Coober Pedy energy fight: Misconduct finding over key council meeting

Ombudsman Wayne Lines has found a Coober Pedy councillor committed misconduct by failing to declare an interest at a key meeting that supported a now controversial new electricity deal for the outback town.

Dec 14, 2017, updated Dec 14, 2017
The opal fields at Coober Pedy. Photo: AAP/Dave Hunt

The opal fields at Coober Pedy. Photo: AAP/Dave Hunt

In a report published on the Ombudsman’s website today, Lines found councillor Paul Reynolds failed to declare an interest at a January 2016 council meeting, after energy giant EDL entered into a sponsorship deal to support the Coober Pedy Gem Trade Show, of which he was an office bearer.

He recommended the council reprimand the councillor.

The meeting has become controversial in the Coober Pedy community because it passed a motion supporting the 20-year, multi-million-dollar deal for EDL to build and operate a new hybrid-renewable energy system for the town.

As InDaily has reported extensively, the council says it regrets its decision, arguing that it was under pressure at the January meeting to approve the deal or it would lose Federal Government renewable energy funding for the project and face other legal consequences.

The deal, which received support from the State Government, has been criticised because it was not subject to a tender process and, according to a council consultant, will cost  $85 million more than it should.

The January 2016 meeting, which had a bare quorum of members, was Reynolds’ second as a councillor and, according to Lines’ report, he had asked then council CEO Tony Renshaw to advise him about whether he had a conflict. Renshaw said he did not.

In relation to his role with the Gem Trade Show, Lines finds that Reynolds’ failure to declare an interest in the motion to execute a power purchase agreement with EDL contravened the Local Government Act and the code governing councillors.

“It follows that I am satisfied that Cr Reynolds committed misconduct in public administration for the purposes of section 5(3)(a) of the ICAC Act,” the report finds.

However, Lines finds that Reynolds was not required to preclude himself from the council’s decision-making on the issue because the Gem Trade Show is a non-profit association. (If he had, InDaily understands the meeting would not have had a quorum and therefore would not have been able to pass the motion supporting the EDL deal.)

Lines finds that the failure to declare an interest did not, therefore, have any meaningful impact on the council’s decision to execute the agreement with EDL.

“I accept that Cr Reynolds’ error arose from the mistaken belief that he was not required to declare a conflict in the matter,” the report says.

“I also accept Cr Reynolds’ submissions, made in response to my provisional report, that this was only his second meeting as an elected member. On the information before me, I do not consider Cr Reynolds’ failure to declare an interest had any meaningful impact upon the council’s resolution to execute the PPA.”

Lines dismissed two other complaints, made to the Office of Public Integrity by an unnamed person, about Reynolds’ having an alleged conflict in relation to his role with two other bodies – the Coober Pedy Miners Association and the Coober Pedy Opal Festival.

As InDaily reported earlier this year, EDL wrote to the Coober Pedy Miners Association in 2015, agreeing to provide annual sponsorship of $10,000 to the Coober Pedy Gem Trade Show and the Coober Pedy Opal Festival.

The agenda for the January 19 meeting, shows that EDL’s “community sponsorship” had increased to $25,000 per year.

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Reynolds, who was president of the Coober Pedy Miners Association at the time, seconded the motion that the council execute the agreement with EDL.

However, Lines found that Reynolds “did not himself stand to receive a benefit or suffer a loss based on the outcome of the relevant motion”.

“Although it might be contended that EDL’s funding of the CP Gem Trade Show and CP Opal Festival advanced the CPMA’s own stated objectives ‘promote the development of the Coober Pedy opal mining industry’), I do not consider this fact alone caused the CPMA to obtain or have a reasonable expectation of obtaining a non-pecuniary benefit as a result of the motion within a manner contemplated by section 73(1)(b) of the Local Government Act.

“It would have been reasonable to expect that the funds provided by EDL to both the CP Gem Trade Show and the CP Opal Festival would be used, inter alia, to promote the Coober Pedy opal mining industry. It could also be argued that utilisation of the funds for such a purpose could reasonably have been expected to benefit persons deriving a profit or loss from this industry, including individual opal miners represented by the CPMA.

“That said, I am not satisfied that the CPMA itself could reasonably have been expected to receive such a benefit under the agreement. I do not understand the CPMA to carry on a business or to otherwise derive a profit or loss from the opal mining industry. At law, it is a distinct and separate entity from its constituent members.”

InDaily has attempted to contact Reynolds for his response. InDaily has also asked the council for its response.

The background to the controversial energy deal, worth an estimated $192 million, has been detailed extensively in a series of exclusive InDaily reports this year.

Coober Pedy council essentially acts as the energy retailer for the town, with the South Australian taxpayer exposed via subsidies the State Government provides to the council to ensure electricity prices are kept on par with those in the city.

EDL, which ran the town’s old diesel generation, has upgraded the infrastructure to include a greater mix of renewables and battery storage. After the system was switched on in July, EDL argues it has passed several significant milestones, including running entirely off renewable energy for more than 24 hours.

The council, though, remains unhappy with the scope of the deal and its cost.

Despite approving the project last year, the council had previously raised concerns with EDL and the State Government about the potential cost to the community and the lack of a transparent tender process.

A consultant, engineer Graham Davies from Resonant Solutions, who is now a Xenophon candidate for the state seat of Waite, advised the council that the deal would cost $85 million more than it should and lacked probity.

Council members later said they felt pressure at the January meeting to approve the deal or they might lose the $18 million grant to the project from the Federal Government’s renewable energy agency, ARENA. Members have also contended they felt pressured by the State Government to approve the deal – a claim refuted by the Government.

The chief executive at the time of the January meeting, Tony Renshaw, was subsequently dismissed for reasons unrelated to the proposed EDL deal, to be replaced by then LGA director David Hitchcock as an interim measure at the suggestion of the LGA.

As InDaily reported last month, the council has lodged a claim for compensation with the LGA over its involvement.

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