Xstrata expected to appeal Ulan offsets

January 15th, 201211:08 pm @

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Xstrata expected to appeal Ulan offsets

Justice Nicola Pain: 'That this is the first such condition imposed on a coalmine in NSW is not necessarily discriminatory.'

Justice Nicola Pain: ‘That this is the first such condition imposed on a coalmine in NSW is not necessarily discriminatory.’ Photo: Robert Rough

Expansion of the Ulan coalmine is caught up in a battle with environmentalists seeking to enforce new rules on emissions.

In the chill of winter, the Land and Environment Court judge Nicola Pain passed the vineyards of the picturesque town of Mudgee, through to the village of Ulan, which squats on the doorstep of the Ulan coalmine. It has disgorged millions of tonnes of coal, on and off, since the 1920s.

The day of the pit pony is long gone; strong coal prices and demand have propelled Ulan’s coal production plans. Justice Pain was there to see first hand the scope of Xstrata and Mitsubishi Development’s existing underground and open-cut joint venture, in light of the approval given by the then Labor minister for planning, Tony Kelly, for Ulan to double production from 10 million tonnes to 20 million tonnes a year, and double its operating life, through to 2031.

At the Mudgee council chambers she heard from seven objectors as to why mining in the Ulan area should not be expanded.

Ulan Coal was ready to argue before the court the economic benefits of the expansion: an additional 295 full-time jobs, more than 880 indirect jobs, and some $11.9 billion in direct increased economic activity over the life of the mine, of which 25 per cent – $2.9 billion – accrued to Mudgee and other parts of the mid-western region.

As with many old mines, Ulan had a grab bag of approvals, and had been discussing with the Department of Planning since 2004 the mutual benefits of operating under a single consent authority. Amalgamation would also bring Ulan under the current environmental regime, which was far more rigorous than the requirements of the early 1980s.

When Mr Kelly signed off his approval, under the major projects part 3A regime in November 2010, one of the conditions was that Ulan was required to implement all reasonable and feasible measures to minimise the release of greenhouse gas emissions from the site – a measure given scant regard in the 1980s.

What had brought the Land and Environment Court into the picture was an appeal by the Hunter Environment Lobby, represented by the Environmental Defenders Office, against the minister’s approval.

Among a number of grounds, it argued that the mine was ecologically unsustainable, given the additional scope 1, 2 and 3 greenhouse gas emissions the expanded mine operation would generate.

Scope 1 emissions come from direct operations, and while Ulan is classified as not a very “gassy” mine, it includes fugitive methane emissions. Scope 2 emissions stem from activities that generate electricity, heating, cooling or steam that are consumed by the mine, while scope 3 are emissions generated in the wider economy – for example, the burning of coal in power stations.

Each year, the Hunter Environment Lobby experts said, Ulan would emit 28.7 million tonnes of carbon dioxide equivalents, which over the life of the mine would pump 575 million tonnes of carbon dioxide equivalents into the atmosphere. But by the end of the case, the lobby abandoned its position on including scope 3 emissions. Instead, it sought conditions for Ulan to offset scope 1 and 2 emissions.

Exactly a year after Mr Kelly approved Ulan’s new life, Justice Pain upheld part of the Hunter Environment Lobby’s arguments, and set a condition for Ulan to mitigate and offset the additional scope 1 emissions that would be generated under the expansion.

Justice Pain is no stranger to controversy in mining circles. Her 2006 judgment concerning the Anvil Hill mine near Denman put on the legal and legislative planning agenda in NSW that the climate-change impact should be taken into account when determining projects.

Justice Pain had strong environmental credentials before her appointment as a judge in 2002, having worked as a solicitor, and later on the board of the Environmental Defenders Office, as well as terms with the NSW and Commonwealth departments of the environment.

Anvil Hill, coincidentally, was later taken over by Xstrata, which operates it under a new name, Mangoola Coal.

While the parties will be back in court for discussions on February 13 to thrash out the final detail of Justice Pain’s provisional judgment, there is little doubt that the miners will appeal rather than let the scope 1 offsets stand. One mining source said if the judgment stood it “changes the whole operational landscape”.

In court, Ulan urged the judge to consider that over the next 10 years Xstrata would invest more than $180 million in renewable or low-emissions technology.

“This is a form of voluntary offset and a huge financial burden, and [it] would be unreasonable for the court to impose any further greenhouse gas offset,” it said.

It argued “the imposition of an offset would be a discriminatory attack on Ulan to the benefit of its competitors”.

The judge disagreed. “That this is the first such condition imposed on a coalmine in NSW is not necessarily discriminatory. It is simply the first occasion that has occurred.

“As other operating coalmines seek approval to modify or extend their operations, or new coalmines are opened, it would be open to the consent authority, which may be the minister, to impose a similar condition,” she said.

“The minister considered that a carbon pricing scheme was a preferable [policy] . . . to drive reductions in greenhouse gas emissions and would provide better incentives for Ulan to do so. That may well be the case but no such system is yet to operate in Australia and this approval is sought now.”

She said there was a mechanism to allow the condition to be waived if there was another regulatory regime, such as a carbon tax.

And what of its cost to Ulan? In an energy and greenhouse gas report, the company estimated scope 1 emissions under its current approvals and 11-year mine life – including methane, diesel, explosives, slow oxidation and spontaneous combustion – was 27,591 tonnes a year (303, 503 tonnes over the life of the mine).

Under the expanded mine life and production, scope 1 emissions would be 104,833 tonnes a year, or over a 20-year mine life 2,096,683 tonnes. Ulan estimated it would cost $2.2 million a year to offset these additional emissions.

Ulan’s opposition to the condition was backed by the Department of Planning and the minister, who described such a condition as inefficient, ineffective and inequitable.

“There are over 50 operating coal mines in NSW and it is likely to take at least 30 years for all these mines to exhaust their current approvals,” the department pointed out.

After the judgment, the chief executive of the Australian Coal Association, Dr Nikki Williams, said the claim by the Hunter Environment Lobby was “without merit”.

“Emissions from the mining of coal are covered by the federal government’s carbon tax legislation, which passed into law earlier this year . . . to commence on 1 July 2012.

“The court has not yet issued final orders in the case. Without pre-judging the outcome, we believe the passing of the carbon tax makes the case redundant.

“Australia is the only coal exporting nation in the world with a carbon tax scheme that includes fugitive emissions. It is estimated that the carbon tax will cost the Australian coal industry $18 billion to 2020. This places our industry at a distinct competitive disadvantage.”

Xstrata, through its spokesman James Rickards, said the matter was still before the court. “Discussions are yet to be conducted, as guided by the court, as we look towards trying to resolve the matter definitely and progress the Ulan operation,” he said.

Natasha Hammond-Deakin, a solicitor with the Environmental Defenders Office, said while the director-general of planning could waive the offset condition if there was another regulatory regime, such as the carbon tax, “we would want to safeguard it, to make sure the requirements weren’t to be lessened under federal legislation.#x2019;’

“This is an environmental impact which should be regulated,” she said. “This was not anything new or outrageous, it is an environmental impact on which there should be conditions.”

MINING

 

Article source: http://www.smh.com.au/business/xstrata-expected-to-appeal-ulan-offsets-20120115-1q1mo.html