A LEADING economist has called into question aspects of Yancoal’s plans to expand the Stratford mine, saying the project would be unviable if the price of coal dips any further.
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Rod Campbell, from Economists at Large, was commissioned by the Barrington Gloucester Stroud Preservation Alliance to assess the economic justification for the project.
His review questioned the overall net benefit from the expanded mine, which according to Yancoal’s EIS (Environmental Impact Statement) could be as much as $215 million – with $146 million accruing to Australia.
Mr Campbell said the socio-economic assessment included in the EIS was “almost certainly optimistic”, had not “included discussion of methodology, working or sources” and was unclear about how adjustments from global benefits to Australian benefits had been made.
Yancoal’s predicted net benefit of between $145 million and $174 million was also called into question by Mr Campbell.
He said neither figure was an estimate of the likely upper or lower bounds of the net present value (NPV) of the project relevant to NSW decision makers (one of the conditions of consent as outlined under the Director-General’s Requirements).
Instead, the figures were estimates of NPV accruing to Australia with and without “non-market value of employment”, a “contentious external value not commonly used in cost benefit analysis”, according to Mr Campbell.
Mr Campbell said a socio-economic assessment of the project estimated a far wider range of NPV values of between $15 million and $326 million.
“The lower end of these estimates is more likely given the current coal market outlook and the high coal price used in the economic assessment,” he said.
“As coal prices have declined by around 20 per cent relative to the case presented in the socio-economic assessment, returning to long-run averages, it is most important to consider the scenario presented in sensitivity analysis with a 20 per cent decline in coal prices.
“Depending on the discount rate, the NPV is estimated at between $15 million and $35 million.
“Any further decline in coal prices will make the project financially unviable.”
But Yancoal has disputed Mr Campbell’s analysis.
“Gillespie Economics has prepared the benefit cost analysis for the project from a national perspective consistent with conventional economic practice and in accordance with the Director-General’s Requirements (DGRs). The socio-economic assessment includes the distribution of costs and benefits to allow a consideration of the benefits and costs that accrue to the region and NSW in accordance with the DGRs,” a spokesperson said.
“The coal price used in the benefit cost analysis is based on Yancoal’s long-term coal price projections over the 11-year life of the project. The analysis includes a coal price sensitivity analysis with a 20 per cent sustained reduction in coal price over the life of the project and this shows that even under this conservative assumption the project would still have a positive NPV.”
Submissions on the Stratford mine expansion proposal closed last Friday.
Alliance spokesman Graeme Healy said the group’s assessment of the EIS, which covers more than 100 pages, had found it to be deeply flawed and inadequate.
“We find many of the impacts to be understated and much of the proposed mitigation to be either inadequate or overly ambitious,” he said.
“The EIS fails to satisfy many of the Director General’s requirements for the project.
“(Mr Campbell’s) analysis concludes that the socio-economic assessment provided has failed to clearly demonstrate the economic benefit of the project for NSW and the local community.
“The social costs of the project have all but been ignored.”
