8th Parliament · 1st Session
The President (Senator the Eon. T. Givens) took the chair at 3 p.m., and read prayers.
Presentation of ADDRESS-IN-REPLY
– I have to say, for your information, sir, and that of the Senate, that His Excellency the Governor-General has intimated that he will be pleased to receive, at Government House, the Address-in-Reply to His Excellency’s Opening Speech, passed by the Senate some time ago, at 20 minutes past 3 to-day.
The following papers were presented : -
Defence Act. - Regulations amended. - Statutory Rules 1920, No. 67- No. 69.
Lands Acquisition Act. - Land acquired at North Fitzroy; Victoria - For Defence purposes.
Papers presented to the British Parliament - Convention between Greece and Bulgaria, signed at Neuilly-sur-Seine, 27th Novem ber, 1919.
Income Tax - Royal Commission - Report. Peace Treaty between Allied and Associated Powers and Bulgaria, and Protocol, signed at Neuilly-sur-Seine, 27th November, 1919.
Profiteering Act- Findings by a Committee appointed to investigate the cost of Production and Distribution of Wool Tops and Yarns at all stages, and the Profits arising therefrom.
Payments to Members of Wheat Board
– I ask the Leader of the Government in the Senate -
– I remind the honorable senator that in his last question he asked whether the statements contained in his questions were correct, and it is not permissible to make statements in asking a question.
– I will put it in any way you like, sir, so long as I get the information.
– So far as I know, the answers to all but the last question put by the honorable senator should be in the affirmative. But as to the last question, suggesting that I should inform honorable senators of any existing vacancies on the Wheat Board, let me say that I think it is asking too much of human nature to suppose that if I knew of a vacancy for a profitable position like that I should be disposed to proclaim it from the housetops.
– (By-leave.) - I wish to make a personal explanation to the Senate. When I was speaking last Wednesday on the Sugar Purchase Bill, Senator Pratten interjected -
The honorable senator must be aware that up to 1919 Java sugar was much cheaper than the Australian product.
At the time I was under the impression that Senator Pratten referred only to the year immediately preceding 1919, and in reply I said that I had not contended that it was otherwise. I am afraid that this reply conveyed to the Senate a quite erroneous impression of the actual position. I, therefore, now desire to say briefly that in 1914, after the outbreak of war, the price of sugar f.o.b. Java was £20 per ton. Theprice received by Australian producers for that year’s output was £14 15s.11d. perton. In 1915, the average price paid by the Commonwealth Government for sugar purchased abroad was £18 4s. 4d. In 1916 it was £20 12s. 4d. The price paid for Australian raw sugar during 1915 and 1916 was £18 per ton. During the years 1914, 1915, and 1916; therefore, sugar was purchased in Australia- at a price on the average considerably below the prices ruling in other countries.
Issue of Butchers Licences
– I ask the Minister representing the Minister for Home and Territories, if it is permissible for a person to open a butcher’s shop in the Federal Territory in order to supply meat to the residents of that Territory?
– The honorable senator previously intimated his intention to ask this question, and I am now able to furnish him with the following reply : -
An Ordinance is in the course of preparation under which authority is granted to the Minister to issue butchers’ licences, but in the meantime no permits can be granted. It is anticipated that the Ordinance will -be in operation early in July next.
– So up to the present the people there have not been able to get a butcher’s shop?
– I wish to ask the Minister for Defence, in view of the fact that some time ago 1,000 blankets were promised by the Defence Department to the benevolent society in Broken Hill for distribution amongst the distressed, and that until recently only 670 had been delivered to the society, whether the remainder have been forwarded, or, if not, are they still likely to be?
– Six hundred and seventy blankets were sent when the approval was given. I remind the honorable senator that they were a free gift. It was intended to obtain ‘the remainder from the New South Wales district, but it was found after some delay that that district had none left. In the meantime we had disposed of some 500 to the Home and Territories Department in South Australia for some purpose or other. It was found that that Department did not require them all. and negotiations were set on foot to see if we could get some back. After some delay we were successful, and 375 blankets - the balance - were sent from Adelaide yesterday.
Bill received from the House of Representatives, and read a first time.
[3.131. - I move -
That so much of the Standing and Sessional Orders be suspended as would prevent the Bill being passed through all its stages without delay.
I do this so that we may get straight on with the Bill, as it is practically the only business before the Senate.
– I object to the suspension of the Standing Orders for this purpose.
– The honorable senator can record a vote against the motion if he chooses.
Honorable senatorshaving given their voices.
– I think the ayes have it, but, in order to make sure that the statutory majority is in favour of the suspension of the Standing Orders without notice, the Senate will divide.
The Senate divided -
Ayes . . . . . . 19
Noes . . . . 1
Majority . . . . 18
– There being the full statutory majority required voting in the affirmative, I declare the motion carried.
– I shall suspend the sitting until a quarter to 4 o’clock, to enable the Address-in-Reply to the Speech of His Excellency the Governor-General to be presented at Government House. I shall be glad if as many honorable senators as can find it convenient will accompany me.
Sitting suspended from3.18 to3.45 p.m.
– I have to report that, accompanied by honorable Ministers and honorable senators, I attended at Government House and presented to the Governor-General the Address-in-Reply which was adopted by the Senate. His Excellency was pleased to make the following reply: -
It gives me much pleasure to receive the Address which has been adopted by the Senate in reply to the speech which I delivered on the occasion of the opening of the First Session ofthe Eighth Commonwealth Parliament. I desire to thank you for your expression of loyalty to His’ Majesty the King.
Bill received from the House of Representatives, and (on motion by Senator Pearce) read a first time.
SenatorEARLE (for Senator Bakhap) asked the Leader of the Government in the Senate, upon notice -
If consideration will be given to the statement of the Hobart Merchants’ Association that working expenses and the very much larger amount of capital now necessary, compared with that formerly required under former conditions, make the handling by Hobart merchants of sugar on a basis of 2 per cent. profit an unprofitable business, involving a loss of 1 per cent., and thata discount of 6 per cent. should be allowed?
– The matter is under consideration.
asked the Minister representing the Postmaster-General, upon notice -
In view of the profit on the telephone services shown in the ninth annual report of the Postmaster-General’s Department, and the recent report by the Chief Electrical Engineer regarding the admitted inefficiency of’ the telephone services in Sydney and suburbs, will the Acting Treasurer make an adequate advance to the Postmaster-General’s Department immediately, so that the funds needed may be made available to keep the above-mentioned telephone services in reasonable working order ?
– Large additional sums have already been made available to meet the more urgent works and supplies for telephone services, and authority has been given to the Postmaster-General’s Department to order further large supplies in anticipation of funds being provided next financial year.
Stocks Held and Adjustment
asked the VicePresident of the Executive Council, upon notice -
– The answers are -
Flour is also held in certain mills. The wheat equivalent is, say, 500,000 bushels.
These figures provide for losses in New South Wales, Victoria, and Western Australia, but not in South Australia.
There are also certain private flour contracts still to be executed. The outstanding quantity has not yet been advised from the various States, but early notification is expected.
Bill read a third time.
– I move -
That this Bill be nowread a second time. This is a most important measure, because it deals with one of the vital necessities for the economic and industrial life of the Commonwealth. The principle embodied in the measure is a new one to Commonwealth activities, because its object is to bring about a partnership between the Commonwealth Government and a private business company. Not many words are needed from me to prove the wisdom of making provision for the Commonwealth requirements in regard to oil. The recent war demonstrated that, for defence purposes alone, oil is the prime necessity. It is the life-blood of the Navy. Without oil a modern navy could not exercise in peace or fight in war. Coal, of course, is a substitute for naval purposes, but all the modern war vessels are built for oil fuel, and in regard to that new arm of the service, I refer to aviation, oil is an essential. In my judgment aviation is destined to play a most important part, not for defence purposes only, but in the commercial development of this country. I speak, of course, as an amateur, but I have given some study to the subject, and during my recent visit to the “United Kingdom I had opportunities of conferring with leading men in the air world there, and I know they think there is a greater future for commercial aviation in Australia than, possibly, any other place in the world. Its wide spaces and configuration lend themselves to the development of aviation, for which oil fuel is a prime necessity. The manufacturing world, also, is becoming more and more dependent on oil for power purposes. Petrol is coming more and more into use for transport vehicles. Those who have visited the Old World must have noted the tremendous progress made during the last few years in motor-driven vehicles, and on this subject a few figures will, no doubt, be instructive. In 1910 the consumption of oil in Australia was 25,725,000 gallons; in 1914-15, 43,000,000 gallons, and 1918-19, 51,000,000 gallons; the quantity being practically doubled in ten years. In the face of these figures. I think it is not at all a wild prophecy that the next ten years will see an even greater increase in the ratio. For our naval purposes in 1910 the consumption was 1,000 tons; in 1914-15, 10,000 tons, and in 1919-20, 50,000 tons, the increase being fifty times within ten years.
As to our sources of supply I may mention that, with a bonus of 21/4d. per gallon, we are producing 2,800,000 gallons of shale oil per annum. The crude oil required by the Commonwealth comes from the United States, America, Mexico, Russia, Roumania, Dutch East Indies and Persia. Practically the whole of the supply coming to Australia at present is in the hands of private companies, and these may be broadly grouped under three headings, namely, the Standard Oil Company, the Royal Dutch Shell Group, and the Anglo-Persian Company. The principal suppliers to Australia are the Standard Oil Company, the Shell Group and the Texas Oil Company. Out of 5,811,824 gallons of residual or fuel oil imported into the Commonwealth during the year ended June, 1919, all but 40,000 gallons were supplied by the Shell Groups while out of 7,444,097 gallons of lubricating oil, all but 100,000 gallons came from the American companies. Again, out of 16,672,963 gallons of kerosene and burning oils 14,548,123 gallons came from the United States and from the companies operating there.
– From the standard Oil Company.
– Practically, it was all Standard Oil Company’s oil.
As showing how prices have operated, the figures I am about to give will prove interesting. The average price per unit of quantity as delivered at the Customs was, for petroleum spirit, including benzine, petrol, &c., 9.95d. in 1910, 13.58d. in 1914-15, and 20.72d in 1918-19; for lubricating oils,11.15d. in 1910, 11.35d. in 1914-15, and 23.21d. in 1918-19; residual oil 2.46d. in 1910, 2.87d. in 1914-15 and 3.31d. in 1918-19; solar oil 5.11d. in 1910, 5.58d. in 1914-15 and 19.14d. in 1918-19. It has to be remembered that residual oil is the oil we use for the surface ships of our navy, whilst solar oil is used by our submarines. The prices I have given are those for entry at the Customs. 1 come now to the prices on. the Australian market. They are as follow: - Benzine ls. 3£d. per gallon in 1911, ls. 9£d. in 1914, 2s. Hid. in 1918 and 3s. 5£d. in 1920; motor spirit ls. 5 3/4 d. in 1911,-ls. 11 1/2 d. in 1914, 3s. lid. in 1918 and 3s. 7d. in 1920; kerosene ls. lid. per gallon in 1911, ls. 3£d. in 1914, 2s. 3d. in 1918 and 2s. 3id. in ,1920; lubricating oils, low grade, ls. 6d. per gallon in 1911, ls. 9d. in 1914, 4s. in 1918 and 4s. in 1920; high grade 3s. 6d. per gallon in 1911, 3s. lOd. in 1914, 6s. 6d. in 1918 and 7s. in 1920; fuel oil 95s. per ton in 1911, 105s. in 1914, 158s. 6d. in 1918, and 190s. in 1920. The Australian Navy prices were as follow: £3 os. to £3 10s. per ton in 1910, £4 5s. to £4 10s. per ton in 1914, and £9 10s. to £10 peE - ton in 1920. Its requirements are 50,000 tons annually, so that the extra cost for the present year over that of 1914 is more than £200,000 for the Navy alone.
The following is the history of the Anglo-Persian -Company, so far as we ara concerned. In 1913, a Bill was introduced and passed by the British Parliament, under which Britain became possessed of a controlling interest in the company, which has a capital of £20,000,000. Its issued capital amounts to £17,500,000, which is made up of 5 per cent, debentures, £5,000,000 ; 6 per cent, participating preferential shares, £5,000,000; and £7,500,000 of ordinary shares. The debentures carry no voting powers, but the ordinary shares carry two votes per share. The total votes ‘number 20,000,000. The British Government hold 10,001,000 votes on account of 5,000,000 ordinary and 1,000 preference shares. The Imperial Government invested in the company, a sum of £5,000,000, and its holding to-day is estimated to be worth £50,000,000.
– What proportion of ordinary shares in the company are held by the British Government?
– They hold 10,001,000 votes on account of 5,000,000 ordinary shares, out of a total of £7,500,000 worth of ordinary shares.
– “Upon those figures, two-thirds of their holding consists of ordinary shares.
– In value, “ yes.” This company has holdings and oil-fields in the following countries : - Persia,
Timor, Mesopotamia, Africa, Trinidad, and Borneo. It possesses a fleet of tank steamers totalling 230,000 tons, which will shortly be increased to 500,000 tons, and which will then be worth £15,000,000. All shares in the parent company, other than those ‘ owned by the. Government, are owned by British citizens. That is an important factor to remember.
The agreement itself provides that a company is to be formed with a capital of £500,000, of which the Commonwealth is to find £250,001, and the Anglo-Persian Company £249,999. The company is to erect a refinery in Australia, and is to supply 200,000 tons of crude oil per annum to be refined here. That oil will, of course, be replaced by crude oil within the Commonwealth if such should be discovered either here or in the Territories that we control. The estimated output of the refinery is as follows: - 40,000 tons of benzine, 33,000 tons of kerosene, 9,045 tons of lubricating oil, 72,000 tons of fuel oil, 4,500 tons of wax, and 9,000 tons of pitch. These commodities, other than fuel oil, are equal to only half of the Commonwealth requirements. The only commodity which will be produced? by the refinery in excess of what the Commonwealth can consume will be that of fuel oil. In that, there will be a surplus for export; but nobody doubts that there is a market within easy reach of Australia for all the fuel oil that we can produce. The Commonwealth is to be entitled to one-half of the refining profits. I desire to draw honorable senators’ attention to the fact that while it can be said that the Commonwealth owns a little over one-half of the shares and the company the other half, iti has to be remembered that of the company’s onehalf only one-quarter interest is in private hands - and that is British - and the other quarter is held bv the British Government, so that it can be said that really ‘three-quarters of the shares are held either by the Commonwealth or the Imperial Government, and the other quarter by private persons. Provision is made for the Government to resume the works after a period of fifteen years, .and the conditions under which the resumption can be made are fully set out in the agreement embodied in the Bill.
Provision is also made for the development of the crude oil industry in Australia and Papua, but not in this agreement. The Government, by ‘other ar- rangements, are prepared to assist in the discovery and development of crude oil fields both- in the Commonwealth and in Papua, or German New Guinea. Honorable senators are aware, that steps- have already been taken to discover oil in Papua, and,, although it has been said that much money has been wasted there-, I do not admit it, as we have not expended more in searching for oil in that Territory than has. been spent on other oil fields in other parts of the world before payable discoveries were made. If we had been fortunate enough to have discovered oil at the outset the money spent would have been a mere bagatelle as compared with the value of the discovery. That oil is there has been demonstrated, but we have not yet been able to ascertain whether it exists in payable commercial quantities. That can only be proved by boring at the right spots and to the proper depths. In various centres the Standard Oil Trust and other corporations have spent enormous sums in unsuccessful attempts to discover oil in payable commercial quantities.
During the visit of the Prime Minister (Mr. Hughes) and the Minister for the Navy (Sir Joseph Cook) to Great Britain overtures were made by them to the British Admiralty for the Admiralty to take a financial interest in the exploitation of the Papuan oil fields, which they agreed to do, and to jointly share the expense with the Commonwealth. The Anglo-Persian Company has been brought into this, not as a part owner or as a concern with any financial interest, but merely as our agents to be used jointly by the Admiralty and the Government in exploiting that field. If. it is successful it does- not give the Anglo-Persian Oil Company any ownership rights whatever, as it is merely an arrangement between the Commonwealth Government and the Admiralty.
The Government some time ago offered a reward of £10,000 to any one who could discover oil in Australia in commercial quantities.
– Are the Government paying one half of the expenses incurred in connexion with the exploration?
– I understand they are.
– And the AngloPersian Company are also paying one half?
– It is npt paying anything but is merely acting as agents for the Admiralty and the Commonwealth, who are- jointly bearing the expense, although we are utilizing the services of the experts attached to the Anglo-Persian Oil Company’s staff. The company has no proprietary rights whatever in the event of oil being discovered. As I have already stated, the Government have offered a reward of £10,000 for the person who discovers oil in the Commonwealth, and honorable senators are aware that the Prime Minister has recently announced that the Government will increase that amount to £50,000 if oil is discovered in payable commercial quantities. Whether that is the best way to stimulate discovery, or whether it will be effective, is a matter upon which I know there are differences of opinion. It has been suggested that it would, be preferable to pay a subsidy of so much per foot for boring, but it has to be remembered that when companies are formed for the purpose of prospecting for oil they do not always operate on the best advice. I know of a case where a company expended large sums of money in defiance of the best geological advice. It is, therefore, felt that if we paid a subsidy of so much per foot for boring, we might be encouraging the unnecessary expenditure of a large sum of money without achieving any beneficial results. It is felt that if people in the Commonwealth believe they have reasonable ground for spending money in searching for oil, and they discover it, in addition to the value of the find, they will have £50,000, which” will he a distinct advantage and enable them to proceed with the work.
– If a company were to discover oil, the £50,000 would hot be needed.
– If oil is. discovered, will this agreement cease to operate ?
– No, because it provides that the crude oil discovered shall be handled by the refinery, and it will thus replace supplies from other sources. It frequently happens that when a company has been searching for oil, and has made a discovery, its capital is exhausted, and that, although it is at the door of Paradise, as it were, it is unable to enter owing to the lack of capital. In such cases the promoters of such enterprises have to share their privileges with others who have not spent ‘anything. The payment of a bonus of £50,000 would probably put a company in the position to reap the whole of the benefits.
The agreement is subject to ratification by Parliament, and it may be argued that this is in some way likely to injure the shale-oil industry in Australia, but that is not the view of the Government. Parliament has already shown its desire to assist the shale-oil industry by the bounty provision it has made in the past, and which will continue. It is the intention of the Government to do what they can, subject, of course, to the will of Parliament, to assist the shale-oil industry. But if it be argued that the refining of this oil in Australia is likely to injure in some way the shale-oil industry, it can only be as a result of the shale oil, even with the assistance of a. bounty, being unable to compete with the oil produced in this way. If that is so, is it worth while encouraging an industry and bolstering it up in such a way that it will injure other industries depending upon oil for their success or failure ? I do not hold out any such claims concerning our shale-oil deposits in the Commonwealth. In Great Britain to-day this powerful Anglo-Persian Oil Company is operating, and yet the production of shale oil is going on in that country side by side with the refining of crude oil by the Anglo-Persian Oil Company, and that, too, without any Government assistance at all. I am told that we have deposits of shale in the Commonwealth equal, if not superior, to the Scottish shales that are being successfully worked in Great Britain.If that be so, in view of the assistance given to the production of shale oil in Australia it should be possible for us, not only to develop the refining of crude oil, but also to promote the progress of the shale-oil industry in this country.
– Is the AngloPersian Oil Company a wholly British company ?
– Yes. I understand that every shareholder is a British subject.
The substance of the agreement is, of course, contained in its details. Honorable senators might agree with the principle of making such an agreement, but might at the same time consider that its provisions would not give effect to what they consider vital in the interests of this country. I think, however, that if they will closely examine this agreement they will find that the position of the Commonwealth is fully safeguarded.
First of all, in paragraph 3 it will be seen that the Commonwealth is to maintain its proportion of holding in the event of any increase of capital, though it only nominates three out of seven directors, whilst the Anglo-Persian Company nominates four.
– The Commonwealth is to have a majority of the shares:
– The Commonwealth will have one more share than the company.
– And one less in the number of directors.
– Yes, that is so. I point out that the directors are charged with the business management of this concern, but certain limitations in regard to its policy are im,oosed upon them by provisions contained in the agreement, and in holding the majority of the shares the Commonwealth will always be in a position to control the direction of things affecting the enterprise that are not expressly provided for in the agreement.
We have no experience in the handling of this business. We have no officers who have had any training in this regard. We have no technical experts who could advise us as to the technical arrangement of such a business. It is, therefore, wise that, whilst fully protecting the rights and business interests of the Commonwealth, we should secure to ourselves the benefit of that superior knowledge, technical and’ otherwise, that comes from the long experience of the Anglo-Persian Company and the assembling by it of the technical experts who comprise its staff. There is, therefore, no danger to be apprehended from the fact that a majority of the directors are to be representatives of the Anglo-Persian Oil Company, especially when we remember’ that the directors will represent shares the majority of which are the property, not of any private interests at all, but of the Australian Government.
There are certain reservations as to the ‘ classes of subjects in connexion with which Commonwealth approval of action must be obtained in any case. These cover questions of policy, naval and military defence questions, change in the constitution of the company, and sale of products on long contracts, or in any other way, so as to prejudice the agreement. Again, the company must not enter any Trust or Combine, and must remain a British company. Though the technical management will be in the hands of the AngloPersian Company, these things which are vital from the point of view of the Commonwealth will be controlled by us, either under the agreement or by the controlling , power which our interest as the majority shareholder will give us.
Paragraphs 8 to 13 contain provisions for regulating the acquisition and supply of crude oil and the refined product. Paragraph 14 gives protection against dumping and unfair competition by legislative or other means. Here I would say that at first blush some of these provisions may seem to be rather extraordinary, but we have to remember that this company will he subjected to tremendous competition from outside interests. Honorable (senators who have read any economic history at all know well how powerful, insidious, and determined that competition may be, and how many strings can be pulled by those from whom it may be expected. To see that this enterprise is established in the Commonwealth in the face of any competition, we must be prepared, if the necessity should arise - and of that the Commonwealth is to be the judge - to protect it against opposition. Let me add that the opposition will be foreign and not British opposition. It will be from interests outside the Empire. The sources from which it will come will be such that no legislation of ours can control or affect them in any way.
– The honorable senator means cheap oil?
– No, I do not. I mean arrangements which for a time might give us cheap oil in order to destroy the local competitor, so that the outsiders might subsequently have our market to themselves. That is the well-known policy of the Standard Oil Company and other oil interests.
– We do not get cheap oil now.
– That is so. In paragraph 15 of the agreement, there 5 3 provision to regulate and safeguard the shareholding interest of the parties. In paragraph 16 the steps to be taken to exercise the option of the Commonwealth to take oyer the business are fully set out in legal form. In paragraph 17 it is provided that the Anglo-Persian Oil Company shall act as marketing agents of the product of the refinery outside the Commonwealth. This is entirely in our interests, since it gives us the services of an organized company with world-wide experience for the marketing of our products outside Australia, and whatever profits they make the Commonwealth will share with the company.
To sum up, it seems to me that, apart from the advantages to which I have specifically referred, the general advantages under the agreement will be the establishment of oil refining in Australia, which will give us not only the refined oil we require, but subsidiary products of the greatest importance to many of the industries of the Commonwealth. So long as the refining of crude oil is carried on outside the Commonwealth, and not within our boundaries, all those by-products arc lost to us, or we must buy them at an increased price. Consequently, in competition in the markets of the world our manufacturers using those by-products in their industries are at a great disadvantage as compared with manufacturers in other countries who can obtain local supplies of those by-products.
I think that most of us long ago shed the pessimism which we may have had that the time would never come when the Commonwealth could go out into the markets of the world with its manufactures. I am confident to-day that the Commonwealth has as good a chance in the outside markets of the world as has any other country on earth. Now that labour conditions are becoming equalled in all countries, the world is open to our products. Surely it is to our interest, and a good economic policy, that we should give our manufacturers a home supply of all the products which they work up into manufactures that they desire to export to other parts of the world.
There is a general advantage arising from the part-ownership and joint control of a great industry essential to our progress. It is unthinkable that the Commonwealth should enter into an agreement with a foreign company or with any of the companies dealing in’ oil to which I have referred, that have no interest in’ the British Empire, whose holdings are outside the Empire, that are under no form of control by the British Empire, and whose legislative authority is not controlled by any Legislature within the Empire. Here we have a company that is wholly British and, what is of great importance to my mind, which comes under the legislative power of Great Britain wherever it is operating. Even in Persia, owing to a treaty recently entered into, the power of the British law can operate through diplomatic channels. It seems to me that no other company could he considered ou an equality with the AngloPersian Company if we were contemplating throwing open the prospect of such an agreement to the world.
We shall have under the agreement an effective voice in the supply of crude and refined oil, and in fixing the price. If honorable senators will examine the provisions of the schedule regulating prices they will see that the control of the Commonwealth is not a nominal, but a real and effective, one.
I submit as the last, but by no means the least, consideration that we have under this agreement an opportunity of acquiring for the Commonwealth, and under its control, the vast technical experience of this great world-wide company. That is surely worth something. If it were the policy of the Government to establish a refinery of its own, it could not make a start with any such advantage. It would have to buy its experience, and we know that for Governments that is _ always a costly matter. It would have to go into the world to compete against these rich and powerful companies to obtain its experts. It would have to build up an organization in the face of fierce competition. Outside the borders of Australia it would be under great disadvantages. Under the agreement we get this expert technical advice, the experience of the Anglo-Persian Company, with its worldwide organization, and under conditions which, it seems to me, are absolutely safe from the point of view of the Commonwealth taxpayer, advantageous from the point of view of the consumer, and of immense value to the Commonwealth as a whole.
.- Recognising the great importance which the production of oil is to Australia, I welcome any movement by which the oil we require may be obtained. I cannot help thinking at the same time that the policy which the Minister for Defence (Senator Pearce) referred to in the concluding words of his very able speech would have been the better policy for Australia to adopt. It must riot be inferred that I am going to oppose this agreement, though I shall try in Committee to make it more watertight. I shall support the agreement whilst expressing the view that something better might have been done. The Government seem to me to be undertaking to supply us with jugged hare, without observing the first principle of the recipe, namely, “ catch your hare.” The first essential to the permanent welfare of Australia is to obtain sufficient quantities either from natural wells or shale deposits of crude oil within, the Commonwealth. Holding as we all do, and as I know the Government do, the belief that we are going to find supplies of oil in Australia, I say it would have been better if the Government could have made arrangements, during the interim between the present t:me and the discovery of adequate supplies of oil in Australia, to have obtained the crude oil we require from this Anglo-Persian Company. I do not know whether such an effort has been made, and has failed. If it has, of course, there is a greater justification for the agreement; but I do think that, before it was entered into, and a copartnership on the part of ‘ the Government with the company arranged for the refining of oil, the Government should have made a special effort to obtain the necessary crude oil - 200,000 tons, or whatever is required per annum - and erected their own refinery, so that when in the course of their explorations they were able to produce their own crude oil, no one else would participate in the industry. I suppose one is excusable for treating any business connexion with those interested in oil with a certain amount of suspicion. It is all very well to say that the Anglo-Persian Oil Company is Britishowned and controlled. So far as concerns the British Government controlling the operations of this company, those contentions are all right; but I am afraid we should be living in a fool’s paradise were we to rely absolutely upon speculators in oil simply because they were of British extraction or British nationality. My opinion as regards this class of gentlemans is that they are out for the accumulation of the dollar, the sovereign, or the rupee, and to convert it into the coin of their own realm, no matter where they can obtain it. Although, of course, to the extent that the British Government controls this company it may make us -a little lenient towards the agreement, yet we must not accept that as a sufficient safeguard for Australia without making the agreement thoroughly watertight and safe so far as our interests are concerned.
I am of the opinion! - and I hope I am not doing any one an injustice in so thinking - that the most suspicious of us do not realize the extent to which the different oil kings of the world have gone in order to prevent the development of oil in Australia. I have seen several instances where it has been most remarkable that everything has been done to prevent the successful exploration of our oil deposits. Let me cite two, for example, in which an effort was made to develop the shale oil resources of Australia. Of one of them I have not had personal experience. I refer to the Walgan Valley, New South Wales. In that case certain investors raised something like £1,000,000, and a mau was employed to manage and develop the show.
– Mr. Georgeson.
– Was that his name?
– He had nothing to do with the management. He was a mere salesman.
– I did not know. I am speaking generally. That gentleman, having considerable power under the company, set about to expend the money in a most extraordinary way. Railways were constructed round cliffs and crags to the wrong side of the hill, and the company, when the whole of their money was expended, found that they had not developed a single’ ton of oil.
– It was a pretty hard place to develop, anyhow.
– Whether it was a hard or an easy place to develop, the money was deliberately wasted . For what purpose? In my opinion - and I hope I am not doing the gentleman who was responsible for the undertaking an injustice! - he was im the pay of the oil kings.
Again, in my own State - and I think there is an honorable senator present who knows more about this than I do - a few investors undertook to develop a well.known! and proved deposit. They were advised by an oil expert, who had severed his connexion with the great oil combinations, nhat a very limited capital would be required. It was within the power of those gentlemen to raise, probably, quite easily £50,000, but they were advised by him that £10,000 would be ample. He was appointed manager. The shale deposit at Latrobe, ‘Tasmania, occurs in an elbow of the river. He set to work. He placed his retorts at a certain level, and then, instead of driving an adit to the shale deposit, and trucking his shale out so that it would gravitate to the retorts, he placed a haulage railway over the top of the hill, started operations on the other side of the hill, got out the shale, and hauled it over the hill and down to the retorts. No practical miner in Australia, setting to work to develop the shale, would have developed it in that way. The result was that before the company began to produce anything at all, the whole of their money was expended.Nothing will convince me that that gentleman was npt also in the pay of the Oil Combines, who are endeavouring to prevent the development of oil in Australia.
– Can you tell us how the shale lies there?
– It lies horizontally, like a coal seam.
– Yes, and on an average of about 4 feet 6 inches thick.
These experiences make one very suspicious in dealing with any proposition -in which oil companies are involved. I am also rather surprised that the Government has not at least done a little more to assist in the development of one of these shows. A short time ago an effort was made by the Tasmanian Government to undertake the development of this particular shale oil deposit themselves. On that occasion the Government got a contract from the Federal Navy Department for the supply of 13,000 tons of oil per annum at 75s. per ton, which was very reasonable indeed, considering the statement made to-day by the Minister for Defence that they are now paying from £9 to £10 per ton for the same oil. The oil from the experimental retorts of this particular deposit has been proved equal in calorific value to any oil produced in the world. That proposition was defeated by the Legislative Council of Tasmania, but subsequently there was every reason to believe that the Council had obtained wisdom in the meantime, and that they would reverse their action. I have the following letter, written by the Acting Prime Minister (Mr. Watt) on the 19th September, 19 IS, to the Premier of Tasmania : -
With reference to your letter of 2nd July, regarding the Railton-Latrobe shale-oil proposition, I desire to inform you that this, matter was fully considered by the Board of Trade, who could not see their way to recommend the proposal that the Commonwealth should take over the undertaking under the War Precautions Act.
The question of renewing the agreement made on 10th November, 1916, between your Government and the Minister for the Navy to take 8,000 tons of liquid oil fuel per annum for a period of eight years at 75s. per ton, has also received full consideration, but in view of the fact that under present conditions it is not anticipated that the naval requirements would exceed 1,500 tons per annum-
That is very much less than the quantity outlined by the Minister to-day - and that arrangements have already been made for the supply of 1,000 tons of oil fuel for delivery at Garden Island, the Government regrets that it is unable to see its way to renew the agreement, or to acquire the property.
I believe that had the Government renewed that agreement at the time, the actual production of considerable quantities of crude, oil would now be established in Tasmania. I very much regret that the agreement was not renewed at a time when there was every likelihood of the Government of Tasmania being able to undertake the proposition.
I wish briefly to refer to the agreement embodied in this Bill. I have every confidence- in the Prime Minister (Mr. Hughes), and in the legal ability of his chief adviser, Sir Robert Garran. But it has been my mis- fortune, on several occasions, to differ from other gentlemen learned in the law, and on two occasions, at least, my “ horse sense “ has proved right. Hence, although I have the fullest confidence in the ability of both those men, who are responsible for this agreement, I venture the opinion that perhaps it can be improved. I notice that so far as the Commonwealth is concerned, it is provided that several very important matters cannot be interfered with except with the concurrence of the Commonwealth’s representatives on the Board. I cannot understand where the advantage comes in of the Commonwealth holding a majority of one share in the company while it has only three-sevenths of the representation on the directorate. It is on the director- ate that the actual business is done, and the constitution or articles of association cannot alter the Government’s representation on it. Hence, for all practical purposes, the Government will be in a minority on those questions with which it is competent for the directorate to deal.
– That is, administration.
– Administration, which embraces a very wide area. It is perfectly right for the directors to have the balance of power, but, although safeguards are contained in sub-clause d (iv) of clause 3, clause 5 places all the technical and commercial management entirely in the hands of the Refinery Company. Does not this cover everything, and does it hotnullify the power given to the Government in sub-clause d (iv) of clause 3?
– Then the Commonwealth will be in the same position as one large shareholder?
– They will have very little power if all the technical and commercial management of the concern is in the hands of the Refinery Company. The only restriction in the agreement is that the oil shall be sold at a fair and reasonable price, but there is no mention as to who will determine this point.
– The largest shareholders.
– But the Commonwealth will have no control over the directorate.
– The Government will control the company.
– The honorable senator might as well say that the electors are the largest shareholders in the Commonwealth, but members of this Parliament are in the same position as a board of directors, and although the vast majority of the electors may be opposed to certain action, about to be taken by Parliament, they are powerless against the majority of members in both Houses.
– They can kick us out.
– Yes, after the damage has been done. And they may replace us with other members of the same class in much the same way as the directors on this proposed company may be replaced. The company will still have the right to four-sevenths of the directors on the Board, so it is no use arguing that the Commonwealth can determine this question of price. Apart from that, if it can be shown that the Government could define what is a fair and reasonable price, there are other questions, notably connected with the commercial side of this business, that will be absolutely in the hands of the Refinery Company.
– The agreement says that the price for crude oil must not be greater than that charged to the British Government.
– That may be all right so far as crude oil is concerned, but there is nothing in the agreement giving the Commonwealth, as the largest shareholder, power to exercise a determining voice in the administration of the company.
– Is not the agreement designed to place the administration in the hands of the company, and not of the Commonwealth?
– Yes, and that being so, why should the Commonwealth be a shareholder at all? What is the use of going into partnership with any body of men, and investing an equal amount of money, if administrative control is to be in the hands of one partner only?
– The honorable senator does not differentiate between administration and control.
– If the honorable senator will peruse the agreement again, and read carefully sub-clause d (iv) of clause 3, he will better appreciate what I am saying. That sub-clause states - that no action or question or decision relating to or affecting -
– That is practically a power of veto in regard to questions of policy.
– Yes; but I invite the honorable senator now to turn to clause 5 of the agreement. It states -
The technical and commercial management of the Refinery Company shall be left entirely in the hands of the Refinery Company.
– That is why we have the company here. We want their knowledge and experience.
– But surely the honorable senator realizes that the clause annuls all that is set out in sub-clause d (iv) of clause 3?
– You contend that the Commonwealth Government is more or less a sleeping partner.
– Yes; that, and that only.
– But at the end of fifteen years the Government may take over the whole business at a valuation.
– I will deal with that matter later.
I would like the Minister to agree to amend the agreement by adding a new sub-paragraph to sub-clause d (iv) of clause 3 to the following effect: -
Any increase in price of the refined product of the company;
This will provide that any increase in the price of the refined product must havethe concurrence of the Australian representatives on the board of directors.
– So far as the home market is concerned.
– Of course.I am not troubled at present about the export price. I think, also, it would be wise to strike out the words “ and commercial” from clause 5, so that only the technical management of the concern will be left entirely in the hands of the Refinery Company.
– And manufacturing ?
– Yes. I think this side of the business should be exclusively in the hands of the company, but I do not want the commercial side of the business to pass from the control of the Commonwealth.
– You do not want the company to control the price?
– No. But more than the question of price is involved. I may say that, rightly or wrongly. I am suspicious of oil kings, whether British,
American, or Dutch, and, therefore, I want this agreement to thoroughly safeguard the interests of the people. The principal object of the Government in entering upon this agreement is to obtain the advantage of the long experience and technical knowledge of the Anglo-Persian Oil Company. That being so, it is perfectly right that we should leave the scientific management of the enterprise exclusively in their hands. We are not called upon to lose control of the commercial side, which embraces everything in connexion with trade.
– Subject to the limitation of the agreement.
– Which is not touched, except by clause 3, and that is annulled by clause 5.
Coming now to the question of the repurchase of the business by the Government. I was struck bv the Minister’s statement that the British Government invested in the Anglo-Persian Company somewhere about £5,000,000, and to-day the investment is worth, approximately, £50,000,000. The assets of all corpo-ration’s authorized by Governments to carry out certain public utilities appreciate after a certain period as the result of community-created values, and I maintain that this value should not belong exclusively to ally company. Some years ago a company was given authority to operate a tram system in Hobart, and the expenditure on the enterprise was about £80,000. When eventually, the municipality repurchased the system, the company had the right, under the Act, to claim’ about £200,000, of which amount £120,000 represented value created by the people of Hobart, owing to the extension of the city and all its conveniences.
– Not all of that was community-created value.
– The greater portion was.
– You must remember though, that the company had more enterprise than the municipality.
– The point is that the municipality had to pay £200,000 for what originally cost £8*0,000. If we are going to refine oil we should either do it ourselves or see that the communitycreated value attaching to the enterprise does not wholly find its way into the pockets of the people who embark upon it.
In another Compa’ny Bill with which I was intimately associated, provision was made that at the expiration of twentyone years the Government should have the right to repurchase the whole of the company’s assets for an amount equal to plus 20 per cent, of the actual expenditure upon the undertaking. That measure passed through both Houses of the Tasmanian Parliament, and I believe that the provision in question represents a wise innovation in regard to private companies.
Clause 16 of the agreement which is contained in the schedule to this Bill provides that at ‘the end of fifteen years the Commonwealth shall have the right to purchase the whole of the assets and interests of the company, and that if the two parties do not agree, two arbitrators shall be appointed, one by the company .and the other by the Commonwealth. If these arbitrators are unable to agree, they will be obliged to appoint a third arbitrator, whose decision as regards the price to be paid by the Commonwealth for the company’s interests shall be final. I should like, after the word “ conclusive,” in sub-clause e of clause 16 of the agreement, to insert the following words : -
But the price paid shall not exceed 49 per cent, of an amount calculated by adding 20 per cent, to the amount expended by the company for land, buildings, and equipment. If the buildings and equipment are not in a state of repair satisfactory to the Commonwealth, then an amount sufficient to place them in such repair shall be deducted from the moneys payable to the company.
This proposal, if adopted, will prevent the community-created value attaching to the enterprise from finding its way wholly into the pockets of the company. The Commonwealth, having through its people, created a tremendous increase in the value of the undertaking, ought, obviously, to share in that increased value. But in order to insure that effect shall be given to my proposal, I suggest the insertion of a new sub-clause, which will read -
Vouchers shall be deposited by the company with the Auditor-General from time to time showing the full amount of expenditure by the company upon land, buildings, and equipment, and such vouchers’ shall be considered conclusive evidence of the amount so expended.
– Will not the representatives of the Commonwealth on the directorate look after that?
– It will be idle for the Commonwealth representatives on the directorate to look after things if they have mo power to enforce their judgment. Under this proposal, if at the expiration of fifteen years the expenditure of £500,000 has created a value of £10,000,000, assuming that the arbitrators appointed by the company and the Government agree as to that value, the Commonwealth will have to pay the company £5,000,000 for the purchase of its interest in the enterprise. That being so, the company will receive during the fifteen years’ currency of the agreement, not only its share of the profits of the undertaking, but also, as a final dividend for the purchase of its interest in the concern, all the added value I have indicated.
– Suppose that the Commonwealth desired to sell its interest, would it not be a fair thing that it should ask a similar amount?
– If it is fair for one side to ask it, it is fair for the other side to do likewise.
– I have mo doubt that the company may put that proposition up to the Government when the Commonwealth seeks to buy it out.
– I am putting it up to the honorable senator.
– If the Minister puts up that proposition to the company and the company says, “ We will agree to it, provided that, if at the end of fifteen years, we want to buy the Commonwealth out, it will treat us in a similar fashion,” their proposal would be a fair one. But it is not likely that the company will wish to buy out the Commonwealth. It is much more probable that the Commonwealth, having obtained a supply of crude oil from its own territories, will be anxious to buy out the company. I intend to ask honorable senators to agree with my proposal, and if the company decline to assent to it, although I recognise the importance of developing the oil industry in Australia, I think it will be better for us to wait a little’ longer rather than to enter into this agreement.’
I have nothing further to add to my remarks. I have made certain suggestions, and I hope that every honorable senator, realizing that this may mark the beginning of the development of a very big industry in Australia, will make every effort, even at ‘the risk of retarding the progress of this particular enterprise, to safeguard the interests of the Commonwealth.
Senator PRATTEN (New South Wales)’ 5.19 J. - It is, I think, a very happy coincidence that i his Parliament is now engaged in the discussion of a proposition relating to the use of fuel oil, the foundation of which was laid by one of our own residents, if not one of our own citizens. It will be remembered that some years ago Mr. W. Knox D’Arcy spent a good deal of money and incurred many risks in looking for oil around the Persian Gulf, and that, as the result of his labours, the Empire possesses to-day perhaps one of its most valuable acquisitions.- I think that Australia is very deeply indebted to the Government for their endeavour to solve the oil problem. The oil industry is a key industry and one which is of overwhelming importance to the people of Australia. To those of us who have perhaps been criticising the Government in connexion with the development of cur .oil resources in New Guinea and who have complained from time to time of the money which has been wasted there, it is satisfactory to learn that even while we were engaged in that criticism, the Prime Minister (Mr. Hughes), in England, had not only conceived, but was elaborating a scheme, which, I hope, will prove to be the successful solution of our oil troubles. This is the age of the internal combustion engine, which will not go without oil. I agree with the Minister for Defence (Senator Pearce), who said this afternoon that the future fuel of our Navy is oil. I believe, too, that the chief and primary reason -why the Admiralty is cooperating with us in this matter is not merely to help Australia to solve the oil problem, but to develop oil depots for naval use right round the Empire. Despite the expenditure of some hundreds of thousands, if not millions of pounds,, in an attempt to supply the whole of our oil requirements from shale within the Commonwealth, we are to-day importing 95 per cent, of the motor fuel that we need. The Minister has told us that our oil requirements to-day as compared with our requirements in the year 1910 have doubled. To-day they are more than 50,000,000 gallons per annum as compared with about 25,000,000 gallons in 1910. If the opinions of Admiral Lord Fisher, late First Lord of the Admiralty, are worth anything, and if there is any significance in the fact that many of our mercantile marine liners are now being built to consume oil fuel, or are being converted to the use of that fuel, the requirements of fuel oil in Australia in the not distant future will again be doubled. So that this Bill is overwhelmingly important to the people of the Commonwealth in almost every direction, and the Government are to be congratulated upon a stroke of business which, though it is not of a spectacular character, will ultimately solve the oil problem, not only to the benefit of our own oil consumers, but also to that of our mercantile marine and of the Empire’s defence. “We all know that recently there has been an oil “squeeze” in progress. The Inter-State Commission has told us that. In the Mother Country an investigation has been conducted into the question of the risk of a petrol famine there, and it may interest honorable senators to note a few of the many conclusions at which the Committee which was appointed for this purpose arrived. Their first conclusion was -
That powerful financial interests are taking advantage of the deficiency of motor fuel to raise prices.
The same thing has occurred in Australia. Their second conclusion was -
That the concentration of control of prices in two enormously powerful Combines, practically world-wide in their scope, constitutes a power so dangerous, should it happen to be improperly used, that prompt international action is imperative.
Exactly the same applies to Australia. The third conclusion was that the two main groups concerned were the Standard Oil Company and theRoyal Dutch-Shell Group. The Commission further states -
An exorbitant profit is being procured by the producer or the refiner of petrol at present market prices. Petrol sold at £23 per ton f.o.b. New York shows grossly excessive profits.
These are some of the conclusions arrived at by the Central Profiteering Committee on the petrol position in Great Britain, and its findings can bo applied to the present position in Aus tralia. What has been going on in England ? . What is the state of affairs that has resulted in such drastic conclusions as those I have quoted being arrived at? The retail price of petrol in England is 3s. per gallon, which includes an Excise duty of 6d. per gallon; but the price in Australia is from 3s. 3d. to 3s. 6d. per gallon, without any Excise duty at all. I understand we are drawing the bulk of our supplies from the Dutch East Indies, only one-third of the distance from our consumers as compared’ with the consumers in the United Kingdom. Bad as is the State of affairs in England with petrol at 3s. per gallon, including an Excise duty of 6d., how much worse is it in Australia, where it is retailed at from 3s. 3d. to 3s. 6d. per gallon, without any Excise duty being paid into the Commonwealth revenue?
– It is practically1s. per gallon more.
– Exactly. The position was so bad that the Profiteering Committee damningly criticised the suppliers in its recent report on petrol prices. But it is infinitely worse in Australia, and the Government are therefore fully justified in submitting this agreement for our approval.
I understand that the two powerful Combines, that have Australia in their grip in the matter of oil supplies, do not pay very much, if anything, in income and. excess profits taxes. As a representative of the State of New South Wales, I most heartily and strongly support this measure, which has been introduced, not for the purpose of giving control of our oil resources to the Anglo-Persian Oil Company, but for entering into a partnership with the company in order to erect a plant for refining 200,000 tons of crude oil per annum, which the company practically guarantees to supply without interfering in any way with the discovery of indigenous oil within Australian territory. Seeing that the British Government practically holds one-half of the AngloPersian Oil Company’s shares, and that this agreement will enable the Commonwealth Government to hold onehalf interest in the refining and distributing business, we havea partnership in this venture of one-half interest owned by the people through the Government, one-quarter interest owned by the British Government, and the remaining one-quarter by the private shareholders of the Anglo- Persian Company. So far as I can test the agreement, both on the utterances of the Prime Minister (Mr. Hughes) in another place, by the Minister for Defence (Senator Pearce) in this chamber, and the agreement itself, it does not give a monopoly to anybody. The agreement is merely for the purpose of erecting a refining plant and distributing the oil to the people of the Commonwealth at a fair and reasonable price. I am prepared to accept the agreement so far as the words ‘ ‘ fair and’ reasonable ‘ ‘ are concerned, because I cannot conceive of anything happening under it that would be nearly so bad as our present position. Gentlemen representing these two powerful world-wide interests have attended various tribunals - both Federal and State - in connexion with the price of oil, and, in effect, have stated that if we do not agree to their prices they will not supply the product.
– They have said that they would cut off supplies.
– That has been their threat, and we have had the revolver of the commercial burglar deliberately pointed at us. Now that the agreement has been placed before Parliament, there is some prospect of the people of Australia getting outside the octopus-like grip of these two great corporations.
The agreement will not prevent people boring or testing country for oil within Australian territory. It will not hamper the development of our shale oil deposits, if they are likely to be commercially profitable, and will not prevent .parties going from north to south or from east to west in search of oil. If those who search should be successful, they will not be prevented from selling oil on the Australian market, and any arrangement made by the Government with the AngloPersian Oil Company will not disturb their rights, provided they are prepared to sell it at a fair and reasonable price. On the figures available, it seems that this is only the commencement of what will be a much larger key industry than we imagine. From the figures given by the Minister for Defence in connexion with our internal consumption, it would appear that if the plant is kept going full time and refines 200,000 tons of crude oil per annum, it will not be able to supply the Commonwealth with approxi mately more than one,half of the kerosene or benzine we require, or more than one-third of the lubricating oil that we are likely to need.
– It will supply only our full requirements of fuel oil.
– Yes ; and our requirements in that direction in the very near future are likely to be doubled, and redoubled, owing to the conversion of present liners into oil-consuming vessels. Additional supplies will also be needed for our various oil depots to meet our needs for Imperial defence purposes. From the figures I have given it will be seen that this is clearly only the commencement, if we are to be a selfcontained and self-supporting country, and that before very long two refining units will be necessary to meet the whole of our requirements.
There is another agreement which does not come within the scope of this measure, but which relates to the exploitation of our potential oil resources in Papua, and embodies an arrangement between the Admiralty and the Commonwealth Government. This agreement, which will come into operation concurrently with the one embodied in the Bill, is for the purpose of further exploiting Papuan territory for mineral oil. Up to the present we have spent approximately £120,000 over a period - so far as I can remember - of five or six years. I do not think, however, that much has been achieved as a result of that exploratory work; but I have been informed by a gentleman who has been on the oil-fields in New Guinea that the only way we can obtain cheap oil is by not losing control of its supply. Of course, that is obvious, and perhaps redundant; but I am quoting an obvious phrase in order to stress the point that, under this agreement for the exploitation of our potential oil resources in Papua, we do not take any one into partnership, as anything discovered will belong to the people of the Commonwealth, and will not be mortgaged by the Government. I am informed that the prospects of discovering oil in Papua are brilliant.
– Oil has been obtained there; I have seen it.
– It is possible that if we strike oil in payable commercial quantities, we shall have a field rich enough to enable us to liquidate our national -debt.
In connexion with the valuation of the British Government’s . interest in the Anglo-Persian Oil Company, I desire to point out to Senator Earle that the valuation is not based on its refineries, tank steamers, and distributing organizations, but on the value of its oil-fields. It has its unearned increment to the extent of £40,000,000 or £50,000,000 in the oil wells in Persia. Under this agreement it is not possible for the Anglo-Persian Oil Company to obtain any- potential increment of that nature, because the Commonwealth Government, own the resources, and will control all the oil-fields that are or will be discovered in New Guinea or any other Commonwealth Territory. I believe that others have been trying rather hard to get some sort of control in New Guinea of the oil we hope to find there. I for one am very glad indeed that no foreign company has been allowed to come in. I am glad that the Commonwealth is to be linked up with a purely British company, and I believe that, although in the agreement for the exploitation of the oil resources of Papua, there is no penalty provided, there is a very .great moral obligation thrown on the Anglo-Persian Oil Company, as an Imperial concern, to find oil there as quickly as they can. The more oil we can obtain in those places marked red on the map, that link the Empire round the world, the stronger shall we be so far as the defence of that Empire is concerned.
With respect to the agreement itself, I ha.ve looked at paragraph 14 with some concern. In Committee I shall have something to say as to the in advisability ‘ of giving any Minister legislative power. All changes we make in the Customs Tariff that possibly may he necessary under paragraph 14 of the agreement should be made, not by an administrative act of a Minister, but by a legislative Act of this Parliament.
Some people say that the control that is given to the Anglo-Persian Company for fifteen years is too long. Others criticise the agreement because there is no penalty upon the company if they do not fulfil their obligations. But, as one of the legislators who must take some of the responsibility in this matter, I shall rest satisfied that it is a purely British company controlled by the British Government, that the oil is wanted for British Imperial and commercial purposes, and also that the Anglo-Persian Oil Company are going to give us of their best technically and otherwise, and that if they cannot discover oil in Papua nobody else can do so. I am in agreement with Senator Earle to some extent when he suggests that the development of the oil resources of Australia so far may, in some instances, have been kept back, perhaps, by sinister means.
I am not altogether satisfied that the Anglo-Persian Oil Company should be able to deal in the “Commonwealth in the same way as they do in England. I do not think that they should be allowed t’“» do so. It is common knowledge that the British Government have been ibo hard put to it to obtain revenue that each and every means possible has been adopted in order to obtain the maximum profit from enterprises with which they have been associated. The profiteering report to which I have alluded deals with this matter, and makes a reference to the Anglo-Persian Oil Company. I am referring to the subject now in order that it may be recorded that we in Australia have our eyes open to the possibilities of the future. The report to which -I refer contains the following: -
We feel strongly that when the Anglo-Persian Company (in which His Majesty’s Government hold a controlling interest) is free to market its own production, steps should he taken by His Majesty’s Government to insure that all products are sold at a reasonable figure in this country without reference to excessive prices ruling in other fields. We attach great importance to this point, as we are of opinion that when the existing contracts by which the Anglo-Persian Oil Company are bound expire in 1922, it will be in the power of His Majesty’s Government to give protection to the British users of petrol, and thereby to confer substantial benefits on the whole community of this country to whom the cost of all commodities must be enhanced by any rise in the cost of petrol. In our opinion, it is far more important that the Government should secure for British users of petrol a reasonable price than that it should participate as a shareholder in a company in .excessive profits made at the expense of the British public.
Obviously, the Anglo-Persian Oil Company, in respect of its supply of oil to the United Kingdom, is under some agreement with other oil interests by which, perhaps, to some extent, the price of oil there is kept up.. I am placing this on record to show when any reference is made to this debate that we know what is taking place elsewhere, and that we do not want a repetition of it here. We do not want the British Government or the Commonwealth Government to look for excessive profits because we shall participate in them. The chief reason why we are establishing the oil industry in Australia - and I hope we shall be able to establish it to such an extent as will make us fully self-supporting and independent in the matter of the supply of oil - is that the consumer shall be able to buy the oil he requires at a reasonable price, and not that the Commonwealth, the British Government, or the Anglo-Persian Oil Company shall reap excessive profits.
– There will be other factors that will soon make the price reasonable enough. Oil is not going to be the fuel for ever.
– I saw somewhere that Dr. Wade had been sent to England to represent the Commonwealth Government in this matter. While not wishing to say anything at all derogatory to that gentleman, who, I believe, is eminent and well known as a first-class geologist, I want to say that his commercial management of oil boring in Papua does not indicate that he possesses the necessary business and commercial qualifications to represent the Commonwealth in connexion with this matter.
– For a time he had very hard luck. Fever killed some of his staff.
– I want to say, as a fundamental principle, if Dr. Wade is going to represent the Commonwealth Government as a geologist and as a scientist, I shall rest satisfied that in that regard the Commonwealth will have good representation. But if he is going to represent the Commonwealth in connexion with the business end of this organization, I say that, clever as the agreement is, and good as it is, it is going to be spoiled by bad administration if the Government make appointments of that sort. I hope that the Minister for Defence (Senator Pearce) has noted the point I have made.
– We had no experience of Dr. Wade’s commercial qualifications.
– Let me put the matter in another way. As a fundamental principle, if. the Government are going to put a scientist in a. business man’s job, or a business man in a scientist’s job, they will be doing the wrong thing . 1 place this on record now because possibly the attention of the Government may not have been drawn to the matter. I do not know in what capacity the services of Dr. Wade are to be used, but if he is to be employed in a business capacity I say deliberately that a round peg will have been placed in a square hole, which’ it will not fit. But if his eminent services as a scientist and geologist can be co-opted by the AngloPersian Oil Company, probably he may be of great use in connexion with future Papuan developments.
Reference has been made in the course of the debate to the directorate of the proposed new Australian Commonwealth Oil Refining Company. It is to have a capital of £500,000, and upon the directorate of that company the Anglo-Persian Company and the British Government are to have the right of nominating four directors, and the Commonwealth the right to nominate three directors. “Because the directors will control all technical and commercial matters, it has been suggested that the Commonwealth will have only nominal control of the company. As I understand the position, technical matters will comprise all the technical skill and knowledge necessary, not only to erect the refinery, but to refine the oil. Commercial matters will cover the transportation of the crude oil to the refinery and its sale and distribu tion after it is refined. These are the four corners within which, so far as I understand the matter, the directorate will have control. The control of the Commonwealth comes in from the fact that Snot only shall we have a majority of the shares, but we can say what is a fair and reasonable price at which the profits of the refinery are to be sold. No articles of association are placed before Parliament in connexion with this company, but I take it that they will be of the usual character, that one share will carry one vote, and, if that be so, the Commonwealth will at the annual meetings of the company be able practically to do anything it likes within the four corners of the agreement.
I have no hesitation in saying that this agreement, this happy combination of solely Imperial interests - the British
Government, the Commonwealth Government, and the Anglo-Persian directors - to solve the problem we have all wanted to solve for so long is going to be kept, not only in the letter of the Bill we have before us, but in the spirit of Empire, to strengthen our people and our defence. It represents a continuation of that Imperial policy to which I believe every one of us adheres, to make, not only the Commonwealth, but the Empire to which we belong, self-supporting and self-contained. I congratulate the Government upon bringing forward this agreement.
It has been improved in another place in some not unessential details, and comes before us in a fairly perfect form. I have one point, and one point only, to deal with in Committee, and it is as I have already said, that I shall not be a party to allowing any Minister or any Government to impose Customs duties by an administrative act. That is the sacred right of Parliament alone. As I read paragraph 14 of the agreement, it gives the Administration the right to impose duties. If that right be taken away, and be given only to this Parliament, the agreement, so far as this country is concerned, will be fairly complete. I again congratulate, the Government upon a sound, strong, Imperialistic attempt to solve the burning oil question. All that we require to complete the benefits conferred by this Bill and to complete our satisfaction so far as oil is concerned, is to strike it in Papua. As there is an agreement with the British Government, concurrent with the refinery agreement, to go on with the work of exploration, I am hopeful that, in a year or two, the combination of our efforts now and our expenditure, stretching over the last six or seven years, will be successful and profitable to the people.
– Notwithstanding all that has been said about the provisions of this Bill, it is still very complicated, so far, at least, as the schedule is concerned. The Bill itself is very short, consisting only of a title, and a reference to the agreement, and the crux of the question lies in the agreement. It is a measure which certainly ought to go to a Select Committee before it is finally dealt with by this Chamber, and I intend to move “That the Bill be referred to a Select
Committee of the Senate, with power to send for persons and papers, for inquiry and report.” It is most difficult, even to those who. devote a great deal of time to the question, to ascertain exactly how the oil supplies of the world are manipulated, and why the people of Australia have to pay such an exorbitant price for the commodity. The price has steadily advanced from a few pence per gallon until at present it is approximately 3s. 6d. per gallon, with the prospect of going higher. There appears no justification whatever for this exorbitant price, but as the transport is largely in the hands of wealthy capitalists, and the oil fields are also in their hands, the consuming public are almost completely at their mercy. While that is so, this measure does not seem to deliver us from that very great difficulty. I understand that the British Government holds half the interests and half the voting strength in the AngloPersian Oil Company, but I would like the Minister for Defence (Senator Pearce) to inform us who the other shrewd gentlemen are who hold shares in it. What other Britishers hold the balance of the interests ? I agree with some of the previous speakers that we have to be most careful regarding the members of a company, irrespective of whether they are British or not. Nowadays, it is realized that a company, whether British or otherwise, is out to make the very last fraction it possibly can. The Coats’ Thread-Spinning Company is all British, and yet it makes enormous and extortionate profits. Reels of cotton which were sold here some time ago at 3§d. now cost ls. each, and the price is still going up. That is done by a purely British Company, and the mere fact that the Anglo-Persian Oil Company is run half by the British Government, and half by another body of, we are assured, British subjects, is to me no guarantee that they will do the right thing by the people of Australia.
– I thought it was claimed that Free Trade would put an end in Great Britain to all such monopolies as the Thread Trust.
– Free Trade is not likely to do anything of the kind, because the ramifications of capitalism have developed to such an extent that to-day they are world-wide. Capitalists do not know any State or national boundaries: Their field is the whole world, and no
Tariff is sufficient to prevent them carrying out their objective.
There is one peculiar part of the agreement to which I would invite special attention. Apparently, it is to be part of the duty of the company to assist in searching for oil in Australia, but in the meantime they are to supply Australia with, crude oil to be treated in the proposed refinery. I understand, from reading through the agreement, that, until the refinery is in operation, the company will use its best endeavours to secure adequate supplies of oil products to Australia at a reasonable price.
– That is so.
– That part of the agreement reads very well, but who is to determine what are reasonable prices ?
– The Commonwealth.
– There is nothing in the agreement so far as I can see to show that the Commonwealth Government has any such power. The agreement provides that the refined products of the company shall be sold’ at a reasonable price, but the reasonable price of the refined products will depend entirely, or almost entirely, upon the price at which the crude oil will be supplied to the refinery. The prospects of securing crude oil in Papua or Australia may be very much better than the general public are aware of, or, on the other hand, the reports which are made public may be quite in accordance with the facts’. The quantity of oil hitherto produced in Papua does not exceed about 5,’000 gallons, and this has cost the Commonwealth in round figures £120,000 to obtain. I am not speaking of the oil produced from shale in Australia, but of the oil production of Papua alone. Apparently the refinery is to be at the mercy of the shrewd band of British in- vestors, backed up by the British Government, who can supply the crude oil to it at their own figure.
– No; at the price charged to- the British Government.
– What the Minister says does not appear to me’ to be a very satisfactory solution of the difficulty, although it is certainly better than nothing.
– Would you expect us to get it for less?
– No. I would not expect the Commonwealth to get it from the company at a fraction less than they will be prepared to supply it to the British Government.
– As the result of this arrangement, the British Navy is getting its oil for half of what we are paying.
– That is something. If it is so, . could not some understanding be arrived at whereby, although the general public might be fleeced, the requirements of the Australian Navy could be supplied in the same way as those of the British Navy are supplied ‘?
– This agreement will do that, not only for the Navy, but for the public.
– Could not the Government go further and see that all Government requirements were supplied at the same figure as is charged to the British Navy?
– This agreement will provide that.
– Perhaps it will, but there is no intimation in the agreement to that effect, so far as I can see. I should like the Minister very much to give us the names of the gentlemen comprising the Anglo-Persian Oil Company.
– I will undertake to do so if you will also give us the names of the persons who comprise the Standard Oil and Shell Companies.
– I thought the Minister had the information at his disposal, but apparently it is not so easy to obtain as one would imagine. To a certain extent, therefore, the Senate is in the dark.
There is also in the agreement a clause dealing with the directorate. It provides that the Commonwealth shall invest £250,001. and have three directors on the board, while the Oil Company put up £249,996 as their portion, and three persons nominated by the company have one share each. At the same time, it is proposed to give the company four directors. I must confess that that arrangement does not appeal to me. As the Commonwealth has a majority, even if it be only a nominal majority, of the shares, it ought to have a controlling voice in the management of the refinery. I agree with Senator Earle that the limitations on the actions of the company, as defined in sub-paragraph d (iv) of paragraph 3 of the agreement are completely vitiated by the provisions of paragraph 5. I should like to hear the Minister on that point before the Bill goes into Committee, if it is intended to push it right through. We were informed this afternoon that it is entirely wrong for a Government or municipality to permit a number of its citizens to get a right such as has been given to some tramway companies, and then to pay them more than the actual value of the concern at a given period. There should be a provision in the agreement empowering the Commonwealth to purchase the assets of the company in accordance ‘ with the money put into it by the parties. If that stipulation were made, the total amount required to be paid by the Commonwealth at the end of fifteen years would be only £250,000, but’ apparently the Government have decided that at the termination of that long period the matter shall be settled by arbitration.
I opposed the suspension of the Standing Orders moved by the Minister to enable the Bill to go through all its stages without delay, because such a proposal was not fair to the Senate. No one who has spoken on the measure yet has shown himself thoroughly acquainted with all the provisions of the agreement.
– You Have shown that you are.
– I have referred only to a few of them. I do not profess to be acquainted with the provisions of the agreement at all, nor did it appear to me that the two previous speakers were thoroughly acquainted with them. In view of the difficulty that most people have in grasping, the full meaning of an agreement of this character, it is not fair to ask the Senate to deal with it without the delay of a day or two. I appeal to the Minister not to insist on the measure going through without delay, although I admit that he has the power to do so. For the reasons I have given and because I believe the Bill will be far-reaching in its effects, I think it should be examined leisurely and with the fullest information at our disposal. I therefore .move -
That all the words after the word “ That “ be left out, with a view to inserting the words “ the Bill be referred to a Select Committee of the Senate, with power to send for persons and papers for inquiry and report.”
– There being no seconder, the amendment lapses.
Senator BAKHAP (Tasmania) T6.10]. - Beyond all doubt, there is the reflection in the minds of most thinking men that the operations of corporations aiming at the exploitation of the oil resources of a country should be carefully scrutinized in the interest of the general public. The American Courts have wrestled with this problem on numberless occasions, and have left it very much where they found it. I am in much the same quandary as most other people. I cannot pretend to understand many matters in connexion with the production and marketing of oil, but I do know that the price charged to the Australian consumers of what has been properly described as a very necessary commodity, has of late years been increasing in a way that one can hardly understand, and it is singular that justification fox this measure should appear in the cable news of the Australian press two or three days after the Prime Minister (Mr. Hughes) introduced the Bill in another place. In the course of his remarks the Prime Minister submitted figures indicating all the successive rises in price, and on the 11th May I noticed in the cable news from New York a statement that the price of general motor-car petrol had been increased to 30 cents per gallon wholesale, and 35 cents per gallon retail. In Australian money this works out at about 15d. per gallon wholesale and 17£d. retail. Now, the Prime Minister’s statement, which appears in E an.sard of 8th May, gave the present price in Australia as 3s. 7d. per gallon, compared with ls. 5£d. in 1911, so there has been a rise of about 175 per cent, in nine years. No statement in regard to freight charges or the cost of retailing petrol ‘ will explain this remarkable difference between the American price and the charge to Australian consumers. Some years ago I read a romance in which the fertile imagination of a novelist depicted the hero as in the grip of a ferocious band of Chinese, the particular chapter being headed “In the Grip of the Hip Sings.” These Chinese bandits were supposed to have a strangle-hold on the hero of the story, and I say that, beyond all doubt, if petrol is going to continue to be a factor in our commercial and industrial development, we are, in very truth, in the grip of modern “Hip Sings.” Therefore, some action # is required to deliver us from the body of this death, for death it will be if this state of aif airs continues. Accordingly, I welcome this measure as a possible source of relief.
There can be no doubt that the Bill has been so improved by hon- orable members in another place that I do not know that we in the Senate require to do a great deal more. The agreement framed by the Prime Minister on behalf of the Commonwealth, and, I presume, by certain officials of the AngloPersian Oil Company, appears to satisfy all requirements. It is possible that they “ builded better than they knew,” for this measure, as an earnest of the goodwill of the Mother Country, may be regarded as an economic and industrial link in the chaim of Imperial Union. I am an Imperialist. I am a British subject, and while I have every respect for the citizens and institutions of the American Republic, the interests of the British Empire are with me paramount; but as an Australian I regard this country as one of the most important component parts of the Empire. Anything that is good for the Empire is, in my judgment, good for Australia, and until we develop other sources of power within our own territories this agreement must be welcomed.
My immediate concern is as to how this agreement will affect the shale oil resources of the State which I have the honour to represent in this Parliament. References of a veiled character have been made to something sinister which has transpired from time to time in regard to the attempted development of Australia’s shale resources. Up to the present, we have not discovered well oil in Australia; but I have very little hesitation in saying, from what I have read of the geological conditions under which oil is found, that we are extremely likely to discover sources of liquid oil at a very early date. I have very little doubt that it will be found south of the Gulf of Carpentaria. I believe that the conditions that were essential when the superficial crust of the earth was being laid down, are present in the northern portion of Australia, and that we are just as likely to discover oil in large quantities on the mainland as we are to discover it in New Guinea.
– If the Standard Oil Company will let us.
– I intend to say something about the attempts of a sinister character which have been made to prevent the development of our oil resources. Certain gentlemen, whose integrity is beyond all dispute., have assured me that a few years ago they visited Melbourne in connexion with the development of our shale oil deposits. One of them with whom I would trust my life, and of whose truthfulness I have not the slightest doubt, informed me that during their stay in this city he and his friends were continually shadowed in motor cars by the representatives of other oil interests, and that their going and coming was observed, in very much the same fashion as if they had been under the suspicion of a detective. I do not feel called upon to disclose the names of the gentlemen in question, nor the name of the State from which they hailed; but I feel sure that the interests which we are now endeavouring to develop, were regarded as of sufficient importance to warrant those gentlemen being kept under constant surveillance by the representatives of foreign oil companies. That being so, I approach this Bill with sympathetic consideration.
It has been stated, that the AngloPersian Company is an entirely British company. If that be so, then my sympathy with it is, to a very large extent, secured. At the same time, I believe that the agreement which is embodied in. this Bill is by no means a onesided one. The smart men who look about for oil deposits, recognise, as I do, that in Australia we have a continent, a very large slice of the world’s superficies, where oil is bound to be discovered, sooner or later. Naturally, they want to be in that discovery. I do not resent such a desire on their part. If a British company establishes a refinery here, the natural inference is that when liquid oil is discovered in Australia, it will be offered an opportunity of doing something in regard to the handling of such deposits. What more natural inference for the representatives of the company to draw ? That is exactly what is likely to happen in the ordinary course of events. The Anglo-Persian Company is, as its name implies, a company which is largelyfounded on the possession at present of oil resources in an area which is, nominally, at least, a portion of Persia. We know that the feeling is abroad in the world that the exploitation of those oil wells will be largely dependent upon the British Empire maintaining the good-will of the Mussulmans of the world. A tremendous Mohammedan upheaval wouldendanger the possession by the Empire of those resources. Recognising that in Australia we have a continent under the British flag, the company naturally wishes to take the initial steps to become connected with any discovery of liquid oil which may be made here. What is necessary in order to completely allay any hostile public opinion, is that the Government at a very early date should submit to Parliament a wellconsidered measure for the purpose of stimulating legitimate prospecting for oil in Australia, and also the exploitation of our shale resources. Such a measure should be complementary to this Bill.
– Does not the honorable senator think that the agreement to search for oil is a very shadowy one?
– Senator Senior will recognise - as I have done after studying the agreement - that it deals with an entirely different matter from the exploration of Australian territories in search of oil. That is a question for the consideration of Australian Governments. The Anglo-Persian. Company will not enter upon that field of enterprise except in the way I have indicated. But if it successfully operates a refinery in which the Commonwealth is interested, it will, no doubt, be offered a prior right in the commercial handling and development of anything which may be discovered in the way of liquid oil deposits in the Commonwealth.
– Does the honorable senator read into the agreement anything beyond that?
– Such a condition of things as I have outlined has not been embodied in the agreement. But I infer that that is the position which will arise in the event of oil being discovered in Australia, and the directors of the Anglo-Persian Company have not lost sight of the fact that it is desirable that they should get in pretty early-
– Get a flying start?
– -Why not? That is perfectly legitimate.
Some people talk of a monopoly in our oil supplies. There will be no monopoly under this Bill. The Government and the people of Australia will retain possession of any oil wells which may be discovered in this country. Personally I have come to the conclusion that it is particularly necessary that in this measure some consideration should be given to the development of the shale resources of the Commonwealth. But my interpretation df the agreement is that that will remain the concern of the individual States. This company will not be given, by virtue of this agreement, any legal authority to exploit our shale deposits. But if it wishes to secure the good-will of the Australian people it will lay itself out to assist in every possible way the development of Australia’s own resources.
Sitting suspended from 6-30 to S p.m.
– I was observing prior to the adjournment that this company, although not under any legal obligation to take part in the development of any known oil resources in Australia, would be very well advised to adopt the most friendly attitude in regard to such development. Even if it should not do so, I am not aware that Australia will lose very much, for I do not think it has been urged by any one that the foreign companies at present selling oil in the Commonwealth have shown the least friendly disposition towards the development of Australia’s oil deposits. Therefore, those who say that this agreement may do something to hinder the development of this country’s shale deposits cannot well urge that anything like a friendly policy has been revealed by the foreign companies at present operating here. The agreement enjoins upon the Commonwealth impliedly a much more vigorous policy of exploration and exploitation than has been the case hitherto. It states that until indigenous oil is available to the Commonwealth, the Oil Company shall supply the Refinery Company with such quantity of crude mineral oil as it requires for refining, but not exceeding 200,000 tons in any one year. It is contemplated, then, that there will be a time when indigenous oil will be refined in Australia in place of that which it is intended to import in the first instance. If I thought that this measure would tend to1 operate in the direction of hindering Ausralia’s known, but yet to be specifically ascertained deposits, I would vote against it: but I feel that it will act in quite a different direction. The Commonwealth has in contemplation the ultimate supply to the Refining Company of Australian oil. If there is anything at all obligatory on the Commonwealth, it certainly will be in the interests of Australian development to supply this oil at the earliest possible date. And, if it is the intention of the
Commonwealth Government to make an endeavour in that direction, it should take into consideration, through the medium of this Legislature, the making provision for most extensive prospecting. It should offer inducements for the discovery of oil such as have not hitherto been contemplated.
I am not one of those who believe that the world is going to be dependent om oil for any great length of time. IF such were to be the case, the fact would set a limit upon human endeavour. For we know that in some of the most prolific oilproducing countries to-day there is already revealed a tendency to exhaustion. There must be a limit to the crude oil resources of the world. I Suppose that members of a democratic Legislature may at least claim that they are in the habit of dealing with things as they are, and not of looking too fax ahead, i could detail dozens of possible sources from which energy may be derived by the scientists of the future. For example, there is as much latent energy in a ton of quartz as in a ton of coal. AH we lack to-day is the scientific knowledge with which to unlock the secrets of nature in order to make that energy available. If there should be any marked advance in the present price of petrol I am fairly confident that it will be rapidly superseded by alcohol, or by alcohol mixed with other elements. Already there is on the market, or about to be placed in Australia, a motor spirit which is largely derived by the distillation of vegetable matter, which is said to have given far superior results compared with petrol as a motor fuel.
– And it is cheaper, too.
– I have read in the Australian press that in South Africa there is a fuel in use, and that the shares of the company owning that fuel have advanced from £5 in a very short while to more than £100. It Will be understood, of course, that I hold no brief for that company, and I am not in any way interested in the spirit which it is placing on the market; but I have long held that alcohol, or some preparation thereof, will supersede petrol, with regard to its use for internal combustion engines, as soon as petrol becomes unreasonably costly. In Germany, alcohol distilled from vegetable matter has been largely in use for motor purposes. For the present, however, petrol ie undoubtedly necessary to’ our economic and industrial life. There is an unquestioned obligation created - a situation set up - in which the Commonwealth Government must furnish every stimulus, both financial and scientific, for the exploration and exploitation of Australia’s known and latent oil resources. I emphasize that if I thought the agreement was likely to interfere with the development of Australia’s shale deposits I would not favour it. I believe, rather, that it would be an1 incentive to development, and in that light I intend to support th; second reading. It is my belief that for the immediate .future this agreement is necessary. What may happen before many years in regard to liquid fuel I am not ready to state. It is not impossible that solar energy may be developed by scientists to such a degree that it will take the place of liquid fuel in the industrial and economic life of the world. But at present Australia is dependent on foreign companies for fuel oil supplies, and I am sufficiently British to prefer a British firm. And, although I have always advised most friendly relations with the people of the United States, I nevertheless, say that there has been nothing apparent in the efforts of the American oil interests operating in Australia to justify us in giving America one moment’s consideration over and above that which we would give .to a company hailing from Greece, France, China or Japan. Taking the measure in general and particular, I fail to. see that it deserves anything but favorable consideration at our hands.
– We are to some extent taking a leap in the dark. The information at our disposal regarding the personnel and constitution of the oil company with which it is proposed that the Commonwealth shall enter into partnership is not adequate.
– Rather than a leap in the dark, I regard the position as being more than a leap out of darkness into daylight.
– At any rate, it is a leap. What may be the results of the agreement we cannot say, but I feel that we can scarcely be in a worse position than we are to-day, and have been, with respect to the supply of crude oil in Australia. Not long ago representations were made to me from a municipality in my own State; and I have found that similar representations could well be made by other municipalities throughout Tasmania. Portion of a letter, which I received officially from one of those bodies, reads: -
There is another item in which you may possibly be of assistance to us, and that is in regard to crude fuel oil. At present we are paying ls. 3d. per gallon for it, which is equivalent to £15 15s. per ton. Charges additional put the price well up to £18 per ton here.I see by Hansard-
It will be observed that Hansard is read pretty freely by the municipal councillors - that contracts for the Navy, etc., are at £5 or £6 per ton. Of course, we only buy up to ten or twenty ton lots, but we could well increase our quantity for a reduced price. Can you help in any way ?
Another communication which 1 have received states : -
I noticed in Hansard of the 20th inst. (page 525) Sir Joseph’s Cook’s reply to Mr. Atkinson, that crude oil has been brought into Australia at £5 0s. 5d. per ton. It is costing us £15 15s. without freight, etc. Repeatedly, in Ilansard, 1 have noticed that crude oil is being purchased as low as £4 10s. per ton.
As a result of this correspondence, I put myself into communication with the Navy Office. I did not for a moment imagine that the Navy Office would accept the responsibility of providing municipal councils, in Tasmania or elsewhere in the Commonwealth, with the oil they required at a cost less than that at which they were receiving it. After some difficulty I obtained the address of one company in Melbourne which might or might not be the company from which these people were buying their oil. But the subsequent efforts I made to locate the cause of the discrepancy were absolutely futile. Honorable senators will agree that I would give close attention to representations of that kind coming from the State I represent, and yet my efforts were entirely fruitless. All I know is that, while the Commonwealth Government could obtain crude oil for £4 or £5 per ton, a private individual in Tasmania would have to pay something like £18 per ton. That does not look as if those responsible for supplying Australia with oil are giving the Australian consumers a fair deal.
– My information is that the Navy are now paying £9’ per ton, and that they paid £4 5s. and £4 10s. per ton for it in 1918.
– Certain statements were made in another place, and, having been recorded in Hansard, caught the attention of people in Tasmania, who compared the price for oil which they were then paying with the price which the Commonwealth was. then paying. If the Commonwealth price to-day is higher, I take it that the price to private consumers in Tasmania has. been correspondingly increased.
– How many gallons of oil go to the ton?
– About 250 gallons.
– I am quite well aware that any arrangement such as that proposed by the Bill will be very adversely criticised outside. Those who have so fax had control of the market for oil in Australia will view any arrangement of this kind with a great deal of hostility and disfavour. We may naturally expect a great deal of adverse criticism of this proposal from those quarters, which we know are very strong financially and otherwise, and quite capable of entering upon a very vigorous propaganda. Whilst we may expect criticism from those quarters, the criticism which I should be more disposed to consider is that which will come from Australians themselves. The disparity between the price at which the Commonwealth” will be able to obtain its supplies and the price at which the people of Australia can purchase oil has been a matter of criticism of the present condition of things, and shows the necessity for some redress in the interests of the private consumer. I can quite understand that the Commonwealth Government, in obtaining crude oil for the Navy, may bring it in their own chartered tanker from the source of supply to the ship’s side. A good deal of expense associated with the importation of oil for private consumption would, of course, in this way be avoided. But even that advantage, great as it may be, would not account for any more than a fractional portion of the disparity between the price paid by the Commonwealth and the price demanded from Australian private citizens.
There is one aspect of the agreement to which I have not heard any reference made. I had not the opportunity to follow the passage of the measure in another place, and so I do not know whether any reference was made to it there. Perhaps, during my temporary absence this afternoon whilst engaged on the Library Committee, a reference to the matter may have been made by the Minister for Defence (Senator Pearce). I refer to the constitutional competence of the Commonwealth to enter upon this enterprise. It appears to me from the Bill, and from what has been said in the discussion of it, that’ under this agreement the Commonwealth is practically about to enter into a definite partnership with the AngloPersian Oil Company, on definite terms, and for a definite purpose. Hitherto we have been accustomed to regard the Commonwealth, as such, as constitutionally incompetent to enter upon matters of trade by way of production or sale, except in so far as provision was being made for tho immediate requirements of the Commonwealth Government. The ‘ Commonwealth Government can establish a woollen factory for the purpose of making material for the uniforms of the Com-monwealth military or other servants of the Government. The Commonwealth Government can erect and operate a rifle factory for the purpose of providing rifles. It can erect an arsenal for the purpose of providing itself with various military requirements.
– What about ships ?
– The Commonwealth Government has entered into the business of shipbuilding, but I think it is generally conceded that, so far as shipping is concerned, its power to act as a shipowner is confined to the importation and exportation of goods to and from Australia.
– Or trading on the coast.
– Yes, Inter-State transportation, because whatever powers it has with regard to trade and commerce are powers as between the Commonwealth and outside countries, or as between the States. Very early in the history of the Commonwealth an inquiry was held into the matter of the establishment of the iron and steel industry in Australia. .The question was referred to -a Royal Commission, of which, I think, Mr. Kingston was chairman. He had some doubt as to the competence of the Commonwealth to establish a Commonwealth iron industry. The matter was referred to the AttorneyGeneral of the day, the Honorable Alfred Deakin, and Mr. Deakin’s opinion, which became a parliamentary paper, the publication of which excited considerable interest, was very specific and very clear, and it was that the Commonwealth Government could not enter upon an enterprise of that character.
– No. ‘His opinion was that it could enter upon an industry of that character* for the supply of its own requirements, and, incidentally, could sell its surplus production.
– I was about to say. that Mr. Deakin’s opinion was that the Commonwealth Government could not enter upon an enterprise of that character except in so far as it was necessary for the Commonwealth Government’s own requirements. That was to be tue primary purpose and scope of the enter. prise, and if, in fulfilling that primary and exclusive purpose, there was a surplus as a part of the conduct of the business, and incidental to it, the Government could dispose of that surplus. But is it contended that in connexion ‘with the enterprise now under consideration, the Commonwealth will import the quantity of oil provided for in the agreement primarily and exclusively for the use of the Commonwealth Government,. .and that only if there should -happen to be- a little imported in excess of its requirements it will dispose of that surplus to citizens of the Commonwealth or to the outside world ?
– The estimated requirements of the Navy are 50,000 tons.
– How many torts is it contemplated will be produced by this enterprise? I think we require to be certain of the ground on which we are treading in this matter. I have taken this measure to have for its object the provision of cheaper oil generally throughout the Commonwealth.
– The production of fuel oil is estimated at 72,000 tons, and of that quantity the Navy will require 50,000 tons.
– That will leave a surplus of 22,000 tons, and- it seems to me that it would not be within the constitutional competence of the Commonwealth to dispose of such a surplus.
– There will be other requirements of the Commonwealth to supply, as well as those of the Navy.
– If 72*000 tons are to be produced, and 50,000 tons are required for the Navy, there will be 22,000 tons available for sale by the Commonwealth.
– The incidental surplus referred to -by Mr. Deakin.
– I am afraid such, a quantity could scarcely be regarded as an incidental surplus.
– What about our air fleets? They will require fuel oil.
– I am dealing with the estimate of production suggested by Senator Pearce, and the requirements of the Navy.
– The honorable senator contends that the Commonwealth cannot be a shareholder of a company trading with the public.
– Not if that_ is the primary purpose of the enterprise. Just as the Commonwealth cannot do that by itself, it cannot do it as a part- ner in a company. When the Commonwealth enters upon production, manufacture, or importation, for its own immediate purposes, if in the carrying out of any such business a surplus is produced, imported, or manufactured, the Commonwealth may, as a matter of prudence, and incidental to the carrying on of the business, dispose of that surplus to the public. That is the effect of Mr. Deakin’s opinion, and, so far as I remember, it has never been contested to this day. As a matter of fact, in connexion with nearly every campaign that has taken place to extend the powers of the Commonwealth Parliament that opinion has been relied upon ; and it has been pointed out that, until the powers of the Commonwealth with regard to trade and commerce are extended, it is forbidden to enter upon various industrial activities into which it might otherwise enter with great advantage to the community.
I mention that matter in passing, and I am afraid that my remarks on other points must also be made in passing, because I regret that we have not had a more extended opportunity for the consideration of this measure. It is only very recently that I have had any opportunity to give the question consideration. There are two provisions in the schedule to the Bill which seem to me to be of considerable importance; and I might as well allude to them here. One is the provision in paragraph 12 of the schedule which seeks to fix the price payable by the Refinery Company for crude mineral oil as equivalent to the price f.o.b. at the port of shipment paid by the
British Government to the Oil Company for crude mineral oil. I have been informed - I do not know with what exactness, but, at any rate, with an air of assurance and knowledge - that this is an altogether fictitious standard of value. I have been told that Great Britain does not require and does not buy crude mineral oil, but buys only fuel oil, which is a refined product of the crude mineral oil. I am told that if we are going to fix the price by the f.o.b. price for crude mineral oil paid by Great Britain to the Anglo-Persian Company, we shall be using a non-existent standard. The information may or may not be right, but I mention it before the Bill goes into Committee, because it is well that the Minister should know that criticism of that kind has been addressed to the agreement.
Another broad principle is involved in paragraph 14 of the agreement, which provides that so long as the prices charged by the Refinery Company for the products of refining are considered by the . Commonwealth fair and reasonable, the Commonwealth shall do certain things. There ought surely to be something more specific in the way of determining what a fair and reasonable price is. The paragraph throws upon the Commonwealth the responsibility of preventing dumping, and’ refunding duties, and introducing a Tariff provided that the products are sold at a price considered by the Commonwealth to be fair and reasonable. Before we reach the schedule in Committee, we should have some assurance from the Government that effective steps, will be taken to determine in some specified way the method of deciding the Commonwealth’s opinion on the matter. Is it to be the opinion of the Commonwealth Government, or of some body like the InterState Commission, or the Board of Trade, or of a Minister, or of some Commission or Committee? As it at present stands, the form of wording seems rather loose and vague, and if the legal representatives of the other partner to the agreement are satisfied with it, they have either overlooked it, or they are eager enough to seize the agreement as soon as they can get it.
– In paragraph 13a on the same subject there is nothing to show who is to determine whether the price is fair and reasonable.
– That is quite true. It seems to me that there are certain provisions in the agreement which have been inserted with a considerable amount of haste. They must have been overlooked by those concerned, or their appearance would suggest an indecent haste on the part of the other party to the transaction to get the agreement in any form.
The question of Inter-State freights once the oil is imported and refined has struck me in connexion with the whole proposition. I understand that at present it is very difficult to arrange for the Inter-State carriage of products such as this refinery will turn out. There are at present, I am informed, some ten or a dozen ports in the Commonwealth at which these products are landed from overseas vessels. When it comes to moving certain of them from State to State under present conditions one is confronted with a considerable amount of difficulty. It is very hard to get freight for certain articles between State and State on coasters or Inter-State vessels, and I believe that, so far as certain passenger vessels are concerned, petrol is a prohibited article of freight. I do not know whether the Government have adverted to the conditions existing on the coast-line of Australia in this connexion, or whether it is proposed to take any action to enable the products of the refinery, at whatever port it may be established, to pass freely from State to State, or from port to port within a State. These are matters to which some consideration might be given before the agreement is completed, and I hope that when we reach the discussion of the schedule, the Minister will be able to afford us information upon them.
I would, impress on the Minister the necessity of inquiring into the information given to me, that the British Government do not buy crude mineral oil from this company, or from anybody, but buy only fuel oil, which is a refined product of crude mineral oil. That wants looking into, because it raises a most important and vital point, regulating as it does the actual price.
– I am inclined to think that fuel oil and crude mineral oil are one and the same thing.
– I am told not.
– In this country crude oil is the same as fuel oil.
– The statement I have quoted was made to me with a great deal of confidence by somebody associated with oil, and I mention it now, so that when we come later to the discussion of the schedule, the Minister will be in a position to give attention to it.
– The Government have no reason to complain of the way in which the agreement has been received. Honorable senators generally have met it in a favorable way, and what criticism there has been has been offered in the endeavour either to get more light on the question, or to tighten up the agreement. I agree with Senator Keating that the point raised by him last is important. I am only in a position to say at present - although I am having the information checked - that the British Government does buy this oil as crude oil, and uses it in that form for certain Navy purposes as fuel, and that, therefore, the paragraph in the agreement, as it stands, is perfectly workable, because there is a price to which we can refer.
Senator Keating also raised the point of the authority to determine what is a fair and reasonable price. To me, as a layman, it seems that if I am appointed a judge of what is fair and reasonable, I must obviously determine for myself how I shall arrive at my conclusions. That may not be the way a lawyer would put it, but I should think I could please myself as to how I arrived at my determination. Clearly what the agreement says is that the Commonwealth - that is, the Commonwealth Government - shall determine what is fair and reasonable. It is immaterial whether we employ the Inter-State Commission, or experts, or a Department, or any other means for the purpose. The essential thing is: Who is to determine what is fair and reasonable? My answer is : “ The Commonwealth Government.”
– Paragraph 13a should be more definite.
– That paragraph says, “ such prices as are fair and reasonable.” It is the Commonwealth Government that is to determine what is a fair and reasonable price. That being so, it is immaterial what machinery we set up to determine it.
With regard to the constitutional rights of the Commonwealth in this matter, Senator Keating mentioned that an opinion had been obtained from an exAttorneyGeneral. It is dated 18th July, 1903, and is as follows -
Opinionof the Hon. the Attorney-General re Establishment of Ironworks by the Commonwealth.
Dear Mr. Kingston,
You ask for my opinion, forthe information of the Bonus Commission, as to the powers, if any, of the Commonwealth to establish ironworks.
In my opinion no such power is included in the express gift of legislative power to the Federal Parliament.
The trade and commerce power, vast though it is, does not appear to extend to production and manufacture - which are not commerce. Commerce only begins where production and manufacture end. (See Kidd v. Pearson 128 U.S. 1,20.) Moreover, the fact that the trade and commerce power is limited to external and Inter-State trade and commerce indicates that the power which the States undoubtedly possess to undertake Government industries within their own limits is not shared by the Commonwealth under this sub-section.
Under sub-section (i), (ii), and (iii) taken together (trade and commerce; taxation, and bounties), the authority of the Commonwealth over industrial development is of the largest; but though it allows of control, regulation, and guidance, it in no respect points to direct establishment or management of any industries.
Nor can I find in any other part of the Constitution any express authority for the course suggested.
The implied powers of legislation remain to be determined, but include, under sub-section 39 of section 51, matters “ incidental “ to the exercise of the express powers.
The manufacture of iron may be incidental to the execution of many such powers, e.g., defence or the construction of railways. The Commonwealth might clearly undertake the manufacture of any goods for its own use; and probably if it did so, and it were incidentally advantageous to the interests of the economical working of the undertaking that it should also manufacture for other consumers, such manufacture would also come within its implied powers. Except as above, it does not appear that any power to establish and conduct manufactures can be implied from the Constitution.
That opinion appears to make it pretty clear that in regard to iron, for defence, railways, or any other purposes, we may manufacture for our own needs, and, if we wish, sell to other consumers. At present our oil requirements for the
Navy are about 50,000 tons per annum, but we do not know what amount will be necessary for our air and naval forces in the near future, though we can safely, assume that a large quantity will be required. I do not think we need concern ourselves very much about the constitutional powers of the Government. The. late Mr. Deakin’s opinion appears to be sound, and it has not been contested.
– The opinion, I think, has been generally acceded to, and’ in fact appealed to, as illustrating the Commonwealth’s lack of power under the Constitution.
– When I commenced to speak in reply I informed honorable senators that I had instructed my officers to ascertain if the British Government were buying crude oil from the Anglo-Persian Company, and I have just been informed that -they are buying both fuel and crude oil. Under the paragraph in the agreement relating to the subject, we have a perfectly safe means of checking the price.
I come now to the point raised by Senator Pratten, whose remarks were friendly to the measure. He pointed out that the agreement would take away the legislative powers of Parliament, in regard to the Customs Tariff, and permit of its exercise by administrative acts. On this point I draw honorable senators’ attention to paragraph 14 of the agreement, which reads -
In order to insure the full success and development of the oil-refining industry in Australia, the Commonwealth will so long as the prices charged by theRefinery Company for products of refining are considered by the Commonwealth fair and reasonable, but not further or otherwise -
exercise or cause to be exercised such statutory and administrative powers as it deems advisable to prevent dumping and unfair competition by importers of refined oil from other countries ;
refund to the Refinery Company any Customs duty paid by the Refinery Company upon the importation into Australia of crude mineral oil purchased from the oil company and refined in Australia by theRefinery Company ;
cause to be introduced into the Parliament of the Commonwealth and supported as a Government measure a Bill providing for the imposition of Customs duties on crude mineral oil whenever in its opinion such action is necessary or advisableto prevent. unfair competition with the products of crude oil refined in Australia by the Hennery Company.
This provides that administrative action may be taken, but I remind honorable senators that no such power would be effective as an administrative act, because any refunds- of duty made would have to appear in the Estimates and be voted upon by Parliament. In other words, until Parliament authorized the refund, it could not be made. If any refunds are made, involving large sums, these amounts must appear as separate items in the Estimates. Statutory power alone might not be sufficient. The Government pledged themselves not only to take statutory power but to administer this provision of the agreement.
– This paragraph will give the Government, if Parliament were not sitting, authority to take any administrative action they think proper.
– Any administrative action thought necessary. Does not the honorable senator see that this is an assurance to the company that the Government will administer this portion of the .agreement?
– It would give the Government authority to administer before the law was passed. ; Senator PEARCE. - No, because the words, “statutory” and “administrative” appear in the agreement.
– Much depends upon the. reading of the phrase.
– That is all I can say .on the> point. That is my interprettation of the paragraph, and I think that is the intention, of the agreement.
– What is the necessity for it at all?
– The necessity lies in the fact that the company wants an assurance on this point. We all know the pressure that might be brought to bear by the Standard Oil and other companies to injure this concern; and the Anglo-Persian Oil Company, before they put their money into the venture, want an assurance from the Government that, in certain circumstances, such as a trade war initiated by the Standard Oil or any other company to wipe them out, they will be protected. And in this agreement we say that if those companies take’ such action as that we will support the Refinery Company by this measure.
– Does this agreement give the company any further power-?
– It gives the Government power to temporarily prohibit importations.
– And that is what I object to.
– Senator Earle, referring to paragraph 5 of the agreement, took exception to the commercial management of the concern being in the hands of the Refinery Company. But his objection, I think, was well answered by Senator Bakhap, and I have nothing to add to what the honorable senator has said on the point. I would like to make it clear, however, that we are not leaving the commercial management of the business to the Anglo-Persian Oil Company, but in the hands of an Australian Refinery Company.
– Which will have four-sevenths of the directors.
– But the Commonwealth will have the voting power. We are availing ourselves of the commercial and technical knowledge of the company, and at the same time we are protecting ourselves against that commercial knowledge being employed to the detriment of Commonwealth interests.
Another, and, in my judgment, a more important, point raised by Senator Earle was in relation to the exercise of the option for resumption, which is dealt with in paragraph 16. The honorable senator indicated that when the Bill was in Committee he proposed to move an amendment to deal with the value of land and buildings; but I remind him that if we do exercise our power of resumption at all, we shall only resume the value of the company’s interest in shares. This, of course, will include land and buildings. But let me say that this is a matter which cuts both ways, and the point was raised by the company’s representatives. They wanted to be protected in the event of the shares falling in value. If we are going to say to the company that any accretion in the value of shares shall not be above a certain percentage in the event of resumption by the Commonwealth, then the company will have the right to say that if shares fall below their normal value, the Commonwealth, for resumption purposes; must not go below a certain percentage.
The Government would not concede that position. Senator Pratten pointed out that the parent company’s interests are said to be worth £50,000,000; but I would point out . that that value is not represented in land and buildings so much as by the company’s vast oil fields from which it draws its supplies. In Australia the Refinery Company will have no such oil fields. Its interests here will be its share interest, the value of which will be determined by the success or failure of the industry ; and if we admit the force of Senator Earle’s contention, there would be no inducement to the company to make a success of the venture, because, in the event of the Commonwealth taking over the industry, they would not be entitled to reap the reward of their enterprise. I am sure Senator Earle has not fully considered this aspect of the question. Other honorable senators who spoke during the debate were favorable to the Bill, as, indeed, were those who raised the points to which I have referred.
– Under this agreement, what will be the position of the company if they desire to prospect for oil?
– They will stand in the same position as any other company.
– Will any such discovery be part of the Refinery Company’s assets?
– No, I cannot say that.
– The business of prospecting has nothing to do with this agreement at all.
– No. The Refinery Company is being formed for the specific purpose of erecting refineries. If the parent company think fit to come to Australia to prospect for oil, it will be in the same position as any other local or outside company. If they getconcessions from. State Governments, in the way. of prospecting rights over certain areas or grants of money, that will be their business. It will have nothing whatever to do with this agreement.
– What is the position of the company in Papua?
– They are in the position of agents of the Commonwealth and Imperial Governments, charged with the duty of exploration for oil.
– The Anglo-Persian Company ; not the Refinery Company.
– I am speaking of the Anglo-Persian Oil Company. I have excluded the Refinery Company bysaying that under its articles of association it will be no part of its obligation to prospect for oil. It will be a refining company pure and simple.
– This Bill will not prevent the Government from offering subsidies for oil-boring in Australia?
– I have already pointed out that we are increasing the vote under that heading from £10,000 to £50,000. In the light of the favorable reception which the Bill has had. I trust that itwill have a speedy passage through Committee.
Question resolved in the affirmative.
Bill read a second time.
Clause 1 agreed to.
Clause 2 (Approval of agreement).
– I ask the Minister to consent to the postponement of this clause in order that we may first deal with the schedule.
– I agree to the honorable senator’s suggestion.
– I move -
That the following new clause be inserted : - “ 3. Indigenous oil shall mean either oil which has been produced from shale or that which naturally occurs in liquid or partially liquid form.”
This measure clearly contemplates the substitution for imported crude oil of an Australian production, namely, indigenous oil. Now shale oil is obtained from the retorting of a mineral - a sedimentary rock - in other words, shale. We all know that when a thing is retorted, and a liquid product is the result, that product is radically different from a partially or wholly fluid product such as is pumped up from wells. The Refinery Company which it is proposed to establish in Australia, may, for many reasons, have some objection to the product obtained from the retorting of shale. If. it be a commercial proposition, that product can be refined, just as it is being refined in Australia, so as to make it a marketable spirit. But the first oil that will be dealt with by the Refinery Company will be an imported liquid oil. It should be our constant concern to see that Australia’s natural resources are properly exploited. I believe that on the Australian mainland liquid oil will be discovered in the course of time. Of course, it may be that my assumption will prove to be unfounded, and Australia may be thrown back, so far as her own resources are concerned, on the complete exploitation of the shale deposits which exist in the various States. Unless the position is very clearly defined, a refining company possessing ample resources of liquid crude oil outside of Australia may quite conceivably have a distaste for the work of refining Australia’s shale product, notwithstanding that it may be clearly to the advantage of the Commonwealth that that product should be substituted for the imported crude oil. I anticipate that the most apposite criticism in. regard to this measure will come from persons who are interested in the development of Australia’s shale deposits.
– If I may be permitted to interrupt the honorable senator, I would point out that- there is already a definition of “ indigenous oil “ in the agreement. Paragraph 7 of that agreement reads -
For the purposes of this agreement the term “ indigenous oil “ shall mean crude mineral oil obtained in the Commonwealth of Australia, or in any Territory of or under the authority of the Commonwealth, or in any place over which the Commonwealth has a mandate.
The dictionary meaning of the term “ indigenous “ is “ produced, growing or living .naturally in a country or climate, not exotic, immigrant, or imported, native.” I have already pointed to the definition of “indigenous oil “ in the agreement, and if we are now going to insert a definition of “ indigenous,” we might just as well insert another definition of “ oil.”
– But the Government have accepted the responsibility of defining “ indigenous “ apart from its dictionary meaning. I think that the Minister will be well advised in the interests of the resources of Australia if he agrees to my amendment. Crude mineral oil may reasonably be construed by the contracting company as crude liquid oil. Now, oil produced from shale, is a secondary product, the result of an elaborate retorting process. Oil shale looks for all the world like a piece of slate. I am very apprehensive that the Senate, as a chamber of review, may. be held to have disregarded the importance of the shale-oil resources of the Commonwealth. We shall be doing well if we can impress upon the Minister the desirableness of showing the Australian people that in approving this agreement with a British company we are not at all oblivious to the necessity of carefully guarding such oil resources as we possess in order that they may be satisfactorily developed later on. The only word in regard to the dictionary definition of the term “ indigenous oil” quoted by the Minister, which might even colour ably obviate the necessity for the amendment I have moved, is the word “produced.”
– The dictionary definition contains the words “not imported.”
– But oil produced from shale is a secondary “product.
– What is the term by which it is known? Is it not crude mineral oil?
– I do not think so. It is known as shale oil. The result of the first distillation of shale is a product which is radically different from the oil which is pumped up from wells. In view of the important Australian interests which are involved, I ask the Committee, with a certain amount of natural diffidence, to approve of what will certainly not be superfluous and of what will be found to be of great value, namely, a definition of the term “ indigenous oil,” because it is clearly contemplated that the imported crude oil shall eventually be supplanted by an Australian product.
– I hardly think this is the place for the insertion of the proposed new clause. The Bill contains really only on© effective clause, namely, clause 2. If the Committee inserts a definition such as is now before honorable senators, it will be a definition for the purposes of the Bill. Where we want the definition is in the schedule; that is to say, _ in the agreement. As has been pointed out by the Minister for Defence (Senator Pearce), there is a paragraph in the agreement which purports to define indigenous oil. When the paragraph comes under the attention of the Committee Senator Bakhap may appropriately move for the definition which he has in view. I support his object. There should be no doubt that an indigenous product such as shale oil shall be ultimately worked, and that it shall not be forbidden entry into and disposal of at the refinery.
– In view of what the honorable senator has pointed out, I beg leave to withdraw my proposed new clause.
Amendment, by leave, withdrawn.
Motion (by SenatorGrant) agreed to -
That the paragraphs and sub-paragraphs be considered seriatim. “ Paragraphs 1 and 2 agreed to.
Paragraph 3 -
The Oil Company shall take all necessary steps to form and register a Refinery Company with limited liability and subject to the following conditions : -
Sub-paragraph a agreed to.
Sub-paragraph b -
The Commonwealth shall subscribe for and be allotted two hundred and fifty thousand and one (250,001) shares; the Oil Company shall subscribe for and be allotted two hundred and forty-nine thousand nine hundred and ninety-six (249,996) shares; and nominees of the Oil Company shall subscribe for and be allotted three (3.) shares in the Refinery Company.
– I want to know the reason for this very unusual sub-paragraph in this agreement.
– I can save the honorable senator’s time by teling him that it is necessary tocomplywith the Companies Act.
– It prescribes that the Commonwealth shall subscribe so many shares, the OilCompany so many more, and that nomineesof the OilCompany shall be allotted three shares. That is five subscribers altogether. In New South Wales it is necessary for the registration of a company that it shall have a minimum of seven subscribers.
– The company will be registered under the Victorian State law, as the honorable senator will see by referring to the next sub-paragraph.
– We have not come to the next sub-paragraph yet, but I take it, from the Minister’s explanation, that to comply with the Companies Act of Victoria, it is necessary that there should be a minimum of five shareholders.
– Yes, that is the reason.
Senator GRANT (New South Wales) paragraph b is proposed in this form in order that the State of Victoria shall be further subsidized.
– Order ! The honorable senator is now dealing with the next sub-paragraph.
– I am not referring to sub-paragraphc, but to the fact that sub-paragraph b provides for the constitution of the company in such a way as to make it mandatory that it shall be registered in Victoria. I should like the sub-paragraph now under consideration to be amended in such a way as to enable the company to be registered in any of the other States.
– I promise to recommit sub-paragraph b if, when we come to consider it, sub-paragraph c is amended in the way the honorable senator suggests.
– It seems to me that in spite of the assurance we have had that the Oil Company will have full control of all technical and commercial work in connexion with the erection of the refinery and the distribution of the refined Gil; sub-paragraphb is deliberately designed to bring about a state of affairs that will compel the registration of the company in Victoria. Unless the provision with respect to the allotment of threeshares is altered to the allotment of five shares, the company will be unable to be registered in the Stateof New South Wales. I have yet to learn that the technical expertsof the Oil Company, who will becharged with the erection of therefinery, have examined the different States of the Commonwealth to decide upon the most suitable site for its erection. I fear that iby passing this and the following subparagraph we shall commit the Anglo-Persian Oil Company to the erection of the proposed refinery in Melbourne irrespective of whether the best site for the purpose is to be found here or not.
– They can erect the refinery where they like.
– Of course they can; but it is natural that they should register the company in the State in which they erect their works, because they would have to work there under the companies law of that State.
– The Broken Hill mine is registered in Victoria.
– I raise this point because the Minister for Defence (Senator Pearce) told us in his secondreading speech that one reason why we should give the Bill our approval was that the Anglo- Persian Oil Company would be exclusively charged, through a majority of the directorate, with the technical and commercial working of the agreement. I trust that the Minister will give the Committee an assurance that the registration of the company in Victoria will not necessarily mean that the refinery shall be erected in Victoria until the whole Commonwealth is examined to decide the most suitable site for the purpose.
– I trust that honorable senators will allow us to get on with the business. I give the assurance that when we come to the subparagraph upon which I will be allowed to discuss the matter, if the reasons. I give for what, is proposed are not considered sufficiemt, I shallbe prepared to recommit the sub-paragraph with, which we are now dealing. Let us have the reasons for what is proposed given on the sub-paragraph which really raises the question.
Sub-paragraph agreed to.
Sub-paragraph c -
The Refinery Company shall be incorporated and registered in the State of Victoria within ninety (90) days after the date of commencement of this Agreement.
– I should like, if possible, to anticipate the discussion upon this sub-paragraph by giving the reasons for its insertion. Honorable senators are aware that we have no Federal companies law. There are six States in the Commonwealth of Australia, and this company must be registered in one. There are many companies in Australia registered in one State that have works in more than one State. Speaking from memory, I believe that the Broken Hill Proprietary Company is registered in the State of Victoria, but it has steel works in New South Wales, and iron ore works in South Australia. It does not follow at all, nor is it implied, that if this Refinery Company is registered under the Companies Act of Victoria, the works will necessarily be erected in Victoria. Furthermore, at the present time, Melbourne happens to be temporarily the Seat of the Government of the Commonwealth.
As this agreement is one between the Commonwealth Government and the company, it is a matter of convenience to have the Refinery Company registered under the companies law of Victoria for the time being. There is no evil design against Sydney or New South Wales in this proposal, and no invidious selection of the companies law of Victoria in preference to that of any of the other States. It is a matter of convenience that the Refinery Company should be registered in the State in which the Federal Government happens to have its head-quarters.
.’ - I. hardly think that the explanation given by the Minister for the registration of the company in Victoria is sufficient. It is true that the Commonwealth has its Seat of Government at present in Melbourne, in the State of Victoria. But if that is. the reason for the registration of this company in Victoria it might not apply with equal force during the whole currency of the agreement, which covers, a, period offifteenyears. In view of the fact that we haveno Federal companies law, I do not think we should indicate by our legislation the companies law of any particular State.
SenatorPearce: - Does the honorable senator suggest that the company, should be registered in the six States ?
– No. Let it be provided that it shall he registered in one of the States of the Commonwealth!.
– Say “ in Australia.”
– That will be sufficient. We could provide that the company shall be incorporated and registered in Australia within ninety days after the, date of the commencement of this agreement. I move -
That the words “ the State of Victoria “ be left out, with the view to insert in lieu thereof the word “ Australia “.
– I hope the Committee will not agree to the amendment. If we are to make amendments in the proposed agreement they should surely be amendments of substance. With, all deference to Senator Keating, as a lawyer, I doubt whether his amendment has any substance.. As a matter of. fact, it is impossible to register a company in Australia to-day Australia means the Commonwealth, and we have no Commonwealth companies law, so that a company . to be registered must be registered in a particular State. I put that forward with diffidence, as a layman, but it seems to me to be common sense. It is proposed that the company should be registered” in Victoria, as a matter of convenience, and in order that this business may not be hung up between the heavens and the earth we must do something definite.
– I am altogether in accord with what the Minister has said. This is a very small matter. If the refinery is going to be of general Australian value and interest, it does not matter much where the company is registered,* and with all due deference to Senator Keating’s legal knowledge, if we give this general direction, and tho company registered itself possibly in another State, a larger number of nominee shareholders would be required by the companies law of that State. There is a considerable diversity in the companies laws of the different States.
– There is, and not much to the advantage of the Victorian companies law.
– Perhaps the honorable senator and myself have suffered from some aspects of the Victorian companies law, and we may not have much respect for it.
– It is a great refuge for scoundrels.
– I do not think that oh ase of the question has any bearing on the agreement, which sets out that there shall bie three nominee shareholders. There are thus to be five shareholders in all - the Commonwealth, the AngloPersian Oil Company, and three nominees. This is to comply with the Victorian Companies Act, which evidently provides for a very small minimum as compared with the other States. In that respect it must be advantageous from our standpoint. I do not think the operations of the company will be in any way circumscribed by the fact that it is registered in any particular State. I am very solicitous about conserving the shale interests of Tasmania, but I am not going to take this objection, and I think we shall be well advised to let this feature of the agreement stand as it is.
Senator PRATTEN (New South Wales) [9.471. - I do not know what action, if any, has been taken by the Anglo-Persian
Company about the site for the erection of the refinery.
– It will not be the Anglo-Persian Company, but the Refinery Company.
– In view of the technical and practical management of the Refinery Company being in the hands of directors nominated by the AngloPersian Company, the Anglo-Persian Company will have the selection of the site. I am sure Senator Keating and myself have been thinking that it would not be right for the Committee to prejudice the new company in its establishment of. the refinery by acceding to subparagraphs b and c, and if there is any suggestion that the registration of the company in Victoria will carry weight in the direction of establishing the refinery itself in Victoria, irrespective of whether it is the best site in the Commonwealth or not, I should vote to alter those two sub-paragraphs. I hope the Commonwealth and Melbourne vested interests will have nothing to do with choosing the site of the oil refinery, but that we shall give the Anglo-Persian people practically carte blanche to put the refinery in the place that they consider best for the future of the Commonwealth.
– And they ought to be registered where. they think best.
– That is so; but it may be that, because negotiations have taken place in Melbourne, and the Seat of Government is in Melbourne, this proposal will be a matter of at least temporary convenience. If the Minister for Defence (Senator Pearce) will assure the Committee that no steps have been taken so far to fix the site of the refinery in Melbourne, as against every other place in the Commonwealth, and that it is not the intention of the Government to interfere in any way with the right of the technical and practical experts of the Oil Company to place the refinery where they think best, I shall be satisfied to let the sub-paragraph go.
– I proposed the amendment seriously; and was a little taken aback when the Minister for Defence (Senator Pearce) pointed out that it might be imprudent to substitute “ Australia “ for “ Victoria,” and suggested that possibly it was not competent to register a company in Australia, as there was no Federal companies law, and that a company could be registered only in a State. I thought my proposal would be more harmonious with the general purpose of the whole agreement. The sub-paragraph refers to the incorporation and registration of a company yet to be formed. That is the Refinery Company, which is to consist ofa partnership between a now existing Oil Company and the Commonwealth. The agreement puts an obligation upon that existing Oil Company, which is already incorporated, to register itself forthwith as a company doing business in Australia, to have and maintain at all times a registered office and a representative in Australia to receive service on its behalf of legal processes, &c., and to notify the Commonwealth from time to time, in writing, of the address of such place. It would have been more in harmony with the general purposes and provisions of the measure if we had applied to the company that is to be formed the same conditions as are applicable to the existing Oil Company. That Oil Company will have the option of selecting which State it shall register in and have its registered office in. The like option and discretion should have been given to the Refinery Company.
SenatorFoll. - Is it not essential that the administrative office should be in the State in which the company is registered ?
– Certainly ; but the registered office of the company need not be where the works are carried on. The Broken Hill Company, as the Minister mentioned, has its registered office in Melbourne and has works in New South Wales, South Australia, and Tasmania.
Question - That the words proposed to be left out be left out (Senator Keating’s amendment) - put. The Committee divided.
Majority . . . . 9
Question so resolved in the negative.
– Have investigations yet taken place as to where the site of therefinery should be, or has any decision been come to as to where it is proposed to erect it? If so, on whose advice has this been done ?
– Not only has no decision been come to, but the matter has never yet been raised.
Sub-paragraph agreed to.
Sub-paragraph d -
The memorandum and articles of association of theRefinery Company and any alteration thereof shall be subject to the approval of the Commonwealth, and shall provide [inter alia ) -
the manner in which, and the times when, capital may be called up;
that on any increase of capital the Commonwealth shall be entitled to subscribe so much capital and be allotted so many shares that at all times the Commonwealth will hold a majority in number and value of the shares in theRefinery Company;
that of the total number of directors of theRefinery Company (including the managing director, if he has a vote), three-sevenths in number shall be nominated by and represent the Commonwealth and foursevenths shall be nominated by and represent the Oil Company;
– This deals with matters affecting the memorandum and articles of association. There is nothing said about a voting provision. If the Commonwealth has half the number of shares, plus one, and votes are given in the articles of association according to the number of shares, and if ordinary articles of association are followed out, then clearly, irrespective of whether or not the AngloPersian Oil Company, for the time being, has four directors and the Commonwealth only three, the Commonwealth will be able, at the annual meetings of the company, by virtue of its majority shareholding, to displace even Anglo-Persian directors who do not; in its opinion, play the game. There is nothing in the sub-paragraph regarding the construction of the articles of association so far as the voting power is concerned.I understand that the directors will comprise four Anglo-Persian representatives and. three representing the Commonwealth, and’ if we pass the sub-paragraph in its present form this arrangement will be mandatory, irrespective of our share-holding in the company.
– That is to say, in the event of any obnoxious Anglo-Persian directors being thrown out, they would have to be replaced by other AngloPersian representatives.
– That is the point I am coming to. I have no objection to the Anglo-Persian Company, through this majority directorate, controlling the technical and business side of the refinery, but I want to be quite sure that, by virtue of its majority share-holding, the Commonwealth will be able at the annual meetingsto deal with the whole of the directorate.
– The articles of association might not provide for one share one vote on the directorate.
– What is the purpose of the Commonwealth holding the extra share?
– I want to be quite clear upon this point. If, by virtue of our majority share-holding, we shall have some reserve power, which some day we may wish to exercise, the position might be satisfactory : but if, by Statute, the Anglo-Persian Oil Company will have the right to nominate four directors out of seven, and the Commonwealth has no reserve power, I think the paragraph should be amended.
– If honorable senators will read sub-paragraph a they will realize that it is not at all likely the Commonwealth will approve of any whittling away of its power. Subparagraph b fixes the proportion of directors, and whatever is provided for in the articles of association must be consistent with it. I cannot answer any hypothetical case; but I do say that, subject to the limitations or restrictions expressly set out in this paragraph of the agreement, the Commonwealth will have all the powers exercised by ordinary shareholders of a company.
– Sub-paragraph d (iii) deals with the number of directors and sub -paragraph b with the number of shares to be held by the Commonwealth and the Anglo-Persian Oil Company respectively. It appears that the position of ordinary shareholders in regard to representation on the directorate is completely reversed, because the Commonwealth, representing the people of Australia, though holding a majority of the shares will have a minority of representation on the directorate. I am not prepared to support a proposal of that kind. The Commonwealth should have four-sevenths on the directorate and the balance of the shareholders threesevenths.
– But the Commonwealth has completepower of veto in regard to five important matters.
– The Commonwealth would, in my opinion, have a more complete power of veto if we Bad proper representation on the directorate.
-The majority of the shares carry a minority of the directors.
– That is so. I move -
That the word “ three,” in sub-paragraph d (iii), be left out, with a view to insert in lieu thereof the word “ four.”
– Can the honorable senator mention any other company in which there is such complete power of veto on the action of the directors ?
– The articles of association of companies differ very considerably. I do not know of any company established on lines similar to the proposed Refinery Company, but I am perfectly safe in assuming that the honorable senator himself would not entertain the idea of minority representation on a directorate of a company in which he held the majority of the shares.
– I would not mind minority representation if I had the power of veto over the action of the board.
– The Commonwealth will have power of veto only in respect of certain matters.
– But they are very important.
– It is doubtful if they are. It appears to me that this agreement is on all-fours with that
Nauru Island arrangement under which we are paying £3,000,000 for nothing.
Senator FAIRBAIRN ( Victoria; [10.11]. - I remind honorable senators that this is not a commercial company, as usually understood, but an arrangement entered into for convenience. It is, in essence, a bargain between the Commonwealth Government, on the one hand, and the Anglo-Persian Oil Company, on the other, and I doubt very much whether there will be anything but a technical meeting of shareholders, because the representatives will have to vote in a particular way. We have to consider the reasons for this apparent anomaly in regard to the directorate. The company, I assume, pointed out that the Commonwealth did not know anything about the development of oil resources and that the company had all the knowledge and experience, so it was essential that there should be no interference by Government representatives on the directorate with the proper and scientific working of the business. To insure this they asked probably for a majority of representation on the board.
– On the management side.
– That is so. I assume that the Commonwealth, represented by the Prime Minister I suppose, said, in effect, “ That is all very well, but it- will be giving you control of the company; so we must have the veto power in respect of certain matters.-“ In the light of these probabilities the agreement seems to me to be a perfectly reasonable arrangement. I do not think the AngloPersian Oil Company would have entered into the agreement if there was any danger of their management on the business aide being interfered with.
– As a matter of fact, the Government nominees on the board are superfluous.
– No. I think they may very well attend the directors’ meetings and report to the Commonwealth Government when it should exercise its power of veto. That is the only possible way in which the agreement can be carried out.
Sub-paragraph agreed to.
Remaining sub-paragraphs of paragraph 3 agreed to.
– I ask the Minister whether this paragraph will cover shale oil ? Various definitions are -contained in the Bill, and there is a difference between “ indigenous oil “ and other classes of oil.
– I will deal with “indigenous oil “ when paragraph 7 is under consideration.
Paragraph agreed to.
Paragraph 5 -
The technical and commercial management of the Refinery Company shall be left entirely in the hands of the Refinery Company.
– I move -
That the words “ and commercial “ be left out.
I am of opinion that the inclusion of those words will nullify the subparagraphs to which we have previously agreed, and under which the Commonwealth will be given complete control over quite a number of the activities of the Refinery Company. The expression “ technical and commercial management” will cover the entire operations of that company. I cannot imagine anything connected with those operations which will not be included in such a comprehensive expression. If we arc going to leave the technical and commercial management of the Refinery Company entirely in the. hands of that company, the Commonwealth representatives upon the board of directors will have absolutely no power.
– I hope that the honorable senator will not press the amendment. In my judgment it is an entirely unnecessary one. There is just as much reason why the commercial management of this concern .should be left to the Refinery Company, as there is why its technical management should he left to that company. The whole agreement stands, and no .part of it nullifies another part.
– I take it that we are not going to give the company more power than we have vested in the Governor of the Commonwealth Bank.
– No. In this paragraph we lay down the policy embodied in the agreement, and subservient to that policy we vest the commercial management in the Refinery Company of which the Commonwealth forms a part.
– Does the Minister think that there is no possibility of a conflict between the sub-paragraphs of paragraph 3, and the words “ commercial management” contained in this paragraph?
– The honorable senator appears to be fighting a shadow. What is the Refinery Company ? It is a company in which the Commonwealth will own more than one-half the shares. If we are not going to leave the technical and commercial management of the concern in its hands, in whose hands shall we leave it? The clause does not mean, as some honorable senators appear to think, that the Anglo-Persian Oil Company is to be given the commercial management
Of the Refinery Company.
– But that company will possess four-sevenths of the voting power on the directorate.
– We have already’ decided that question, and there is good reason why the company should have four directors on the board. Instead of selling the oil through the medium of the Customs Department, we shall sell it through the medium of the Refinery Company.
– The Minister has entirely misrepresented the position. He has stated that the Commonwealth will hold a majority of the shares in the Refinery Company, but he has quite ignored the fact that it will not have a majority of the directors.
– Order! That matter has already been decided by the Committee. .
– Tho Minister was allowed to refer to it. As a matter of fact, he has quite misrepresented the position. The Commonwealth will not control the operations of the Refinery Company. The Persian Oil Company will have a majority of directors on the board, and consequently the technical and commercial control of the Refinery Company will be entirely in its hands.
Amendment negatived; paragraph agreed to.
Paragraph 6 agreed to.
Paragraph 7 -
For the purposes of this agreement the term “ indigenous oil “ shall mean crude mineral oil obtained in the Commonwealth of Australia or in any Territory of or under the authority of the Commonwealth, or in any place over which the Commonwealth has a mandate.
– I think that a clear and unmistakable definition of the term “ indigenous oil “ is most important. Consequently 1 move -
That the word “ obtained “ he left out with a view to insert in lieu thereof the words “ which has been produced from shale or any other source.”
Senate adjourned at 10.27 p.m.
Cite as: Australia, Senate, Debates, 19 May 1920, viewed 22 October 2017, <http://historichansard.net/senate/1920/19200519_senate_8_92/>.