Proposal a 'clear and present threat' to NSW economy

CONCERN: Economic modelling has shown a new coal project in Queensland, if approved, could have a negative impact on the NSW economy and the Hunter mining industry, with suggestions some coal mines "would likely close".
CONCERN: Economic modelling has shown a new coal project in Queensland, if approved, could have a negative impact on the NSW economy and the Hunter mining industry, with suggestions some coal mines "would likely close".

THE fairness of a proposed Commonwealth loan of nearly $1 billion to fund a rail link to the giant Adani coal mine in Queensland's Galilee Basin has been called into question by economic modelling showing it could cost NSW hundreds of millions of dollars a year.

Adani's Carmichael mine would increase the global supply of coal by around 6 per cent, putting downward pressure on prices received by NSW coal exporters and slashing mining royalties paid to the state government, the report by the Australia Institute says.

NSW coal royalties would be reduced by nearly $50 million a year and possibly by as much as $70 million once the Adani mine is fully operational, the analysis shows. Some NSW coal mines "would likely close" while others would be forced to reduce costs, the report said. The coal-rich Hunter Valley region would especially vulnerable. 

Should all the coal mines proposed in the Galilee Basin go ahead it could reduce NSW coal royalties by up to $349 million per year, with a central estimate of $240 million per year, the Australia Institute analysis said.

Adani has applied to the federal government's Northern Australia Infrastructure Fund for a confessional loan of almost $1 billion to help fund the construction of a railway line to transport coal more than 300 kilometres from the Galilee Basin to the Adani-owned coal port at Abbott Point.

A NSW Department of Industry spokesperson said it did “not expect a significant impact” on traded coal prices if the project was approved.

Prime Minister Malcolm Turnbull met with company chair Gautam Adani this month and said the loan application would be assessed "scrupulously and independently" by the fund's board. But the Australia Institute report said taxpayer loans to subsidise the Adani project, and others, were "not in the interests" of NSW.

"The NSW government should strongly oppose taxpayer subsidy of Adani's infrastructure," the Australia Institute report said.

"Given the potential impacts of lower prices, it is surprising that no state or federal government body has published more detailed analysis of how Adani and Galilee Basin development would affect NSW and other parts of Australia's coal industry."

Adani's Carmichael coal mine is destined to be one of the biggest in the world should it go ahead. The NSW government makes around $1.2 billion each year from coal royalties – 2 per cent of its total revenue.

A spokesperson for the NSW Department of Industry said: "NSW produces high quality coal that is exported mainly to Japan, Korea, China and Taiwan. We do not expect a significant impact on the traded coal prices or NSW coal production if the Adani project is approved. All matters in relation to this project are for the Commonwealth and Queensland governments."

The NSW Minerals Council declined to comment on the proposed loan, or the potential impact of the Carmichael mine.

The Australia Institute's research director and report author, Rod Campbell, said it was "surprising" that the NSW government or the NSW Minerals Council had not said more about a federal subsidy of infrastructure that could cost NSW hundreds of millions each year.

NSW opposition spokesman for industry Adam Searle said the Adani mine proposal represented a "massive clear and present threat" to the NSW economy and the state budget.

"The Adani project will put existing mine operations in NSW, and the jobs they provide to regional communities, at some risk if it goes ahead," he said.

"If the Berejiklian government is so confident Adani does not represent any economic threat to NSW, it must provide full economic modelling to support their claim. Otherwise we know it is just hot wind."

Adani spokesman Ron Watson downplayed the impact of the Carmichael project on NSW, saying coal from the mine will be used in the company's own power plants and would "not be in competition" with NSW coal.

"We have stated in many official documents that the coal will be bound for India to be used in Adani power stations," he said. "It will replace coal from India and Indonesia. It is not going onto the international market."

But some industry players have signalled concern about the use of public funds to support major new coal projects. In 2015 Glencore’s Peter Freyberg said "bringing on additional tonnes with the aid of taxpayer money would materially increase the risk to existing coal operations".

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