Industry update – November 2012

The last few months has seen a number of key coal project approvals and considerable public controversy over coal expansion plans. Uncertainty and volatility in the Australian coal industry continues amid uncertain economic signals from China and a sustained drop in coal prices. Meanwhile community opposition continues to grow as more and more people realize the negative impacts of the industry.

A few recent milestones include:

  • First of the proposed new coal ports in the Great Barrier Reef gets regulatory approval (T3 at Abbot Point);
  • First Galilee Basin coal mine (GVK’s Alpha Project) delayed by at least 12 months;
  • First federal Labor MP to publicly oppose the building of a new coal export port;
  • New coal port (T4) in Newcastle advances in planning process and legal appeal rights are removed from the community amid growing concerns over the health impacts of coal dust;
  • Hunter Valley event brings together rural communities opposing coal and gas expansion;

Major developments:

In terms of the longer term dynamics, the renowned Australian economist Ross Garnaut has been making the case that the structural shift within China towards a low carbon economy is having an impact on Australian coal exports already. In a recent speech, Professor Garnaut said China had exceeded its ambitious emissions targets, cutting coal-fired generation by more than 7 per cent in the past year. He was quoted in the Australian Financial Review as saying “In China, thermal [coal] is in deep shit”.

The most advanced project in the untapped Galilee Basin has now officially been delayed by a year despite GVK recently signing a key construction contract. Last year they hoped to reach financial close by September 2012. Earlier this year it was pushed into Q1 2013 and now it is Q4 2013.

While the drop in coal prices has undoubtedly affected market sentiment, the delay is also due in large part to the regulatory pressure placed on the project – due in turn to the high level of public scrutiny. While GVK have now received federal environmental approval for the mine, rail and port, the conditions are far more stringent than would normally be applied and require the company to do a lot more environmental studies and to get further Ministerial approval before construction can begin.

Investigations by Greenpeace and local conservation groups has uncovered a number of documents that bring into question the legitimacy of the GVK/Alpha approvals and as a result, the Alpha project approval process still has a long way to run. There are serious questions over the water impacts (and indeed water availability) of this project.

The other major project in the Galilee that is not dependent on the GVK/Alpha project is the Adani’s massive 60 Million tonne per annum Carmichael mine. In a public statement last week, Adani said that they can start construction of the mine in 2013, but this is clearly not realistic given the status of the project in the regulatory system. Adani group are running into problems in India and project delays due to environmental concerns are becoming a major problem for them. A recent article in the Business Standard summed it up nicely: “Analysts fear if environment clearances get delayed for the Australian project, it would further increase pressure on the group, as it has taken on huge debt to fund the acquisition… it might not be understanding the scale of the problem here, as local Australians are funding the Greenpeace campaign with donations.”

One of the big obstacles to Adani’s development plans is the health impact of the proposed Dudgeon Point coal port expansion on local residents – due to coal dust.

Greenpeace released a detailed report into the climate impacts of the Galilee Basin and there is ongoing research into water issues, marine impacts and the legality of the approval processes for the Alpha project.  A year ago the momentum behind the Galilee Basin developments seemed unstoppable. Now, with global economic headwinds and strong public pressure, the whole Galilee development is starting to look like a very risky investment indeed.

Further South in the Surat Basin, there are plans for 110 million tonnes per year of coal exports that depend largely on the plans of Xstrata to build the Wandoan coal mine and the “southern missing link” rail line. A key part of this export chain is the proposed new coal ports at Gladstone and Balaclava Island.

Local community organising by the Keppel Bay Alliance resulted in the Labor MP Kirsten Livermore openly opposing the Balaclava Island coal port in Parliament – the first time (to the best of my knowledge) that a sitting Labor MP has openly opposed a new coal port.

Earlier this year, the World Heritage Committee clearly recommended that no new port developments be allowed outside of existing port areas. The response from the Queensland Government has been to declare that the pristine Balaclava Island and Fitzroy Delta region is actually part of the port of Gladstone – so it is fine to build two new coal ports there! Federal politicians seem to be taking a more responsible view although this is going to be an important and controversial issue over the coming months.

One of the most potent factors that is likely to influence the Balaclava Island port proposal and the entire Surat Basin development is the proposed merger between Glencore and Xstrata. The Glencore Chief Executive has made it clear that they are not in favour of major new greenfield infrastructure spending. This merger it due to go through next month and if Xstrata does not build the massive Wandoan project (estimated to cost $8billion) it will have significant flow on implications for the financing of infrastructure in the region.

In the Hunter Valley, the campaign against the 120Mtpa T4 coal terminal in Newcastle is steadily building. The health impacts of coal dust on the local community has hit a chord and has been the focus of repeated front page news stories. The Coal Terminal Action Group, an alliance of local community groups, is starting to conduct their own health monitoring, and a recently released report into the health impacts of coal mining in the Hunter Valley created significant media attention – drawing considerable political response in the region. The Federal Greens continue to push for an inquiry into the health impacts of coal dust on Hunter residents.

In a somewhat bleak demonstration of the failure of the regulatory system, the Ashton mine near the town of Camberwell in the Hunter Valley was approved by the Planning Assessment Commission after an appeal by the company. A year ago they rejected the proposed mine due to unacceptable health and water impacts. No new information has been provided but the decision has changed. Local residents are deciding whether or not to appeal the decision.

The other major setback in the Hunter Valley was the approval of the massive Boggabri mine – despite strong community opposition. Despite being in an ecologically important State Forest, the mine was approved by the NSW Planning Assessment Commission (PAC) but still needs federal environmental approval.

The approval of these two projects is symptomatic of the failure of the NSW land use planning process. There is a growing sense of unity with the farming and environmental community as people realize just how completely the mining industry is trampling other industries and interests. The thoroughbred breeding industry are becoming more vocal about the impacts of coal expansion, as are other parts of the agricultural sector.

In late October, the local community in Gloucester organised a fantastic event that brought together communities from around NSW that are concerned about the expansion of coal and gas. The two day event saw over 100 people sharing stories and learning from each other and included local Mayors, farmers, environmentalists, health experts, lawyers and a wide variety of community members concerned about the impacts of mining.

In Victoria, public opposition against the granting of new coal allocation permits is building. Environment Victoria commissioned a detailed economic analysis of the proposal for brown coal exports from Victoria while Friends of the Earth are continuing to work with local communities to oppose coal exploration.

From one end of the country to the other, local communities are increasingly standing up to hold the coal and gas industries to account. It is about time. While the economic benefits of the mining boom are real for some, most of the benefits flow overseas and negative social, economic and environmental impacts are becoming increasingly clear.

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