Published in March 2010 Australian Longwall Magazine
Over the past few years, many new coal developments have come under increasing pressure from environmental groups and local communities. These groups have shown they have the power to influence the outcome of a new mine or expansion. High-profile New South Wales cases such as longwall mining in the Liverpool Plains, expansions at Appin and Metropolitan, and the development of Kores’ Wallarah are just a few which have been affected.
BHP Billiton’s Caroona project in the Liverpool Plains has gathered plenty of attention and headlines. Strong community action led by local farmers has put pressure on the state government and BHP to amend plans. Leading the charge has been the Caroona Coal Action Group which is concerned longwall mining will damage the underground aquifers in the Liverpool Plains and affect the agricultural industry.
In September last year, the NSW government announced amendments to the special conditions of BHP’s exploration licence, preventing the company from applying for a mining lease that includes longwall mining underneath the deep alluvial irrigation aquifers, and longwall or open cut mining underneath the floodplains. Before this government move, BHP had already committed to not mining these areas.
Late last year, a report to the Senate called for total prohibition of mining under the floodplains and raised concerns about proposed mining by BHP and Shenhua Watermark on the ridges surrounding the plains.
In its report the Select Committee on Agricultural and Related Industries urged the NSW government to take steps to enforce the companies’ commitment to exclude mining from certain areas.
The latest development in the ongoing saga was CCAG’s failed legal challenge to the NSW government over its approval of Caroona exploration licence 6505 in the Liverpool Plains.
The saga is sure to continue with findings of an independent water study still to be released and ongoing pressure from the community.
“It is essential that decisions about land use are based on science. That’s why NSW Minerals Council supports the proposed Namoi Valley water study and a fact-based approach to any proposed developments,” the council has said over the controversy.
“Governments are elected to provide the definitive answer to questions about optimum land use. Any potential impact on the community or other land users is a key consideration in the environmental assessment process for any new mining project so the government can decide whether or not they are acceptable.
“The state and federal regulatory framework already in place more than adequately allows for the evaluation and assessment of the potential impacts of any mining project, including any potential environmental impacts.”
Kores’ Wallarah development is another NSW project that has been waiting in the wings for some time and has encountered environmental opposition.
Back in 2007, Kores’ preliminary application met environmental challengers and an independent inquiry into the development was ordered by the New South Wales Department of Planning.
In mid-2009 the company suffered considerable delays due to water concerns after submitting its preliminary environmental application.
Among several findings, the independent inquiry found there were no significant reasons why coal mining should not be permitted in the Wyong Local Government Area and mining the resource was unlikely to compromise in any significant way the water supply of the Central Coast.
Environmental studies are now nearing completion and formal environmental assessment documents will be lodged and put out for public examination.
Expansion plans at BHP Illawarra’s Appin and Peabody Energy Australia’s Metropolitan longwalls have been modified due to environmental concerns in the particularly sensitive Southern coalfields.
At Appin’s Area 7, operations were designed to minimise the impact on the surrounding natural and man-made features, including the decision to move the longwalls away from the river, sterilising some 12 million tonnes of coal – the equivalent of approximately four years of production.
At Metropolitan, a $US70 million expansion approved this year will lift production from 1.5 million tons per annum to 2.5Mtpa in a couple of years. Peabody had originally targeted a bigger expansion but left out more than 8Mt of coal as an environmental pillar to get plan approval and ensure protection for the Waratah Rivulet and Eastern Tributary from the impact of subsidence.
The Metropolitan expansion was the first project assessed by the Planning Assessment Commission.
Runge NSW general manager Hal Morris said project owners and operators had become more aware of the potential impact on project delivery timetables and are now planning for these risks by allowing extended time to gain approvals and associated increased costs.
“Some project developers now look at the risk between delays and uncertainties with new project approvals against the risk of extending or modifying existing projects, with the ultimate outcome reduced expenditure and reduced number of new projects coming onstream,” he said.
Snowden divisional manager David Arnott did not believe environmental or community groups had slowed project approvals, as government go-ahead was a defined and legislated course of action that must be adhered to.
“I am aware though, as would be many other Australians, either involved in, or taking an interest in mining industry projects, that have been portrayed in a negative light within the media,” Arnott said.
“Recent events in the Gunnedah and Surat basins, where potential future coal mining operations are seen to be in direct conflict with local landholders involved in agriculture, have seen individuals and community groups either appropriately voice their opinions, whilst others have undertaken more drastic measures that could be considered illegal through either hindrance of the mining company carrying out exploration, like setting road blocks or sabotage and vandalism of equipment.”
To cope with these pressures, Arnott advised, it was imperative for company management to understand the market before stepping into it and commencing a risk assessment.
“There are plenty of locations both within Australia and around the world that have fantastic potential for the development of mineral resources, yet the risk involved in developing their potential is too great or outside the appetite that many companies are prepared to accept. This risk could be from a variety of sources; social, environmental or political,” he said.
“What the Australian community has been seeing in recent months in relation to areas such as the Liverpool Plains, is based on a combination of risks. Arguably the primary agenda for this region is defined as environmental risk, with the potential ramifications to the Black Soil Plains and the Murray-Darling Basin catchment seen as one of the major cause for disagreement with this area being opened to mining.
“Further investigation by any of the parties involved in exploring for mineral resources in these areas would have highlighted the risk involved initially from a socio-economic stand point. It would have been clear that many of the conservative white middle-class rural Australians whom have farmed some of the best agricultural lands in eastern Australia for a number of generations are not going to just sell up and move out to make way for an open cut mine, particularly one that may involve foreign investment, without a fight.”
“It should have also been obvious that such people would rally to form local community groups that would protest loudly, and that individuals within such groups would have alliances to members of the major political parties.
“Ultimately assessment of risk by companies prior to becoming involved in a project will always be seen as a sound investment.
“Similar examples of conflict outside coal mining can be seen with oil shale mining in Queensland and the mining and enrichment of uranium for nuclear power generation.”
Runge’s Morris said coal companies were seeking the help of personnel and companies experienced in mine planning for the approvals process and developing project timelines that were realistic for approvals and development.
He said they were also ensuring adequate budgets were in place that could extend approvals and extraordinary development costs.
Will coal miners look elsewhere when it gets too hard? In a presentation last year, Xstrata Coal group executive Mick Buffier said the Australian government needed to remove investment barriers if it was to continue receiving benefits from coal, including the global giant’s pipeline of projects in New South Wales.
Buffier said Xstrata felt comfortable in NSW and wanted to continue to invest and grow, but he warned that gaining support from the community and government was crucial.
“Increasing government charges and regulatory inefficiency represent a significant impediment to investing – there are global choices,” he said.
“Xstrata has a significant pipeline of opportunities in New South Wales coal if the return on investment fundamentals are there.”
Runge’s Morris believes coal miners are looking elsewhere to invest when environmental and community pressures and approvals become too much.
“This is happening but ultimately it comes down to cost benefit analysis of projects. The more expensive the project to develop in developed countries with infrastructure in place means that it may well be more beneficial to the stakeholders/investors to spend the money somewhere else and with it establish all the infrastructure to go with it,” Morris said.
Arnott said developing countries were increasingly seen as an attractive market for many of the big mining houses.
“Costs of development are lower (real wages considerably less than what is paid for equivalent personnel in the first world), legislative risk can be considerably less arduous and governments and communities that have been ravaged by the affects of famine or socio and political unrest for years are more than happy to see development and opportunities arrive on their back door where they can benefit directly from the development of such operations.”
“There are also cases of companies reassessing risk in less developed countries and have made the decision to move away from offshore operations.
Political risk seems to be the main driver behind such decisions.
“Regardless, companies will continue to assess risk, both locally and internationally, making the decision to invest in an area dependent upon their own appetite to accept the risk and the returns that it can provide their investors.”
*Note, the NSW Parliament has since passed amendments to clear up land access issues since the Supreme Court decision against the Caroona coal project. See related stories for more information.
