The other question to consider is: what if changing government laws mean you are never allowed to mine your coal?
Of course, that can be the situation today for coal reserves inside national parks and other areas that government considers too sensitive for mining.
The new nasty on the horizon, and one that is being talked about in places where coalminers are not welcome, is related to the vexatious question of climate change and the role of coal – real or imaginary.
Carbon Trackers, an organisation closely allied to the anti-coal climate-change lobby, has found a fresh way of attacking coal – as if this Australian government needed fresh ammunition to prolong its assault on the industry.
The issue identified by Carbon Trackers is one of whether Australia’s coal should be “frozen” in the ground because to mine it threatens to unleash vast amounts of climate-changing carbon.
This is an argument we have heard before, but this time it comes with a twist that goes straight to the heart of every coal-mining company – its balance sheet.
Along with the usual climate-change spiel, the Carbon Trackers report suggests stock exchange-listed coal companies might be overvalued because of the potential threat from changing government climate policies.
The suggestion is investors should start to question coalminers about the values assigned to coal reserves because those values might be misleading and, therefore, inflating the share prices of coalminers with unrealistic reserve values.
The Coal Trackers reported titled Unburnable Carbon suggests Australian coal companies spent an estimated $US6 billion finding coal reserves that might be left in the ground.
It quotes a leading member of the climate change lobby, Climate Institute chief executive John Connor as saying: “Australian and overseas investments in Australian coal rest on a speculative bubble of climate denial, indifference or dreaming”
So much for that bog standard rant that most people working – or investing – in the coal sector will ignore.
The next bit is what might raise the eyebrows of fund managers.
“This report [Unburnable Carbon] shows that they do not take climate change seriously or are taking risky gambles,” Connor is quoted saying.
Disregarding his overkill, and the silly point about “risky gambles”, given that all gambles are risky, there is an important message in the way this phase of the anti-coal crusade is targeting the money side of the business with an interesting argument that will catch the ear of some people in government, funds management, and the international media.
Last week the well-read British news magazine, The Economist, picked up the Unburnable Carbon theme by asking in its headline: “Either governments are not serious about climate change or fossil fuel firms are overvalued”
In a nutshell, that is the point because what The Economist is asking is whether values assigned to coalmining companies are an example of the stock market “mispricing risk”
Another example of mispriced risk, or of an event that could have been foreseen but was ignored, was the 2008 sub-prime crisis where banks lent money to people who could not, or would not, repay it.
“The share prices of oil, gas and coal companies depend in part on their reserves,”The Economist writes.
“The more fossil fuels a firm has underground, the more valuable its shares. But what if some of those reserves can never be dug up and burned?”
Where the argument goes, and it will ring a bell in government, is the tricky question of how government balances its desire to please that part of the electorate that wants a heavy-handed attack on carbon emissions and that part of the electorate wanting reasonably priced electricity.
At this point, The Hog feels it’s time to morph into his other persona, that of a chicken.
But, before clucking off for the week why not ruin your day by reading the full Unburnable Carbon report at http://www.carbontracker.org/australia – but if you are in the coal business best do that behind a closed door, and with a glass of something strong at hand.
