Shenhua set to walk away from Watermark coal mine with taxpayer payout

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Shenhua set to walk away from Watermark coal mine with taxpayer payout

By Peter Hannam

The Berejiklian government plans to buy out the remaining licence for a proposed coal mine planned for rich farmland on the Liverpool Plains, ending a 13-year-long saga that pitched miners against farmers.

While the government is publicly stating that a mining lease for the Shenhua Watermark open-cut mine remains under assessment, multiple sources have told the Herald that a deal has been struck that would allow the Chinese energy company to walk away from the project.

Shenhua’s project is too close to Liverpool Plains to avoid the court of pastoral public opinion. 

Shenhua’s project is too close to Liverpool Plains to avoid the court of pastoral public opinion. Credit: Photo: Louise Kennerley

The revelation of the mine buyout comes days after senior government officials described coal as a “forever” industry in the nearby Upper Hunter region, where a byelection will take place in May, and after the Herald revealed NSW Treasury documents predicted a decline in the industry.

The amount to be paid to the Chinese state-owned company will be less than $200 million, a senior government official said, speaking on condition of anonymity because the agreement has not yet been made public.

Shenhua initially paid $300 million for an exploration licence for land near the town of Breeza in 2008 when the Labor government was in power. In July 2017, the government agreed to pay Shenhua $262 million to hand back 51 per cent of the exploration licence.

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Discussions for a dignified exit for Shenhua have been in the works since last year. Farmers in the region say they expected some deal was imminent after Deputy Premier and Resources Minister John Barilaro made comments intimating that Shenhua would give up its coal plans.

A spokeswoman for Mr Barilaro on Monday said “there is no such agreement. Their application for a mining lease remains under assessment”. Treasurer Dominic Perrottet referred questions about the matter to Mr Barilaro.

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A spokeswoman for Shenhua said that as its mining lease was still being assessed “it is inappropriate for us to make any comment at this time”.

A farm in the Breeza region, close to the proposed Watermark coal mine.

A farm in the Breeza region, close to the proposed Watermark coal mine.Credit: Dean Sewell/Oculitg

However, one of the sources told the Herald it had become clear for some time Shenhua was willing to give up the project after its own management changed and its priorities shifted.

Another of the sources said he had been told this month by Mr Barilaro that “money was in the budget to do it”.

The source said that revealing the deal now would be awkward for the government because it would signal it is planning to protect farmland in the Liverpool Plains while saying “coal mining should expand indefinitely in the Upper Hunter”.

A sign erected by a landholder on the Liverpool Plains, where farmers have long called for the NSW government to cancel Shenhua’s proposed coal mine.

A sign erected by a landholder on the Liverpool Plains, where farmers have long called for the NSW government to cancel Shenhua’s proposed coal mine. Credit: Paul Mathews

At about the same time as the partial Shenhua buyout, the government spent more than $200 million so BHP would give up its Caroona coal mine plans in an area close to Shenhua’s proposed three-pit mine.

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Andrew Pursehouse, a farmer whose property bordered the Watermark area on three boundaries, said the company had said the mine would cost $1.6 billion to develop.

That sum included $200 million Shenhua would have had to fork out to proceed to mining. It had planned to produce about 10 million tonnes a year for 30 years for export.

“We’ve been predicting this for a long time,” Mr Pursehouse said. Still, “there’s been a lot of heartache”, and locals had spent more than $1 million to fight the mine. Concerns include damage to aquifers in the key farming region particularly if the mine were to expand in the future to reach better quality coal some 600 metres below the surface.

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“There’ll be one hell of a party when it’s over,” he said. “The whole farming community was against it.”

Labor’s resources spokesman Paul Scully said “the Berejiklian government’s ad-hoc approach to major projects continues at massive cost to the taxpayer.

“The Deputy Premier appeared to back the Shenhua project in budget estimates earlier this year and has now backed off with a rumoured multi-million dollar price tag for taxpayers,” he said. “If the Government didn’t want the project to proceed it could have exercised its right not to renew the original exploration lease at no cost to the taxpayer.”

NSW Co-ordinator for the Lock the Gate Alliance Georgina Woods said a decision to “end the shadow of this coal mine hanging over our national foodbowl on the Liverpool Plains would be very welcome.

“It was a costly mistake to approve this mine,” she said. “We look forward to decisive action by the Berejiklian government to ensure it never proceeds and that precious groundwater, koala habitat and prime farmland are safeguarded for the long-term.

“This plan to open up a whole new farming area to coal mining was always a crazy idea and it’s essential that Liverpool Plains farmers can now focus on doing what they do best – growing food and fibre for Australia,” she said.

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