Key developments in coal mining and power in Australia in 2012

March 2012

 * March 29: the new Queensland Premier, Campbell Newman, announced that the government would not allow the doubling of New Acland mine. New Hope Corporation had proposed to expand the, located approximately 150 kilometres west of Brisbane, from 5 million tonnes a year to 10 million tonnes a year of thermal coal. Newman also stated that he would oppose the development of Ambre Energy's proposed coal-to-liquids project at Felton, on the Darling Downs.

April 2012

 * BHP Billiton announced that the BHP Billiton Mitsubishi Alliance's (BMA) Norwich Park mine would close in May 2012 "indefinitely". In a media release the company stated that the "has been losing money for several months. This situation has come about as a result of a combination of lower production, a significant increase in costs and lower coal prices." BMA Asset President, Stephen Dumble stated that "this decision was not made lightly. However, the impact of last year’s floods, combined with lower coal prices and high costs, has resulted in an operation that is not currently viable." BMA stated that the company would "be aiming to maximise redeployment opportunities for Norwich Park employees to Saraji Mine to enable, where possible, those employees and families to remain living in Dysart." It was reported that approximately 1300 workers and contractors were affected by the closure. BMA claimed that 99% of workers have been redeployed to their first or second choice location while 80 had taken voluntary redundancy.

June 2012

 * June 29: The Australian Energy Market Operator (AEMO) released the inaugural National Electricity Forecasting Report which "shows lower industrial energy consumption, significant uptake of rooftop solar photovoltaic (PV) systems and consumer response to rising electricity prices are behind a 2.4 per cent drop in annual energy for 2011-12." In a media release AEMO Managing Director and Chief Executive Officer Matt Zema stated that "consumers have responded to price increases and taken advantage of government feed-in tariffs by installing rooftop PV systems and adopting energy efficiency measures, and that has reduced the amount of energy supplied by the electricity grid. Investment signals for new large scale electricity infrastructure are muted when compared to a year ago.” The report revealed that actual electricity consumption was lower than the "low" scenario in the 2011 Electricity Statement of Opportunities.


 * In an accompanying background paper on rooftop solar photovoltaics, AEMO reported that the National Electricity Market "has experienced a rapid uptake of rooftop PV over the last four years, with total estimated installed capacity rising from 23 MW in 2008 to an estimated 1,450 MW by the end of February 2012." AEMO stated that by 2020 installed capacity was forecast to reach 5,100 MW and "almost 12,000 MW by 2031 (based on a moderate growth scenario)." AEMO stated that it will include an assessment of rooftop solar PV installations in all future annual electricity forecasts.

July

 * July 2: A report for the Bureau of Resources and Energy Economics projects, based on a market share analysis, stated that Australia's exports to 2025 for thermal coal could increase to between 267 and 383 million tonnes and metallurgical coal to between 260 to 306 million tonnes by 2025. Key factors affecting export volumes include developments in Indonesia and Mongolia.


 * In a supplementary report, BREE assessed export infrastructure capacity and expected expansions. The report considered that "almost all" of the projected expansion in thermal coal exports "will come from New South Wales (Hunter Valley) and Queensland (Surat and Galilee Basins) with initial expansions likely to occur first in New South Wales". For metallurgical coal, the report considered that the growth "is projected primarily from the Bowen Basin in Queensland with a smaller proportion coming from the Hunter Valley." The report considered that current export infrastructure capacity for thermal coal is approximately 219 million tonnes with an additional 57 million tonnes under construction and expected to be operating by 2015. "To support the projected export volume in the high market share scenario a minimum of 108 Mt of additional infrastructure capacity will need to be built by 2025. BREE estimates there are proposals to build around 400 Mt of additional infrastructure capacity by 2025."


 * The supplementary report estimated that by 2025 Australia’s market share "is projected to be between 56 per cent and 66 per cent, with exports ranging from 260 Mt to 306 Mt." The report estimates that by 2015 there will be port infrastructure capacity to support exports of around 251 Mt of metallurgical coal. "To support the higher end of the projected exports range an additional 55 Mt of infrastructure capacity would need to be built by 2025. BREE estimates there are proposals to build infrastructure that could provide an additional 88 Mt of port capacity."


 * July 3: The permanent closure of the black-coal fired Munmorah Power Station in New South Wales was announced. The power station, which was commissioned between 1967 and 1969, was placed on a 'standby' basis in August 2010. The company stated that "decreasing energy demand in NSW has created an excess supply situation. Munmorah’s place in the market has been overtaken by newer and more efficient generators and alternative electricity sources. The station’s ageing infrastructure and high maintenance costs mean that it is not economically viable to operate. The carbon tax further erodes its viability." While the plant initially comprised four 350 megawatt units, two were decommissioned in 1996 and the remaining two had a rated capacity of 300MW each.


 * July 4: Dr Nikki Williams, the Chief Executive of the Australian Coal Association, bemoaned how the industry is facing increasing opposition in a speech to the "The opening of A Tale of Two Cities might just as easily describe the great contradictions that currently characterize how Australia feels about its economy, and its mining industry. We’re the darlings of the business pages, yet we’re painted as demons in the early general news. We help Treasurers keep budgets healthy and give Australia the strength to stave off the threat of recession, yet our industry is a lightning rod for the most adversarial of political debates ... Australia cannot take its comparative advantage in coal for granted. Whilst the industry is – as it always has been – highly exposed to intense competitive pressure, the very legitimacy of coal mining in Australia is being called into question by campaigns of misinformation, disruption and delay by anti-development activists. These campaigns extend to opposing the development and demonstration of carbon capture and storage ... An industry that prefers to go quietly about its business, digging and shipping, has gained unprecedented public profile in Australia in recent years and become a central actor in major and vitriolic public policy debates. Whether it be resource taxation, carbon pricing or a contest to retain our social licence, such profile is not a place that the industry is used to, or finds comfortable."


 * July 7: AGL Energy, which has major investments in coal and gas-fired power stations, released a report arguing in support of time of use electricity pricing and against the use of average tariffs. The report's author noted that as electricity prices increased consumer demand had reduced consumption, embraced more "energy efficient appliances, housing insulation and the uptake of solar hot water and solar PV units." Reduced demand, which has fallen by 2% a year over the last four years, has the company alarmed. "Falling base or average energy demand naturally results in higher tariffs, because the industry‟s heavy fixed costs will be spread across fewer units of output, holding all other variables constant. But ongoing rises in peak demand on very hot days necessitates a continual run-up in new power system equipment to ensure reliability since electricity cannot be stored. The resulting higher capital expenditure thus further intensifies the underlying tariff increases. In this instance, bad plus bad equals worse – falling throughput leads to tariff increases, and rising peak demand and the consequent new investments impounds additional tariff increases. It is not difficult to see how this could become a vicious cycle in the absence of careful intervention by policymakers, and in particular, the introduction of default time-of-use and critical peak pricing structures."


 * The authors of the paper complained that the use of average tariffs "appears to be stoking the potential for an energy market death spiral, whereby peak demand growth continues unabated while higher prices lead to reductions in underlying energy demand at times least inconvenient to consumers when the grid is underutilised in any event. A progressively worsening capital utilisation rate is capable of setting-off a whole new cycle of price increases, yet again."


 * Ausgrid, the largest electricity distributor in New South Wales stated that the claims of a 'death spiral' were exaggerated. "We have seen rapid price rises but we expect that at least the network cost component is going to be lower,” said Robert Smith, manager economic policy and strategy for Ausgrid. “We expect they will be below or at the consumer price index for the next regulatory period.”


 * July 17: New Hope Corporation announced that it would close its New Oakleigh mine at Rosewood near Ipswich in early 2013. In a media release the company stated production at the mine "had been declining over recent years with 2012 production at only 350,000 tonnes. The mine has now reached the end of its productive life. New Hope is working closely with about 30 employees to find other positions within the company where possible.


 * July 20: Rio Tinto confirms that it is considering job cuts at the Clermont mine, a thermal coal mine which began to be commissioned in 2010. The company indicated that increasing domestic costs and declining prices in the Asian market had spurred the company to review the project. It was also reported that Rio is expected to shelve the proposed $2 billion expansion of the Mount Pleasant mine in New South Wales. A spokesman for the company stated that "Rio Tinto is looking at ways to reduce costs at Clermont mine, to improve its competitiveness in an environment of significantly lower thermal coal prices."


 * July 24: The West Australian Mines and Petroleum Minister Norman Moore announced that the state government had decided to prevent future coal mining in the Margaret River area by terminating all pending applications for coal exploration activities within a 230-square kilometre coal mineralisation zone. "This decision sends a signal to the industry - applications will not be accepted to explore for or mine coal in this area", Moore stated in a media release. The government's media release stated that "under the Mining Act 1978, the Minister for Mines and Petroleum can terminate or refuse applications if the Minister is satisfied on reasonable grounds that it is in the public interest to do so. This provision will be invoked if explorers are unwilling to withdraw their coal applications." The decision was welcomed by local residents and prompted calls for the ban to be made permanent by enshrining it in legislation. The Wilderness Society called for the same protect to be offered to areas in the Kimberley threatened by coal mining proposals.


 * July 24: The Climate Institute released the results of an online survey and focus group market research of Australians on climate science and policy. In one question, respondents were asked to nominate their three preferred and three least preferred sources of electricity generation. Solar was the most preferred (81% in favour, least preferred by 6%), wind (59% in favour, least preferred by 13%) and hydro (44% in favour, least preferred by 11%). The three least preferred sources of electricity were biomass (52% least preferred, 8% most preferred), coal (66% least preferred, most preferred by 14%) and nuclear (least preferred by 64% and most preferred by 20%).


 * July 27: Federal Minister for Resources and Energy, Martin Ferguson, announced that, after four extensions granted to HRL to comply with conditions of a $100 million funding agreement for the 600 megawatt brown coal and gas fired Dual Gas power station, the government had decided to withdraw funding as the company "did not meet the required conditions set out in the funding deed." The decision was welcomed by environmentalists.


 * July 28: The Australian Financial Review reported that "Deutsche Bank analyst Paul Young estimated that 20 per cent of Australian thermal coal exports are loss-making and that growth at all but the lowest-cost expansion options is off the agenda. Yet miners are reluctant to cut production. That could be partly based on insulation from the low spot prices for those that have signed longer-term contracts at higher prices. But as Young says, there are other factors at play such as rehabilitation and labour exit costs, coal supply contract terms and take-or-pay rail and port contracts. “We expect companies will operate even if marginally unprofitable,” he says.


 * July 31: The Bureau of Resources and Energy Economics releases the Australian Energy Technology Assessment (AETA) report and model. The report assessed the costs of 40 electricity generation technologies under Australian conditions. "By the mid 2030s some renewable technologies, such as solar photovoltaic and wind onshore, are expected to have the lowest levelised costs of electricity generation of all of the evaluated technologies.," said Executive Director and Chief Economist of the Bureau of Resources and Energy Economics, Professor Quentin Grafton. He also stated that "among the non-renewable technologies, combined cycle gas (and in later years combined with carbon capture and storage) and nuclear offer the lowest levelised costs of electricity generation over most of the projection period, and remain cost competitive with the lower cost renewable technologies out to 2050.”

August

 * August 2: In an address to the Australian Mines and Metals Association, the federal Minister for Immigration and Citizenship, Chris Bowen extolled the virtues of 457 visas and Enterprise Migration Agreements (EMAs) to cater for the labour needs of the mining industry. "Australia is experiencing the largest mining boom on record. There are currently 98 major mining projects at an advanced stage of development, representing proposed capital expenditure of over $260 billion. And there is a further $243 billion in capital expenditure in the pipeline for less advanced projects. Not only that, but the profile of investment means that we're seeing significant amounts of project construction all coming online around the same time, creating up to 287 000 new construction jobs through to 2018. That's over 28 per cent of Australia's current construction workforce," he said."There are now more than 90 000 primary 457 visa holders in Australia," Bowen stated.


 * "Of course, we are also mindful of meeting the labour requirements for mega resources projects created by the mining boom, which is why we established Enterprise Migration Agreements. Enterprise Migration Agreements essentially allow the government and project proponents to negotiate one labour agreement - or Deed of Agreement - to cover an entire project. Then, each subcontractor who wishes to avail themselves of the agreement enters into a direct contract with the government that mirrors the overarching deed. This means that project owners can plan their workforce needs from the start and there will be a straightforward process for subcontractors to sign up to an individual labour agreement. It also means there's one negotiation instead of dozens that would otherwise be required. The key benefit of EMAs is to assist project owners to plan their workforce needs and mitigate any risk that projects won't be able to source sufficient skilled workers to be completed on time and on budget. Indeed, this is now the biggest challenge they face when looking to secure finance for major expansions or new projects. By helping to secure finance, EMAs will also secure thousands of jobs and significant training opportunities for Australians, because without EMAs, there's a real risk that some large resources projects simply won't go ahead. (Emphasis added - ed). This, to me, is a key reason for, and benefit of, EMAs - providing certainty and facilitating jobs creation that will benefit literally thousands of Australians," Bowen stated. (See Enterprise Migration Agreements and the coal industry for further details.)


 * August 3: The federal and Victorian state government announce the establishment of a $90 million Advanced Lignite Demonstration Program "to develop and deploy emerging technology to reduce the greenhouse gas emissions intensity of lignite (brown coal), improve the economically recoverable return from lignite and provide employment opportunities in the Latrobe Valley and broader region." The announcement of further funding for the coal industry was condemned by Environment Victoria. Campaigns Director, Mark Wakeham said that "both governments," he said, "were refusing to learn any lessons from recent experience and are obsessed with the coal resource at the expense of other industries."


 * August 4: Coal baron Clive Palmer, when asked how he would address global warming, said "Change our diet - not eat so many sheep." Or, he suggested, developing "global answers" through the Club of Madrid which he is a financial supporter of.


 * August 6: Beyond Zero Emissions releases its report Laggard to Leader, which calls for a moratorium on coal and gas expansions.


 * August 6: Xstrata announced that it will defer $US1 billion of capital expenditure in the face of falling commodities prices and the high Australian dollar. Jamie Freed reported in the Australian Financial Review that Xstrata would:


 * "invest 'judiciously' in prospective near to medium-term projects, including studies of the $6 billion Wandoan thermal coal project in Queensland’s Surat Basin. 'The timing of approvals will be sequenced to maximise returns and account for anticipated demand conditions,' Mr Davis said. Analysts have raised doubts over whether Xstrata was likely to approve Wandoan in the near term given that low thermal coal prices, a strong Australian dollar and the need for pricey new infrastructure make it look marginal on current prices."


 * August 7: The Australian Financial Review (AFr) reported that Lanco had reached a "preliminary agreement" with the Bunbury Port Authority to export coal from a proposed berth at the port in the inner harbour. Lanco, which bought the Griffin Coal, which operates the two major coal mines, the Muja Mine and the Ewington Mine near Collie, wants to expand coal production to 18 million tonnes a year. "The company last year lost a bid for space at the port of Kwinana," the AFR reported.


 * August 8: Rio Tinto announced that it planned to close the Blair Athol mine by the end of the year. The company stated that the "coal seams are largely mined out" and attributed the decision to close to the "recent significant drop in thermal coal prices, and other factors such as rising costs and the foreign exchange rate.


 * August 13: The Age reported that in December 2011 the Victorian government had cancelled a 50-year brown coal licence which had been allocated to Monash Energy, a consortium of Anglo American and Shell. The Age reported that "the licence was cancelled after Monash failed to comply with milestone conditions." The Victorian government is currently preparing a new round of brown coal allocations with the aim of expanding domestic brown coal use and developing an export market. Environment Victoria's Mark Wakeham said "If large companies like Shell and Anglo American can't deliver on their so-called 'clean coal' projects, what hope do tiny players like Exergen [which is also seeking a new coal allocation] have?". Megan Davison, from the Minerals Council of Australia defended the government's plans for a new coal allocation on the grounds that without further exploration "Victoria will not know what potential can be realised through its development."
 * August 15: Dr Hugh Saddler, from the consultancy firm Pitt & Sherry, released the firm's latest analysis of the Australian power generation market. "Output from both black and brown coal fuelled power stations fell and, for the first time, coal fired generation fell in all four states in the same month. Total coal fired generation was 1.4 TWh lower in the year ending July 2012 than it was in the year ending a month earlier. This is the amount by which coal fired generation was lower in July 2012 than it was in July 2011, and is equivalent to a decrease of 10% in coal fired generation for the month. It is the largest monthly decrease in coal fired generation over the whole period covered by CEDEX, with the exception of two months at the end of 2010. The decrease in coal fired generation was larger than the decrease in total demand; the difference was made up by increases in both gas and hydro generation," they wrote.

September 2012

 * September 10: Xstrata Coal announced that it would cut 600 jobs across its coal mines in Australia but did not provide details on where the cuts would occur. In a media release the company stated that it was "undertaking a planned restructuring to respond to industry-wide pressures including low coal prices, high input costs and a strong Australian dollar against the US dollar." The company stated that its "approved growth projects, such as Ravensworth North, Ulan West and our expansion at Rolleston, are proceeding as planned, and remain on budget and on schedule." While Xstrata did not detail which mines would bear the brunt of the impact, the following month it was reported that 40 permanent positions and approximately 120 contractor possitions had been cut from the old Ulan coal mine in New South Wales.

October 2012

 * October 10: BHP Billiton Mitsubishi Alliance's Gregory open cut mine, a part of the Gregory Crinum mine in Queensland's Bowen Basin, was closed. The company stated that, as a result of a review that "the Gregory open-cut mine production was no longer profitable in the current economic environment of falling prices, high costs and a strong Australian dollar." The company stated that it would "look for opportunities to redeploy affected employees to other BMA operations." The Crinum underground mine and the Gregory Coal Handling Preparation Plant continue to operate though these continued to be under review "to further reduce operating costs, making remaining underground production more profitable." At the time of its closure, the Gregory open-cut employed 55 employees and 242 contractors.


 * October 11: Stanwell Corporation announced that it would mothball two of the plants five 350MW units at its Tarong Power Station due to an "over-supplied energy market with lower than forecast electricity demand". Stanwell stated that the plants would be closed "for at least two years or until wholesale electricity demand improves" in order to "lower its operation and maintenance costs and reduce its carbon emissions.”


 * October 17: EnergyAustralia announced, as part of its lobbying against retaining the Renewable Energy Target in its current form, that it would idle one 360 megawatt unit at the Yallourn W power station due to the impact of the carbon price "together with weak wholesale electricity prices and falling electricity demand." The company argued that the Renewable Energy Target should be revised to reduce the amount of new wind and solar power supplied to the grid.

November 2012

 * November 20: The Queensland Resources Council Chief Executive Michael Roche stated that "based on public statements and information provided to QRC, we estimate the Queensland coal industry has been forced to shed between four and five thousand positions over the past few months." Roche siad the job cuts were "a sad but inevitable consequence of a collapse in coal prices and rising production costs."

December 2012

 * December 18: Mining contractor John Holland informed 108 contract workers at the Isaac Plains Mine near Moranbah that they would be made redundant early in 2013. The coking coal mine is owned by Sumitomo and Vale. A spokesperson for John Holland stated that some of the redundant contractors may be redeployed but declined to state how many.


 * December 19: The Bureau of Resources and Energy Economics released its energy projections to 2050.


 * December 28: EnergyAustralia shelved plans for a gas-fired power station in Victoria's Latrobe Valley. EnergyAustralia's head of markets, Mark Collette, told The Australian that the power station would not be needed until much later this decade. "We are seeing further deterioration in the energy market and wholesale prices, and we don't expect conditions to improve in the foreseeable future," he said.


 * December 29: Xstrata Coal confirmed that 95 jobs would be axed from its Collinsville mine by the end of January. "Due to the downturn in coal prices we have been working with Thiess to review mining operations at Collinsville and, as a result, we expect 95 Thiess positions will be made redundant in January," Xstrata Coal told News Ltd. Thiess, which operates the mine under contract to Xstrta, said that it was "continuing to identify opportunities to redeploy a number of these employees to other projects."


 * December 31: Construction, Forestry, Mining and Energy Union (CFMEU) Mackay district vice president Steve Pierce told The Morning Bulletin that about 2,000 Bowen Basin mine workers had lost their jobs since the downturn in the industry began in early 2012.

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