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Reef saved?

March 9th, 2014

Following a similar announcement last week by Lend Lease, and earlier announcements by BHP Billiton annd Rio Tinto, mining company Anglo American has withdrawn its proposal to take part in the expansion of the Abbot Point coal terminal. That leaves only two proposals, both from Indian companies owned by billionaire entrepreneurs reminiscent of Bond, Skase and other Australian heroes of the 1980s. Both Adani and GVK are heavily indebted conglomerates of the type that invariably emerge when money is cheap, and mostly collapse when the tap is turned off.

It’s not surprising that these companies have not yet abandoned their bids. Doing so would involve booking huge losses on their mining prospects in the Galilee Basin. But, it’s hard to believe anyone is going to lend them the billions required, not just for the port expansion, but for a 500km rail line and the mine itself. The price of coal is well below the level required to cover the costs of extraction and transport, let alone to provide a return on capital. And if Adani and GKV don’t build the rail lines, the development of the entire Basin will grind to a halt.

The end of the Abbot Point expansion and the proposals to mine the Galilee Basin would be a huge win for the Barrier Reef and the entire planet. The port expansion will involve the dredging of millions of tonnes of waste, to be dumped in the Great Barrier Reef Marine Park. But far more dangerous is the Galilee Basin itself, containing at least 25 billion tonnes of coal. That would produce around 50 times as much CO2 as Australia currently generates every year.

And, unsurprisingly, both Gina Rinehart and Clive Palmer hold big stakes (though Rinehart wisely offloaded much of hers). So, as well as saving the Reef and the planet from some imminent threats, the abandonment of the Abbot port expansion and rail line will clip the wings of some very unappealing billionaires. Here’s hoping.

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  1. rog
    March 9th, 2014 at 23:16 | #1

    Hopefully the Reef will be saved but according to this report Adani and Hancock are pressing ahead.

    The item re John Holland is interesting; they were recently involved in a major stoush with Adani over Abbot Point. There is an enormous amount of money to be made and players like Hancock will be hard to shift. Of course we can expect zero help from either State or Federal govts.

  2. March 10th, 2014 at 03:07 | #2

    “But, it’s hard to believe anyone is going to lend them the billions required ..”
    If you look at the studies on renewable energy coming out of the big banks (Citi, Deutsche, HSBC, UBS, Macquarie, Morgan Stanley…) you’d be inclines to agree. Citi even model a doubling of the current learning rate for solar. They are much more gung-ho than the IEA. the establishment intergovernmental think tank, which doesn’t even get the current price for utility solar right. But do the research departments of banks accurately reflect or lead the lending departments?

  3. rog
    March 10th, 2014 at 05:42 | #3

    In 2013 the World Bank, European Investment Bank and the European Bank for Reconstruction and Development all issued policies scaling back or eliminating funding for coal projects. This must put the industry under pressure including the price for coal.

  4. mary
    March 10th, 2014 at 07:14 | #4

    so will the above effect the owners of coal in aust, these things are all important to get out for both sat elections. Makes people understand about renewables, I think Tasmania will lose the companies that have been doing very well there. I wish this also applied to the timber industry if it does in some roundabout way please make it know this week tasmania is in dreadful trouble because the population seem to think forestry can come back how it was and create many jobs, all knowledge about this may even turn 100 votes in some electorates is worth the effort please

  5. Ikonoclast
    March 10th, 2014 at 07:22 | #5

    How many coal basins will rising sea levels submerge? Would that stop coal mining or would they just dredge for it? Silly question by me. Of course, they will dredge wherever or whenever it is economic. (Some undergound mines today tunnel out under the seabed from land based shafts.)

  6. Hermit
    March 10th, 2014 at 07:25 | #6

    My guess is that in China 1.4 bn and India 1.3 bn (but growing faster) the middle class will level out at some 0.3m each. That means 2 bn in permanent poverty. Much has been made about rural electrification in India and the role of solar panels. That’s good that villagers have reading lights at night and small TVs but one day they may want dishwashers and air conditioners. At the moment imported coal seems to be essential to what electricity production India can manage.

    Some like former trade minister Craig Emerson say we are morally obliged to supply that coal. I suggest India tries harder to come up with alternatives. That’s easy for Australians to say when we are utterly coal dependent ourselves. On the other hand our modest population is more attuned to our domestic resource base. If indeed we are obliged to help a developing country with cheap energy I suggest the emissions should come off our books. That means the 2020 emissions reduction target is still 5% less but now includes CO2 from coal exported to India. That’s about 32 Mtpa X 2.4 = 77 Mt CO2. Time for Direct Action Plus.

  7. Sue
    March 10th, 2014 at 09:49 | #7

    I was lucky enough to chat with a fellow from an Indian renewable energy activist NGO, who had some startling maps showing the location of all newly-built coal-fired power plants in India, the concentration of the poor in the surrounding areas/provinces, and the change in their access to electricity over the period of implementation of these new plants. There was very little change in the circumstances of the poor, as the energy was being directed to industry, or air conditioners in New Delhi (up 25% in 1 year) and other cities. His NGO claims that the “plight of the poor” argument is a complete furphy, used to justify CFPPs which then do not benefit the poor but only take their land and pollute their air and water.

  8. Pete Moran
    March 10th, 2014 at 10:47 | #8

    It’s becoming increasingly clear that the fossil-fuel age will end only when it’s business model is forcibly destroyed by renewable energy. The globe is not going to get the help of right-wing politicians and captive center-right (ie Labor) parties. Those of us in The Greens can only do so much.

    I’m hopeful that the tremedous polution problems in China has already seen their leadership under pressure to fix that problem. Coal has to go. Hopefully it won’t mean gas, which is a larger time bomb than even Canadian tar-sands.

    I’m sure for a time, nuclear will seem like a pathway, but the continued downward pressure on renewable costs has already been fatal for it’s completely flawed business model.

  9. Hermit
    March 10th, 2014 at 13:24 | #9

    The trouble is that barring technology or major cost breakthroughs I don’t think renewables can seriously replace coal due to operational constraints. Yes I’m saying the AEMO report on high renewables was a forced effort; see detailed critiques elsewhere. Two developed regions we can study South Australia and Germany both have 20-30% renewable penetration. To their credit SA has reduced emissions while Germany’s has increased while their retail power prices are 70% higher than in neighbouring France.

    If anything coal could make a comeback climate policy or not. In the US until recently gas fired generation was over 40% of the mix while coal was under 40%; now that has reversed. When oil supply gets dire (2020s) followed by gas (2030s) we may be tempted to make liquid fuel from coal eg for aviation fuel. I doubt India can divert sufficient capital to achieve current Western levels of per capita energy consumption in that time frame. Like it or not a lot of poor people will remain poor in energy terms.

  10. John Quiggin
    March 10th, 2014 at 13:58 | #10

    @Hermit

    As I’ve said in the past, Hermit, just repeating your priors isn’t very helpful. Unless I have you wrong, you live in a state that has already achieved what you previously thought impossible, and has done so without any real effort. With substantial effort and accepting higher costs as part of the deal, it’s obvious SA could do more, and there’s nothing particularly special about SA.

  11. Ikonoclast
    March 10th, 2014 at 14:24 | #11

    @John Quiggin

    Replacing stationary energy generation with wind and solar seems possible in most countries. The real problem is how do we replace all oil based transport? Oil and natural gas supply about 50% of the world’s energy and about 95% of the energy for transport. So the biggie is transport. I am not sure how we are going to find something new in an acceptable timeframe and prevent gas, oil and transport shortages from critically constraining the world economy. I would be interested in how you think it could be done.

    Of course, I think it can’t be done. The world economy and population will both have to shrink considerably IMO. This is unless a massive build-out to supply all energy via solar and wind is possible and possible by 2050. Are all required materials available to allow a scalable solution to this extent? Opinions to the contrary are fine but not just as mere assertions. You need to show whether the “scale across” or refit of the entire economy is possible in the timeframe AND whether ALL the materials will be available for the build-out.

    Personally, I suspect it might just be possible if we stopped all IC engine auto construction for private ownership right about now and channelled all that material and manufacturing capacity into making solar and wind power from now to 2050. But I seen no sign of such radical re-tooling of the entire world economy.

  12. Hermit
    March 10th, 2014 at 14:59 | #12

    @John Quiggin
    Yes this is going over old ground but the issues are a guide to the possible future. In fact Tasmania leads the way with 86% renewable energy in 2013 but that was a wet year and the geography is different. I believe South Australia is next with 30% windpower but this is the big caveat.. it is also 50% dependent on gas fired generation. That sets it well apart from the other coal heavy eastern mainland states. In 2015 that same gas can get 2-3 times the price being liquefied at Gladstone Qld and exported as LNG.

    I conjecture that SA retail electricity prices will go up 15% in 2015 (others say 25%) thereby scaring away possible replacements for Holden. SA needs a form of dispatchable generation (hopefully not coal) to substitute for gas and fill in windpower lulls. If they build more wind farms (this depends on the continued RET) to displace gas it will still be expensive. Most of this is strangely absent from electioneering for this Saturday.

  13. Ikonoclast
    March 10th, 2014 at 15:17 | #13

    @Hermit

    S.A. is pretty much at the wrong end of the world to be a world competitor in heavy or medium industry. It wouldn’t matter if its power was competitive, its wages, transport costs and remoteness would still hobble it. I really don’t think electrical power costs are the issue.

  14. rog
    March 10th, 2014 at 20:44 | #14

    @Ikonoclast This whole cheap energy thing might well be a furphy – look at how states and countries bent over backwards to provide aluminium producers cheap power only to see the industry self destruct.

  15. rog
    March 11th, 2014 at 06:30 | #15

    The end of cheap energy was not by a carbon tax but by the privatisation of the electricity market wiping out govt inducements to major users.

  16. conrad
    March 11th, 2014 at 08:17 | #16

    “The real problem is how do we replace all oil based transport”

    I think the problem is the other way around — replacing cars should be ridiculously easy. Just think Tesla and a solar panel with a battery. If you could buy a car for, say, 30K, and a solar panel with a storage battery for, say, 5K, and never pay for fuel again, that would be a bargain for many people (I realize they’re much more expensive now incidentally, but they’re not mass produced yet). This is hardly science fiction we’re talking about here — GM even had a prototype vehicle with a solar panel embedded into its roof this year. This only leaves planes and large trucks, and in many places that have decent population densities (like China), planes can be easily replaced by the cheaper, more scalable, and better fast trains. No-one I know in Euroland, for example, catches a plane even when it is somewhat faster than a train since you do not have all the hassles, and they are vastly more reliable. So even some of the market for planes could be closed down (quite possibly with private money in many places too).

    I also think replacing power in places like Aus would be not such a big deal, because there is lots of space. It’s the huge cities in places that have much less space that I’m dubious about. If someone tells me how renewables will solve the power problem for, say, Shanghai, then I’ll be more convinced.

  17. Hermit
    March 11th, 2014 at 09:54 | #17

    It seems third world development will be the guilt trip offered by the coal barons to keep expanding. See yesterday’s This is Power website article. Both the US based Peabody Coal and our own BHP Billiton apparently have clear consciences about digging up coal to provide energy for the benighted masses. Sure there may be a CO2 problem but poverty relief comes first.

    A few problems with this line of thinking. Crop failure due to extreme weather doesn’t help the poor, as pointed out in India a lot of that coal energy powers air conditioning for the middle class and one day coal will be a lot more expensive to produce carbon taxes or not. On the latter point building new railroads for the Galilee Basin will not be cheap. Big Tobacco wants Africans to smoke and now Big Coal and their captive politicians want poor people to air condition themselves into a better lifestyle. So it’s not just the $43 bn in coal revenue we’re helping to save the world at the same time.

  18. Ikonoclast
    March 11th, 2014 at 10:59 | #18

    @conrad

    There are number of issues. Large scale electric car fleets will require large scale battery manufacture. Do we have enough minerals for this including the rare earths needed for efficient batteries, motors, generators and solar PV? Is there enough energy for the changeover? Ramping up renewables to make electrical power takes oil power first up at least until some critical mass of renewable power exists. Can we retool our civilization rapidly enough to move from oil to renewables?

    Will the EROEI (energy return on energy invested) be enough to run the whole system and all other mod cons of civilization? How are we going to stop growth? We cannot grow indefinitely. We must stabilise. What are the economic and geopolitical issues involved in moving from a growth economy to steady state economy?

    The compounding problem that people really don’t understand is this. Exponential population and industrial growth are meeting up with peak energy limits in turn meeting up with ever declining ore qualities requiring more energy for extraction. This means more people to support with more demanding living standards with less and less energy just when it also takes more and more energy to extract given amounts of resources. Greater efficiency can take up a little slack and give you a few more years breathing space but no more than that.

    Strangely, or perhaps not so strangely, almost all orthodox economists, who dominate our modern discourse, have little real appreciation of these basic physical, energetic, geological and mining realities. They effectively posit that economic production is disconnected from and independent of real physical and energetic resources. Some claim they don’t think this but then turn right back to issuing equations and statements which reveal this is their essential premise. It’s a reflex intellectual action drilled into them by the basic (fallacious) assumptions of their entire discipline.

    “Anyone who believes that exponential growth can go on forever on a finite planet is either a madman or an economist. – Ken Boulding.

  19. conrad
    March 11th, 2014 at 15:08 | #19

    “Do we have enough minerals for this including the rare earths needed for efficient batteries, motors, generators and solar PV?”. You don’t need rare stuff for any of these. There are also now projects run by large companies trying to recycle batteries en masse, so you will have both new and renewable sources for them.
    “Is there enough energy for the changeover?”. Presumably far less than would be used without changing over.
    “Can we retool our civilization rapidly enough to move from oil to renewables?”. If it becomes cheaper, which seems inevitable, I can’t see why this won’t happen in a few decades — probably far less for cars — just look at how quickly hybrids that use 2-3 liters per 100ks have caught on for people that drive a lot. You can look at all of those Priuses used as taxis driving around Adelaide if you want to see it with your own eyes.
    “How are we going to stop growth?” Population growth has already more less stopped in many places, and the places it still grows don’t use much energy. In terms of economic growth, I don’t see the problem as long as most new technologies don’t use more energy (which they don’t — things like computing etc. use less, health technologies never used much energy to start with, and things like advanced polymers and so on may well use less energy than steel to make).
    “Will the EROEI (energy return on energy invested) be enough to run the whole system and all other mod cons of civilization?”. I don’t think we need to work out how to run 100% of things tomorrow. Do the easy cheap things now. Cars, batteries, and solar (or whatever — wind, geothermal..) in many places are easy and people are going to develop them no matter what as there really is a pot of gold at the end of the rainbow for the winners. Once household batteries become more common (and these seems likely), renewables will be especially competitive for the average person paying retail prices for energy.

  20. March 11th, 2014 at 16:42 | #20

    conrad, I catch taxis in Adelaide fairly regularly – it’s the only way to get home after a late night out on the pisslistening to live music. All the drivers reckon that the hybrids are far and away cheaper to run than the previous default taxi (Ford Falcon on gas).

  21. Jim
    March 12th, 2014 at 11:09 | #21

    It is not just the price of coal conspiring against the commercial viability of the port expansion.

    If we assume the port expansion does proceed, it will need to secure offsets for the damage attributable to the dredging.

    I did a back of the envelope calculation for a client a few weeks ago. The bottom line was: 1) Even if all farmers in the adjacent catchments went to “A Class” practices, there won’t be enough physical supply of offsets available. The only way to secure sufficient offsets would also require significant catchment restoration, or reverting agricultural land back to native vegetation.
    2) The cost of the offset would be so high (particularly further up the abatement cost curve), that it might actually be cheaper to dump dredging spoil on land anyway.

  22. Hermit
    March 12th, 2014 at 12:26 | #22

    The thing about increased fossil fuel exports from Abbot Point, Gladstone and elsewhere is that there are multiple insults to the environment
    1) CO2 induced warming from burning the fossil carbon
    2) ocean acidification and coral loss from the extra CO2
    3) siltation from harbour and channel dredging
    4) physical damage from ship grounding like the Shen Neng incident.

    The day can’t be too far away when Queensland is both under extreme weather duress (drought, cyclones) and one of the coal or LNG carriers has a major accident. Our love affair with coal could prove to be high maintenance.

  23. Ikonoclast
    March 12th, 2014 at 15:27 | #23

    @conrad

    Don’t get me wrong. I agree we have to try. I just expect it will be very difficult and there will be at least a partial collapse with decades of recession/depression to contend with. And I expect that any sustainable global civilization after that will support more like two billion people rather than ten billion people and that global warming will easily run to plus 2 degrees C and maybe more. That is my assessment of what is realistically likely. Let’s hope I am too pessimistic.

  24. Jon Brodie
    March 12th, 2014 at 21:16 | #24

    @Jim
    Jim
    Your numbers are correct but the developer is assuming they will get away with a mickey mouse effort and rort in the fashion of Gladstone Port. Remember the catchment monitoring of offset conditions will be overseen by the Federal Dept. of Environment (not GBRMPA) and they are easy to fool. If it was to be assessed and monitored credibly so that the correct amount of less than 15.6 um sediment is stopped from reaching the end of river that process alone would cost more than is likely to be available in offsets, much less actually doing any on-ground works.
    Jon

  25. plaasmatron
    March 13th, 2014 at 21:55 | #25

    @Ikonoclast

    wrt batteries, Tesla motors recently announced the “gigafactory” to make lithium ion batteries on an unprecedented scale by 2017. Even if it is only half as big as they hope (“by 2020 will turn out as many lithium-ion batteries as the whole world produced last year”- The Economist), the scale of production is going to drastically push down costs.

    The new challenge is political. Here in Germany it is illegal to use your own renewable power and sell the excess to the grid (net metering). Only gross metering is allowed. Despite the “Energie Wende” the control is still firmly in the hands of the government and the big power companies. I suspect it is a matter of time before the same happens Down Under.

  26. Uncle Milton
    March 14th, 2014 at 15:58 | #26

    But far more dangerous is the Galilee Basin itself, containing at least 25 billion tonnes of coal.

    Clive reckons its 100.

  27. Hermit
    March 14th, 2014 at 16:38 | #27

    @Uncle Milton
    Let’s hope the greenish tinged voters of SA and Tas remember that tomorrow. That’s PUP for the Tas lower house and Palmer ‘independents’ for the SA upper house.

    If Palmer’s influence increases and he manages to scrap perhaps refund the carbon tax then dig up the Galilee Basin he will make Italy’s Berlusconi look like a babe in the woods.

  28. Tim Macknay
    March 14th, 2014 at 17:28 | #28

    @plaasmatron
    Re the gross metering situation in Germany – is that a recent change?

  29. plaasmatron
    March 14th, 2014 at 20:22 | #29

    @Tim Macknay

    I believe it has always been the case.

    from greenforcesolar.com.au: “Experts attribute Germany’s leadership (in uptake of PV) to the clarity that gross metering provides to investors, as businesses love certainty and transparency. In our experience, based on anecdotal feedback, customers on net metering report trying to cut consumption more often than gross customers.”

    Happily for Australia the political climate is a little better.

    (www.) businessspectator.com.au/article/2012/10/22/smart-energy/how-electricity-sector-killed-gross-metering

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