The Mt Thorley-Warkworth "final void" is too expensive to fill in.
Early this month mining giant Rio Tinto sold its mothballed Blair Athol coalmine to a tiny ASX-listed company called TerraCom for $1. Rio Tinto had been trying to sell the mine since it closed in 2012.
$1 is rapidly becoming the market rate for coalmines in Australia. In the past year, seven marginally profitable coalmines in Queensland and NSW have been sold for a peppercorn price by big corporate miners to inexperienced, newly created companies.
But the price hides the real issue. Large mining companies are not only selling mines because of the downturn in the price of coal. They are also selling the responsibility to rehabilitate the mined areas, which in some cases can amount to millions of dollars. The worry is that the new owners will not be technically or financially equipped to undertake rehabilitation.
This is not the only way miners are dodging responsibility for cleaning up the mess they leave. There are about 50,000 abandoned mines across the country, where companies have simply walked away when the profits dried up and left the sites unrehabilitated. Some of these mines are huge and the billions of dollars it will cost to repair the land and water resources will be borne by the taxpayer.
Rehabilitation of coalmines in NSW and Queensland does not necessarily mean restoring a mine to its former state or even to a healthy or useful condition. In some instances, the site simply needs to be safe. Voids may not need to be refilled and prime agricultural land or state forest may not need to be restored to its former glory: in many cases the process of mining itself has made this impossible.
Before mining operations commence, coal companies typically commit to a “rehabilitation management plan” in order to obtain the licences needed to operate, but the terms are vague and allow for a lot of flexibility over the life of the mine.
Proper rehabilitation can be expensive. In New South Wales and Queensland, where most of Australia's coal mines are located, rehabilitation costs are secured by bank guarantees. The guarantees are often secured by the mine itself and serviced by a yearly fee.
But what happens if the bank guarantee is insufficient or the company goes bankrupt? The risk is that taxpayers will foot the bill to rehabilitate the land or that the site may never be rehabilitated.
To avoid this, new and operating mines should be made to progressively rehabilitate the land while they are still turning a profit and they should also pay a rehabilitation security bond in cash equal to the cost of rehabilitation as part of their mining licence.
Currently Queensland holds $5.38 billion in cash or bank guarantees from mining companies. But it could cost up to 10 times that amount to ensure mines are rehabilitated so that pollutants do not contaminate surrounding lands and waterways, the landform is safe and stable and the rehabilitated land is sustainable.
A 2014 Queensland Auditor General's report found: “The financial assurance held is often insufficient to cover the estimated cost [of] rehabilitation and is rarely enforced. As a result, successful environmental rehabilitation is not occurring and the state remains exposed to unnecessary and unacceptable financial risks.”
In the case of one particular mine the bond held was $150,000 or just 1.5% of the estimated rehabilitation cost of $12 million. The report also found the government department overseeing mine rehabilitation was reluctant to claim the bonds for the state.
The Rix's Creek coalmine is undergoing rehabilitation so it can be once again used for farming.
In NSW, the government holds $1.8 billion in security deposits, but it is estimated that to rehabilitate the “final void” — the huge hole in the ground left by an open cut mine — of Rio Tinto's Mt Thorley-Warkworth mine alone would cost at least $2 billion.
Is Rio Tinto likely to spend that amount to rehabilitate the mine? A Rio Tinto spokesperson said that the final void “will be largely hidden from view due to the surrounding landscape and extensive rehabilitation works planned after mining”. But will it be completely filled in? No. The Department of Planning said it would “not be reasonable to impose a condition that requires Rio Tinto to completely or even partially backfill the final void”.
Whitehaven Coal's plan for the Maules Creek mine in the environmentally sensitive Leard State Forest is to leave a 170 hectare lake on the site that will take 350 years to fill to a depth of about 100 metres and 1000 years to reach its full salinity at about a quarter the strength of ocean sea water.
An independent Planning Assessment Commission panel wanted Maules Creek to backfill its final open-cut rather than leave a void, but the NSW Department of Planning has rejected this, saying backfilling the hole would waste 84 million tonnes of coal and cost about $800 million
A 2005 report by the department noted that final voids were likely to cover about 1270 hectares of the Hunter Valley, and that all would become "saline water sinks" unless they were "configured for an alternative post-mining land use", in other words filled in. The report raised "a number of general concerns" about final voids and groundwater, including the chance for "super saline void waters" to enter the environment.
Ten years later, the Department of Planning has revealed it is “not aware of the total size” of existing and approved voids in the Hunter, but approval had been given for about 30 to be developed that on a “conservative estimate” would cover 10,000 hectares.
So why aren't these miners required to fill in their final voids as a matter of course, as part of the government-approved mine rehabilitation plan?
The NSW and Queensland governments have a range of powers regulating mine site rehabilitation, including setting environmental management and rehabilitation conditions, requiring rehabilitation security bonds and enforcement powers to ensure lease holders comply with their obligations.
But they now say that, despite their legal responsibility to ensure that miners undertake rehabilitation, the cost is too great. “Best-practice ecological rehabilitation” of mined lands now means leaving the final void in the landscape to fill with rain once mining ceases.
Despite lower prices and contracting export markets, NSW is considering four new coalmine applications and 13 mine extensions in the Hunter Valley. NSW Greens MP Jeremy Buckingham says he is concerned mining companies are seeking extensions or placing mines in care and maintenance as a deliberate strategy to delay expensive rehabilitation costs.
"Once you actually factor the cost of rehabilitation in to the bottom line of some of these mines they're unviable," he said.
Energy market analyst Tim Buckley has seen the same trend in Queensland. "In Queensland there hasn't been a mine closed for the past 33 years. The government doesn't want to take on the risk of a closed mine and the industry is reluctant to spend the money required to safely close the mine," he said.
"Instead, what we see are mines placed into care and maintenance where the mining companies can avoid paying out rehabilitation bonds because the mine isn't officially closed.”
The cost to rehabilitate coalmines should be borne by the industry that has earned income from digging up and selling the coal. It should no longer be acceptable to leave a large hole in the ground as a legacy.
New Acland coalmine in Queensland is being expanded so it will not be rehabilitated.
HOW MINING COMPANIES AVOID CLEANUP COSTS
Environmental Justice Australia says there are six tricks coalmining companies play to avoid, minimise or delay mine rehabilitation costs:
1. Care and maintenance: This is where the mine is not functioning but it has not closed down. As such, the mine does not need to be rehabilitated and future costs stay off the balance sheet.
2. Extract until cash reserves run dry: If a company with a loss-making mine keeps operating the mine until its cash reserves run out, rather than closing the mine, it does not have to pay either rehabilitation costs or workers' entitlements. If governments do not have a bond covering the total rehabilitation costs, the site may never be rehabilitated or the taxpayer will foot the bill.
3. Just do not rehabilitate: The NSW government regularly concedes that if the cost is too high, miners do not need to rehabilitate mined land.
4. Sell to an unknown minnow: The dual threat of rehabilitation costs and falling coal prices makes holding on to mining operations too financially risky for parent companies. Luckily for them, there are always people prepared to start a company with little experience and less money, who will buy an old mine for a pittance.
5. Expand: If an existing mine expands instead of closing, its owner can leave rehabilitation costs off their balance sheets. Not only does expanding a mine buy time to avoid rehabilitation and other closing costs, it also makes the mine a more attractive prospect for potential buyers.
6. Inappropriate discounts: The government of Queensland applies discounts to the rehabilitation bond paid by mining companies. The original amount asked by the government will probably be less than actual costs of rehabilitation, but mining companies can also receive discounts of up to 30% on the calculated amount. Discounts can be granted because of the “financial standing” of the mining company if it is “solvent and not in external administration”. Companies on the brink of bankruptcy, such as Peabody Energy Inc, are still given this discount.