Can Queensland save its mining towns with FIFO restrictions?

The most dramatic changes seen in real estate markets around Australia in recent years have been felt in towns and cities touched by the resources sector.

And the biggest source of distressed messages I receive from real estate consumers is from those who property in Gladstone, Moranbah and the Surat Basin towns in Queensland.

The greatest single influence has been a fundamental shift in how mining companies source their workforces, creating the modern phenomenon of fly-in-fly-out (FIFO) workers.

The reality of the mining industry these days is that the towns near the mines or the big processing plants don’t surge as they did in the past because most of the workers are living (and spending) elsewhere, flying in and staying at workers camps. In some cases, locals living a few kilometres from the mines are unable to get jobs there.

In Gladstone where three massive gas plants were built, the non-resident workforce peaked at 6,655 in 2014, of which 5,475 (82%) were living in camps on Curtis Island, where the plants were built. That meant few were buying or renting local dwellings. Vacancies remain high, around 8%, according to SQM Research figures.

Developers who built new dwellings in Gladstone were left disappointed – and property prices fell. The median prices for Gladstone suburbs like Clinton, Glen Eden, Tannum Sands and West Gladstone have all fallen at a rate of at least 8% per year over the past three years – remarkable given that $60 billion was invested in three projects in a regional centre of less than 70,000, creating many thousands of jobs.

Currently BHP Billiton has 270 jobs on offer at two mines near the boom-bust town of Moranbah in Central Queensland, but only 70 workers will be locals.

The other 200 will be sourced from centres like Townsville, with regular flights from there to Moranbah. The reality is that Townsville, 350 kilometres from the mines, will get more benefit from these projects than will the local town.

Practices like these have caused Moranbah’s median house price to fall from a peak of $750,000 to around $150,000 - with price decreases averaging 27% per year over the past three years. There has been a glimmer of improvement recently, with vacancies (which peaked around 10%) now below 5%, according to SQM Research, but it’s been an ugly three to four years to this point.

This is possibly the most extreme example of a boom-bust market in the history of the nation. The town’s property market was a victim of its own success: with very ordinary houses costing $750,000 to buy and $1,500 per week to rent, it’s not surprising that mining companies sought alternative ways to accommodate their workforces.

The whole issue of FIFO workforces has become very contentious, with local residents believing they now get few benefits but lots of problems when there’s a big mine with an accommodation camp just outside their town.

There are also the family issues to consider, with FIFO workers spending long periods away from their families, friends and home communities.

So now the Queensland government is trying to force changes. And like anything that involves change for reasons that appear worthy, there are all sorts of unforeseen consequences.

A Queensland parliamentary committee hearing is currently considering legislation that would ban companies from having a 100% FIFO workforce if the mine is close to a town where it could source workers.

Unsurprisingly, big mining companies like BHP Billiton are unhappy. The Courier-Mail declared in an article this week: “Taxpayers could be forced into paying a massive compensation bill to mining giant BHP Billiton over State Government plans to restrict fly-in, fly-out workforces.”

In a submission to the committee, BMA (a BHP joint venture company undertaking mining in Central Queensland) said there were concepts in the government’s planned legislation which “have the potential to result in absurd outcomes”.

“It also claimed it had been singled out by the government and specifically targeted by the legislation because of its Daunia and Caval Ridge mines, near Moranbah, which were 100% FIFO,” the newspaper report said.

The government’s goalis to ensure regional communities benefit from the operation of nearby mines, but the proposed laws have a retrospective element, meaning it affects projects that are already under way, not just the new ones.

BMA claims to have invested $200 million in the 2,000-room Buffel Park FIFO village near Moranbah, on the basis that it would be fully utilised for the 30-year life of the mine.

BMA asset president Rag Uddwas quoted as saying:“A subsequent change in Queensland’s law that erodes the value of this overall investment is deeply disturbing to our business. If the government proceeds with this Bill as it is currently drafted then we reserve the right to enter into discussions to achieve fair and reasonable compensation from the state.”

BMA said it would be happy to work with the laws if they applied to new projects but the current Bill is retrospective to 2009.

“Queensland Law Society also said the legislation was flawed, but councils have broadly endorsed its objectives,” the Courier-Mail reported. “The state government said it would await the parliamentary committee’s report, due in March.”

Something has to change, but the current situation it untenable for local communities and hugely disruptive to their property markets. Here’s what an SBS report on Moranbah and FIFO said:

The boom is now over, with fewer mining workers living in the town and the resulting cash flow drying up. One resident said, “You’re walking around the streets going, ‘why am I still here? There is no benefit in staying out here anymore’.”

Anne Baker, the Mayor of Isaac Regional Council, of which Moranbah is a part, laments the loss of people and economic activity from her towns. “We’ve currently got 27 operating coal mines and two of them are 100% forced FIFO and surrounding mines are adopting similar practices. It’s a significant change in how mining companies employ their workforce.”

A 100% FIFO mine requires that all workers must fly in from areas such as Cairns and Brisbane - not come from the local towns. This system prevents Moranbah residents from working in the mines, effectively inhibiting the ability of the employees to have a work-life balance.  

Residents claim that some go so far as to relocate to Brisbane or Cairns to keep their jobs, staying locked up in the camps overnight rather than with their families just a few kilometres away.

Tony Windsor, a former federal independent MP, also raised concerns on the impact of FIFO work.

“I think that’s a shocking indictment of policy in Australia. We should be encouraging people to move to these towns and promoting a sense of the community as a benefit,” he said. “To shuffle them back into the feedlots – our major cities – and just fly people in and out. That’s mining in two respects; mining a resource, but also mining people.”

And the additional fall-out from these mining practices is property markets that are seriously undermined and disrupted. Locations that should be booming are doing the opposite.

We await the outcome of Queensland’s proposed solutions to see if significant change can be achieved. In the meantime, it remains ugly for those who own real estate in these places.

Terry Ryder is the founder of hotspotting.com.au. You can  email him or follow him on Twitter.