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Toxic projects

March 1st, 2014

The announcement that Lend Lease is pulling out of a joint venture bid with Aurizon (the former Queensland Rail freight arm) to participate in the expansion of the Abbot Point coal terminal comes shortly after the Great Barrier Reef Marine Park Authority has approved a proposal to dump dredge spoil from the Abbot Point coal terminal expansion in the marine park area. (The government’s go-to guy for “independent” ethical clearances, Robert Cornall[1], assures us that there were no conflicts of interest arising from the presence of coal companies executives and employees on the Board. Then he had to rush off to whitewash investigate the conduct of the government and its agents on Manus Island).

On normal commercial calculations, this decision ought to have made the project more appealing. But the Lend Lease statement withdrawing from the project included the slightly gnomic observation that “Lend Lease remained committed to applying “rigorous due diligence” and considering the environmental impacts of all it projects,” it’s reasonable to infer that the decision made the project more toxic rather than less. The obvious reasons
* Coal projects are attracting more and more opposition, but it’s always possible for the proponents of one project to say that if theirs didn’t go ahead, another, possibly worse one, would. By contrast, when a government that’s busy revoking World Heritage Status announces that the project will involve dumping waste in a sensitive marine park, any company that cares about its public image is going to run a mile
* Given the obvious PR costs, the fact that the proponents went for this, rather than looking for a more expensive but less politically toxic approach to waste disposal suggests that the project is economically marginal, an inference supported by the earlier abandoment of a more ambitious version involving Rio Tinto and BHP.

An obvious follow-on project is: who is financing these projects. It looks as if all the major Australian banks are involved to some extent. Westpac is already running into trouble in New Zealand for financing coal mines in sensitive areas. As major international banks, particularly development banks, start dumping toxic projects like this, the Oz banks are likely to find themselves with a lot of undiversifiable risk.

fn1. Breaking usual protocols, I’ve linked to the Oz. When the Murdoch press calls someons a “Howard defender” and strongly implies that he’s stooge, I think it’s safe to say that the appearance of independence is compromised.

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  1. paul walter
    March 1st, 2014 at 16:13 | #1

    Sorry, too depressing..

  2. Hermit
    March 1st, 2014 at 16:24 | #2

    When Aurizon/QR issued a share prospectus it said not to expect future problems with carbon tax. Perhaps they knew something. Coal expansion is undergoing swings and roundabouts. The Qld mines minister says he will only take submissions on the new stage of the Acland deposit from ‘locals’. Perhaps the only investors allowed should be ‘locals’.

    I read somewhere BHP Billiton is the world’s 7th biggest coal miner. They showed the door to former CEO Marius Kloppers when he said carbon pricing was inevitable. A push to get reformed coal miner Ian Dunlop on the BHP board was quashed. They say that India can longer afford its coal import bill. China says it will burn 4 bn tonnes of coal a year until 2030. On the other hand people don’t seem to want to live in their steel and concrete intensive ghost cities. Obama wants new power stations to emit less than 1,000 lb of CO2 per Mwh but Congress is hostile. I think a large volume of coal burning will linger on due to inertia and lack of political will to make energy more expensive.

  3. Jungney
    March 1st, 2014 at 16:36 | #3

    Thanks for this. I’m writing to my two banks to ask how they might be funding this project. PW, take heart, it’s turning.

  4. rog
    March 1st, 2014 at 17:15 | #4

    If you look at this list of projects loans and lenders and compare with the most favoured investments for SMSFs – the top 4 banks and Telstra – you can see why voters could be reluctant to act against their sources of income retirement. Of course this could all be turned around but would take a lot of convincing promotion from a respected source.

  5. Jungney
    March 1st, 2014 at 18:05 | #5

    @rog

    Thanks for that :)

  6. bjb
    March 1st, 2014 at 18:24 | #6

    As JQ, any company involved in this can expect a PR nightmare. Getup are funding a legal challenge

    https://www.getup.org.au/campaigns/great-barrier-reef–3/reef-fighting-fund/reef-fighting-fund

    so, to use Tony Abbott’s words, “the bad guys”, can’t expect to get it all their own way.

  7. rog
    March 2nd, 2014 at 04:31 | #7

    Rats in the ranks? Shell admits that they lobbied the World Bank against coal mining and that climate change was a part of their argument.

  8. Ikonoclast
    March 2nd, 2014 at 09:58 | #8

    Capitalism is a toxic project.

    (There I made a short post.)

  9. iain
    March 2nd, 2014 at 12:19 | #9

    Hydrogen fuel cells and battery storage will make coal obsolete soon enough. Also, enhances the logic for distributed electricity asset “offloading”. Hard to argue for one and not the other. Though many, here, do try.

  10. March 4th, 2014 at 03:49 | #10

    It brings to mind the Government’s ongoing attempts to go back on the forestry agreement in Tasmania – against the wishes of the forestry industry (and of course the conservationists). It’s starting to look like several of these policies are aimed not so much at being “open for business” as much as “starting a cultural war with conservationists”.

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