Carmichael mine is a game-changer for Australian coal

Australia’s largest coal mine has been decried by many but the economic boost is significant, and emissions are essentially a zero-sum game if Indian power companies simply source their coal from elsewhere.

The Conversation

The Carmichael coal project, approved this week by environment minister Greg Hunt, is unprecedented in its scale, and also represents a significant shift in Australia’s coal industry.

If the mine goes ahead – Adani is yet to make a final commitment – it will be Australia’s largest, and represents the start of the opening up of Australia’s Galilee Basin, one of Australia’s richest coal reserves.

Most of the environmental concerns have focused on climate, groundwater, and indirect impacts on the Great Barrier Reef. The mine was approved with 36 conditions, many to offset damage to water; potential impacts on the Great Barrier Reef and climate were considered in the approval process but not included as development conditions.

However it is likely that the greenhouse emissions are a zero-sum game; even if the carbon emissions generated from burning the coal in India were included in the assessment, India would source coal from somewhere else.

Australia’s largest coal mine

The most notable feature of the new project is its sheer scale. If constructed, it will become the biggest mine in Australia, and one of the biggest in the world, producing an estimated 60 million tonnes of steaming coal each year over an estimated life of 60 to 90 years.

This dwarfs most existing mines nearby. There are currently almost 50 coal mines operating in the Bowen Basin, most producing between 5 and 10 million tonnes per year, and most with relatively short life spans of 10 to 30 years. The proposed mine is six to 12 times bigger than most operating mines, and will operate for at least twice as long.

Along with the change in the scale of operation come significant economic impacts. Queensland produced 284 million tonnes of coal with a total operating workforce of almost 29,000 people in 2013. This mine alone is set to have an operating workforce of 3,920 jobs, meaning that coal output and coal-mining employment would increase in Queensland by 21 per cent and 13.5 per cent, respectively.

The economic benefits will multiply back through regional, state and national economies. The varied location of coal employees and business suppliers, and the flow-on impacts to Government revenue, including royalties to the Queensland Government and company and income tax receipts to the Australian government, mean that the positive economic benefits will not only accrue to mining areas but much more widely across Queensland and Australia.

The proposed mine is remote from established communities in central-western Queensland, and development would be a welcome respite to businesses and workforce grappling with the recent downturn in the fortunes of the mining sector.

The big questions will focus on where the fly-in/fly-out (FIFO) workers will be sourced from and how much economic stimulus can be injected into regional communities. While the regional cities of Rockhampton, Mackay and Townsville are closest to the mine site, trends towards sourcing FIFO workers from further afield and capital cities do not guarantee that employment be sourced from the closest regional areas.

Linking Australian coal to Indian power

The Carmichael coal project is a proposal of Indian energy company Adani. Unlike most of Australia’s coal producers, Adani is essentially a power generator that is looking to secure energy sources into the longer term and to meet the growing demands for electricity in India.

This explains why, when prices for steaming coal are depressed internationally, Adani appears committed to the new mine and the scale of the infrastructure development needed, even though raising capital is challenging in the current environment. Currently exports to India at about 27 million tonnes each year from Queensland account for about 10 per cent of the State’s coal production, so the new project would more than triple that level.

Most of the coal producers in Australia are content to specialise in their mining operations and then deal with the vicissitudes of market prices, as compared to investments by countries like China into Africa where control of supply chains is a primary driver.

Adani is yet to make the final investment commitment to the project, but if it does, it will signal the emerging importance of supply chain integration in the Australian mining sector.

Opening up the Galilee

The scale of the project is tied to another notable feature of this development; it will establish mining in the Galilee Basin. Unlike the Bowen Basin further to the east, the Galilee Basin has remained undeveloped because of its remoteness and because its vast reserves of coal are suitable for power generation (steaming coal) rather than the more valuable coking coal used for steel production.

Figure 1: Australia’s coal reserves, including the vast, untapped areas of the Galilee basin in inland Queensland. 

Source: Geoscience AustraliaCC BY

To develop the mine requires associated development of a rail corridor through to the coast for an additional $2.1 billion, as well as the extension of the Abbott Point coal export at Bowen.

To meet the costs of these major infrastructure needs, there has to be enough coal. The size of the Carmichael proposal, and other proposed mines in the Galilee Basin by GVK Hancock (the Alpha Coal Project) and Clive Palmer (China First Coal Project) are at the scale needed to justify the huge infrastructure costs required.

Benefits outweigh the risks

This change in the scale of development also has implications for the environment.

These can be separated into four main groups: the impacts on terrestrial biodiversity of mine and rail corridor development, the potential impacts on groundwater from the mining operations, the impacts of the port development, including the dredging activities, and the greenhouse emissions associated with extra coal development and combustion.

Although the latter is the focus of criticisms from many environmental groups, emissions are essentially a zero-sum game if Indian power companies such as Adani simply source their coal from other sources.

A generation ago, the potential impacts on terrestrial biodiversity would probably have been the key environmental concern in Australia for a development of this kind. There are some substantial biodiversity impacts identified for the Carmichael Coal project, but the careful impact assessment process that is now required, the conditions imposed by both the Queensland and Australian governments, and the system of offsets that have to be established addresses these much more thoroughly than in the past.

It is notable that the headline environmental concerns now seem to be more focused on the issues where the impacts are much harder to predict with certainty – the groundwater and port development impacts. Again, the Queensland and Australian Government approvals come with strings attached. Adani has to comply with major conditions and offset the predicted impacts.

Ultimately both government approvals processes have judged that the risks of environmental impacts can be managed and that the large economic benefits outweigh those risks.

John Rolfe is deputy dean of research, School of Business and Law at Central Queensland University

In the past fifteen years John Rolfe has been involved in a number of research projects assessing the economic, social and environmental impacts of resource industry developments in Australia, from a range of funding sources, including industry and government. He has never had any involvement or research with projects in the Galilee Basin, including the Carmichael Coal Project.

This article was originally published on The Conversation. Read the original article here.