Carmichael Coal Project

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The Carmichael Coal Project is a coal mine proposed by Adani Mining, a subsidiary of the Adani Group. The proposed mine is located approximately 160 kilometres to the north-west of Clermont in the Galilee Basin of Central Queensland, Australia. The company has stated that while the initial mine capacity would be 2 million tonnes a year, it could be expanded to 60 million tonnes a year by 2022.

The Carmichael coal mine is planned to operate for 60 years and is predicted to emit more than 200 million tonnes of greenhouse gas throughout its lifetime. The project includes an open cut and underground coal mine and a 189 km rail link to transport the coal from the Galilee Basin to Abbot Point Coal Terminal, near the Great Barrier Reef.[1]

Background

In November 2010 Queensland Premier Anna Bligh announced that the Coordinator-General had declared the proposed Carmichael Coal Mine and Rail Project as a 'Significant Project'. Bligh stated that the cost of the project would be US$4.1 billion for the mines with an $6 billion rail infrastructure "leading to coal export terminals at Abbot Point, Hay Point or both." She stated that the mine "could employ 4000 people during construction and a permanent operational workforce of up to 5000 employees." In addition, she stated, the railway could employ "approximately 2000 people during construction and an operational workforce of up to 120".[2]

In 2011, India power company Adani stated on its website that the Carmichael mine has an estimated 7.8 billion tonnes of coal resources and that a 60 million tonne a year project could have a mine life of a century. "The proposed mine involves the development of both a greenfield open-cut mine and an underground mine, supported by rail facilities leading to coal export terminals at either Abbot Point or Hay Point or both these ports. The mine has an expected life of more than 100 years. Export coal from the Project and will predominantly service the Indian domestic power market," the company states.[3]

Adani also stated that it is proposing that the mine would be initially commissioned in 2014 producing 2 million tonnes and increase to 60 million tonnes capacity, and that the cost of the project would be $6.8 billion for the mine rail and port infrastructure if coal is exported from the Port of Abbot Point or $6.0 billion if coal is exported from Hay Point Coal Terminal.[3]

On 8 May 2014, Queensland’s Coordinator-General gave approval for the project to proceed.[4] 190 conditions were set by the state during both construction and operations phases of the mine with particular attention paid to groundwater and water bores which may be potentially affected.[4]

In July 2014, Australian Minister for Environment Greg Hunt approved the Carmichael coal mine and its associated rail link to the coast[5]; however, environmentalists have expressed strong opposition to Galilee Basin coal mining and development of a major coal port so close to the Great Barrier Reef and have launched petitions and legal proceedings to block Adani's plans.[6]

One lawsuit filed by the New South Wales Environmental Defenders Office, on behalf of the Mackay Conservation Group, will argue that federal environment minister Greg Hunt failed to take into account the climate impact of greenhouse gases emitted by the burning of coal from the Carmichael mine when assessing whether to grant its license. Under the environmental assessment process, Hunt accounted for greenhouse gas emissions from extracting and transporting the coal, but not from burning it. Predictions suggest that this could produce an extra 130 million tonnes of greenhouse gases over the mine’s lifetime - a quarter of Australia’s annual emissions. Hearings begin February 3, 2015.[1]

In early September 2014, it was reported the plan to dump dredge spoil on the Great Barrier Reef had been scrapped.[7][8] The plan to dump the spoil at sea was widely rejected on the grounds that the fragile coral and seagrass ecosystem could be damaged. Great Barrier Reef Marine Park Authority scientists had opposed the dumping plan.[8]

In January 2015, Australia Mining reported that Adani had awarded a US$2 billion contract to the Australian engineering company Downer EDI for development of Adani's Galilee Basin mines, with mine construction slated to start in 2015 and coal production expected to begin in 2017.[9]

However, in July 2015 Adani dissolved the project management team before construction was set to begin, leading to speculation that the project may be cancelled. Adani said it remained committed to the mine and insisted the move, which leaves only a small legal and approvals team engaged in the project, was linked to the suspension of engineering contractors in June 2015. Managers of the Korean steelmaker Posco, who had been working on the project for a year out of Brisbane, will return to Korea.[10]

In August 2015 a federal court overturned the Abbott government’s approval of the proposed mine, finding environment minister Greg Hunt ignored his own department’s advice about the mine’s impact on two vulnerable species, the yakka skink and the ornamental snake. As stated in the Guardian: "The decision leaves Adani, which is yet to secure sufficient financial backing for Carmichael and recently slashed its workforce on the project, without legal authority to begin construction."[11] Shortly after the federal court ruling, the Commonwealth Bank of Australia pulled out of its role as financial adviser to the project,[12] followed by Standard Chartered.[13]

However, in October 2015 the Australia government reissued the environmental permit for the coal and rail project, subject to 36 conditions including improving the habitat of an endangered finch, protecting groundwater, and providing A$1 million for conservation research.[14]

In February 2016 Adani was issued environmental authority for the Carmichael mine by the Australia department of environment and heritage. Adani still needs to obtain significant bank funding, and must convince the Queensland government it has obtained “financial closure” before it will be allowed to begin dredging near Great Barrier Reef waters to expand the Abbot Point Coal Terminal. Adani also still has to obtain a mining lease from the Queensland government.[15]

Shortly after receiving environmental authority, a report by Axis Capital described Adani's investment in Carmichael as "dormant" and said no capital expenditure was expected in the mine until at least April 2016 (FY 2017). According to the report, Adani's management said "that further investments in its Australian coal mine project shall be dependent on visibility of revival in global coal prices."[16]

In April 2016, the Queensland government granted Adani rights to three mining leases covering an area estimated to contain 11 billion tonnes of thermal coal. Adani said a final investment decision would not be made until court challenges to the project were resolved, and it had secured the final approvals it needs.[17]

Financing

In November 2014, Adani signed a memorandum of understanding with the State Bank of India for a loan of up to US$1 billion to help finance the Carmichael project.[18] In March 2015 it was reported that the State Bank of India (SBI) was preparing to turn down the US$1 billion loan request from Adani, as the project was looking risky and unprofitable,[19] although SBI chief Arundhati Bhattacharya dismissed the news as "gossip."[20]

According to Greenpeace (June 2015), a recent court case in Queensland revealed that Standard Chartered of UK had previously provided a loan of US$680 million to the Carmichael Mine and Rail Project. While the bank disputes this, Standard Chartered has not publicly explained where that money has come from.[21]

As of June 2015, a total of 11 international banks have publicly distanced themselves from the Galilee Basin coal projects and its financing, including HSBC, Barclays, Morgan Stanley and Citi.[22]

The estimated cost of the Carmichael mine is US$4 billion, plus US$2 billion for the rail line and US$1 billion for expansion of Abbot Point Coal Terminal. As of 2015 Adani has already spent US$1.3 billion on the project and is seeking US$4 billion in debt. Over its 60-year mine life the investment from Adani will be US$16.5 billion.[23]

Australia government support

In November 2014, responding to falling coal prices and diminishing interest among other potential developers, Queensland's state government offered to contribute an unspecified amount ("hundreds of millions, but not billions" of dollars) in incentives towards construction of the proposed $2.2 billion rail line between Galilee and Abbot Point.[24] Shortly after, Korean steelmaker Posco began talks with Adani about taking equity stakes in the mine and rail link, and attracting US$1 billion in funding from Korean banks.[10]

However, the newly elected Labor Party in 2015 stated that taxpayer funds should not go toward the project, and that “The stewardship of the Great Barrier Reef necessitates that we have a comprehensive climate change policy.”[25]

In June 2015 documents released under Queensland's freedom-of-information laws showed officials at the highest level of the Queensland Treasury held grave doubts about the financial viability of the project, even as former premier Campbell Newman was promising taxpayer funds to help establish the mine. Former treasurer Mark Gray and principal commercial analyst Jason Wishart expressed fears about Adani's high level of debt and identified the mining giant as a "risk" because of its unclear corporate structure and use of offshore entities.[26]

Questions over company ownership

In 2015 Fairfax Media reported that Adani was operating a complex web of companies associated with the Carmichael mine and Abbot Point port out of tax havens, including the Cayman Islands. The company documents suggest that many of the companies associated with the Carmichael mine and infrastructure development are not controlled by the head of Adani, Indian billionaire Gautam Adani, but instead by his brother, Vinod Shantilal Adani. Vinod has been named in an Indian criminal investigation into the alleged siphoning of $1 billion from Indian shareholders. Company documents also revealed that Adani sold its stake in the Abbot Point port -- through which the Carmichael coal would be exported -- in 2013 to a Singaporean company in which Vinod was the sole director, however this was not made known to Australian authorities or the Bombay stock exchange. Adani was also found to still control a number of Australian companies linked to its Carmichael coal project in the Galilee Basin, despite excluding these companies from its 2013-14 accounts.[27]

Operations

The mine is planned to contain six open-cut pits and five underground mines.[28]

Operation at the mine are expected to consume 12 billion liters of water each year.[29] According to the mine’s environmental impact statement it will produce 200 million tonnes of carbon dioxide over the expected 60-year life of the mine,[30] including gases produced during the mining process and from emissions created from the mining and transportation of the coal.[30]

Rail line and port

A new railway line is planned to transport coal to port facilities at Abbot Point Coal Terminal. The line will join the existing Goonyella railway line at Moranbah, Queensland.[28] Adani has partnered with the Korean construction group Posco to build the rail link, aided by a reported US$450 million in state government subsidies. Adani plans to expand capacity at the Abbot coal terminal by 70 million tonnes.[31]

Coal plant

Australian firm RCR Tomlinson has established the subsidiary Moray Power to develop the 150 MW Moray power station in the Galilee Basin of Central Queensland. The power station would provide energy for the Carmichael Coal Project.[32]

Project Details

  • Sponsor: Adani Group
  • Location: Galilee Basin, Central Queensland, Australia
  • Proposed Coal Capacity (Tonnes per annum): 40 million (2017), building up to 60 million (projected)
  • Status: Pre-permit development
  • Projected in service: 2017
  • Type: Exports (India)
  • Proposed coal terminal: Abbot Point Coal Terminal
  • Cost: US$4 billion
  • Financing:

Queensland Department of Employment, Economic Development and Innovation Project website

Website: http://www.deedi.qld.gov.au/cg/carmichael-coal-mine-and-rail-project.html

Articles and resources

References

  1. 1.0 1.1 "Court challenge will test coal mining’s climate culpability," The Conversation, January 15, 2015
  2. Anna Bligh, "Carmichael Coal Mine and Rail Project declared ‘significant project’", Media Release, November 24, 2010.
  3. 3.0 3.1 Adani Group, "Coal Mining", Adani Group website, accessed September 2011.
  4. 4.0 4.1 Coordinator-General decides on Galilee Mine. Media Statement. Department of the Premier and Cabinet (8 May 2014). Retrieved on 2 August 2014.
  5. Largest Australian coal mine given the go-ahead. worldcoal.com (July 28, 2014).
  6. "Environmental group takes Adani’s Carmichael mine to court", Mining Australia, October 9, 2014.
  7. Ben Hagemann (2 September 2014). "Abbott Point dredge dumping plans on the rocks", Mining Australia, Cirrus Media. Retrieved on 21 January 2015. 
  8. 8.0 8.1 Oliver Milman (2 September 2014). "Abbot Point port developers to ditch Great Barrier Reef seabed dumping pla". Retrieved on 21 January 2015. 
  9. "Adani awards Downer EDI $2 billion coal contract", Mining Australia, January 5, 2015.
  10. 10.0 10.1 "Adani dissolves 50-strong project team from troubled $16.5bn Carmichael mine," Guardian, July 21, 2015
  11. "Approval for Adani's Carmichael coalmine overturned by federal court," The Guardian, Aug 4, 2015
  12. "Adani Carmichael mine: Commonwealth Bank walks away from financial adviser role for $16 billion coal mine project in central Queensland," ABC Australia, Aug 5, 2015
  13. "Standard Chartered quits controversial Carmichael coalmine in Queensland," Guardian, Aug 10, 2015
  14. "Australian govt nod for Adani project," Decan Herald, Oct 16, 2015
  15. "Queensland gives Adani environmental permit for Carmichael coalmine," Guardian, Feb 2, 2016
  16. Daniel Burdon, "Adani puts mine funding 'on hold' until coal price goes up," Queensland Times, 4 Feb 2016
  17. "Adani's Carmichael coalmine leases approved by Queensland," Guardian, Apr 3, 2016
  18. "Adani lines up $1 billion SBI loan for Australian coal venture", Reuters, November 17, 2014.
  19. "SBI to turn down Adani's $1 billion Australian loan request - sources," Reuters, March 13, 2015
  20. "SBI chief Arundhati Bhattacharya scotches reports of scrapping $1 bn loan pact with Adani," The Economic Times, March 13, 2015
  21. "Pressure builds for UK’s Standard Chartered to refuse investment to Great Barrier Reef coal project," Greenpeace UK, June 9, 2015
  22. "Australian banks under pressure after French lenders rule out funding Galilee Basin coalmines," Guardian, April 8, 2015
  23. "Adani’s Carmichael coal mine a step closer," The Courier-Mail, April 16, 2015
  24. "Newman government courts Adani on Galilee Basin coal deal", The Saturday Paper, November 22, 2014.
  25. "Adani’s Carmichael Coal Proposal Will Now Have to Rely on Commercial Viability," IEEFA, Jan 31, 2015
  26. "Adani's Carmichael Mine is unbankable says Queensland Treasury," Sydney Morning Herald, June 30, 2015
  27. Aaron Packard, "The Murky and Troubling Maze Behind Adani's Australian Coal Projects," HuffPo, 02/10/2015
  28. 28.0 28.1 Carmichael Coal Mine and Rail Project: Project Overview. Completed EIS projects. Department of State Development, Infrastructure and Planning (9 July 2014). Retrieved on 2 August 2014.
  29. Ben Hagemann (29 July 2014). "Carmichael coal mine means more jobs, less water for Queensland.", Australian Mining, Cirrus Media. Retrieved on 2 August 2014. 
  30. 30.0 30.1 Lenore Taylor (14 January 2015). "Federal court asked to overturn Adani mine approval due to impact on Great Barrier Reef". Retrieved on 21 January 2015. 
  31. "Abbot Point: onshore dump would favour Adani, say coal miners", The Guardian, January 12, 2015.
  32. "RCR Tomlinson Establishes Moray Power to Develop Power Station in Galilee Basin," Morningstar, 01 Dec 2014

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