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Coal Sea Of Galilee

With a raft of projects currently on the drawing board for the Galilee Basin, is Queensland’s coal sector on the verge of making a comeback? asks T.R. Mackay.

AbbotIn November of 2013, Deputy Premier Jeff Seeney announced to a small contingent of journalists at the Queensland Major Projects Convention that the Newman Government was “opening up” the coal-rich Galilee Basin in Central Queensland.

The strategy announcement came as very welcome news to Queensland’s mining community, still reeling from a string of job cuts across dozens of mines throughout the state. At the time, many in the coal sector were beating the bass drum in their own private funeral march for an industry that had seen better days – along with much higher prices in world markets.

Mr Seeney’s announcement was seen as a ray of hope for the ailing coal sector in Queensland, but would ‘Big Coal’ come to the party?

Fast forward to the last quarter of 2014 and one of the biggest projected coal mines in the southern hemisphere has received state and federal approval to begin construction in the Galilee; and a material change of use application has been lodged for a 310km rail line to service two more proposed coal projects.

Things are moving fast.

It’s now obvious that by ‘opening up’ the Galilee Basin, the government was flagging its intention to fast-track the approvals process for new projects in the area. ‘Open up’ was also what the government did to state coffers, making available tax incentives to miners who invested in the infrastructure needed to make mining in the remote area viable.

And it’s unlikely that the area would goahead without the help and close attention of state government. The Galilee Basin, which snakes its way from a little east of Hughenden in the north to a little west of Springsure in the south, is not an area of high population, and as such, vital infrastructure like base electricity, bitumen roads and rail is thin on the ground. These are very big ticket items when you’re talking about an area that is 400-500 kilometres from the nearest regional city, depending on what part of the basin you plan to build your mine.

In the current economic climate, it would be a very steadfast and stout CEO to commit the billions of dollars needed to develop the infrastructure necessary to operate a mining operation and get the product to port. And in a similar vein, in the current political climate, it would be a very steadfast and stout politician to commit billions of dollars to infrastructure projects that appear to the public only to benefit Big Coal.

So what is the government doing to attract Big Coal to the Galilee without appearing too much of a flirt in the public arena? Let’s take a look:

GALILEE BASIN DEVELOPMENT STRATEGY Lowering start-up costs, in particular, royalty payments
For a limited period, the government will “slow down” royalty payments, on a sliding scale, for those companies that invest in infrastructure needed in the Galilee Basin, such as rail and electricity. Because “slow down” sounds better than “discount”.

Streamlining land acquisition, planning and approvals
In June 2014 the government created the Galilee Basin State Development Area (GBSDA) which basically allows them to compulsorily acquire land for projects associated with developing the coal industry in the area. Yes,that mostly involves the rail corridor, as well as roads and some power infrastructure.

The ability of government to compulsorily acquire land removes a lot of negotiation work, and let’s face it, headaches, for resources companies and potential investors. However it also generates a lot of uncertainty for landowners who are, understandably, very concerned about what this all means for them.

Reducing red tape
The process for assessing Environmental Impact Statements (EIS) for new projects has been put on a diet and exercise regime aimed at reducing the fat (and by fat I mean approval time) by 50 per cent. A 43-point fast-tracking action plan has been introduced to get things moving fast and cut out some of the previous unnecessary duplication. Judging by the amount of projects already on the treadmill, so far it seems to be working…

CARMICHAEL COAL MINE  – CURRENT STATE OF PLAY
Unless you’ve been living under a rock, you would know that the latest Galilee Basin project to receive both state and federal government environmental approval to proceed is the Carmichael coal project, proposed by Indian-based company Adani.

The massive $16.5 billion coal mine and rail project, north west of Clermont, includes a rail line that will connect to the Moranbah line and transport coal to the Port of Abbot Point near Bowen.

At full export capacity, the project is expected to contribute almost $930 million to the Mackay region’s gross regional product and $2.97 billion to the Queensland economy each year for the next 60 years.

The project is expected to generate an estimated 2475 construction jobs and a further 3920 jobs during the operations phase.

The project has a lifetime resource value of at least $300 billion, and will “enhance economic development opportunities throughout the region through indirect employment and training, and contract and supply opportunities,” according to Federal Environment Minister Hunt.

The project will reportedly supply Indian power plants with enough coal to generate electricity for up to 100 million people.

However approval of the mine is subject to 36 strict environmental conditions with a specific focus on the protection of groundwater. Despite one of the longest lists of environmental conditions ever placed on a resources project, federal approval has raised the ire of environmentalists across the country.

In November the government dropped a bombshell, announcing they would invest taxpayer money in Adani’s rail link connecting the mine to port.

Reading between the lines it was clear to see the government was very nervous that the project would not go ahead at all due to the high initial-outlay infrastructure costs involved with mining in the Galilee.

And sure enough, just a day after the announcement, Adani secured a $1billion loan from a state-owned bank in India that will allow them to proceed with the project.

Despite the government stipulating that this model of funding was open to any Galilee Basin proponent, and that it only applied to infrastructure that could be shared by more than one user, the announcement was met with a storm of controversy.

Clive Palmer, owner of Waratah Coal, was the loudest of the naysayers, incensed that his proposed mines, China Stone, had, in his view, been snubbed in favour of the Indian Adani.

“Waratah Coal plans to build a thermal coal mine near Alpha, west of Emerald, which would be linked to the coal terminal at Abbot Point by a new 453km standard gauge, heavy haul railway line,” he said.

“But Campbell Newman has had no interest in the China First project with his government giving favourable treatment and now taxpayer funding to Adani ,” he said.

It remains to be seen if others in the Galilee Basin will ask for, and enjoy, the government’s generosity.

RAIL CORRIDOR ON TRACK
The next cab off the rank, at least at the time of writing, appears to be GVK Hancock’s 310km rail project. This new rail line will be a vital piece of infrastructure connecting GVK Hancock’s two proposed mine sites, Kevin’s Corner and Alpha Coal, to the Moranbah rail network and ultimately the port of Abbot Point near Bowen.

In September of 2014 the company lodged a ‘Material Change of Use’ (MCU) application to develop the first stage of the rail corridor.

The MCU application is the next step in finalising planning for the project and follows on from the granting of State environmental approval in May 2012, Federal environmental approval in August 2012 and the granting of the Galilee Basin State Development Area in June 2014.

The rail project will be significant in that it will connect the southern end of the Galilee Basin to the northern end; home of the Carmichael project and the existing Moranbah to Abbot Point rail line.

This project raises significant challenges in that any rail line extending from the southern to the northern end of the Basin must traverse the flood plains of the Belyando and its tributaries at some stage.

This presents a number of engineering challenges, as well as environmental ones. Understandably, landowners in the area are concerned about how a rail corridor through the floodplain will affect the health and course of waterways and if erosion levels will increase.

In response to these concerns the government has set stringent regulations for flood immunity levels and drainage structures.

At the time of writing, GVK Hancock had successfully negotiated term sheets with landholders for around 75% of the rail corridor, which outline the commercially agreed terms for the acquisition and compensation of land.

The company is continuing to finalise a joint venture agreement with Aurizon to develop the required rail and port infrastructure.

Projects In The Pipeline

abbot-point-map

 

1 Alpha North Coal Project

Who: Waratah Coal Pty Ltd
Where: The mine would be located approximately 100km west of Clermont.
Worth: $8 billion
Status: Still at concept stage.

The proposed Alpha North Coal Project could potentially comprise two open cut operations and four underground longwall mining operations, coal handling preparation plants and a rail spur transportation network to Galilee Coal Project rail network. The project intends to mine 56 Mtpa of run-of-mine (ROM) coal, which will be later processed to produce 40 Mtpa of product coal.

2. Alpha West Project

Who: GVK Hancock Coal Pty
Where: The mine would be located approximately 40km west of Alpha in the Barcaldine Regional Council Area.
Worth: n/a
Status: Early days yet for this one. To date, only a concept study has been completed

Mining of the Alpha West thermal coal deposit, should it be developed, is expected to by underground longwall. Potential mining operations could accommodate 2 to 3 concurrent longwall operations.

The project would utilise the rail and port infrastructure established for GVK’s Alpha Coal and Kevin’s Corner mine developments as well as sharing elements of the site-based infrastructure such as roads, airports, and water and power supply lines.

3 Carmichael Coal & Rail Project

Who: Adani Mining Australia
Where: The mine would be located approximately 160km north-west of Clermont in Central Queensland.
Worth: $16.5 billion
Status: The federal government has approved the project subject to a number of environmental conditions.

The Carmichael project comprises six open-cut pits and five underground mines, coal handling and processing plant, water-supply infrastructure, 189 kilometres of rail line and off-site infrastructure including workers’ accommodation village and airport.

The company claims the project will yield of 60 million tonnes of thermal coal per annum.

The project is expected to generate an estimated 2475 construction jobs and a further 3920 jobs during the operations phase.

4 Galilee Basin Power Station

Who: Galilee Power Pty Ltd (a subsidiary of Waratah Coal)
Where: Approximately 30km north-west of Alpha in the Barcaldine Regional Council Area.
Worth: $1.25 billion
Status: Terms of reference were released in April 2013. The proponent is currently preparing an Environmental Impact Statement (EIS) for the Queensland Government’s approval

The proposed project is a 900 megawatt coal-fired power station incorporating clean-coal lowemission technology and carbon capture and storage.

The project is expected to employ approximately 1000 people during construction and 60 in full operation

5 Alpha Coal & Rail Project

Who: GVK Hancock Coal Pty
Where: The mine would be located 38 km north-west of Alpha in the Barcaldine Regional Council Area. The proposed rail corridor would run through the Isaac and Whitsunday Regional Council Areas to the Port of Abbot Point, approximately 25km north of Bowen.
Worth: n/a
Status: The federal government has approved the project subject to a number of environmental conditions

The proposed Alpha Coal Project is an open-cut coal mine with an initial export capacity of 30 million tonnes per annum, supported by new rail and port infrastructure.

The proponents are proposing to build just under 500km of railway, an extension to the Port of Abbot Point as well as new water and electricity infrastructure.

The railway will be designed to transport, load and ship the coal produced by GVK Hancock mines (see Kevin’s Corner and Alpha West) but will be capable of expanding to accommodate additional users, subject to further assessment.

6 China Stone Project

Who: MacMines Austasia Pty Ltd
Where: The mine would be located approximately 300km west of Mackay in the Isaac Regional Council Area.
Worth: $6 billion
Status: The proponent is currently preparing an Environmental Impact Statement (EIS) for the Queensland Government’s approval.

The proposed China Stone Coal Project will be a large scale greenfield coal mine with a peak production of about 60 million tonnes per annum of run-of-mine thermal coal. The project will include opencut and underground coal mines, a coal handling and preparation plant, tailings and water storage facilities, an airstrip, an accommodation village and a power station.

The project is expected to employ approximately 2120 people during construction and 3000 in full operation.

7 Kevin’s Corner Coal Project

Who: GVK Hancock Galilee Pty Ltd.
Where: 160km west of Emerald in the Barcaldine Regional Council Area.
Worth: $4.2 billion
Status: The federal government approved the project subject to a number of environmental conditions in November 2013.

The proposed Kevin’s Corner project will comprise two open-cut coal mines, three underground mine areas, coal handling and preparation facilities, an on-site accommodation village and an airstrip.

The project is expected to employ approximately 1800 people during construction and 1600 in full operation.

The mine will use the rail and port infrastructure being built as part of the Alpha Coal Project to transport product coal to the Port of Abbot Point for export. Common port facilities will also be used for both projects.

8 Galilee Coal Project

Who: Waratah Coal Pty Ltd
Where: The mine would be situated approximately 30km north of Alpha in the Barcaldine Regional Council Area with the railway to run from the mine site through the Isaac Regional Council Area to the Port of Abbot Point, approximately 25km north of Bowen in the Whitsunday Regional Council Area.
Worth: $6.4 billion
Status: The federal government approved the project subject to a number of environmental conditions in December 2013.

The proposed Galilee Coal Project and Northern Export Facility will comprise two open-cut and four underground coal mines (with a total yield of 40 million tonnes per annum and capacity for future expansion) and a 453 km railway line connecting the projects to port.

The project is expected to employ approximately 3500 people during construction and 2325 in full operation.

To Market To Market: Port Of Abbot Point

01-Port-of-Abbot-Point

No conversation about the Galilee Basin would be complete without mentioning the proposed expansion of the port of Abbot Point near Bowen. Community backlash against expanding the port could prove the biggest obstacle to the success of a new coal industry for the Basin.

However, the success of Galilee Basin coal projects rests on the ability of mine companies to get their coal to overseas markets via the nearest designated coal port – Abbot Point.

Adani bought the 99-year-lease to Abbot Point in 2011 as part of their planned expansion into
the Galilee and has sought approval to build a second coal shipment terminal adjacent to the existing facility.

Located on the fringes of the Great Barrier Reef, environmental groups are up in arms about the impact construction work associated with an expansion of the port could have on the health of the Reef and marine park area. This is understandable considering Adani’s poor record of environmental compliance in its home nation of India.

In 2013, an independent government panel in India found “incontrovertible evidence” that
Adani had seriously flouted environmental regulations during the construction of their massive Mundra Port in the Indian state of Gujarat. According to a report in The Australian in 2013, “…the violations had resulted in large-scale mangrove destruction, groundwater contamination, river blockages and fly-ash pollution.”

“The panel recommended the government revoke approval for an additional port at Mundra and that Adani pay at least $36 million towards environmental restoration.”

The Queensland Government, to itscredit, has invested considerable time and resources into addressing the concerns of environmentalists, and has commissioned several studies into the environmental impact of the proposed expansion.

The big issue is dredging – and where all that dredging material would end up. The first proposal involved dumping the dredge material just inside the marine park area in an area devoid of reef or the ecologically important sea grass beds.

Loud and sustained opposition to this plan has now seen the government opt to deposit dredged material on nearby vacant land – a much more expensive proposition, but one that is hoped will satisfy environmental concerns. No such luck it would seem with environmental groups vowing to continue to fight against any kind of construction or expansion of the port.

Environmental groups are determined to get their way, but so too, it would seem, is the government.

Watch this space…

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