Watermark Project

The Watermark Project is a coal exploration project located on the Liverpool Plains near Gunnedah in New South Wales. The project is being developed by Shenhua Watermark Coal, a subsidiary of Shenhua Australia Holdings which in turn is a subsidiary of the Chinese Shenhua Group.

The project has been reported as being approximately 10 million tonnes a year While the company provide no data on the project on its website, it states that the feasibility study "will be completed at the end of the first quarter of 2011."

The project, Shenua's first proposed overseas coal mine, is currently at the feasibility study stage. In late 2010 Shenua told a local Community Sonsultative Committee meeting that a development application for the project "will be lodged towards end next year, with construction starting 2013 and first coal around 2014." The company also stated that it had bought over 12,000 hecatres of land for the project with further purchase under negotiation which would bring the total to 14,500 hectares. The committee minutes record Shenua's Joe Clayton stating that "there is a little bit more but basically have enough now."

The project, and BHP-Billiton's Caroona Coal Project, have both encountered strong opposition from local farmers and residents. Despite this, in September 2011 the newly elected Liberal government led by Barry O'Farrell announced that both the exploration licences had been renewed. In the case of the Watermark project O'Farrell stated in a media release that the licence "will be subject to tougher conditions" to "ensure our valuable agricultural and water resources have much greater protection."

The NSW Department of Primary Industries tates on its website that the "Watermark deposit is expected to contain shallow resources of domestic and export quality thermal coal, with in situ coal resources expected to exceed 1 billion tonnes."

Environmental Impact Statement
In 2013 the Caroona Coal Action Group paid for an independent review of Shenhua's Environmental Impact Statement. The result of the report reveals substantial problems with the proposed mine. The mine would likely breach a prohibition on open-cut mining on the Liverpool Plains. The report also shows that the mine's risk assessment lacked detail regarding baseline data for water quality and geochemistry, making it very difficult to properly assess the environmental impacts of the mine.

Economic Impact Assessment
Shenhua Watermark Coal claims that "the project would create $913 Million direct and indirect regional output or business turnover each year while providing 1,015 direct and indirect jobs to the regional economy (Gunnedah, Tamworth, Liverpool Plains, Narrabri and Upper Hunts LGAs). The New South Wales economy will gain $1,554 Million annual direct or indirect output or turnover and 3,260 direct and indirect jobs." A Benefit Cost Analysis which was undertaken by Gillespie Economics on behalf of Shenhua Watermark Coal determined net production benefits of $3,047 Million. $1,726 Million out of this amount are net production benefits to Shenhua Watermark Coal, $745 Million are net production benefits to the Commonwealth government, $565 Million are net production benefits to the New South Wales government and $11 Million are net production benefits to the local and regional community in the form of voluntary contributions.

Review of Economic Impact Assessment
An independent economic impact assessment by Economists at Large said that the case for the mine had been overstated. Economists at Large claim key data in the economic assessment are missing and that the assessment is not suitable for decision making in its current form. They suggest Gillespie Economics‘ estimates of coal prices, royalty and tax rates results in an overstatement of tax revenue by almost $700 Million - $47 Million rather than an initial estimate of $745 Million. This tax revenue is overstated for two reasons:

1. The tax revenue is based on Shenhua's optimistic forecast of semi soft coking coal prices. Estimating company revenue based on this price will overstate the value of tax collected.

2. The assumption of a corporate tax rate of 30% is not very likely due to ignores a wide range of rebates, tax exemptions and depreciation allowances. This results in an effective corporate tax rate which is much lower. Economists at Large used a tax rate of 15.5%.

Furthermore the current economic impact assessment assumes the project will be able to sell 86% of its production into metallurgical coal markets. Historically, much PCI coal is not able to be sold into metallurgical coal markets and is instead sold more cheaply as thermal coal. Royalty revenue is the most important benefit from the project for NSW decision makers to consider. According to Economists at Large, the project economic assessment overstates royalty revenue in present terms by $82 Million. They claim the assessment's royalty calculations are not transparent or adequately explained.

Contact details

 * Website: http://www.ecolarge.com/
 * Website: http://www.shenhuawatermark.com/

Related SourceWatch articles

 * Australia and coal
 * New South Wales and coal
 * International Chinese coal projects