COAL has been kicked off the black soil at Caroona in the Liverpool Plains, following a landmark $220 million deal from NSW government to buy BHP Billiton’s exploration licence. Now all eyes turn 20 kilometres north to Shenhua’s Watermark project.
The black soil on the Liverpool Plains is some of the most prized in the world and unrivalled in Australia for its drought resistance and ability to reliably produce high-yielding summer and winter crops.
BHP paid $100m for the Caroona licence in 2006, which was granted under the Labor government by Resources Minister Ian Macdonald during the height of the mining boom; two years later Shenhua paid $300m for an exploration licence of a poorer-quality deposit at Breeza.
Deputy Premier Troy Grant said the buyback was a “major step to secure (the Liverpool Plains’) long-term future.
"Labor recklessly issued this licence and it has taken the hard work of the NSW Nationals and our Coalition colleagues to finally clean up Labor's mess,” Mr Grant said.
Premier Mike Baird said “coal mining under these highly fertile black soil plains, as proposed by Labor, poses too great a risk for the future of this food-bowl and the underground water sources that support it”.
The government said negotiations are underway to buy back parts of Shenhua’s coal tenements that encroach onto land identified as strategic agricultural land.
It declined to comment on the question why a buyback is needed when the project has received approval at state and federal level, pending management planning requirements issued by federal Environment Minister Greg Hunt.
Agriculture Minister and New England MP Barnaby Joyce said “the (Caroona) licence should never have been granted”, and an asset such as the Breeza Plain should not be compromised.
“It was an expensive mess to clean up, but not nearly as expensive had they gone forth with the mine.”
NSW Gateway Panel, which assesses resources projects on prime agriculture land, found the Caroona mine would cause subsidence to 8500 hectares of land.
BHP’s minerals Australia president Mike Henry welcomed government’s approach to negotiations over the licence buyback and thanked the community for consulting with the company through the years.
Shenhua a $1 billion dollar stranded asset
SHENHUA’S Watermark project has long been doomed to fail by the numbers, according to Institute for Energy Economics and Financial Analysis (IEEFA) director Tim Buckley.
Mr Buckley has been a prominent voice with the IEEFA think tank highlighting what he says are the harsh realities that confront Australian coal as Chinese demand falls.
“There’s almost no chance Shenhua will proceed to build Watermark irrespective of government compensation for what was a 100 per cent flawed decision to issue the exploration licence eight years ago,” he said this week.
In 2014 he told NSW’s independent approvals panel, the Planning Assessment Commission (PAC), that Watermark was not economically viable, but the PAC didn’t include any of the economic modelling submitted to it in its report which recommended NSW government approve the mine. In July 2015 he said coal prices must rise at least 30pc for Shenhua to make money.
Now he says Chinese government policy will inexorably pivot state-owned Shenhua, the world’s biggest miner, away from the Liverpool Plains – citing China’s current $30 billion retrenchment of 1.8 million coal and steel workers in state-owned enterprises.
“There’s no way Shenhua will spend $1bn more to export coal when government is sacking 1.2m coal miners.”
Shenhua’s annual report recorded an 18pc drop in coal sales value and an 80pc fall in profits and flagged its ability to divert coal into exports and cut capital expenditure by 44pc. The board approved just US$100m for mine development at Watermark in 2016 – which has cost $700m to date, with remaining development to cost $1 billion.
Shenhua declined to comment for this article.