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Environment Be Damned, a Gamble Will Decide Future of Giant Australian Coal Mines

This week the Federal government approved what is expected to be Australia’s largest coal mining effort. Simultaneously, coal prices are dropping and other Australian mines are closing. Oh, also the reef is dying.
July 31, 2014, 2:15am

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This week the Federal government approved what is expected to be Australia’s largest coal mining effort. The Carmichael Coal Project will cover over 200 square kilometres, cost $16.5 billion, excavate six open cut mines and five underground ones, and drain an average of 10 billion litres of water from the Galilee Basin annually over 60 years of operation.

Environmentalists are supremely pissed. The proposed project would see 450 more ships per year entering the already feared for Great Barrier Reef. If this mine, the Alpha Coal project, and the five other projects on the Galilee Basin awaiting approval, all go ahead—it would mean that by 2020, the total number of ships on the reef each year would blow out to 7,000.

There are also concerns about the environmental impact on the reef caused by dredging, the impact hundreds of kilometres of rail work and mining sites will have on local biodiversity, the impact of using so much groundwater from the basin, as well as the effect the mine could have on agriculture. On a more global scale, as The Conversation publicised, Victoria University Climate Expert Professor Jones has said if all coal mines under consideration for the Galilee Basin were operating, they would exceed 10 percent of global greenhouse gas emissions.

To top it all off the Indian company heading the Carmichael Project, The Adani Group, has a history of non-compliance with regulations and environmental destruction. This has been recorded by Greenpeace, and been used by them and Getup! to discourage international banks, such as Barclays and Deutsche Bank, from financing aspects of the project.

A quick summary of their record: Adani has screwed over Indian villages by building on their land, destroyed environmentally protected areas, and flipped the bird at the Indian government by bribing port officials and illegally exporting iron-ore.

The only public statements from the government responding to environmental concerns have come from Environment Minister Greg Hunt. He stressed the strictness of the environmental conditions Adani will be held to, argued over the definition of what constitutes a reef, and complained to ABC radio that there was less protest around the Alpha Coal Project, given the go ahead by the Labor government, and steered by Indian conglomerate GVK and Hancock Coal. “The green groups said virtually nothing. I think that all that was said by Greenpeace was ‘unfortunate’. So it appears that there's one rule for a Labor decision and another rule for a Coalition Government decision.”

Disregarding the fact that Greenpeace said more than “unfortunate”, the Environment minister seems to be struggling with the idea of a proportionate response. The Alpha Coal Project is expected to cost $6.9 billion, yield 30 million tonnes per annum, and have a mine life of about 30 years. So it’s a little over a third of the cost of the Carmichael project, is expected to yield half as much, and be around for half as long. Greg Hunt’s complaint that there was less of a fuss over the Alpha Coal Project would be like if Sultan Kösen bemoaned the fact that people half his size, like Peter Dinklage, rarely get called tall.

There is some doubt that Adani will ultimately go through with the project. They’ve already threatened to pull out over port dredging delays, it’s been reported that they have a $12 billion debt they are failing to pay the interest on, and they are yet to secure final funding.

Adding to their difficulties is the cost of doing business in Australia. Yes, coal is a very cheap source of energy, but it gets a whole lot less cheap when you have to source it from a stranded area deep in the outback of Queensland. That’s because when you get it from there you have to build everything: the railway lines, the airport, water infrastructure, the workers’ villages, the port, and the mines themselves. Then you have to pay the ongoing costs of getting all that coal from Australia to India. Tim Buckley from the Australasia Institute of Energy Economics and Finance Analysis said to ABC Rural that Indians would have to pay an electricity price “double the current levels” for Adani’s project to be financially worthwhile.

Not to mention that while coal is cheap it’s also dirty, and this could make it more expensive. It would be the resource hardest hit by carbon pricing. And in spite of the Australian government’s best efforts that is exactly what the rest of the world, including China—the biggest user of coal—is moving toward.

More immediately affecting the viability of the Carmichael Coal Project is coal’s waning price on commodities markets. This would be exacerbated by the project, as it would robustly increase the world’s already abundant coal supply and therefore reduce its cost. How bad is the price already? Australian coal mines have already been closing.

Essentially Adani is set to make a two-fold bet: that India’s demand for electricity will remain high and that the price of coal will rise in the long-term. Are those good bets? It doesn’t look like it but who bloody knows?

What’s plain is this: now that the federal government has given the go-ahead, environmental concerns have taken a back seat. The decision on whether or not Australia will be home to one of the world’s largest coal mines is purely financial.

@GirardDorney