Outsiders question economics of lignite

MICHAEL BERRY
Last updated 07:36 22/01/2013

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Environmentalists and a mining lobby group agree: the likelihood of Solid Energy ramping up its lignite programme in Southland seems slim.

Coal Action Network Aotearoa held its second annual Keep the Coal in the Hole Summer Festival at a Gore campsite at the weekend.

It focused on government-owned Solid Energy's plan to develop lignite mining in the region.

Solid Energy says there are 3 billion tonnes of lignite available in the coalfields of Waimumu, Croydon and Mataura that could be converted into briquettes, fertiliser and diesel.

Lignite is the lowest-quality coal.

Solid Energy chief executive Don Elder has said diesel and fertiliser were significant drivers of the economy, and lignite conversion could reduce the $5 billion the country spends each year on buying them from overseas.

Elder could not be contacted yesterday.

Coal Action Network spokeswoman Cindy Baxter said Solid Energy seemed to be struggling to get the $29 million pilot briquette plant - its only active lignite processing asset - running commercially.

Solid Energy's partners for both its fertiliser and briquette projects - Ravensdown and Fonterra respectively - had abandoned the coalminer, she said.

Baxter believed the lignite project was not worthwhile given the low price of coal.

"We hope Solid just gives up. The price and quality is so bad, why do it?" She believed Solid Energy had hit the wall in Southland and was unlikely to proceed with lignite in the near future.

For the year ahead, the network would prioritise fighting Bathurst Resources' proposed Escarpment coalmine on the Denniston Plateau and the North Island mine floated by Fonterra to fire its milk processing plants.

Solid Energy spokesman Bryn Somerville said lignite could be used to lower New Zealand's dependence on imported diesel and fertiliser, and provide affordable and reliable energy.

Mining lobby group Straterra's chief executive, Chris Baker, said new fracking and drilling technologies developed in the past few years had changed the global environment, making lignite conversion less alluring than it once was.

Those technologies meant there were a lot more accessible fossil fuel deposits around the world than there had been in the past few decades.

With the explosion of fracking and drilling in the United States, the price of gas had dropped, as well as the price of oil, as it exported more of its reserves.

The international oil price was the benchmark against which other types of energy were measured, he said.

Global prices were "by far the major influence" on whether the lignite project would go ahead. If something was too expensive compared with alternatives, it would not go ahead.

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"None of which is very promising for the development of the New Zealand lignite resource, but that's a broad context."

Making diesel from lignite was viable, but required a favourable investment case.Fairfax NZ

- © Fairfax NZ News

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