Largest Australian coal mine given the go-ahead

Greg Hunt, the Australian environment minister, has approved the Carmichael coal mine in the Galilee Basin and its associated rail link to the coast. The minister’s approval comes after the Queensland government approved the project in May.

The AU$ 16.5 billion project will create the largest coal mine in Australia and one of the largest in the world. The mine will produce an estimated 60 million tpa of coal over its 60 year lifetime: generating an expected AU$ 300 billion.

Hunt said he approved the plan with the “absolute strictest” environment conditions: imposing 36 conditions aimed primarily at protecting groundwater.

The project, which will be overseen by Indian mining company Adani, will consist of a network of both opencast and underground mines. The total area of the project is about seven times that of Sydney harbour.

The associated rail line from the mine will transport coal to the port of Abbott Point, where Adani already has approval to build a coal export terminal – though the terminal has been hit by a number of withdrawals from investors, including Deutsche Bank and Anglo American.

Not without controversy

The coal mine has been attacked by environmentalists over the impact it will have on both local habitats, which face destruction, and on national and global carbon emissions. Greenpeace has claimed coal from the mine will pump an additional 128 million tpa of CO2 into the atmosphere. By contrast, the Australian government’s proposed Direct Action climate scheme – which has been criticised by a number of analysts and onlookers – aims to reduce domestic emissions in Australia by 131 million tpa.

Adani estimates the mine itself will produce about 3 billion t of CO2 over its 60-year lifespan, due to “fugitive” emissions released during mining.

Hunt said the conditions he has imposed ensure Adani “meets the highest environmental standards and that all impacts, including cumulative impacts, are avoided, mitigated or offset”.

Adani will be required to ensure at least 730 megalitres of water are returned to the environment every year for five years.

The company will also have to monitor the condition of groundwater, offset the impact of cleared habitat and assess the impact to threatened species.

Adani does not boost the cleanest of records in environmental responsibility. In the past, the country has been fined in India for violating environmental conditions relating to a port development in Gujarat. The company has also been criticised for its destruction of mangroves.

Economic boost

Hunt said the project will have a value of AU$ 5 billion/year over the next 60 years, adding AU $2.97 billion to the Queensland economy a year over this period. He also said that the mine would provide electricity for “up to 100 million people in India”.

The mine will also create thousands of jobs for industry workers. The project will create almost 2500 construction jobs, while the mine is built, and a further 3920 jobs once the project becomes operational in 2017.

Gautam Adani, the chairman of Adani, said the project would provide a significant economic boost to Queensland.

“Adani’s commitment to nation-building in India goes hand in hand with its commitment to providing sustainable employment opportunities for local workers and suppliers, not just through our rail infrastructure, but also our longer-term investments in ports and mining," he said.

“Development of the Galilee Basin is vital for the regional and economic growth of both Queensland and Australia, and Adani’s projects play an important role in realising this growth," Adani added.

Oversupply of coal

Once the Carmichael coal mine is built, it will potentially face tough market conditions which will need to be overcome before any economic benefits are felt.

The coal market is currently experiencing downward pressure on prices due to oversupply – and there are fears this may only increase as nations, such as Russia, Indonesia and Mongolia, join Australia in preparing ramp-up production.

This excess supply may well be produced just as demand drops further, as international regulations aimed at curbing carbon emissions take their toll on the coal industry.

South Korea, for example, has recently imposed a coal tax of about 17 won/kg of coal with a net calorigic value below 5000 kilocalories/kg. The country will also introduce a broad carbon price from 2015. Neighbouring China, easily the world’s largest producer and consumer of coal, has also unveiled plans for a national carbon emissions market and may aim to curb coal consumption within coming years.

Tim Buckley, a former Citibank analyst and now a director at the Institute for Energy Economics and Financial Analysis, said the environmental approval itself was no surprise.

“I never expected [Mr] Hunt to go against Premier [Campbell] Newman nor Prime Minister [Tony] Abbott's desire to promote foreign firms trying to sustain Australia's coal industry,” Buckley said.

“Ironically, should the Galilee proceed, it will actually accelerate the longer-term destruction of our coal export industry by dramatically expanding the capital invested, whilst at the same time taking coal prices globally down another 10-20%,” he warned. 

Written by Sam Dodson

Published on 28/07/2014

World Coal

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