May 23, 2017 - A company controlled by an Indian billionaire has deferred a decision to build one of the world’s biggest coal mines in Australia following political wrangling over whether it should be granted financial concessions in the form of a “royalty holiday”.

The A$16.5bn ($12.3bn) project has divided the state government over the merits of providing taxpayer support for a mine, which would create jobs in Queensland but generate environmental costs by exporting large volumes of greenhouse gas emissions.

One sustainable energy proponent sees the deferment as blatant political “blackmail” of the Queensland government.

On Monday the Labor government in the state of Queensland was unable to agree on whether to provide tax relief to Adani, a move that prompted the Indian company to defer its own decision on a final investment decision. 

“Adani has been advised today that the Queensland cabinet did not consider any submission or make a decision on royalties for the Adani project,” said Ron Watson, an Adani spokesman. 

“In light of this Adani has today deferred a decision by its board on a final investment decision until the government decision is clear.” 

The Adani project has become a potent symbol of the global battle between environmentalists and the fossil fuel industry, attracting a series of legal challenges that have already caused years of delays. 

The proposed Carmichael mine sits in Queensland’s Galilee Basin, one of the world’s largest untapped coal resources. Adani plans to ship the coal to India from Abbot Point, a port near the Great Barrier Reef marine park. 

A sharp fall in thermal coal prices since 2012 and concerns about the viability of coal projects in the face of international efforts to tackle climate change have complicated Adani’s efforts to fund the project. It recently applied for a A$900m government grant to help it finance a railway to bring the coal from the mine to a port it owns near the Great Barrier Reef marine park. 

Adani is also seeking a royalty holiday from the Queensland government, which would dramatically reduce the amount of royalties it pays in the early years of the project. Under the proposal the royalties would be repaid later when the financial pressures on the project are less severe. 

Queensland premier Annastacia Palaszczuk told reporters the issue had not come before cabinet on Monday, adding “every single dollar owed will be paid” by Adani. 

Queensland’s government in April gave the go-ahead for construction, subject to the Indian company demonstrating it has raised enough money to fund the project. 

Financial analysts say a recent recovery in thermal coal prices may help the project’s backers, but many question whether the project is needed now because the seaborne coal market remains well supplied.

Tim Buckley, an analyst at the US-based Institute for Energy Economics and Financial Analysis, an organization aiming to promote sustainable energy, considers the deferment by Adani to be blatant political “blackmail” of the Queensland government.

“This just shows yet again this project is not commercial and is unbankable without public subsidies,” he said. Adani declined to comment.

Other companies plan to develop mines in the same Galilee basin, including GVK Hancock, a joint venture between India’s GVK and Hancock Prospecting, which is controlled by Gina Rinehart, Australia’s richest person. But this is likely to prove difficult unless Adani is able to finance construction of a railway to transport coal to the port. 

Adani Group chairman Gautam Adani
 

Photo Courtesy of EPA