Environment and Communications References Committee : 14/03/2018 : Waste and recycling industry in Australia (2024)

KHOURY, Mr Tony, Executive Director, Waste Contractors and Recyclers Association of New South Wales

WILSON, Mr Harry, President, Waste Contractors and Recyclers Association of New South Wales

[10:16]

CHAIR: I now welcome representatives from the Waste Contractors and Recyclers Association of New South Wales. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. We have your submission. Would you both—or perhaps one of you—like to make a short opening statement before we proceed to questions?

Mr Khoury : The Waste Contractors and Recyclers Association is a federally registered body under the registered organisations act. We've been continuously industrially registered since 1948. We're the oldest waste body representing employers in the waste industry anywhere in the world. We've got 190 members who own, operate and control an estimated 90 per cent of the commercial vehicles and equipment used across all parts of the waste management sector in New South Wales and the ACT. Wherever a council contracts out its waste, it does so to one of our members.

There were three parts in our submission. There was one on the environmental regulators and regulations. We gave some submissions there that, in our view, state and territory EPAs across Australia, and in particular New South Wales and the ACT, which is the area we work in, really focus on the depots and the facilities of the legitimate compliant operators. The EPAs in those jurisdictions spend the bulk of their time and resources regulating operators who have high profiles and who are very cooperative with EPA staff.

The fines and the penalties that the EPAs issue are manifestly inadequate in enforcing compliance. A fine of $10,000 or $15,000 is a hugely ineffective way to deal with a rogue operator, who doesn't really have any real regard for the law. I'll come back and talk about rogue operators in a moment. Rogue operators really have little regard for reputational issues. The penalties at times are meaningless to these operators. Some have a phoenix style operation where they transfer assets to avoid penalties. We don't believe that the state and territory EPAs in New South Wales and the ACT have sufficient laws, resources, regulations and strategies for dealing with rogue operators.

Waste has a tendency to always gravitate to the lowest cost disposal option, whether it be landfill in South-East Queensland or recyclers in China——they're two very pertinent current examples. Modern business rogue operators are sophisticated people. They stay a step ahead of the regulators. The fines and penalties are a cost of doing business. They see that there is a risk that is acceptable. They see that the reward is far greater than the penalty they're going to get, and they have little regard for reputational issues.

The word on the street is that even if the loopholes allowing New South Wales waste into South-East Queensland is shut down that rogue operators are looking at other disposal options—possibly other parts of Australia, where there is no waste levy and possibly even nearby Pacific countries. There has been lots and lots of money made by long-distance transport operators. Some of these operators have started from scratch in the last few years. We said to government and to the EPA when we first became aware of it in 2012, 'Stop it sooner rather than later, because the longer you let it go on the harder it'll become to stop.' These people are turning over major amounts of money and they have invested in equipment to be able to go the long distances.

In our view, the rogues have built substantial business operations on the back of ineffective government policies and poorly resourced regulators. The rogues often have better lawyers and better advisers than the regulator—that is a fact. We see so many examples. I will give the example of a Minto operator, who has recently claimed in a press release an understanding with the New South Wales EPA to breach their licence conditions by 300 per cent. So they're bragging about it in the media! Where that operator has significantly exceeded their licence conditions, they say they have an understanding with the EPA. We look at that, and our legitimate members look at that, and they ask: 'Is this rogue operator above the law? Is this rogue operator intimidating the EPA?' We ask questions, 'What's going on?' and we don't get any answers.

In relation to rogue operators, probably the way to bring them back into line is to provide more resources to the regulator, and also to license all waste transporters. In New South Wales, the barriers to entry are very low, as I'm sure they are in every other state, and anybody can become a waste transporter. All they need to do is buy a truck! The EPA's view is that a waste transporter will just go to the EPA's website and they'll work out what they need to do. Our argument is that with the value of waste in this state, which is the highest waste revenue state when it comes to waste anywhere in this country—and probably in the south-east Pacific area—while ever you have these types of rogue operators, while ever there is no licensing system and while ever there is no sort of lawful requirement for them to be licensed then they will continue to turn a blind eye to the law. No-one really knows who these waste transporters are. They operate under the radar and they're very difficult to communicate with. That's the first part of our submission.

The second part of our submission will also touch on the first part, and that is the interstate waste transport factor. The waste levy in New South Wales is $138 per tonne in the metro area and $79.60 in the regional areas. Queensland, which is not in New South Wales, has no waste levy. There has been an argument now for the last six years by our regulators here that for constitutional reasons they can't stop the long-distance transport of waste from New South Wales to South-East Queensland. I don't think our forefathers, when they designed the Australian Constitution would want to be hearing that, though. The net negative impact on the environment of long-distance transport is a major cost to the economy. No-one is taking that into account. Reportedly now, there are a million tonnes a year that are leaving this market and going to South-East Queensland. That is a cost to this government of $138 million a year. It keeps increasing every month and every year. That amount keeps increasing. Every time I look at it again, the anecdotal evidence is that it's just increasing, whether that's by road or by rail.

The proximity principle that was referred to earlier was an absolute failure in this state. There was never one prosecution. There was a court challenge when the EPA tried to collect an estimated $100 million from a company called St Marys Recycling. That matter never made it to court. The matter was settled out of court, which is the worst possible thing that could have happened from our point of view, because it was never tested in the court. But, arising from that settlement, the EPA said that they will repeal the proximity principle. They still haven't, and as we sit here before you today it still is law in this state. It hasn't been repealed. Perhaps there is a role for the federal government to play with the proximity principle. If the federal government were to introduce a proximity principle that would apply across the whole country, that might work.

The sole objective of the logistic facilitators who've entered the market with long-distance transport is to transport waste from one jurisdiction to another. All they do is arbitrage the waste; they don't add any value whatsoever. They collect waste in a marketplace in New South Wales where the waste has a very high value because of the levy and they transport it to another jurisdiction where there is no levy applicable.

The other key factor in relation to this between New South Wales and Queensland is that we have different landfill standards between New South Wales and Queensland. We have open-cut mines in the Hunter. They have open cut-mines in the Ipswich area. We drive past our own open-cut mines, which our regulators and our legislators won't allow to be turned into landfill, to go to the South-East Queensland open-cut mines. The regulators are really out of whack with their regulations. Ultimately, you have to ask the question. The only way for the Queensland government to solve it in the short term is to introduce a levy, but be mindful of what I said earlier. The rogues are looking beyond the introduction of a Queensland levy. Perhaps there's a role for the federal government to intervene and look at this a little bit more closely.

We held a long-distance transport of waste forum on 1 February in Sydney. We invited the New South Wales government to attend that forum. We invited the EPA to attend that forum. Their involvement was very, very disappointing. The New South Wales government sent nobody; the EPA sent one person along to observe. We put out a press release in relation to this matter. They really don't want to get involved in resolving this issue. They don't want to talk to industry about resolving this issue. They don't have a can-do attitude when it comes to resolving this issue. We had the police there. The police reported eight serious truck accidents involving the long-distance transport of waste from New South Wales to Queensland. The police and their association don't want to wake up to the news that one of these trucks has caused a fatality on the Pacific Highway. We already have an overcongested Pacific Highway and the million tonnes of waste that are heading north, by a combination of road and rail, are going to lead to a serious road accident at some stage. If you don't respectfully believe me, then you should call the police to appear before this inquiry. We resolved as a forum to express our concerns to the Premier and to request that the EPA hold a second forum by 1 March. We are yet to hear a response from the EPA, because, as I said, they don't want to engage in the conversation to resolve this issue. It's frustrating the industry that they don't want to engage in this conversation.

The third area that we reported to you on included recycling and commodity markets and the issue of stockpiling. For a number of years, our members have expressed concern about both the reliance on exporting material to China that has high contamination levels and the fact that there have been no local markets for glass. I'd like to address both of those issues briefly. The glass issue, which a couple of months ago seemed like such a difficult issue, is now the easiest issue to resolve. Glass is collected through all of our commercial recycling, through all of our kerbside systems. Without an end market, why are we collecting glass? We're not using it in the manufacture of new bottles and jars because cheap imports of bottles and jars have filled that space. Our request to government for some time has been to mandate the use of recycled glass in road-base-making material. Tell the RMS and tell local councils that they have to use this product in road-base-making materials and aggregates, because, if you don't have a demand for the glass, why are we collecting it? A recyclable is only recyclable if there's a demand. The supplies are constant and nobody's listening. The EPA are currently commissioning a behavioural survey to see why people won't buy recycled glass. It's just ridiculous, honestly. It's wasting valuable time. We've already done a number of reports. Any number of specifications around the countryside, as Gayle Sloan said earlier, show what a great product glass is in road-making. Yes, the cost will be slightly higher, but that's the price you have to pay if you want recycling.

CHAIR: And it was a key recommendation in the national waste plan back in 2009 as well.

Mr Khoury : And it's been the recommendation in our report that we sent to the EPA from A.Prince consulting. Then the EPA here had the Centre for International Economics do a study into it. But at the moment they have Meld doing a behavioural research study—God only knows why.

The fourth area I'd like to comment on is the waste levy. I made some notes earlier; it was helpful sitting in the back there. The waste levy is greater than $600 million a year in this state, and it's all going to consolidated revenue. Approximately 15 per cent is handed back to industry and to local government through the Waste Less, Recycle More initiative. So 85 per cent stays within consolidated revenue. The New South Wales waste levy, which was designed to divert material from landfill, is now subsidising the cost of 1 million tonnes a year from the New South Wales market to South-East Queensland, at a loss of $130 million a year to this state in waste levy.

The hike in the waste levy, Senator Keneally, was back in Morris Iemma's day. When he was the Premier of this state, he approved an increase of the waste levy of $10 per annum plus CPI in 2008, to bring it to the current level of $138.20. The intention in increasing the levy was to encourage investment in recycling, to encourage investment in alternative waste-treatment technologies, to encourage the production of refuse-derived fuels and to encourage investment in waste to energy. The intention of hiking the levy to $138.20 a tonne was not to subsidise long-distance transport to South-East Queensland. I also make the point that we are the New South Wales affiliate of the National Waste and Recycling Industry Council; in fact, we're the ACT affiliate as well. You've made reference to the NWRIC a couple of times. We support their positions.

I'm going to come back to glass. It is not affected by the National Sword. The government needs to mandate the use of glass in road base and aggregates. If they don't, we'll still be having this discussion for many years to come. The container deposit scheme was introduced in New South Wales in December last year. It is a concern that every state and territory has a different container deposit scheme; they all operate differently. The intent of the New South Wales scheme was to reduce litter; that's how it was sold to us. We weren't real keen on it, because we saw that the CDS would basically take materials away from kerbside. We've been proven to be correct, because the evidence to date is that all that's happening is the eligible containers, in the main, that are going into the CDS system are being taken out of the kerbside bins and deposited in reverse vending machines. So where you had a truck that was collecting 14,000 bins with a yellow lid on a fortnightly basis—and that activity is still taking place—that truck is now collecting a little bit less small product from each households, but you have hundreds if not thousands of householders who are making their own trips to the reverse vending machines to deposit those same containers. Again, I ask the question: where is the benefit to recycling?

CHAIR: Can I start with that one? We've received evidence that South Australia has a much higher quality of glass because of their CDS scheme. Whole bottles are accepted under the scheme. The system has less contamination, because comingled kerbside gets a lot of contamination. You've been dealing with issues with recycling of glass from MRF, which is lower quality than what we've seen from the CDL, for example, in South Australia. So I would put to you that while there's a market potentially for road base out of MRF glass, which is lower quality, Owens-Illinois doesn't take glass from MRFs because it's too low quality. We would like to see that glass reprocessed into glass here in this country. If it were higher quality from a CDS, wouldn't that be of benefit?

Mr Khoury : Look, the CDS material will be much cleaner, and yes the CDS material will get preference over the MRF material, because the CDS material is hand sorted and yes there will be lower contamination factors in there. Absolutely; that's a no brainer. However, you've still got material that's been relocated from the kerbside system, which is largely under threat at the moment, and it's being redirected into a CDS system. Our main focus, once the CDS was announced, was to protect the position of the materials recycling facilities to ensure that they could be part of the process of claiming a redemption on eligible containers. But I will say this: the CDS in New South Wales has diverted the focus of the government and the EPA away from all the key issues that I spoke about earlier, because any time we would go anywhere near the EPA or near the government to talk about anything, we'd be told, 'Oh, no, we're busy with the CDS.' So for the last two years they've been busy working and planning and delivering a CDS to this state, and the rest of the waste management issues that I have just spoken to you about have largely sat unresolved.

CHAIR: I can understand that; if their priority has been to put a CDS in place, that makes sense. I'm not saying it's a good thing or a bad thing, but that makes sense. We also heard from our previous witness—and it was acknowledged by witnesses in South Australia—that the way the CDS has been set up in New South Wales, local government can actually get revenue benefits from the CDS scheme that they wouldn't have access to otherwise.

Mr Khoury : Let me say this: we really don't want local government to have access to that revenue. We need the MRFs to have access to that revenue. It's the MRFs that are under threat, not local government. Local government have, for a long, long time, not been part of the risk-sharing process in relation to the collection of waste and recyclables. Now that there's a little bit of blue sky, here they are, putting their hand up and saying, 'We want a little bit of this CDS revenue,' where you've got MRF operators who are likely to have to close their doors because of the whole issue with the Chinese situation.

CHAIR: So you have your upfront fees, which are an important component in terms of the funding of recycling or waste processing in general, and then you've got your markets—your demand side. My understanding is that they're both important in the balance. The crisis in Victoria at the moment is that the councils don't have those kinds of upfront fees, so they're having to put up those fees to try and at least initially cover this situation until the markets can be generated for remanufacturing and other processing in the country.

Mr Khoury : Look, it's a simple supply and demand situation. The supply of materials from recycling is a constant. Every day of the week householders put their bin out, on the same designated day each fortnight, and it gets collected. It's the same commercially. At every commercial facility around town that's got recyclables they will still be collected. The supply is a constant. The demand through China has knocked out half of the world's recyclables—

CHAIR: The Australian industry kind of shut down—

Mr Khoury : Supposedly. Half of this mixed paper and a lot of these plastics, with contamination rates of up to 15 per cent, were reportedly headed to China. So the supply, which is a constant, has now been impacted by a 50 per cent reduction in the demand for the materials. What will happen is over time, with the intervention of government, with industry working with local government and with industry working with the federal government is, hopefully, we will develop other opportunities for these commodities. It was said earlier that the intention is not to send anything to landfill; the intention is to increase stockpile limits. That's about a one- or two-week fix. I'm telling you that there will be material going to landfill in the short term.

CHAIR: Just going back to the local government issue for a second: it's interesting what you say about local government, that you think the pressures are on the MRFs. But your industry essentially wouldn't exist without local government and kerbside, is that correct?

Mr William : Absolutely.

Mr Khoury : Our industry would. I mean, local government is only about 40 per cent of our revenue in our industry. The other 60 per cent is the commercial and industry sector as well as the construction and demolition sector, then you have the hazardous waste sector. But, yes, local government is a very, very important customer of our industry.

CHAIR: Of course, you've got your political component to rates and who's funding those kinds of services as well.

Mr William : I'm a waste contractor, both a collector and a processor, and I run a MRF. What's happened in the last five to seven years is the MRF structure in Australia changed. We went to what I'd call fast MRFs, catering for the Chinese market. My MRF is a slow MRF. I produce product, and 90 per cent of my product goes to the Australian market. I'm going to be a secondary factor of the Chinese Sword, because as they clean up the products in the fast MRFs they're going to be looking for markets. So the markets that I'm already supplying in Australia are going to be under pressure from too much product. So I have an immediate effect and a secondary effect as these products come back and get cleaned up. So those fast MRFs have got to change their footprints and they've got to change their practices, but that's all cost. But where local government has been accepting those low costs and pushing their risks elsewhere, there is no elsewhere to push them anymore. We have to address this problem, and it's going to cost.

CHAIR: I'd like to hear your views about what kind of government can be very specifically targeted at getting us through this period to the point where we can look at remanufacturing here and developing that demand. I don't quite understand, when we use the term 'rogue operators' are they acting legally or illegally, strictly speaking? Are we talking about organised crime as well or are we being a bit more broad in our definition?

Mr Khoury : So rogue operators will be acting both legally and illegally, and there will be some criminal elements in there.

CHAIR: I'm just trying to get in my mind exactly what a rogue operator is.

Mr Khoury : A typical rogue operator is this—we have 190 really good members, and I would hope that if any of those members were to look at laws and regulations they would have compliance systems in place to say, 'This is what we need to do to comply.' Whether it be the regulations of the EPA, SafeWork New South Wales, the tax office or whoever, a good operator will look at the regulations and they will ask themselves the question, 'How do I comply?' A rogue operator will look at the regulations—in particular the EPA's regulations—and say how do I get around it to make $1.

CHAIR: Certainly the inference from the Four Corners program was there was potentially corruption here between the EPA and some of these rogue operators. My understanding is that the EPA has now been investigated and formally cleared of any perception or allegations of corruption. Do you have any comments on that?

Mr Khoury : I'm not aware of any issues of corruption that we could talk about. The EPA referred themselves to ICAC. It was their decision to do that. The only issue really outstanding from the Four Corners program that hasn't been fully explored is this issue of Mangrove Mountain and why the New South Wales government hasn't collected this $100 million of waste levy for material that went into that landfill. As I understand it, Penny Sharpe, who's the opposition spokesperson for the environment, has referred that matter to ICAC.

Senator KENEALLY: I want to pick up on some things in a speech you gave last year as well, and they touch on some of the matters raised in your submission. You pointed out that about $4 million a week is leaking out of New South Wales, in terms of waste levy dollars, because of this transporting to landfills. That's not good for government and it's not good for the industry, you said. You said:

Some would argue that the current waste levy system in NSW is flawed and it's dysfunctional, and it's in urgent need of review.

Before I pose my question can I say thank you for your explanation of Premier Iemma's intention when introducing the waste levy—far more credible coming from you than me in this setting! It was helpful to have that on the record. Can you speak a bit about what you think should happen with the waste levy? You've already pointed to some things, like the proximity principle. Does it need a review and what would be the key areas you would like to see reviewed and changed as a result?

Mr Khoury : The New South Wales EPA only have jurisdiction within New South Wales, so they can't collect the levy once the material leaves this state. That's proven. We've got six years of records that I can point to where they haven't been able to collect it from one tonne of material that's left this state.

Senator KENEALLY: Nor do they collect from the rogue operators, correct?

Mr Khoury : Well, rogue operators could be taking it to Queensland and rogue operators could be dumping it illegally.

Senator KENEALLY: So they're not collecting that, obviously.

Mr Khoury : No. So what we've done is put to EPA a couple of times that, rather than have the levy collected at landfills, why not collect the levy at transfer stations? Why not collect the levy at recycling facilities on their residues? Bring the waste levy collection point forward in the system. The EPA has already got waste-levy-reporting portal requirements on all licensed facilities. And with a little bit of will and a little bit of can-do, and a little bit of really good senior council advice, I'm sure that the waste levy would be paid, could be brought forward in the system. Then it wouldn't matter. If the waste levy was paid at a transfer station or if the waste levy was paid on the recycling residue from a recycler, it wouldn't matter where they took it. They're not going to take it long distance, because they will have paid the levy. And that credit goes with that levy, and it can go to a New South Wales facility. That's what I meant when I said that we'd like to see the waste levy system reformed.

We've put this proposal, in some detail, to both the Minister for the Environment in New South Wales and the head of the EPA, Barry Buffier, and we've never ever had a response.

Senator KENEALLY: Thank you, that is really helpful. In the speech you gave last year—and, for the record, it was a WCRA breakfast briefing in March 2016—you said that for the way forward there were two options for the New South Wales waste levy: either to apply it across all operators or to get rid of it.

Mr Khoury : No, I would never say to get rid of it.

Senator KENEALLY: And you go on. I was going to say, you went on to say we should not get rid of it.

Mr Khoury : Yes, I wouldn't say that. The waste levy has done many positive things for this state. We've seen a lot of investment in recycling because of the waste levy. There are many facilities that now operate because of the waste levy. The waste levy system just needs an overhaul because of the fact that there's this long-distance element and the rogue operators who do different things with waste products. That's why it's in need of a review and an overhaul.

Senator KENEALLY: We heard a submission earlier this morning that argued that the waste levy is being used as, basically, a way to raise funds for consolidated revenue and that it needs to be more transparent for households. What's your view of that argument?

Mr Khoury : I did say, in some of my comments earlier, that there are about $510- to $550-odd million that stays within consolidated revenue, that doesn't come back to the industry. I'm not sure that householders and consumers and business operators know anything about the levy. Anytime I ever talk to people about the levy no-one ever knows about it. It's only us within the industry or within government or within local government that really know of the levy. Everyone pays it through their household rates, and every business pays it on any tax invoice that they get from a waste transporter.

Senator KENEALLY: Do you have any thoughts about whether or not we should make it more transparent, or is it too high?

Mr Khoury : Is it too high? I don't think it's too high. We need to ensure that we encourage recycling but we need to encourage re-use. We need to encourage waste to energy. We're only going to get that by lifting the waste price, and we've lifted the waste price. What we don't want to do is have that levy misused. This long-distance transport is an unintended consequence, and it needs to be fixed.

Mr Wilson : Can I just point out the dollar side of that? If Queensland do put on a levy, it's got to be fairly severe levy to make up the difference of the transport cost. If they put a $50 levy on it, it's unlikely to change any of the movement. They will still be making money out of shifting it to the south-east corner of Queensland. So it's not just a levy, it's the quantum of the levy as well—

Mr Khoury : That's right.

Mr Wilson : that will come under scrutiny of these operators, to see whether they can still make a dollar out of it.

Senator KENEALLY: Given that New South Wales can't actually affect the amount of a levy that Queensland may or may not impose, is there a role for COAG or the federal government in this space?

Mr Khoury : If you could influence the Queensland government to put in a levy of, say, $60 a tonne that would be a great starting point.

Senator KENEALLY: I'm not sure that Senator Whish-Wilson and I have that ability, but my point is—and that is the point of this inquiry, to ventilate some of these ideas and to consider what recommendations we might make. That is my question. What role would the federal government or COAG have, in your view, in whether there's a consideration of harmonising levies across jurisdictions or harmonising approaches to setting levies across jurisdictions?

Mr Khoury : Harmonisation, as Gayle Sloan mentioned earlier, across all parts of the waste industry is to be encouraged. As long as we don't pick the worst of the worst when it comes to regulations and laws, I've got no problem with harmonisation. I think harmonisation would be a good thing. It would make it easier to do business across the country. As I said earlier, considering the way our forefathers drafted the Australian Constitution, they wouldn't be very proud of us at the moment, I don't think, with the way some of these interpretations come through. We're watching a million tonnes a year go up that highway, and people hide behind the Australian Constitution as to why they won't fix this issue.

CHAIR: Mr Wilson, you said you operated a MRF or you own a MRF, I'm not sure which.

Mr Wilson : Both.

CHAIR: I asked this of the previous witness. We've seen a lot of media coverage in Victoria about the state of their waste management industry. There's been this perfect storm of a collapse in commodity prices in recent years, and glass has collapsed for various reasons, including imports, as you mentioned earlier, and, obviously, with the National Sword and what's been happening in China, there's a lot of uncertainty in the industry. We've seen recently that the state government has had to step in with emergency funding to keep the kerbside system going, because there's been force majeure claimed. What's the situation like, in terms of profitability, for your industry in New South Wales?

Mr Wilson : It depends which MRF you've got. I spoke about fast MRFs. Most of the growth in recycling has been taken up by fast MRFs. Naturally, in the metropolitan area there's enormous throughput.

CHAIR: Did you say fast?

Mr Wilson : Forty tonnes an hour.

Mr Khoury : Quick processing.

Mr Wilson : A fast MRF is 40 or 50 tonnes an hour. I run a regional MRF and I don't have the same volumes, so I run it at a different pace, and I can get a cleaner product out of that MRF, so I sell to the Australian market. The fast MRFs have a percentage of contamination that was acceptable in China, and they were selling their product into China. They were able to price their MRFs' operations cheaper, so most of the material that was taken up in the last five or more years has been through those types of MRFs. They're the ones that are suffering today for yesterday, because they don't have a market anymore. They've got to change their product. They're the ones that are impacted down in Victoria, and the same thing's happening in New South Wales. There are seven councils that are not supposed to getting a service in New South Wales tomorrow. That deadline has been extended for 14 days, I understand. There are other councils that are, at the moment, negotiating price variations so that those MRFs can clean up their products, so it is impacting us today and yesterday. It just depends which MRF you go to.

CHAIR: I was going to ask you specifically: what's required? When you say they could change their products, clearly they need to be cleaner if they're going to meet the Chinese standards

Mr Wilson : Correct. They need to reduce the contamination levels.

CHAIR: What kind of investment are we looking at there? Is it washing plants or—

Mr Wilson : In the short term, it's labour. In the short term, it's putting additional sorters and checkers on, cleaning up the product and getting it to an acceptable level to be able to sell it. Down the line, they'll all be looking at different methods, depending on their MRF. Some of these MRF are built on a footprint that can't be extended, so there may be secondary processes set up where it's shipped off to somewhere else to be cleaned up. So each MRF will have a different solution.

CHAIR: In some of the readings I was looking at last night, there was a suggestion that there should be a process of sorting before it reaches MRFs and that maybe local government should have a role in that. What's your view?

Mr Wilson : As an industry we pulled off the advertising and the education of the ratepayers over the last five or 10 years because of the acceptability of this product into China. I think that was a bad mistake by the whole industry. That has to come back on and we need to tell the public that some of these products aren't recyclable and get them out of the stream so that we're not handling non-acceptable items. I think we can do better in that area, and that's federally.

CHAIR: Speaking about federally, the issue around China has been flagged by big companies like Visy and others for years.

Mr Wilson : Correct.

CHAIR: Were you surprised to hear today, from our previous witness, that the federal government's only meeting with them about this next week?

Mr Wilson : Tony and I met with the EPA federally three years ago to discuss this item.

CHAIR: Federally?

Mr Khoury : Federally, yes, we did.

CHAIR: Who did you meet with? Do you mind—

Mr Khoury : I tried to find that—

CHAIR: Was it in the environment department?

Mr Khoury : Yes, in the federal EPA.

Mr Wilson : We had concerns about the percentage of waste going offshore. We were aware of companies looking at shipping waste to Darwin. We wanted to understand the federal government's position on this because there are some international standards on contamination levels and the China market was accepting materials well above those standards. We wanted to know whether there was a federal interest, because we were having difficulty raising that at the state level with the state EPA.

CHAIR: What kind of feedback did you get from the EPA once you met with them or from anyone in the environment department? Be frank with us please because this is important.

Mr Khoury : We got a fair hearing, but we never got any feedback in writing or anything like that.

CHAIR: There was no follow-up or continuing discussion around developments in the Chinese market?

Mr Khoury : No.

CHAIR: Did DFAT or any other government department provide you information about the China free trade deal or—

Mr Khoury : Not at the time. They have attended a couple of the EPA meetings in recent weeks though in New South Wales.

CHAIR: The federal government have?

Mr Khoury : Yes. In relation to the whole issue of recycling, I had to research the matter. I delivered a presentation yesterday to 125 members and local government people in Lidcombe. There is massive demand for information in this area now. Everybody wants to see kerbside survive, and I'm sure it will. Every ratepayer is paying for their bin to be collected. The bin will continue to be collected. It's just a matter of what's going to happen with those full trucks in coming months.

CHAIR: I was about to say that my view is that they want to see it survive, provided they know it's going to be recycled or reprocessed. If it's going to landfill, I don't think they'll be very happy.

Mr Khoury : At the end of the day they've got a bin with a red lid that is very small and they've got a bin with a yellow lid that's very big, so they want it to survive so that they can keep the product moving out of their household. The government will most likely need to intervene in some fashion between now and 30 June. My recommendation to local government yesterday was that they spend the next few weeks working out what the additional costs might be over the next 12 months and factor that into their budgets and possibly factor that into the collection of garbage rates from householders.

CHAIR: Fees and rates, yes.

Mr Khoury : Yes. There will be increases in the system. There has to be increases in the system.

CHAIR: There will be renegotiations with your industry, transporters and local government. Is that happening right now?

Mr Khoury : Yes, it is. We know that quite a number of the main MRF operators have written to transporters and local government. They've pretty much put them on notice that the market has collapsed, the prices have dropped significantly and the specifications are now considerably tougher than what they were at the start of this year.

CHAIR: I sensed that the previous witness acknowledged that that was also occurring, but they didn't seem to think that it would reach a crisis point here, like it did in Victoria recently. Do you agree with that?

Mr Khoury : I don't agree with it, because I reckon we're about a month behind. Visy probably don't have the ability to tackle this across all states at the same time. They started in Victoria and they are moving into New South Wales. I think we will see this happen soon.

CHAIR: We did have Visy on the witness list today but they pulled out yesterday. That was disappointing. I understand that they didn't provide any reason for that. That is certainly something I would have liked to have put to them. You believe that, if we are potentially a month behind Victoria, you may be facing the same crisis?

Mr Khoury : We're probably four to eight weeks behind—that's when something will happen here. We are aware of a number of regional council situations at the moment that are only a matter of weeks away.

CHAIR: We can certainly put that to the Local Government Association when they present to us.

Mr Khoury : Yes. One group of councils was given a 14-day extension yesterday.

CHAIR: Could you tell us privately, perhaps afterwards, who that was?

Mr Khoury : Sure. Could I quickly make a comment about planning and encroachment?

CHAIR: Yes.

Senator KENEALLY: Yes, I was going to ask you about that. Thank you.

Mr Khoury : It is fairly and squarely a New South Wales government issue. They are expecting the 120-odd councils around this state to show leadership on this issue. It's just not going to happen. They're not capable of acting in the best interests of the overall New South Wales waste management industry. They'll always say, 'Not in my backyard,' when it comes to a development. We need major facilities in this state. We're going to need new major facilities. We've just seen the Eastern Creek landfill close down. Lucas Heights and Woodlawn are the only two key bits of putrescible landfill that we've got left. I have seen facilities that have closed down because of encroachment. The main one was Onesteel at Chipping Norton, for all the reasons that were discussed earlier. Onesteel was a major metal recycler in Chipping Norton and they had a massive buffer zone around them. Liverpool council then allowed residential developments to virtually come right up to the boundary and, within a matter of months, Onesteel were forced to close down their Chipping Norton operation and relocated, at very considerable cost, to the Newcastle area.

We agree with what Gayle Sloan from WMAA said, that New South Wales and the ACT need dedicated waste management precincts, but, more importantly, we also need to streamline the approval processes for the approval of waste and resource recovery facilities. There currently is a waste-to-energy parliamentary inquiry in relation to the proposed Eastern Creek waste-to-energy plant. We've all had opportunities to make submissions before that inquiry. The terms of reference for that inquiry, by the way, were expanded after Four Corners—

CHAIR: And after our inquiry was established too.

Mr Khoury : to take into account all of the issues that we have spoken about here today.

CHAIR: I read the transcript of their first hearing. Their first hearing talked about the paltry fines the EPA had been levying and some concerns about that.

Mr Khoury : My closing comment would be this: our government and our government departments don't want the media looking at our industry. I've never seen so much media interest in our industry as I've seen in the last two months. The number of calls and requests for interviews and comments that we receive at the association at the moment is at an all-time high. I've probably received more requests in the last two months from the media who want to know about our industry than I've received in the last 14 years.

CHAIR: Given that media interest and given what we've heard about the impending crisis with China, and we've all seen the collapse in commodity prices—it's all been out there—why is the federal government asleep at the wheel on this issue?

Mr Khoury : Why? The states and the territories basically control the regulations and the laws surrounding waste. I don't think the federal government's ever had an operational or hands-on role to play in relation to the waste management industry. It's always been left to the state and territory governments. There have been policies handed down from time to time and guidance and the packaging—

CHAIR: The national waste management plan in 2009 was supposed to change that. It was supposed to show federal government leadership on this issue. One of the key things you talk about is mandating for the use of glass on roads. That was a federal policy.

Mr Khoury : Why is our government still doing a behavioural research study on it?

CHAIR: That's a very good question.

Mr Khoury : It's just nonsense.

CHAIR: Yes. We're out of time now. Once again, thank you very much for your presentation today. We'll put some questions on notice for you. If I could see you privately to get the name of that council, that would be very interesting.

Mr Khoury : Yes.

Senator KENEALLY: Thank you very much.

Mr Khoury : Thank you.

Proceedings suspended from 11:03 to 11:16