Xstrata Queensland Mine Challenged as Threat to Barrier Reef

Xstrata Inc., the world’s largest exporter of power station coal, began its court defense of the A$6 billion ($6.2 billion) Wandoan coal mine in Australia that the project’s opponents say threatens the Great Barrier Reef.

Friends of the Earth, an international environmental lobby group, is attempting to block the mine’s approval at a trial in Brisbane that’s scheduled to take two weeks, arguing the coal exported from the project and burned overseas will add to global warming. Xstrata plans to dispute that argument, its lawyer David Jackson said at the start of today’s hearing.

The environmentalists’ argument is a test case for mine approvals, which are generally only assessed on the immediate environmental damage, and a win by the group will make it more difficult for companies, including Vale SA (VALE3) and BHP Billiton Ltd. (BHP), which have about 30 mines in development in the state, to get approvals. Companies would have to include the effects of coal-burning worldwide in environmental impact assessments. The Wandoan appraisal has already taken almost four years.

“The overall effect seems to be to make it harder” to open new mines, Jacqueline Peel, an associate professor at the Melbourne Law School, who practiced environmental and planning law at Allens, Arthur Robinson LLP from 1997 to 1999, said in a phone interview. “Every time one of these cases comes up, it often leads to policy or legislative changes.”

Xstrata won initial state approval for the mine, about 350 kilometers (220 miles) northwest of Brisbane, in November and federal approval in March.

‘Economic Benefit’

The project will have a “very significant economic benefit” for the region, creating 1,700 jobs and providing governments with about A$3.7 billion of royalty payments over the 30-year life of the mine, Jackson said. Xstrata will also pay about A$500 million a year in port charges, to ship the coal abroad, he said.

Xstrata is investigating the construction of another coal- handling facility in the region, Jackson said.

The company said earlier it’s spending A$250 million on reducing pollution from the project.

Xstrata, based in Zug, Switzerland, plans to make a final investment decision on Wandoan later this year. The mine property holds more than 600 million metric tons of thermal coal, second in Australia to BHP’s McArthur project, which has more than 1 billion tons of reserves, the company said.

The Wandoan District Liaison Committee withdrew its objection to the project after Xstrata agreed to conditions including moving a buffer zone further away from the town of 350 people, according to the company.

Carbon Emissions

The exported coal will create as much as 1.3 billion tons of carbon emissions over 30 years, or 0.15 percent of annual global emissions, according to Friends of the Earth Brisbane chapter spokesman Bradley Smith.

Those emissions will contribute to climate change, which has already harmed the Great Barrier Reef, Smith said.

“Upward of A$1 billion could be lost to local Queensland communities every year from climate impacts on the Great Barrier Reef,” he said.

The marine park stretches more than 3,000 kilometers along the Queensland coast. The coral reef is longer than the Great Wall of China and the only living thing on earth visible from space, according to its website.

Queensland Tourism

An Australian government report in 2009 said there have been two “severe mass coral bleaching events” resulting from prolonged elevated sea temperatures in the previous decade and changes to the ecosystem because of climate change “are likely to have serious implications for dependent industries and communities.”

About 10 percent of Queensland jobs are dependent on tourism, with the industry generating about A$17 billion, or 7 percent of the state’s economic output in the year ending June 30, 2009, according to Tourism Queensland, a government agency.

In the same year, Queensland exported A$41 billion worth of coal, with the biggest increases in exports going to China, South Korea and India, according to the Department of Employment, Economic Development and Innovation.

Japan bought the most thermal coal from Queensland in the year ended June 30, 2010, at 22.5 million tons. South Korea purchased 10 million tons, according to data from Queensland’s Mining and Safety ministry.

Environmental groups are increasingly pressing courts to force companies to consider the effects the products from mines have on the environment, Melbourne law school’s Peel said.

“In the U.S., there is nothing happening at the federal and national level as far as climate change,” said Peel, co- author of “Environmental Law: Scientific, Policy and Regulatory Dimensions.”

“The groups are forcing policy changes” through the courts, she said. Australia’s plans to introduce a tax on carbon in parliament next month cover only domestic emissions and won’t have any impact on exported coal, Peel said.

To contact the reporter on this story: Joe Schneider in Brisbane at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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