Shenhua coal mine doomed by China energy transition

Photo by Kate Ausburn, Creative Commons License.

The proposed Shenhua Watermark coal mine on the Liverpool Plains has been widely opposed by farmers and environmentalists, but it appears the energy transition of China and the economics of coal have ultimately doomed the project. Original article for Nofibs.com.au

The fact is China ‘Is Getting Serious’ About Scaling Back Coal. A rapid transition is taking place in China transitioning to renewable energy and scaling back coal power. Part of this is the concern over chronic air pollution problems.

According to Tim Buckley from IEEFA, "New data shows China’s electricity-sector transformation accelerating in the first two months of 2016. While electricity consumption was up just 0.3% year on year (yoy) to 870TWh for the January-February period, coal imports fell 10.2%i and coal production declined 6.4%."

"China’s absolute use of coal likely peaked in 2013. The subsequent data certainly supports this position. China’s coal consumption declined 2.9% yoy in 2014, with a further decline of 3.7% yoy in 2015 that accelerated in the first two months of 2016. As a guide, production year to date was -6.4% yoy." reported IEEFA


Tim Buckley tweeted that "China Shenhua forecasts an 8.2% decline in their 2016 coal volumes and capex cuts. Watermark looks ever less likely."

The news was broken by Heath Aston in the Sydney Morning Herald article: China's fossil fuel transformation places axe over controversial Shenhua coal mine in New England.

"We predict coal prices will remain at a low level, losses among coal enterprises will worsen, some coal mines will cut or suspend production and output for the whole year will steadily drop," the firm said, according to a Reuters article.

Barnaby Joyce, the MP for New England and Deputy Prime Minister was heavily criticised by farmers and environmentalist for not stopping the mine proposal from going ahead. He is now happy that one issue has seemingly been removed from the election contest for New England. He faces stiff competition from Tony Windsor, the former Independent MP for the seat, who announced his return from retirement to challenge Joyce.

SBS reported that Barnaby cheers over Shenhua mine doubts.

Greens Mining and Agriculture Spokesperson, Jeremy Buckingham called on Premier Mike Baird and Deputy Prime Minister Barnaby Joyce to actively negotiate an exit strategy for Shenhua.

“Even the world’s biggest coal miner has recognised that there is no need for new coal and it’s up to Barnaby Joyce and Mike Baird to create certainty for the farmers of the Liverpool Plains by negotiating an exit for Shenhua,” said Greens MP Jeremy Buckingham.

“It’s economically and strategically foolish for the Coalition and Labor to fail to acknowledge that the future is renewable energy and sustainable agriculture, not giant coal mines in our food bowl.

“Barnaby Joyce has failed to use his significant power as Deputy Prime Minister and Agriculture and Water Minister. Unless he can negotiate a swift and fair exit for Shenhua and save the Liverpool Plains, the voters of New England should throw him out.

Of course the Environment Minister deserves questioning. He has been approving new coal mines despite the structural changes in export coal. He gave conditional approval for the Shenhua mine in July 2015. He gave conditional approval for the Adani Carmichael coal mine in the Galilee Basin of Queensland for the second time in October 2015.

Both of these mines are uneconomic at current coal prices in an industry in structural decline due to changes in development of India and China with the transition to renewables, an imperative of climate change driven in part by international climate negotiations.

Background

Farmers of the Liverpool Plains were particularly concerned about impacts on agricultural operations and changes to groundwater in a major food production region.

"If anything happens to the irrigation water, this country is annihilated..." tweeted StopShenhua

UNSW research published in October 2016 shows Liverpool Plains mining groundwater models used for the mining approval are far too simplistic.

"Current groundwater models being used to forecast the impact of mining and agriculture on the groundwater resources use an overly simplistic two layer model of the paleovalley-filling sediments. Such simple models cannot be used to accurately model local impacts." says the media release for the study by Acworth et al (2015): Late Cenozoic paleovalley fill sequence from the Southern Liverpool Plains, New South Wales — implications for groundwater resource evaluation.

The mine will also devastate the Liverpool Plains koala population. The mine will obliterate 847 hectares of koala habitat. A local population of about 262 koalas would need to be translocated, even though translocation in the past have resulted in substantial death rates.



The NSW Land and Environment Court ruled in February 2016 that development could proceed and koala habitat destroyed with koalas translocated. Read more at this Sydney Morning Herald report: Shenhua coalmine given go-ahead to destroy koala habitat.

In February 2016 it was also becoming very clear the economics of the mine were difficult. Although the company had applied to renew its exploration licence, it had not applied for a mining lease, despite already having development consent from the State Government, reported ABC News: Shenhua coal mine: Controversial Liverpool Plains project 'unlikely' to go ahead, Government sources say.

Here is my storify slideshow of social media associated with this story:

Lead image photo by Kate Ausburn/Flickr (CC-by-2.0)