A proposal by Midland Energy to develop new coal mines in Tasmania is in the headlines and has received a $50,000 grant from the State Government. While the company is talking up its prospects, most of its claims do not stack up.
Midland Energy claims that coal demand is “rampant” in Asia and increasing globally. Growth in Asian coal demand was indeed rampant from around 2000 to 2011, the year Midland Energy was founded. Since then there has been little growth, with demand declining between 2013 and 2015. Globally, coal demand peaked in 2013.
Under the International Energy Agency’s analysis, coal demand remains flat under current policies, but declines rapidly under the Paris Agreement.
Midland Energy claims that Tasmania’s “proximity to Asia” will be a competitive advantage. However, Tasmania is further from Asian markets than all other major coal suppliers such as China, Indonesia, Queensland, New South Wales, Mongolia, Russia and even South Africa. Every shipment of coal from Tasmania to northern Asian ports would incur an extra $100,000 in shipping costs compared to Queensland ports.
Midland Energy suggests its mines will be low cost. This is unlikely given the extra shipping costs and capital investment necessary for a new mine. Most new mines in Australia look to spread capital costs across large coal volumes. The newest mine in NSW produces 10 million tonnes per annum (MTPA) while Queensland’s new projects aim for up to 60 MTPA. Midland Energy is looking to produce initially just 1 MTPA, with a longer term goal of reaching 3 MTPA. On a per tonne basis, it will be difficult for this mine to compete without further and larger government subsidy.
Midland Energy claim coal exports make up 15% of Australia’s GDP. This is incorrect. The real figure is just 2.2%. Energy coal for power stations, such as would be produced by Midland Energy, would be less than half this figure.
New mines in the Midlands would compete with agriculture for water use. A basic estimate of Midland Energy’s water requirements is up to 750 million litres per year.
The Midland Energy proposal dates from 2011, the peak of the global coal boom when prices were high and demand seemed set to grow indefinitely. Other coal white elephants like Adani date from around the same time. The current round of publicity appears to be aimed more at increasing the value of the company and extracting government subsidy than at developing a mine that could deliver value for the Tasmanian community.