When was the last time you made a $3 billion dollar error? OK, how about a $200 million dollar error? Still no? Have you ever added up a bill and found it was $500 million out, only for the waiter to complain about your “stylised” methodology? These are just a few of the issues to come out of our review of the the Maules Creek Coal Proposal.
In September we reviewed the economic assessment of the Maules Creek project, by Gillespie Economics, on behalf of the Maules Creek Community Council. We pointed out that the net present value of the large open-cut coal project proposed for the north of NSW was overstated and that key figures didn’t add up. Our review led to ANU’s Professor Jeff Bennett being commissioned by the mine proponents to conduct another review of the assessment.
Professor Bennett agreed with us that the inclusion of profits to foreign investors in the benefits of the project was inappropriate (at least $3 billion), as was the inclusion of “social value of employment” (over $200m). These corrections meant the proponents had overstated the value of the project to the public by around 40%.
“So what? Even with a $3 billion dollar error, we’re all still going to be rich!” the proponents cried. We disagree. The main point is that when profits to foreign investors were incorporated into the proponent’s own economic assessment, the value to Australia of the large coal project was reduced by 40%. This project is 50% foreign owned. There are many similar projects proposed, such as Boggabri (NSW), Shenhua (NSW), China First (Qld), Kevin’s Corner (Qld) which are 100% foreign owned. The net present value to Australia of these projects has either not been adjusted for foreign benefits (Boggabri) or has never been calculated at all (all others mentioned).
Who should care? The public should care that the economic benefits to them are being wildly overstated, or not stated at all. Governments should care that major shortcomings of economic assessments are not being picked up by the public service. Coal companies should care that their well-paid consultants are making large errors. Minerals companies who do contribute greatly to communities should care – they have a hard enough time getting their message across to an increasingly sceptical public without overblown economic assessments making it harder.
There are plenty of other issues raised by Prof Bennett’s review and the proponent’s response to submissions and our new report which discusses the issues in detail. Read about them over the Christmas break, just be careful not to overestimate your net present value by a couple of billion when buying your pressies!
Here is the new report – Ecolarge Dec 2011 Aston response to submissions Final
