Big Four banks reject Adani's dirty mine but governments fund it anyway

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(Screen shot via @stopadani)

Why should Australian taxpayers invest $1 billion in Adani if the big four banks don’t think it’s commercially viable? Patrick Keane reports.

ON MONDAY, Adani Group announced early works on the Carmichael mine would begin in October.

Australia’s big four banks have ruled out investing in the Adani-Carmichael mine so why do Federal and State governments want to use our money instead?

Although Federal Leader of the Opposition Bill Shorten committed not to spend public money on Adani during the Federal election campaign last year, the royalty deal struck between the Queensland Labor Government and Adani is effectively a subsidy of as much as $700 million to the Indian mining giant.

The Federal Government may propose lending Adani a further $1 billion through the Northern Australia Infrastructure Facility (NAIF).

The mine isn’t commercially viable.

If the mine was commercially viable then it wouldn’t need public financing because investors like money.

The public cannot afford to be financing the white elephants of the Federal and State governments.

Although unemployment in metropolitan Queensland has been improving since the last State election in 2015, in regional Queensland it is still rising. Unemployment in inner city Brisbane is currently 4.3% but in the Queensland outback, the average is 13.5%.

Queensland cannot afford to waste more money. Is there a better way to spend $1 billion?

What is the opportunity cost of public funding for Adani?

Because Adani Group’s Australian corporate structure is not exactly transparent, some of the benefits and costs are difficult to precisely identify.  

What opportunity?

The reality is that since the end of the mining boom coal has been a minor contributor to the Australian economy. The age of fossil fuels is over.

Source: data.erinsights.com.

We know one of the costs is the deferment of royalty payments granted to Adani by the Queensland Government. A royalty "deferment" fulfils the definition of a subsidised loan.

A recent economic analysis by The Australia Institute calculated that at current coal prices a royalty holiday for Adani could see the Queensland Government loaning Adani at least $370 million and as much as $700 million — depending on coal prices and what scale of mine goes ahead.

Instead of Queenslanders benefiting from revenue made by the mine, we are likely to continue to subsidise its operation. For the Queensland State Government, car registrations are a bigger revenue earner than coal.

The value of coal exports to the Australian economy has plunged from nearly 4.5% of GDP to less than 2%. Since 2008-09, the value of coal exports has fallen by a third while the national economy has grown by over 60%.

The world’s largest economies – the USA and China – announced moratoriums on new coal mines in the wake of the Paris COP 21 Accord.

Although the new American President Donald Trump is undermining the Paris Accord he cannot stop the transition of the American or the global economies.

Trump’s claims that he has returned coal miners to work is as implausible as Gautam Adani’s claim that he is bringing jobs to Queensland. The Adani group has been eager to convince Australians their mine is bringing jobs and have established an impressive marketing network.

At the Gladstone Observer, a regional Queensland daily, one can visit a "jobs portal" sponsored by the Adani Group. The portal repeats the spurious claim made by Adani that "10,000 indirect and direct jobs may be available with the Carmichael coal mine".

But Adani’s expert witness, Dr Jerome Fahrer, admittedin court in 2015, the mine would create an average of only 1,464 full-time-equivalent jobs a year — not the 10,000 jobs figure more commonly associated with the project.

The reality is there are few jobs in coal mining anymore and there will be even less soon. Since 2012, nearly 20,000 jobs have been lost in the coal industry. McDonald's in Australia employs more people than coal. Automation, such as driverless trucks, is continuing to limit employment opportunities in mining.

Another proposed benefit of the mine was relief for energy poor Indians. However, subsidising the world's energy poor does not fit with the commercial purpose of the Carmichael mine.

Adani chairman Gautam Adani told an Australian business forum in India his country needed imported resources — contradicting the Indian Government's policy of coal self-sufficiency.

Mr Adani said at the conclusion of the Australia-India CEO forum in New Delhi:

"Imports of high-quality resources to augment domestic mining will be required."

In June this year, Indian Energy Minister Piyush Goyal said at a press conference:

"We do not wish to import any coal from anywhere in the world."

The costs

Most of the costs of the Adani Carmichael mine are so clear they are stark:

  • Collectively the nine new mines would produce an additional 330 million tonnes of coal per year. This means another 705 million tonnes of CO2 per year to global greenhouse gas emissions. This would be the equivalent of Australia doubling its domestic emissions. 
  • Within three years Australia will export more carbon than Saudi Arabia.
  • Although exported emissions are not counted in Australia’s carbon budget they have the same effect on the climate and the Great Barrier Reef.
  • Last year the Great Barrier Reef experienced its worst bleaching event ever. This is the third bleaching event in 18 years.
  • Almost a quarter of the Reef has died.
  • According to Reef scientists, only an immediate and drastic reduction in the use of fossil fuels will save the Great Barrier Reef.
  • Reef scientist Professor Terry Hughes said 'he didn’t expect to see a bleaching event like this for another 25 years and unless we make an immediate and drastic reduction in carbon pollution the Reef will not recover'.
  • Deloitte’s economists valued the Great Barrier Reef at $56 billion.
  • The death of the Reef would be comparable to a national disaster like Cyclone Yasi, the 2011 Brisbane floods or the Black Saturday bushfires.

The opportunity cost

What is less difficult to see is the opportunity cost of the mine. In addition to the devastating economic impacts the mine will inevitably accelerate, there are the jobs and infrastructure we could have built instead.

By subsidising an extinct industry, Queensland is missing out on the opportunity to rebuild and renew the communities that are struggling to stay afloat in the wake of the mining boom.

The looming Queensland State Election means we are about to hear politicians talk a lot about their plan for jobs — and Queensland desperately needs a plan for jobs.

The end of the commodities boom has settled into a malaise across Queensland that you can see the trajectory of unemployment. The unemployment figures I am using are from the Queensland Governments database of state districts that you can see for yourself here.

Employment in Queensland has flat-lined after unemployment appeared to peak in 2015. In 2012 – while we were still living high off a mining boom we didn’t know had already ended and the average rate of unemployment across Queensland was 5.9% – unemployment spiked at around 6.2-6.3% in 2015, and has declined slightly so that in December 2016, the average unemployment rate in Queensland was 6.1%.

'Guarding the Galilee' trailer (source: @StopAdani).

Although some places like Aspley or Ashgrove (now called Cooper under this year’s redistribution of electoral boundaries) recovered since peaking unemployment across the State, there are regionalised examples of unemployment.

In Queensland’s far north, the State electoral district of Cook is experiencing rising unemployment — in 2012 the unemployment rate was 11.3%. By 2012 it had risen to 12% and in December last year, unemployment in Cook reached $14.2%.

In Mt Isa, now known as the state electoral district of Traegar, unemployment almost doubled since 2012. In 2012 the unemployment rate in Mt Isa was 6%. Late last year the unemployment rate reached 9.2%.

What would a plan for jobs in Queensland look like?

Already the Palaszczuk Labor Government has spruiked a “jobs bonanza” with more jackpots of jobs to come presumably once the election is called. But the Queensland Government proposed no new renewables projects in the last budget.

And in the State's far north there is simply a promise to deliver a $386 million Powering North Queensland Plan to strengthen and diversify the North's energy supply.

Queensland Opposition Leader Tim Nicholls offers little vision for Queensland except that he isn’t former Premier Campbell Newman. Nichols proposes no new innovative projects to renew regional Queensland and he even stopped short of ruling out more asset sales if elected again. Privatisation of power generation is one of the reasons the price of electricity has increased for consumers.

Meanwhile in South Australia and Huinan

South Australian Premier Jay Weatherill secured a 150-megawatt solar power plant for Port Augusta.

Port Augusta, like many places in regional Queensland, was stuck between the old economy and the new.

Construction of the $650 million plant will start in 2018. The plant will be one of the biggest in the world and deliver more than 700 jobs.

In South Australia’s mid-north, Neoen's 99-turbine wind farm at Hornsdale will generate energy to be stored in Tesla's new 100MW battery near Jamestown. 70% of the battery’s generation is to be reserved for government use and the remainder released to the market.

For about the same price as the Adani loan, Queensland could build two solar plants on the same scale as South Australia.

In China, the coal rich city of Huainan, by one 2008 estimate – home to nearly a fifth of all of China’s coal reserves – built the world’s largest floating solar farm atop a former coal mine. The China Daily reported the farm began generating electricity this month. The 40-megawatt power plant consists of 120,000 solar panels covering an area of more than 160 football fields. The $45-million investment could help power 15,000 homes.

The renewable energy industry is growing rapidly. The industry now employs more than 8 million people worldwide — up 5% from last year. Nearly three million people work in the solar sector alone — an 11% jump from 2015.

Queenslanders without solar power suffer highest electricity costs. (Source Courier Mail.)

The Queensland Government submission to the Inquiry into the Northern Australia Infrastructure fund says:

The NAIF Act and the Investment Mandate requires that the Queensland Government be consulted on any projects under consideration for financial assistance by the NAIF Board for which there is an Investment Proposal.

The Facility must commence consultation with the relevant jurisdiction as soon as practicable after receiving an Investment Proposal. (NAIF Investment Mandate, Section 13(1).)

It also outlines that the Queensland Government has the right to veto any projects by the NAIF board:

The facility must not make an Investment Decision if at any time the relevant jurisdiction provides written notification that financial assistance should not be provided to a Project. (NAIF Investment Mandate, Section 13(4).)

At the time of writing, the Queensland Government has yet to receive an investment proposal from NAIF for consideration.

The Queensland Government should join the 1.5 million Australians, so far, who are part of the movement to stop the Adani mine.

The Queensland Government should scrap the royalty deal with Adani. Further, the Queensland government has the power to veto any loan to Adani by the Federal Government through NAIF and should do so in order to renegotiate a better deal to build renewable energy infrastructure that also rebuilds the communities that are languishing in the wake of the mining boom.

Read the Queensland Government's submission at the Inquiry here.

You can follow Patrick Keane on Twitter @pckeane2014.

Adani's reputation was bad. Last week, it got even worse. (Source: @StopAdani.)

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