Environmentalists take economic tack on Buller mine
For the first time, environmentalists are attacking coal mining on foreign ground. Economics.
The Royal Forest & Bird Society and the West Coast Environment Network this week started battling West Australian mining start-up Bathurst Resources in the Environment Court.
The fight is over the 190 hectares of the Denniston Plateau, a unique ecosystem with millions of tonnes of coal under it.
Bathurst says its Escarpment coalmine, near Westport, would pump about $1 billion in the New Zealand economy over its six-year life.
However, the environmental alliance believes that benefit is overstated and likely to leak from the country like a sieve.
The conservation society usually locks horns with prospective miners by talking about the birds and the bees, ie the environmental impact. That cash money from coal does not offset irreparable damage to the environment.
This time around the environmentalists are questioning whether the economic benefits are as compelling as Bathurst makes out, as well as the effect on plants and critters.
If the argument is true, it could make the mine more of a close run thing than at first glance.
In August 2011, when West Coast Regional Council commissioners originally approved the project, the vast economic benefits were pivotal.
"We have decided to grant this application, but not without some considerable reservations and anguish," the commissioners' decision says.
"The most and almost overwhelming factor that we had to consider is the enormous financial benefit that the mine will bring to the Buller district and the West Coast region."
The West Coast had a rough time in the late 1980s and 1990s.
During the 15 years to 2001, the number of employed Coasters dropped 8 per cent and in Buller by almost 15 per cent.
But aside from this year's Solid Energy failure at Spring Creek underground mine near Greymouth which put more than 220 people out of work, the region has recovered strongly since the turn of the millenium through a mixture of tourism, government services, mining and construction.
Mining and support trades are hugely important for West Coast employment, as well as for flow-on effects like sustaining railways which are vital to the dairy farming and forestry industries.
In Buller, mining is almost the only game in town, with 70 per cent of new jobs between 2006 and 2011 coming from the mining sector.
Bathurst's Escarpment mine on the Denniston would directly employ 225 people. Most of them would be earning more than $100,000, significantly greater than the average wage.
At its height, the mine would process about 1 million tonnes of the black stuff each year.
Bathurst's economic consultant, Geoff Butcher, created economic models of both the West Coast and Buller and added the mine's predicted spending and employment to determine the project's benefits.
He has 20 years experience in such work and advises central and local government analysts as well.
The project's net present value is $467m, with $145m likely to go to the Government through taxes, royalties ($11m) and other payments.
The rest would go to company shareholders, but with 82 per cent of them foreign - mostly Aussies - that $263m of benefit has to be written off.
Indirectly, the mine would foment about $994m on the West Coast and an extra 430 jobs for coasters.
Butcher calculated the project's benefits assuming a coal price of US$240 a tonne.
Coking coal prices peaked close to US$350 a tonne last year, but have slumped to about US$170 this year, with some forecasting it to go lower as coal-hungry China loses its appetite and new coal supplies come on in Australia and beyond.
If the price falls to US$160 a tonne - a 30 per cent drop on the assumption - the project's net present value would be not much above zero and the shareholders would get nothing, his analysis says.
Forest & Bird's economist Peter Clough, of NZ Institute of Economic Research, says Butcher's coal price assumption was "improbably optimistic".
Clough used a US$200 price for his analysis because the long-term price track pointed to a "rather lower" average.
"The coal price is pivotal to the estimates, but there is much uncertainty round it. It could conceivably be higher or lower."
Subsequently, the two economists have agreed on a coal price range between US$160 and US$200 a tonne.
Clough says the project would undoubtedly inject money into the West Coast, but he believed the amount was inflated.
The Denniston Plateau was valuable and would become more valuable over time, he says.
"By virtue of scarcity and distinctiveness they warrant a high economic value attached to their protection."
Apart from the inclusion of payments to government, Butcher's analysis reads like a private commercial report, and does not take into account all social costs, he says.
Butcher believes there is considerable unemployment and underemployment and the creation of jobs would reverse that.
Clough says mining jobs are highly skilled and the jobs would be filled by skilled Coasters leaving other jobs or miners from overseas. He believed the influx of labour for such a short time would push housing prices up with no time for new buildings to meet the demand.
At US$200 a tonne, the country's "welfare gain" would be $114m in present value terms over the six years, compared with Bathurst's equivalent estimate of $189m, Clough says.
And if the price of the coal is hard to pin down, the value of the environment is even harder.
Butcher told the court he had not put a dollar amount on the ecology and wildlife, although it was valuable.
"I've watched people try, and watched people fail."
Clough, also, did not put a price on the the environment.
Will it matter if a few hundred endangered snails are crushed?
If the home for lizards, spiders, giant weta and kiwi is dug up for the carbonised plants that lived and died millions of years before?
Are the economic benefits real and do they outweigh strip mining 100 per cent Pure New Zealand for New Zealand Inc?
That decision is up to Environment Court Judge Laurie Newhook and Environment Commissioners Russell Howie and Carron Blom.