Mining Industry Dodgy Dealings

  1. Dodgy dealings in NSW
  2. Australian Coal Industry in Structural Decline
  3. Another Warkworth Win
  4. Green Tape
  5. Recent submissions
  6. TAI Out and About
  7. TAI In The Media

Dodgy dealings in NSW

With ICAC bringing down the likes of Assistant Treasurer Arthur Sinodinos and NSW Premier Barry O’Farrell over the Australian Water Holdings affair, it’s easy to miss the close links the current corruption enquiries have to the NSW coal industry.

The closest connection is to the Wallarah 2 coal project. Proposed for near Wyong on the NSW Central Coast, the project would undermine the drinking water catchment which 300,000 people rely on. Not surprisingly it is bitterly opposed by locals. 

Local opposition is such that any pro-Wallarah mine politician is unelectable in the region. Prior to the last election all parties opposed it, with Barry O’Farrell giving a “no ifs, no buts” guarantee that it would not go ahead.

Enter Nick Di Girolamo, lobbyist for Wallarah and Australian Water Holdings, and sender of the now-infamous bottle of Grange that led to Barry O’Farrell’s resignation. After a few meetings between Nick and the government, the project found its way through the politicians and through the planning department to the Planning and Assessment Commission (PAC), which is in the process of making a politically fraught decision about the project’s future.

TAI’s Rod Campbell recently travelled to Wyong to present to the PAC. Analysis of the project’s economic assessment (read it here) showed up $1 billion worth of errors and overstatement of thousands of jobs, based on economic modelling TAI has long campaigned against.

Next in ICAC’s sights is colourful coal “boganaire”, Nathan Tinkler. Much of Tinkler’s (largely former) wealth came from his stake in the Maules Creek coal project which will clear much of the ecologically significant Leard Forest. Despite TAI submissions resulting in the mine’s economists conceding they overstated the value of the project to NSW by at least $3 billion, and a string of independent ecologists demonstrating major flaws in the environmental assessment; the project was approved by state and federal governments. Protests and arrests at the Leard Forest site regularly make the news.

For the moment, however, ICAC is more focused on Tinkler’s failed bid to build a coal loader at the Newcastle port. Tinkler is alleged to have made illegal payments to politicians to support his bid to develop his project. Tinkler’s project was opposed by proponents of a container terminal development in the same location. What will eventually be built in the valuable port location is still unclear.  What is clear, however, is that if Tinkler’s coal loader had gone ahead it would have made life difficult for the established coal port operators and their proposed Terminal 4 (T4) project. TAI will appear in hearings relating to the T4 project later this year. Download our submission here. 

With many coal projects competing with each other during the boom and struggling against stiff community opposition and difficult market conditions, it comes as no surprise that some developers have tried every trick in the book. The coal industry and its opponents in NSW will be watching ICAC very carefully in the coming weeks.

Australian Coal Industry in Structural Decline

“Detailed financial modelling has exposed Galilee Basin coal as essentially unusable – the two biggest thermal coalmine projects in Australian history are fundamentally unprofitable and commercially unviable.

The financial justification for Galilee Basin coal is based on flawed economic assumptions, including a reliance on the increasingly uncertain prospect of India being able to continue to finance and economically justify building imported coal-fired power stations.”

That quote is from Tim Buckley, Director of Energy Finance Studies, Australasia for the Institute for Energy Economics and Financial Analysis (IEEFA). TAI has been exposing flawed economic modelling used by the mining industry to justify its projects for some years. IEEFA’s modelling demonstrates the miners’ incorrect assumptions about the Indian market, and questions the massive impacts on Australia’s environment if proposed mines in the Galilee Basin go ahead.

IEEFA’s damning report, released on Monday, states that coal mining in Australia is entering into ‘structural decline’ with countries such as China and India starting to focus more on renewable energy. The analysis also shows that the wholesale cost of electricity in India is half that of Galilee coal-fired power, making it unlikely that the Indian government will buy the expensive Galilee coal.

Chinese demand for coal continues to slow, and it is expected that India will follow suit. The report found that the cost of electricity generation from solar in India has fallen 65 per cent over the past three years. Renewable energy not only starts out cheaper but, unlike coal, gets cheaper over time. Both China and India are experiencing significant problems with air pollution. India is also facing water scarcity issues.  Solar and wind energy are looking like far more viable options for these countries both economically and environmentally.

Whilst the coal industry accepts that exports are in decline, it considers them to be in ‘cyclical decline’, and will increase as India becomes the next big market. Comprehensive analysis from IEEFA demonstrates that it is unlikely that India will be in a position to finance building coal fired power stations for expensive coal imports – the basis for the Galilee expansion.

“The industry’s economic models are flawed, the world’s poor won’t be helped, and the demand that is used to justify ruining Australia’s natural wonders is an illusion. Savvy operators are increasingly avoiding the Galilee,” Mr Buckley said.

Another Warkworth Win

Last year’s win for the community of Bulga in the Hunter Valley (assisted by The Australia Institute) against Rio Tinto’s Warkworth mine in the NSW Land and Environment Court sent the NSW government scurrying to amend legislation and Rio Tinto back to their lawyers to launch an appeal to the Supreme Court. While the government succeeded in changing legislation allowing the project to be resubmitted under different legislation, the Supreme Court appeal was handed down last month. The appeal strongly endorsed the original win and criticised Rio and the NSW Government.

The appeal was based on points of law rather than new evidence. One of the legal questions raised by Rio, however, was whether the original judge had unfairly rejected evidence from Rio’s economists, Rob Gillsepie and Jeff Bennett. Rio’s lawyers argued that by rejecting their economists’ evidence, the original judge arrived at the wrong decision in rejecting the mine. Three Supreme Court judges found that the original judge:

…did not reject that evidence, but rather considered that their evidence was of limited value. In coming to that conclusion, his Honour reviewed the economic evidence in some detail. He found the evidence of Mr Gillespie and Professor Bennett … to be inadequate in the various ways particularised.

Although his Honour did not expressly state his preference for the evidence of a particular expert, it is clear from his Honour’s reasoning that he accepted the expert evidence of [TAI’s] Mr Campbell in preference to the expert evidence of [Rio Tinto’s] Mr Gillespie and Dr Bennett.

The appeal judgement is not only important for endorsing the decision of the Land and Environment Court, but also for the campaign against the misleading environmental valuation studies that mine economists have applied to coal mine projects. This week the NSW Planning and Assessment Commission has taken on board the courts’ decisions and will now be applying much greater scrutiny to economic assessment. This means that while the Warkworth project will be resubmitted, it will face a tougher time from the planners this time around. 

Green Tape

Is our economy being strangled by “green tape”? Are environmental offsets costing billions? Should we set up a “one-stop shop” to speed up environmental approvals?
The new parliament is so keen to answer these questions that it has set up inquiries in both the Senate and the House of Representatives to get to the bottom of them.
Problem is, the Productivity Commission just finished looking at these issues and (after extensive submissions and correspondence with TAI) they found:

The Commission considers that the one-stop shop approach for all regulatory approvals is impractical for the broad class of major projects in Australia. Major projects are not limited to a single sector or activity and a vast amount of legislation would need to be modified to give authority to a one-stop shop. Moreover, establishing a single agency with the requisite skills and expertise to assess and approve a diverse range of project types and impacts would be very challenging. It would also create overlap with agencies that regulate regular-sized developments and risk ‘regulatory capture’.

Just in case the inquiries are not convinced by the Productivity Commission, TAI has made submissions to both. Our submissions, (you can read them below), re-enforce the Commission’s findings with arguments from economic theory and examples from our recent experience in the world of “green tape”, including:

  • China First Coal Mine in Queensland
  • Maules Creek Coal mine in NSW
  • Warkworth Coal mine in NSW
  • Tasmanian forestry issues

Recent Submissions 

SUBMISSION: Cobbora coal project

The Cobbora proposal is to develop an open cut coal mine near the towns of Gulgong and Dunedoo, east of Dubbo, NSW which would extract up to 20 million tonnes of coal a year. Our submission focuses mainly on the economic aspects of the project and how these were addressed in the Department of Planning and Infrastructure’s recent Environmental Assessment.


SUBMISSION: Streamlining environmental regulation, ‘green tape’ and one stop shops

The Australia Institute has made a submission to the House of Representatives Standing Committee on the Environment inquiry, Streamlining environmental regulation, ‘green tape’, and one stop shops. Our submission draws on earlier TAI research which found that there is considerable room for improvement in environmental regulation. 

TAI Out and About

Mark Ogge, TAI’s Public Engagement Officer, has been attending community meetings in regions threatened by coal mining and fracking in QLD and SA. Landowners and local businesses are rightly concerned about the impacts of these industries on their land and livelihood.

Having someone directly challenge the claims and misinformation of big business is incredibly important. In Central Queensland, graziers are threatened by compulsory acquisition of their land to build mining railways. These railways can make some areas of their land virtually inaccessible, and damage the local economy. A skills shortage in the area can already be linked back to the mining industry.

In Airlie Beach, tour operators are under threat from dredging the reef. Tourism employs double the number of workers that QLD mining does. The economic impacts the loss of the tourism industry would have on high street businesses, as well as the tour operators themselves, will be profound if dredging goes ahead.

Wineries in the iconic Coonawarra region of SA are facing the prospect of shale gas wells alongside their vineyards. Each time a well is fracked several truckloads of chemicals will be pumped underground, risking water and land contamination. Gas extraction in this area would damage the tourism and wine industries just by virtue of wrecking the areas’ ‘clean, green’ image, even before the toxic chemicals are pumped in.

In all these areas, the mining industry, and in some instances government officials are peddling inflated economic benefits while ignoring significant costs to the environment and community. TAI’s research into the real impacts of these industries, as well as their dodgy economic modelling is vital in combating industry spin. A presence at community meetings where industry claims can be challenged by well-researched factual information gives locals the information they need to make decisions in the best interests of their community. Not surprisingly, most of them are opposed to decisions made for the benefit of big mining to the detriment of the local economy and environment.

TAI has also been visiting NSW, including Wyong, Maules Creek, Gunnedah, Narrabri, Liverpool Plains and Sydney.

TAI In The Media

Dodgy Economics in Coal Mining Submission Radio Adelaide

Mining industry ‘misconceptions’ The Naracoorte Herald

“We are unwittingly backing anti-local employment policies” Central Telegraph

Why Are Gas Prices Set To Rise In NSW? www.newmatilda.com

Fracking assurances fail to convince opponents ABC South Australia

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jake@australiainstitute.org.au

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