By Clayton Loader
For months now the news media has featured revelations from public hearings at The Independent Commission Against Corruption (ICAC); featuring ex Labor Ministers Ian MacDonald and Edward Obeid. This article is an attempt to provide some context and work up a timeline including some basic maps so we have a idea what was done where & when.
We know that mining is an important factor in our National wealth – so this article is written from the perspective that we do not want a weaker and poorer Nation – but we expect mining and mineral exploration to be impartially regulated for the good of all.
Mining is worth $20Bn (mainly coal) per year to NSW and actual mines occupy a very small area of the State, although for sure in the Hunter region the percentage is higher because of open cast coal mining but that’s success for you. “Where there’s muck there’s money”, goes the old saying. Statewide agriculture earns less than half of mining and occupies vast areas, many farmers are keen sellers of their land when the miners knock on their door.
Here is link to a NSW Govt map of NSW coalfields just so everybody can update themselves on some basic geography.
Note Bylong in the north of the blue zone.
A quick diversion here quickly explaining the broad legal structure of how Australia regulates mineral exploration and mining.
In Australia the States own and administer the vast majority of terrestrial mineral rights – farmers and graziers own or lease surface rights. So lets get it correct first up – landowners do not own the minerals – they do not have a veto on access for mineral exploration – but they are entitled to fair compensation while exploration companies conduct exploration on the land.
The system works by States (& the NT) licencing competent exploration companies to explore for metals, coal, oil and gas. The expectation being that success leads to a Mining Lease at which point the explorer will usually buy the farms involved. There are strict compliance, environmental and reporting conditions on explorers and large cash bonds have to be posted to ensure performance. The aim is that the undiscovered mineral wealth of the State is explored for diligently and any mining opportunities are exploited which will have flow through benefits to the entire economy – all with a minimum of environmental impacts.
In NSW the Govt has traditionally played a role in coal exploration, they hold large prospective areas for the Crown which is intended to benefit all of us; they do some coal drilling and if payable-coal is discovered they can then offer potential mine areas out to industry by public tender.
To see the reasons for the flurry of Ministerial activity half a decade or more ago which has lead to the ICAC hearings, first we look at the 20 year price history for Australian thermal or steaming coal.
Quite a roller coaster but that’s commodities for you, prices are still at much higher levels than pre 2007.
A particular coal product varies in value due to location and rank which relates to the depth of burial during the geological time the coal was formed. Low rank coal, lignite or brown coal is usually cheapest and contains the least energy, this type of coal is used to generate electricity in Victoria.
Thermal or steaming coals are burnt for their energy but are higher rank than lignite.
Coking or metallurgical coals tend to be higher rank again and are generally more expensive; used in making steel. Google will provide links to much info for those interested.
In the space of about a year starting in late 2008 the NSW Minister Ian MacDonald, released by some form of tender process at least four coal exploration licences listed below for discussion.
Map of areas 2, 3 & 4.
[1] 15 Aug 2008 Govt announces $300Mn Watermark EL7223 deal with Shenhua a large Chinese resource group – situated SE of Gunnedah and NOT in the sights of ICAC, included as an example of what the State can earn through the public tender process at a time of high coal prices.
[2] Doyles Creek EL7270 granted to Doyles Creek Mining Pty Ltd on 15 Dec 2008 – The EL is now owned by ASX listed company Nucoal Resources Ltd – ICAC hearings are planned.
[3] Mt Penny EL7406 granted to Mt Penny Coal Pty Ltd (Cascade) on 21 Oct 2009. This is the Bylong Valley EL that has to date has been the focus of most ICAC and media attention. Mt Penny Coal Pty Ltd is owned by Cascade Coal and was in Late 2010 – early 2011 sold on to the ASX listed White Energy who pulled out of the deal with Cascade in April 2011.
[4] Ferndale EL7430 granted to Loyal Coal Pty Ltd on 18 Dec 2009 – Loyal was owned/controlled by Andrew Kaidbay who has told the ICAC that he has represented the Obeids – ICAC transcript from the morning of 29 Nov 2012 has Mr Kaidbay discussing the Yarrawa EL. Ferndale was owned by Coalworks who were taken over by ASX listed company Whitehaven Coal Ltd in 2012. The timing of Coalworks buying of Loyal Coal is not clear yet.
ICAC inquiries into these coal licensing corruption issues are termed Operation Jasper (EL’s 7406 & 7430) and Operation Acacia (EL7270 Doyles Creek). Jasper also includes Glendon Brook (EL 7405) which has not been examined here.
A link to a pdf file – Operations Jasper Acacia Indus public inquiry scope -
Operations Jasper and Acacia transcripts can be located at this link – helps if you know the date – the pdf files are searchable.
A curious point about Mt Penny EL is the Obeid family and their connections bought land there in 2007-2008 well before the EL grant. In normal mineral exploration this is putting the cart before the horse, you get the EL first, buying land comes later if you are lucky enough to prove up payable reserves.
There must be hundreds of media articles online now that can be easily searched for; this April 2012 SMH article by Kate McClymont covers a broad sweep of the issues very well. “And on that farm he had some mates“
