Warkworth Extension

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The Warkworth Extension is a possible extension to the Mount Thorley Warkworth mine near Singleton in the Hunter Valley in New South Wales. The mine is operated by Coal & Allied.

The company states that in April 2008 Coal & Allied the land is owned by the company and is within the existing lease area for the Mount Thorley Warkworth mine. "Coal & Allied is applying for the Warkworth extension which would take the operation further west within its existing mining lease, and add a further 21 years of operation to the mine."[1]

Developments in 2013

The Warkworth expansion was proposed in late 2009 and approved by the NSW Planning Assessment Commission in February 2012. The Bulga Milbrodale Progress Association (BMPA) appealed against the decision, on a range of grounds. One criticism was that the economic assessment of the project overstated its value.

Economic assessments

Two economic assessments were included in the environmental impact assessment. The court heard evidence relating to both reports.

Firstly a cost benefit analysis (CBA), prepared by Gillespie Economics, which included a choice modelling study. The estimated net benefit resulted in $1.9 billion.[2] The second was an input-output analysis, prepared by the Hunter Valley Research Foundation (HVRF), which estimated creation of 44,600 new jobs due to the expansion of the mine. Both, the CBA and input-output analysis received criticism for not taking all relevant costs and benefits into account, and how the non-market impacts had been assessed.[3]

Misleading cost benefit analysis

Economists for the BMPA suggested the CBA was misleading because it claimed that the project would lead to net benefits of $1.9 billion for the people of NSW. But instead of that the majority of the benefits would accrue to overseas shareholders. The mine’s consultants pointed out that the benefits to the NSW economy were nevertheless around half billion dollars, instead of $1.9 billion.

Using input-output modeling

Rio Tinto’s consultants claim that an extra direct and indirect 44,675 jobs would have been created was deceptive because of using the input-output model to estimate the number of new jobs. The assumptions behind this number were based on the definition of job that a job only lasted for one year and that there was an unlimited supply of skilled labour ready to work.

Choice modelling study

The choice modelling study that was used didn’t produce useful results. The judge was of the opinion that the information provided to the survey respondents “was not sufficiently accurate to enable them to make informed and meaningful choices”. Economists for the BMPA claimed the respondents to the survey did not have the choice to put monetary values on the option “no mine”. They were forced to put a value on the mine’s impacts even though they may not want to value them.

Rejection

The NSW Land and Environment Court overturned the approval for an expansion of Warkworth mine in April 2013. Chief Judge Preston was not convinced by the economic assessments prepared by the consultants of Rio Tinto and stated that he had doubts that environmental and social matters were addressed appropriately – “I am not satisfied that the economic analyses provided on behalf of Warkworth support the conclusion urged by both Warkworth and the Minister, namely that the economic benefits of the Project outweigh the environmental, social and other costs.[4]


Articles and Resources

References

  1. Coal & Allied, "Warkworth Extension", Coal & Allied website, accessed July 2010.
  2. “What's good for globe may trouble town”, ’’The Age’’, September 15, 2012.
  3. "Rio fails basic maths at the coalface", The Sydney Morning Herald, April 22, 2013.
  4. "How Bulga Burst Mining's Economic Bubble", New Matilda, July 31, 2013.

Related SourceWatch Articles

External resources

Coal & Allied documents on the proposed extension

External Articles