(Repeats an earlier story for wider readership with no change
to text. The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia May 31 The world's
biggest planned coal mine is once again lurching toward the
finish line as India's Adani Enterprises moves ahead with a
final decision on its Carmichael project in Australia.
Even if Adani does approve the $4 billion thermal
coal and rail project in central Queensland state, the venture
is shaping up as a turning point for coal in Australia, with
consequences for the industry across Asia.
The first implication of the Carmichael saga is that it
shows that major coal projects in Australia need subsidies from
governments to be viable, undermining the industry assertion
that coal is the cheapest source of energy and has a major
competitive advantage in Asia.
While various Australian governments have invested in
infrastructure for mining in the past, the Carmichael mine had
been touted as proof that profitable ventures could be done
entirely by the private sector, with government support limited
to ensuring a competitive regulatory framework.
Much of the recent controversy over the mine has centred on
two issues, both of which go to the heart of just how cheap coal
is as a fuel source.
First, Adani delayed making a final investment decision on
the 25-million-tonne-a-year mine, saying on May 22 that it had
yet to reach a deal on royalty payments with the Queensland
While the details of the company's talks with the state
government haven't been made public, the main issue appears to
be Adani's desire to have either a royalty holiday for the
initial period of operation, or extended payments.
For its part the Queensland government has been adamant that
Adani will have to pay the royalties due, but at the same time
sources within the Labor Party-ruled state have said the
government is considering flexible arrangements for the Adani
The issue has effectively wedged the state government, as
Premier Anastasia Palazsczuk has to balance her desire to create
jobs against a public resentful of giving tax breaks to foreign
corporations to extract natural resources that can't be
Second, Adani wants the federal government to agree to loan
it about $1 billion to develop the rail infrastructure to the
mine, which is located in the remote Galilee Basin, more than
200 kilometres (120 miles) from the port to be used for
exporting the coal.
Once again, Australia's Liberal Party-led federal government
is facing a choice similar to its Queensland state counterpart.
If the federal government does advance the loans in the name
of job creation, it will face questions from the media and
environmentalists opposed to the mine as to how many jobs in
other parts of the economy could be created with an investment
of $1 billion.
Both the federal and state governments also have to deal
with a well-funded environmental campaign against the Adani mine
and a public that is increasingly sceptical about giving cash to
This is especially the case in the wake of media reports
about the lack of taxes being paid by the global oil firms that
have invested some $200 billion in making Australia the world's
biggest exporter of liquefied natural gas.
ROYALTY DEAL REACHED
Adani said on Tuesday that it has reached an agreement with
the Queensland government on royalties, without disclosing
details, and it will consider a final investment decision on the
Carmichael mine at its next board meeting, due within a month.
If the Adani board does decide to go ahead with the mine,
it's likely to be a difficult and fraught process, as
environmentalists will use every legal avenue and possibly some
illegal methods of protest to try and halt it.
While the activists are opposed to any and all coal mining,
it could be argued that even if they lose the Carmichael battle
they may end up winning the coal war, as any company considering
building a new mine would be wary of the reputational damage
that will invariably come with the project.
Governments may also be wary of investing political capital
into new coal projects, calculating that the economic benefits
are outweighed by the costs, both in terms of using taxpayer
money for loans or subsidies, and the potential for lost voter
The Carmichael mine was supposed to be a game-changer. It
was the pioneer project for opening up a new coal basin in
Australia, and the template for how private companies could
handle major resource projects, meet Asia's appetite for energy
and contribute to Australia's economic growth.
However, it has already been scaled back from an initial
assessment it could produce as much as 60 million tonnes a year
to just the 25 million now being touted, with attempts to limit
costs the reason for the less ambitious project.
Carmichael, if finally approved and built, may well end up
as a game-changer, but not in the way intended.
The mine could become the poster child for how coal is now
reliant on government largesse, how it can no longer compete
against cheaper and cleaner rivals, and how it damages the
reputations of anybody brave enough to go near it.
(Editing by Christian Schmollinger)