated with exploration for uranium and, indeed, any commodity. It's a very time-consuming, expensive operation and more often than not doesn't yield results.

PAUL HOLLOWAY: Uranium exploration is now at its highest level in this state for 25 years. It was about $21.2 million in 2005 and that was about 54 per cent of the uranium exploration in the country which reflects the prospectivity that this state has for uranium. In relation to the no-new uranium mines policy, it is worth pointing out that up until four or five years ago uranium was probably spot priced at less than $US7 a pound, it's now up $US40-$US45 a pound. It actually wouldn't have been particularly sensible to open too many new mines at that level. So, as well as the broader international issues changing, the economic issue is changing. That's why the issue in future will be more crucial than it has been in the past. The classic case of that is the Honeymoon mine which was approved some years ago but at $US7 per pound did not proceed. Now it's being taken a step forward - economically driven, not policy driven.

THE ADVERTISER: What then is the economic risk to the state if Labour nationally isn't able to change it's policy on uranium mines?

PAUL HOLLOWAY: The point is there are some good uranium prospects in the state but there's no discovered resources that are ready to go. It would be at least five years before any discovery or any of the prospects would be proven up to the situation that would advance to a mine, apart from expansion of the existing Olympic Dam. I really don't think in this State it's going to have a huge impact in the short term. Rather it is dealing with the future, the future expansion of the industry is where it would be more significant rather than any short-term impact.

THE ADVERTISER: So it's important to wipe that policy now so that the industry is able to expand in the future?

PAUL HOLLOWAY: It's a matter of confidence in industry as well.

THE ADVERTISER: Back in the early 1980s, WMC found that SA was the best place in the world to store high level nuclear waste, or spent fuel as they like to call it. Where does the SA Chamber of Mines stand on closing up the nuclear fuel cycle?

PHIL SUTHERLAND: We would say that the idea of a waste repository or a waste dump is something of a distraction. It's not really the main game. Exploring and mining uranium is important in SA and to Australia and the question of whether we then move further along the cycle to enrichment and/or nuclear power generation are debates and decisions that would have to be had. What we say is that in every facet of the cycle let's make decisions based on sound science and facts and common sense. Let's not be driven by misinformation and fear because uranium and nuclear power for most Australians does remain a great mystery, even though there has been a shift in community and political opinion which has been useful, it still is a great mystery for most Australians because of our geographical location in the world. Most Europeans and folk living in Japan and North America are exposed to the nuclear industry almost on a day-to-day basis. Many people drive past a nuclear power plant on the way to work. Most of their power comes from nuclear power and so it isn't the mystery it is for us. But unfortunately there are those in the anti-nuclear lobby that seize on the ignorance that seems to permeate our community and drives fear into our community and puts out this view that all facets of uranium and nuclear power are unsafe, are not environmentally friendly and should be avoided at all costs.

THE ADVERTISER: Would the Australian Conservation Foundation agree that there is a lot of ignorance in the community?

DAVID NOONAN: The Australian community has been subject to quite a serious and misleading public debate, essentially a public relations exercise for the international nuclear industry and Australian uranium mining interests for the last few years. Nuclear is certainly no solution to climate change. Nuclear power is both unnecessary and uneconomic for Australia. International nuclear dumping, as with all nuclear waste issues, when proposed and discussed by Australian parliaments has been opposed by the democratically elected leaders of states and territories of Australia. It was actually Liberal premiers of SA and Western Australia who passed the first significant legislation to prohibit reactive nuclear waste being transported, stored or imported into WA and SA. It was a Liberal premier - John Olsen - who prohibited the Federal Government's plan to bring what were formerly called "long-lived intermediate level waste" or spent nuclear fuel reprocessed waste, not low-level waste, Mr Downer. Long-lived intermediate level waste

ALEXANDER DOWNER: The debate here was about a low-level waste dump.

DAVID NOONAN: Not originally, it wasn't.

ALEXANDER DOWNER: It was what we were talking about earlier.

DAVID NOONAN: It was Premier Olsen who made your plans illegal and then you modified your plan and now you are targeting the Northern Territory to impose against community will there as well.

ALEXANDER DOWNER (with irony): We're all going to die.

DAVID NOONAN: Wherever we have had this debate in Australia, the parliaments have made the decision that they didn't want nuclear waste in their states or territories. Now why would we be imposing on the developing world, and I know this in Asia, the risks and the management problems that we are unwilling to accept due to the advanced Australian community.

THE ADVERTISER: Should we then be retreating totally from the nuclear fuel cycle and not mining uranium?

DAVID NOONAN: We believe we should be certainly be phasing out the nuclear industry globally and in Australia. We should be backing off from the uranium mine proposals. We have commitments from the SA Government for instance that they will oppose the development of any new uranium mine and we expect that to be honoured. Democratically we believe that the vast majority of ALP members are opposed to a change to the no-new uranium mines policy.

ALEXANDER DOWNER: How do you know that?

DAVID NOONAN: The last Newspoll of May for instance had 70 odd per cent of Labor voters and the majority of Coalition voters and 66 per cent of all Australians opposing a new uranium mine in the country.

ALEXANDER DOWNER: Newspoll?

DAVID NOONAN: May, 2006.

THE ADVERTISER: Given we do have a uranium industry wouldn't it be responsible to store the waste in a place like South Australia which in sovereign terms and geologically seems to be one of the best places in the world.

DAVID NOONAN: It's not responsible, no. It's neither scientifically nor publicly acceptable to be furthering the nuclear industry and expanding the risks of proliferation and global terrorism and unresolved waste management and the potential for reactor risks by Australia nominating to the world that it is somehow in the public interest that we should be expanding uranium mining and exports and nuclear power. That's not at all in the public interest.

PHIL SUTHERLAND: But are we all wrong? There are, what is it, 440 nuclear power generators in the world today, in 30 countries. There is growing energy demand. It is a reliable fuel source that is essentially plain despite what people are saying. Is everybody wrong?

DAVID NOONAN: Essentially it beggars a nonsense when you are talking about the most long-lived hazardous industrial waste on the planet. There's some 250,000 tonnes of high level nuclear waste and no government has established any facility for its long-term storage or disposal. There hasn't been a reactor ordered in the U.S. for over 25 years. The number of reactors in the European Union peaked back in 1989 and has declined since. There are only two countries in the world, China and India, with any potentially significant nuclear power expansion. Even that in their own terms is also quite limited. China might get from 2 per cent to 4 per cent of electricity production from nuclear and India from 2 per cent to 10 per cent. In no way are they significant answers to national or international energy or climate change issues.

ALEXANDER DOWNER: One sixth of the world's electricity is generated by nuclear power plants so I don't think we should just try to pretend it's not important in terms of the current mix. It's obviously very important. The thing is, the decision makers, they actually have to make practical decisions. We have to generate power and there is no way of generating power which is perfect. Every single form of power generation has its downsides and I made the point that 20,000 coal miners have been killed since 1970 and of course there's an argument about C02 emissions from coal. So you have to take into consideration the downside to coal mining and fossil fuels more generally. If one sixth of the world's electricity were suddenly to be turned off tomorrow, which is the sort of proposition that you get from the kind of more extreme elements of this debate, it would plunge many, many people into the dark. What the world needs to do is think about how it manages what it already has and ask itself whether more nuclear power is going to be better than a range of alternatives, or whether it's going to be worse. Not just running a scare campaign against nuclear power without pushing forward sensible and practical alternatives, that will work.

PHIL SUTHERLAND: That's right.

THE ADVERTISER: Is that the end game for those opposed to nuclear fuel and the nuclear fuel cycle? That we have no uranium mining, no nuclear energy generation and we therefore withdraw one sixth of the world's electricity generation?

DAVID NOONAN: What we should be having is a sustainable future based on a clean, green and renewable and energy efficiency and not on unnecessary hazardous, radioactive and toxic technologies. Just as the responsible governments of Germany and many other countries in Europe have phased out their nuclear power commitments

ALEXANDER DOWNER: They have made commitments, they actually haven't done it though.

THE ADVERTISER: Green and renewable would probably be universally regarded as a wonderful solution. But how close are we to that being a viable alternative?

DEREK LEINWEBER: It's current contribution to the power demands of the world is down at the 2 per cent level. It's microscopic. And, we have a very daunting CO2 emissions problem. There are lots of ways to cut that back but I think you're going to have to be bringing in every angle that you can imagine to combat these CO2 emissions. There's some very nice ideas about carbon capture of coal and gas power plants but this is not really enough. We are looking at around 25 per cent reductions in emissions (being needed). So, it's helpful and it's one of these "wedges" that they talk about to get down to a sustainable level with carbon in the atmosphere. But to rule out nuclear power I think you're eliminating a huge advantage that the nuclear industry has to offer in solving this problem. The other thing that needs to be mentioned is that we often hear of these scare tactics of forever long-lived nuclear waste. The reality is that after 1000 years the radiation levels have dropped back to the level of the ore that was originally mined. Now you do still want to contain the stuff but you can move it around like you do the ore in the mine.

THE ADVERTISER: But 1000 years is a long time.

DEREK LEINWEBER: A 1000 years is a long time. But there is also new technology and one thing that should be mentioned is the accelerator-driven technology where you take a proton and you smash it into a chunk of lead and you create a heap of neutrons and you create very neutron-rich environments and you can put these waste materials in this neutron-rich environment and continue to burn it. In fact they have shown that you can burn these things down to some very short-lived isotopes. So there is some new technology on the horizon that could have a dramatic impact on the waste issue. So I am wondering a little bit about these very long-term deep storages, you may actually want to get your hands on this stuff again and use it as a fuel. Already we have technology using the Candu nuclear reactor that uses a heavy water moderator. What that means is that it doesn't soak up all the neutrons in the reaction. You can take the waste material out of one of the U.S. reactors, pressure light-water reactors, put that in a Candu reactor and continue to burn it.

PHIL SUTHERLAND: Unlike some other fuels, at least we can capture the waste from nuclear power production, contain it and and manage it.

THE ADVERTISER: As opposed to burning coal which has some very untested ideas.

PHIL SUTHERLAND: There's some very interesting advances in clean coal technology and some other fossil fuel sources which is very encouraging. Nevertheless it would be our view that there's a place for all forms of energy production going into the future. It is not a case of one size fits all. For example, there is a view that using gas for energy production is not really an efficient thing to do with that product. There are many other applications. It is a finite resource. The long-term availability of uranium far exceeds that, for example, of gas. So maybe we just need to be a little bit cleverer about which energy form we use for what.

THE ADVERTISER: Won't there be many members of the Labor Party who share Mr Noonan's view and won't that make it difficult to get the change of the no-new mines policy through the national conference?

PAUL HOLLOWAY: There are people with different views on the uranium issue there always have been. However, I think views are shifting on this area.

If you look at this state, we very much lead the way in terms of renewable energy. We have got more than 50 per cent of Australia's wind power capacity, we have 45 per cent of the nation's grid-connected solar panels. We also have the prospect of geothermal energy with hot rocks. We in Australia are in a luxurious position in that we have alternative energy sources. Other countries - Japan, the U.S., Europe, China, India - don't have that luxury and of course you still travel to those countries I'm sure. The Foreign Minister has to see the air pollution in places like China from burning low-grade coal. It's when you go to those places you realise the massive problems that they face and they need every alternative possible. It's not just nuclear. But that's one where we have a significant part of the world's resource and we can contribute to that. In my view, we have international obligations. I've compared it to Saudi Arabia sitting on its oil reserves. For those countries that have few alternatives, we have an obligation to contribute.

THE ADVERTISER: Coming up to the ALP national conference where that decision will be made, Kim Beazley has stated his position that he is looking for a change but there do still seem to be a large number of ALP members who are opposed to it. How confident are you that the policy will be changed?

PAUL HOLLOWAY: I am confident that the change will be made.

ALEXANDER DOWNER: If I could throw in a ha'pence worth here. I don't think Kim Beazley, knowing Kim Beazley as I do, would have suggested that this should be debated at the ALP national conference if he wasn't sure that there was a majority there. That's not the Kim Beazley we know.

DAVID NOONAN: While there's a lot of discussion about the prospects of a new uranium mine, you could note that in 10 years of the Federal Government's full support for uranium mining they have only got one new mine up in Australia. That's the in-situ leach proposal at Beverley which has in part relied on driving down environmental standards, in our view, by discharging all their mine waste to ground water without any rehabilitation. Very many of the uranium exploration projects in Australia are high-risk, high-speculation, private ventures that should not be provided with any public subsidy like the subsidy provided by the South Australian Government. They are highly unlikely to come to any fruition. If you are talking about uranium ventures in Australia you are really talking about BHP Billiton's interest in the Roxby expansion. That is the single – by far the largest – driver for the nuclear debate that we are having in the country. It's an exercise in attempting to legitimise their mining interest for massive increases in uranium mining and exports' expansion. You can look at the context of what the standards are going to be in terms of the so-called safeguards for instance, that might apply to that uranium in the future. Australia is about to enter an arrangement with China for the export of uranium and it may well be that in the future both SA's responsibilities and the standards and so-called safeguards will be judged by the accountability of the authoritarian Chinese state, by the prospect that we should somehow have confidence in every future government in China. (And that's despite) having had the experience of Tiananmen Square and Tibet and their appalling human rights record and their multiple examples of breaches of foreign treaties and agreements. It will be South Australians who bear responsibility for nuclear risks in China in the long term because of the pecuniary interests of one company, BHP Billiton.

ALEXANDER DOWNER: When I was a student I remember on campus having these debates about these sort of capitalist robber baron conspiracies. But I wouldn't worry too much about that to be honest with you. I don't think it's anything to do with BHP Billiton, I think the reason this issue has become – speaking here as somebody who is not in the pay of BHP Billiton but actually is elected by a large number of people in the electorate of Mayo – what has generated my interest in this issue has been a combination of things but the most important of them has been the climate change issue. I don't think there's any doubt about that.

I also put forward – only as an idea and you know it would need a great deal more thought and work – whether at some stage in the future, and it might be quite a long way into the future, that we build nuclear power plants in Australia. That's a possibility for Australia, down the track.

Whether you would at the same time look at having some kind of desalination plant associated with a nuclear power plant because when you have to deal with practical issues and make decisions about practical issues you have to take into consideration the degradation of the River Murray and the overuse of the water in the Murray and Adelaide is a substantial consumer of River Murray water.

Out of the desalination plant, coupled with a nuclear power plant, you could generate somewhere between half and two thirds of Adelaide's water needs. There would be some real cost issues you would have to work through – it might in the end be prohibitively expensive. That's the sort of debate, I don't think we should be conclusive about it, but that's the sort of discussion and debate that the community has to have. I could quite easily be persuaded that it wouldn't work although I could quite easily be persuaded it could and I would like to hear that debate.

DEREK LEINWEBER: I am wondering why is it that we need to wait for this time to pass? Is it simply to allow the debate to happen? I mean, we are certainly aware of the problem with carbon dioxide emissions and that has to be tackled now.

ALEXANDER DOWNER: I think that as an elected official - and I think Paul Holloway would go along with this also being an elected official - you need to take into consideration the degree of community comfort with a lot of these debates. I don't think we are on the threshold in this country of building a nuclear power plant. Whatever the arguments for it may be, I think it's a little way down the track.

THE ADVERTISER: Finance Minister Nick Minchin said he didn't envisage a power plant within 100 years. Do we have that long to wait?

ALEXANDER DOWNER: He's talking about the economics of it.

THE ADVERTISER: What about the climate change issue?

ALEXANDER DOWNER: Yes, there's the climate change issue, as Derek says, and that's an important issue. I think the other issue and Nick Minchin's point is the economics of this. We will see what the Federal Government's report (from the Switkowski inquiry) says but my sense is that the economics of it aren't quite there yet. I'm not sure when they could be - they could be at some time. Look at the increase in price of oil, gas and coal that we have experienced.

THE ADVERTISER: If you throw in hydrogen as well as desalination as a product from a power plant - not just electricity generation - but the production of hydrogen as an alternative to oil, does that help sway the economic argument?

ALEXANDER DOWNER: For use in motor vehicles? Yes, but that's for the market to work out.

PAUL HOLLOWAY: With those technologies you really need all sorts of associated infrastructure with it.

ALEXANDER DOWNER: You've got an infrastructure problem there

PAUL HOLLOWAY: At this stage they are not off-the-shelf technology.

If I could just say something about the debate, I think the debate in this country will move on towards the circumstances in which uranium is used rather than which mine it came from. It always was a pretty phony debate whether it was from mine X or mine Y. Where one was good uranium and one was bad uranium. That was always a compromise position, it was never a particularly sensible debate. I think the debate that we will have - not just in the Labor Party but in the community generally - will be more of the conditions under which our uranium is sold in the world markets and that in my view where the debate should be.

DEREK LEINWEBER: While we're talking about the economics, I just wanted to ask about the possibility of a carbon tax. A lot of countries are talking about carbon taxes or pieces of paper that allow you to emit carbon. It certainly would balance the economic equation.

ALEXANDER DOWNER: Yes, well, if you had a carbon tax. But we are not in favour of a carbon tax. With petrol prices where they are at the moment I think people would feel they are paying enough carbon tax

THE ADVERTISER: Except the money is not going to much other than fatter profits for oil companies, is it?

ALEXANDER DOWNER: Well, the States are getting an increasing amount of GST out of it. The federal excise is fixed at 38 cents but the states are getting increasing GST revenue. I am not sure what they are doing with it.

PAUL HOLLOWAY: A lot of it is being displaced because it's discretional expenditure. You have to look at the overall GST take. I mean, GST from oil might be rising but it is obviously falling if people are cutting back their expenditure in other areas. But that's really a side debate.

THE ADVERTISER: Turning back to that infrastructure/planning debate. Should BHP Billiton go ahead with the expansion of Olympic Dam, it is going to require an extra 400MW of electricity supply. They now use 120MW. Where is that going to come from?

PAUL HOLLOWAY: That's part of their feasibility study.

THE ADVERTISER: They say it's up to the market.

PAUL HOLLOWAY: They will arrange that, and they've got to look at sourcing water and a number of other issues. But the important thing is that the extra uranium that they will produce - and they'll be producing copper and gold as well - but just the extra uranium, a threefold increase, will on a world scale, massively reduce greenhouse gases.

THE ADVERTISER: What proportion of the State's electricity supply would 400MW be?

PAUL HOLLOWAY: From memory I think our electricity - and I'm not the minister - varies between about 1500MW and 3500MW.

ALEXANDER DOWNER: 3500MW is the peak, the maximum.

THE ADVERTISER: So the 400MW is quite significant. What should we be doing to supply that extra?

DEREK LEINWEBER: One nuclear power plant gives you 1000MW.

PAUL HOLLOWAY: Again that comes back to economics. Nuclear is a high capital cost, low fuel cost. We in this country, as I said earlier, are blessed with low cost fuels. The U.S. would be paying two or three times what we do for the natural gas for example. We have potential supplies from a number of sources in this state. We have cheaper alternatives both conventional and also we have these hot rocks that in the immediate term might offer another solution.

DEREK LEINWEBER: I wonder about these hot rocks.

PAUL HOLLOWAY: We are in a very fortunate position that we don't have to face this high capital cost, low fuel cost option. Other countries aren't. You know Japan, the U.S., Europe.

THE ADVERTISER: If you factor in carbon costs though, nuclear becomes a lot more economic and that's something that we, presumably, are going to have to look at.

PHIL SUTHERLAND: There are shifting sands here. There's no doubt advances are being made in the technology associated with the construction and operation of nuclear power plants. We are now seeing some quite small scale plants and there is even an off-the-shelf plant that you could locate in SA or some other part of Australia. And we shouldn't overlook the fact there are 200 maritime reactors floating around the oceans as we speak - so they can be quite small. Nonetheless, I think the decision has to stand robust economic analysis. The reality is we are a country with only 20 million people. We are not overly industrialised in comparison with a Japan or a North America and there is an abundance of the traditional fossil fuels.

PAUL HOLLOWAY: And cleaner energies as well.

PHIL SUTHERLAND: Cleaner energies, renewables and so on. But nevertheless, someone might put a proposition to the government about a small-scale pilot plant somewhere but we would say this is a national decision and if you are talking about location and logistics for example it might be better to locate the plant in New South Wales, in Sydney somewhere, you know because there's a lot more industry over there than there is in South Australia.

DEREK LEINWEBER: There are also several different methods for generating nuclear power and types of nuclear power plants. Some are more safe than others. I think that one should have some Australian forum to bring experts from all around the world where you can hear about the various reactor designs and educate the people about which designs have which features and which ones are important to have and from the reading that I've done I think one should be having a very careful look at the Candu system. It has extraordinary safety features that a lot of other power plants don't have. It also offers more efficient burning of the fuel. The other thing it does is it allows you to already start using thorium. Australia has huge, vast resources of thorium and one could begin burning that in the Candu system right away.

THE ADVERTISER: Can you give us a lay explanation of thorium?

DEREK LEINWEBER: People are excited about thorium because it is not active by itself. But if you put it in a neutron-rich environment it will capture a neutron and turn into uranium which then is fissile and you can get energy from that. So what you need is a neutron-rich environment and where you get a neutron-rich environment at this point in time is to use something like the Candu system with standard uranium or maybe slightly enriched. While we're on this dimension, enrichment for power plants is typically 2 per cent maybe 5 per cent at most, (of the proportion of fissile U-235 isotopes). Weapons-grade enrichment is around 85 per cent so you are in a completely different ball park with mining and enrichment.

Anyway, with some uranium to provide the neutrons you can combine that in the Candu system with some thorium and actually convert that into uranium and burn it at the same time. The key is that they use a heavy water moderator and that does not absorb neutrons so you have a neutron-rich environment. So that opens up new avenues and Australia has huge potential here.

PAUL HOLLOWAY: In a South Australian context, almost 1000MW of electricity capacity is needed for just 10 days of the year at a cost of over $1 billion for it. Most of that would be used for air conditioning and clearly that raises a number of demand-side management issues which really are for us the obvious alternative rather than looking at big new plants.

ALEXANDER DOWNER: To be fair - and I don't want to sound as though I am in any way diminishing my own home State - Australia has moved on from thinking about energy, just in terms of one state here and one state there.

South Australia has been very poor, well states generally have been very poor at building their interconnectors. But you are, as time goes on, going to have a national grid and this is going to be a national debate, the whole issue of building a nuclear power station or several nuclear power stations, that's not going to be just something that would supply power to SA alone.

We need to be clear headed about it, take into consideration a lot of the issues that Derek raises. Think about the environmental consequences of all of the alternatives, but think about the economics.

It's estimated by my Department that to build a 1000MW nuclear power plant - a standard size I guess - a nuclear power plant would cost somewhere in the vicinity of $3 billion and it would take 5 years to construct. Now that is a cost which includes all the externalities as they call it, that's liability, insurance, spent fuel management, waste disposal and decommissioning. It includes everything, that's not just the basic cost of buying and building the power plant.

You have to weigh that up. It would be cheaper to build a coal-fired plant and import coal from other states, or it would be cheaper to use gas, I suspect, as well.

And wind? Well to build enough windmills to generate 1000MW you know you would need to cover thousands of square kilometres of SA with windmills so I don't think that's possible and you would need the wind to be constant all the time. You wouldn't want the wind to die down one day or blow such a gale that you had to stop using the windmills.

So you have to think about all of these things in a practical and realistic way.

Can I also just make the point that in terms of operating costs, as distinct from the capital cost, nuclear power plants are relatively cheap to run. Once you have built it. I think Paul made that point earlier.

PAUL HOLLOWAY: That's right, it's a high capital but low operating cost.

THE ADVERTISER: So given that high start-up cost but lower operating cost, will a nuclear power plant ever be built in South Australia without government intervention of some kind?

PAUL HOLLOWAY: Again I come back to our gas prices. They are probably half, a third, of what they would be if sold on the world market and we have other alternatives as well. As a country we are a net energy exporter.

ALEXANDER DOWNER: My view is you shouldn't ever rule it out. And the people who say "Oh, yes, but you would have to subsidise a nuclear power plant" are surely not suggesting that the subsidies that are built into the existing power generation systems should be taken away. Even windmills get subsidies, and I turn advisedly to David because I think he's our windmill man here.

PAUL HOLLOWAY: Another point that needs to be made too is that if you were going to have a nuclear power industry like France does, they have standardised the number of generators they make and I think about 92 per cent of their power is nuclear. They have it on a large scale and have the benefits, because it is obviously a fairly complex high technology industry and you need experts in it. Having just one or two of these things in a country is maybe not such a good idea. It makes more sense for those countries like Europe and Japan where you have lots of these things. You have some scale in terms of the expertise within the industry and how you manage it rather than just having the isolated plant here and there.

ALEXANDER DOWNER: For them the alternatives remember are a lot more extensive than for us. Coal here is a very cheap - not so much South Australia - but for Australia is a very cheap alternative. It's not in France or the UK.

THE ADVERTISER: Have either levels of State or Federal Government or the Chamber had companies approach you about the feasibility of building a nuclear reactor?

PHIL SUTHERLAND: It's fair to say that the prospect of a nuclear power plant is always under consideration and some companies have looked at the feasibility. But that feasibility is all about the economics.

I think we have to maintain an open mind on this because it is a moving feast. Things don't stand still and things change. But right here and now I am not sure the numbers do stack up.

I think we probably need to step back a little bit and look at if its about economics and making money and generating wealth for Australia, you might want to step back and look at the enrichment side of the cycle. There's exploration, mining and enrichment. Because you can make a lot more money from enrichment than you can from just selling the yellow cake.

THE ADVERTISER: Would companies be interested in enrichment? Have you had active proposals

PAUL HOLLOWAY: In terms of hard proposals, no. (But) you sometimes have it raised as a general issue of interest.

ALEXANDER DOWNER: They did years ago though didn't they? In the '80s?

PAUL HOLLOWAY: Yes, in the '80s but I mean for a start where would you source the material from? There would be a lot of issues to be resolved.

THE ADVERTISER: In terms of companies expressing interest in nuclear power, can we distinguish between them actively saying "Look we would really be keen to go and do this if only there were government approval" or only saying "Wouldn't it be nice to be able to do this?"

PHIL SUTHERLAND: Look, I think there's a lot of companies in the mining industry that are very entrepreneurial and always looking for opportunities. Theye prepare feasibility studies and cases on a range of things and options and this clearly would be one of those. With the price of uranium and growing global demand, it's an absolute no brainer.

ALEXANDER DOWNER: Certainly people are interested in the issue. I'm a bit with Phil really, I think in the end it's a bit unlikely for quite some time anyway. You aren't going to see a really hard proposal come forward to build a nuclear power plant. I think the national grid isn't sophisticated enough for that and all sorts of issues.

But I think you are likely to get a lot more enthusiasm in the short-term for enrichment and on the face of it - because we haven't really talked much about enrichment - on the face of it there are some very good arguments for why it would be better to have uranium enriched in Australia than in some of the countries it is enriched in.

Number one, of course, is you could make a lot of money out of it - and that's good for the country obviously. So, we get value added.

But secondly when it comes to non-proliferation, the enriched product is the one you are concerned about as you know from the context of the debate about Iran.

It's going to be better to have fuel enriched in a country like Australia with its instinctive sense of responsibility - in terms of the nuclear fuel cycle - than enriched in countries that would apply less responsible standards.

There's no doubt about it in this country, we are unanimous in not wanting to see nuclear weapons proliferation. I never came across anybody in Australia who wanted nuclear weapons proliferation.

Our involvement in the nuclear fuel cycle is a better guarantee - in so far as there can be a guarantee - that there won't be proliferation than other countries involvement in the nuclear fuel cycle.

We saw what happened out of the AQ Khan network in Pakistan as an example of the other extreme. Something like that is unimaginable in a country like Australia.

So I think that for non-proliferation reasons - and I think for perfectly good economic reasons - what you will see is the debate focus changing in the short-term.

There will be the Labor Party's three mines debate, then that will pass and they will abandon their three mines policy. That's a given.

You will then see a lot of interest in enrichment, I think a lot of companies will come forward.

The debate in terms of nuclear power plants that's still got a way to go in the economics. I think Phil's right the economics still have a way to go.

DEREK LEINWEBER: I would like to add that with the process, the enrichment process, you have the opportunity to actually produce a fuel that's ready to go in a reactor, you can actually package this up, catalogue it and watch it go around the world and know where it is, what's happened to it and get it back if you think you should.

THE ADVERTISER: Would the State Government support enrichment in that form?

PAUL HOLLOWAY: There are the international issues which you have raised in relation to preparation which really have to be decided at the federal level. There's also the question about where you would source the uranium from. What I've heard from the industry is that "look at present there's plentiful capacity". So quite apart from the economic reasons there are those international reasons and clearly that can only be done at a federal level and negotiations would be necessary through the International Atomic Energy Agency and all those sorts of bodies. So we are certainly not advocating a move into that area.

ALEXANDER DOWNER: There's a negotiation that has to be had with the Americans on enrichment because they've produced what's called GNEP - the Global Nuclear Energy Program. Under GNEP their initial proposition is that only those countries that already have enrichment capacity should be able to have enrichment capacity. There should be no proliferation of enrichment. We have spoken - I personally have spoken to Condi Rice about this. We and the Canadians feel that the two of our countries with the enormous uranium reserves we have, I think between the two of us we must have something like 70 per cent perhaps of the world's exploitable uranium. It would make a lot more sense to have Canada and Australia enriching uranium than other countries and maybe the Americans should go and have another look at this particular proposal which they've said they will. So that's also a negotiation - if I could call it that, it's certainly a discussion - with the Americans that we have now initiated and we will see what happens.

THE ADVERTISER: What was the Secretary of State's response? It was reported that Dennis Spurgeon of the US Department of Energy was giving ground on the idea of Australia and Canada being involved in enrichment. What did the Secretary of State indicate to you?

ALEXANDER DOWNER: Well I am not going to put words into her mouth, I will let her speak for herself. But only to say that the Americans are following it up.

THE ADVERTISER: You must have got a fair hearing though by the sounds of it?

ALEXANDER DOWNER: I always get a fair hearing from Condi Rice.

THE ADVERTISER: What sort of time scale are you looking at there? Is that something that the Americans will be able to make a decision on fairly quickly or

ALEXANDER DOWNER: The GNEP initiative is in its early stages.

But first of all it's not going to matter is it if we decide against enrichment. It's just that I think there's a reasonable chance we could start to go, we could look at going down, the enrichment path. There's a lot of federal issues there. There will be some party political issues, there will be a lot of politics that will come into it as well. So all of those issues, whether you like them or whether you don't they will all have to be played through. So it's a little way away.

It's politically an extremely difficult issue. There are all sorts of opportunists who come out of the woods on this one.

But I think we need to take very seriously the proposition that we could build an enrichment plant in Australia and thereby make a very great contribution to the global non-proliferation regime. Just butting out of the nuclear debate altogether, closing all our uranium mines, no enrichment, nothing, the consequence of that is that Australia becomes a non-player in the global nuclear debate. That is the only thing you would achieve. You would make sure that you had no voice. Australia's voice would fall silent and that would be all you would achieve.

PHIL SUTHERLAND: Consumers would simply turn to other countries.

ALEXANDER DOWNER: You can get uranium anywhere at a price, can't you?

DAVID NOONAN: There wouldn't be many countries left with the proposed treaty to sell Australian uranium to China and with the expected agreements with India as well as the U.S.

ALEXANDER DOWNER: China. Horror of horrors. When I was a student the Left used to be out there supporting Mao and demonising Taiwan, now they seem to have gone over to the other side. I'm not quite sure what's happened here.

DAVID NOONAN: It will reflect that we ignore liberties and human rights in China.

ALEXANDER DOWNER: You didn't respect it when they marched in support of Ho Chi Minh and Mao Tse Tung, I don't think.

THE ADVERTISER: Given that going down the path of enrichment is going to be as much a political decision as an economic decision, should the Federal Government be taking a bigger role in terms of public education, in terms of a public campaign to really move the debate.

ALEXANDER DOWNER: Well it may surprise you to hear me say this but I think we've got it just right in this one respect, that we are not cowardly in the sense that we leave it to someone else to take on or to lead the debate.

I'm here participating in this as part of the debate. We have set up an enquiry. Quite a lot of us have made speeches which have been perceived by the media as controversial. We have been attacked of course, vigorously and violently been attacked by a lot of people. We think that it's a debate this country has to have. We think these are issues for the future that must be on the table and there's no point in running away from it.

On the other hand, there's a difference between having a discussion like we are having now and producing the report and making a decision to do something and the decision phase will be you know - if it ever comes to decisions over and above the status quo, say the three mines policy of the Labor Party - if it comes to a decision that will be a very contentious point.

There will be a lot of feeling about it. I would imagine, David, you would be able to organise one of your Sunday marches on the steps of Parliament House, with megaphones and denouncing Paul Holloway and other evil doers around the world. So you know there will be all of that.

DAVID NOONAN: You trivialise the communities' rights to decide their own future and to reject the imposition of nuclear projects.

ALEXANDER DOWNER: No, actually I was elected so I don't trivialise their right to determine their own future. I have gone out there and I have got them to vote for me so I take it very seriously and try to keep it that way.

THE ADVERTISER: Is there an economic demand or is there likely to be in the future for enrichment?

PAUL HOLLOWAY: Some in the industry would say "no" for that to happen immediately. Remember uranium is sold generally by long term contracts because of the nature of it. So if you were talking about these sorts of issues you have got to think where is the uranium going to come from? Where will it be sourced, which immediately means you have got to start talking to companies but also you know the times

PHIL SUTHERLAND: There is certainly no demand within Australia for enrichment. It would be an economic proposition with international customers. The industry is very excited at the moment about the support it is getting for uranium exploration from the State Government and the very likely prospect of the change to the Labor Party no-new mines policy. They are very, very happy about that. We think that's a vote for common sense. We're very pleased and confident that the current Labour Government will put the people of South Australia before party politics at the convention next year and we hope with the amount of exploration going on that there will be further discoveries and we can really maximise the potential of the uranium industry in South Australia to the benefit of all South Australians.

THE ADVERTISER: Thank you for contributing to a debate that is going to be an issue for many years to come.